AAL Investment Forum 2010 - A business case in AAL: How does it work in practice?

A business case in AAL – how does it work in practice?

14.09.10

Kenneth Sandström

14.09.2010

1Kenneth Sandström

Experience tellsHow to avoid the project graveyard and move

them into business casesChallenges are manyOne needs to be aware of themSolutions can be foundGood business cases can be builtMarkets are changing and growing at an increasing

speedLots of opportunities for innovationEU integration efforts (digital agenda) are beginning to

open bordesFertile ground for investors and entrepreneurs

14.09.10 2Kenneth Sandström

Market focus (Elderly, Public vs Private)General Background on the Finnish Health- and Socialcare systemHealth- and socialcare services are predominantly produced by the

taxfunded public systemSome 20% of healthcare services are produced by private

healthcare providers, mainly through occupational healthPrivate citizens expect to get a well performing system for their

tax money and are generally reluctant to pay more for social- and healthcare services either through insurances or directly

The Finnish market is similair to many others in Europe

Therefore when developing services and products for the elderly, the role of the publicly funded market is crucial

The private market will grow in the future14.09.10 3Kenneth Sandström

Business & ProjectsObservations based on experience from the point of view of

service innovations and technology integration Businesses/ Investors want returns as soon as possible (=urgency=good) This means aquiring paying customers for existing services and products The problem with the health- and socialcare services market is that

markets with earningspotential generally have to be created and in order to do that a component of innovation is required

Projects become an important tool in developing services and products, which adress the need for customers and market creation at the same time (the first call for AAL projects not so attractive, AAL deployment funding potentially very attractive)

Public and Private partnerships are a crucial element in creating the market for services and products

This generally means more investment and longer returns

Implication


Challenges with integration of innovations into the public system? Perceived chronic lack of budgetary funds due to underbudgeting Municipal law –the balanced budget requirement forces municipalities

into a plan economy, difficulty of justifying investments in service development

Costly laws and regulation = viewed as poor laws = no need to follow, until sanctions enacted=slow adoption of new services and techologies

Poor appreciation of cost of individual processes and their interrelationship as part of the big picture (Operational statistics incomplete and not used to the degree needed as part of managing the processes)

Suboptimization (between organizations, budgets, public &private) Organizational inertia (perception of ’Doing nothing costs nothing’! =

expensive from taxpayer point of view, management of changes and integration of changes challenging because of strong unions and regulations)

Public tender legislation kills innovation particularly in services – mechanisms that more clearly allows development and deployment needed

Excellent projects / business opportunities buried as a result of some the above


14.09.10

Innovation-Investment-Integration How does innovation become part of the mega legacy health or social

care processes?

One possible solution Turn over the keys

during the trial to a nimble and motivated

outsider with total control over the legacy structuresand innovation – make it a mega project in the real world but withmanagable size

=systemic change

14.09.10 Sivu 6

Secondary Care

Innovation

Primary Care

Home Care

6Kenneth Sandström

Background Elderly Care Care personnel retiring in masses General ageing Costs escalating Public sector not attracting enough employees Funds tied up in institutionalized care, need to move more emphasis into

home care Huge absenteeism (20-25%) and inefficiency in service production (approx

35% of working hours only producing services at customer) = Out of every euro only 25 cents worth of work is conducted in the customers home

Little innovativeness, penetration of new technology non-existant Urgency Huge public and private sector market potential


Building on T-Seniority ( EU ICT-PSP, CIP project) Medineuvo is a partner in the T-Seniority consortium

together with the City of Tampere (3rd largets city) in Finland and other partners throughout Europe

Goal is to develope and trial services and technology to assist elderly to cope at home longer and for the service provider to increase efficiency (reduced physical visits)

Technology based on IPHN video communication technology using touch screen PC technology

User experience indicates users without prior computer experience learn to use the system in 5-10 minutes, are extremely happy about the interactive services and new friends aquired during the project

As part of the deployment part of the project Medineuvo has sofar acquired two new customers, Pyhtää (a small municipality) and the City of Espoo (2nd largest city)14.09.10 9Copyright by Medineuvo OyKenneth Sandström

14.09.10

Seniorline™

10Copyright by Medineuvo OyKenneth Sandström

Lessons learned on business models Unit based business models fits poorly with rigid budgeting requirements

as per municipal law due to unpredictable nature of demand and hence costs

Business model needs to be as predictable to public customer as possible, i.e. Fixed cost based Outcome based, i.e linked to key performance criteria which have a

clear cost associated to them either as a unit cost or a total budget A combination of fixed and outcome based Municipal carrot, i.e savings sharing, higher output for same money

