The costs and benefits of the introduction of Ambient
Assisted Living in the Netherlands
Author: Inge Hesselink Student number: 1457845 E-mail: i.hesselink@student.rug.nl
Date: February 8th 2010
University of Groningen
Faculty of Economics and Business MSc Business Administration
The costs and benefits of the introduction of Ambient
Assisted Living in the Netherlands
I. Hesselink February 2010
Abstract
This study develops a financial model for the calculation of the costs and revenues of offering Ambient Assisted Living (AAL) services by home care organizations in the Netherlands. The research is conducted by gathering information from three large Dutch AAL projects. The model is developed by identifying the potential costs and benefits of AAL and the key value drivers for the home care organizations that offer AAL products and services.
JEL classification: I11, I12, I18
4 Table of contents
Abstract ... 3
Acknowledgements ... 3
1. Introduction 1.1 Introduction ... 5
1.2 The need for AAL... 7
1.3 Motivation for the study... 8
1.3 Problem statement ... 9 1.4.1 Research objective ... 9 1.4.2 Research question ... 10 1.4.3 Research conditions ... 11 1.5 Research design ... 11 1.5.1 Research concept ... 12 1.5.2 Research process... 15
1.6 Data requirements and data availability... 16
1.7 Methodology... 17
1.8 Planning... 17
2. Literature review ... 18
2.1 Measuring the financial feasibility of healthcare projects ... 18
2.2 Characteristics of the Dutch healthcare sector ... 19
2.3 The introduction of AAL into Dutch home care organizations ... 21
2.3.1 Revenues of AAL... 22
2.3.2 Non-financial benefits ... 24
2.3.3 Costs of AAL... 25
3. Focus projects review ... 26
3.1 Koala... 26
3.2 Aveant ... 31
3.3 ZuidZorg ... 34
4. Development of financial model ... 38
4.1 Preconditions ... 38
4.2 Benefits of AAL... 39
4.2 Value drivers ... 42
4.3 Revenues... 44
4.3.1 Added value... 44
4.3.2 AWBZ neutrality and funding ... 44
4.4 Costs... 48 4.4 Client profiles ... 49 4.7 NPV... 54 5 Conclusions... 57 Glossary ... 60 References... 62 Appendices ... 65
Appendix A: Overview AAL products and services by home care organizations... 66
Appendix B: Overview most important effects of video communication aimed for... 68
Appendix C: Overview interview topics ... 69
5
1. Introduction
1.1 Introduction
While demand for healthcare in the Netherlands keeps on rising, the number of professionals offering this care is decreasing. In order to ensure high quality care available for all in the future, adjustments in the healthcare sector are needed. Ambient Assisted Living (AAL) is the use of technology in giving healthcare to people in the comfort of their own home. AAL acknowledges the important role communication plays in giving healthcare, next to physical actions. Activities such as giving advice, support, education, listening, encouragement and monitoring are highly important and can, because of technology, increasingly be given without actual physical face-to-face contact. Although worldwide many different terms and definitions are used to describe AAL, this paper uses the definition introduced by the NIVEL1; “all forms of healthcare in a clients’ home that are not offered by a physically present care giver”. Even by using this definition, the concept of AAL covers a wide range of products and services (e.g. video communication devices, measuring devices, emergency alarm systems, and security devices) which can be used for diverse groups of clients. Actiz defines two broad categories of clients for AAL; care and pre-care clients. The group of pre-care clients can be subdivided into wellbeing and cure clients. These categories consist of differentiated individual clients. Besides these different target clients, the services offered may differ as well. The services can roughly be divided into; care, telesupport, convenience, wellbeing, communication and safety and surveillance equipment. Table 1.1 gives an overview of the target client groups and the services that fit these categories. The added value of the specific offering will depend on the demands of the individual client. Appendix A gives an overview of the different products and services offered.
Care Telesupport Convenience Communication Safety and Surveillance
Care x x x x
Pre-care; cure x x x
Pre-care; wellbeing x x
Table 1.1: Overview client groups and AAL services
1
6
Potential advantages of AAL are; to increase efficiency in giving care by professionals, to support clients and their informal care takers thereby increase clients’ independency and to increase the quality of care given including prevention of escalation.