To compensate for the fixed cost or performance based risks the company needs take on as large a responsibility as possible of the process and its production assets, to control change levers as well as possible = outsourcing

Outcome based earningsmodels will protect against price erosion in public tenders long term and support continous development


Case Pyhtää (pop 5000)A novel approach in elderly care

Goal: To support coping at home with novel approaches that lead to reduced use of expensive institutionalized care

The municipality outsources the customers, personnel and budget for 5+3 years The municipality retains its organizing and fiscal responsibilites according to the

law Medineuvo invests in the innovative services and technology and manages the

personnel The carrot for both the company and the municipality is shared income on 50/ 50

basis from netsavings of reduced institutional care = shared motives, good cooperation, prevention of sub-optimization

Changes and outcomes will be measured, researched, new standards will be developed, tested cost accounted for preparing the municipality for a very informed public tender process eventually

Result : Faster development of processes, services and testing of technologies

14.09.10 12Copyright by Medineuvo OyKenneth Sandström

Elderly care concept – home sweet home -Pyhtää

14.09.10

Elderly atHome

Nursing homePC long term careHospital care

Servic

e

need

s

Health

Inform

ationInteraction

Medineuvo 24/7•Competence•Multichannel•PMR•Monitoring•Logistics•70 nurses

PyhtääHome care team1Doctor5 nurses2 fysiotherapists9 home carers

Health Line 24

Inform

ation

Line 2

4SeniorLine 24

Servi

ce Li

ne 24

€/ day€/ day€/ visit

Case manager

Services for coping at home

Copyright by Medineuvo Oy13

135 customers3 with computers

Kenneth Sandström

Earnings logic - Commitments

Budget compensation Total home care budget moved to company, including personnel and support

servicesSavings compensation

Calculated on reduced insitutionalized days as measured on a quarterly basis compared to the last two years (2008-09) average. Net savings are shared 50/50. This accounts for higher cost of care of more frail elderly at home. This will help finance development long term

Commitments Caring for 135 customers and moving approx 10 out of 60 institutionalized elderly

into home care Investment and development commitments as outlined on next slide

Other income sources in the future (Private market) Commission on services and or products brokered Sales of Seniorline client to relatives and friends Advertising


Company investments into the concept over timeWhy? InvestmentsPrivate investment

enables development without constraints of public tender legislation

Investments prioritized based on impact on reduction of institutionalized days

Investments paced over contract time

Health and wellfare care center 24/ 7 Interactive telepresence (video) – Seniorline ™ Seniorline™ health content production Field management system Specialized doctor in geriatrics Preventive health coaching of chronic diseases Senior coaching Discharge team Home hospital activities (remote monitoring,

acute care, laboratory results, medication) Service integration Regular customer surveys Continuous education of personnel Introduction of incentive program for personnel

to drive desired changes Project funding to be applied for jointly

14.09.10 15Kenneth Sandström Copyright by Medineuvo Oy

Early resultsEffective time of work day spend at the home of the elderly

by the care team increased from approx 35% to 60% in six months (consolidation of teams, reorganisation of tasks and routes, 24/ 7 preparedness introduced on the field as well)

A reduction in institutionlized days becoming evident during the first 6 months particularly in the long term Primary Care area (almost 20 % reduction at end of the 7 th month)

A new mobile care alarm system introduced and tested with possibility for two-way calling and GPS location

Budget component needs adjustments to better reflect the actual prior costs, the original number did not account for all costs. Good cooperation in the joint finance committee.


What next?The concept is innovative in technical, integration,

service development and business model point of view

Many municipalities very interested in the modelCompany is looking for outside investors with

resources and know-how as co-investors in the concept or for a spin-off . The goal is to position this very promising business concept for a quantum leap.


14.09.10

Innovation-Investment-Integration Can innovation become part of the mega legacy health or social care

processes?

Absolutely!Through the 4PsPublic-Private-People-Partnership and developmentof the investor toolbox

14.09.10 Sivu 18

Secondary Care

Innovation

Primary Care

Home Care

18Kenneth Sandström

Thank you!

Kenneth SandströmMedinovo [email protected]+358-40-847 7291


mailto:[email protected]

AAL Investment Forum 2010 - A business case in AAL: How does it work in practice?

Health & Medicine

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