ActiZ is an association which advocates the interests of their members, being organizations in the Dutch healthcare sector (nursing- and elderly homes, home care, maternity care and youth healthcare). The organization creates opportunities for innovation in this industry by making efforts to change governmental policies, collecting and publishing available information and connect different parties in the sector for possible alliances. As part of the “Transition program in the long-term healthcare”1 ActiZ has initiated the program “AAL, nearby”2 in which it supports home care organizations in developing and testing AAL solutions. Within the programme 12 healthcare organizations (pioneers) participate in the “AAL Network”3. These organizations together offer AAL services to approximately 1000 clients4. As a condition to participate in this network, the organizations have to be willing to share their knowledge and experiences. Together the pioneers develop the conditions which are needed to deepen and broaden the use of AAL in the Netherlands.
The Dutch government is supportive of these initiatives and therefore offers temporary funding regulations for pioneers in AAL. However in order to be able to offer AAL services on a wider scale, permanent changes in the funding structure for healthcare organizations are needed. In order to develop such a funding structure, an overview is required of the costs and benefits of integrating AAL products in the offering of healthcare organizations. In this thesis an effort is made to contribute to the existing literature of determining the costs and revenues of offering AAL within a home care organization. Although different target client groups will be discussed, most emphasis will be on care clients.
1
Transitie Programma in de Langdurige zorg, www.tplz.nl 2
Programma "Zorg op Afstand, dichterbij, 2007-2010" www.zorgopafstand.net 3
Netwerk Zorg op afstand; Activite, Aveant, Beweging 3.0, Careyn-zorggroep, Het spectrum, Koala, Orbis Medisch en Zorgconcern, Proteion Thuis, Thebe, Vierstroomzorgring, Zorgcentrum St. Jozef, ZuidZorg. 4
7 1.2 The need for AAL
In an explanation of its program1, ActiZ describes that the need for AAL is the consequence of a number of challenges that the healthcare sector currently faces. These challenges originate from certain developments and trends in society which can be divided into demographical developments and social trends. Demographically it can be noticed that the demand for care increases because of ageing and an increase in the number of people with chronic illnesses. At the same time, the number of professionals in the healthcare sector is decreasing. These developments put an increasing pressure on volunteers and informal care takers. Moreover, the Dutch society is becoming more diversified, causing the demand for healthcare to diversify as well. In addition, certain social trends have to be considered, since they strongly affect the healthcare sector. First, people show a greater need for independency. Also, people increasingly value that care can be given in the comfort of their own home. Moreover, clients increasingly want to have a say in their care process. In addition to clients, care givers also request more independency and less bureaucracy. Finally, the need for collaboration is increasing because of specialization and technical developments.
ICT-solutions offer the possibility to anticipate on these trends. The costs of ICT-solutions are decreasing since their use is becoming more common, while their potential applications are increasing. Moreover people are becoming increasingly ICT-literate and thereby are expecting ICT solutions from their healthcare providers.
The healthcare sector in the Netherlands is undergoing some major changes. By adapting laws and regulations, the government tries to solve problems in the sector, decrease costs and adapt to changes in demand. One of the trends in society and in regulation is a demand for smaller scale healthcare supply with a strong focus on the individual client. AAL solutions can be used in this trend because of the high level of personal attention that can be given by using AAL. Because of changes in the health insurance market, the focus of insurers is also changing towards a more segmented strategy, finding an optimal combination between price, coverage, communication channel and purchase (BS Health Consultancy).
By providing more custom-made healthcare services, enabling clients to live in their own home longer and saving costs, pioneers in AAL feel that they can assist in adapting to the situation and the trends in the healthcare sector.
8 1.3 Motivation for the study
The previous section discussed several developments which put a pressure on the healthcare sector. The situation demands innovative solutions to be able to continue to make proper healthcare affordable for everyone.
Several healthcare organizations in the Netherlands agree that the introduction of AAL in the care system will contribute to reducing the hours of professional care needed and increasing the quality of the care given. Because of this, trial projects have been set up, research is being done and knowledge about using AAL solutions is increasing. However thus far it proves to be difficult to quantify the costs and benefits associated with AAL projects. This is partly caused by the start up phase in which most projects currently still are. Moreover it is difficult to determine the future revenues that may follow from introducing AAL.
Current projects are often set up as trial projects and are financed with subsidies and temporary funding regulations. However in order to implement AAL on a larger and more permanent scale, permanent funding solutions are needed. In order to be able to negotiate about the possibilities of these solutions, clarity is needed about the costs and revenues of AAL in the longer term.
One project that has made some important contributions to the research with respect to the economic evaluation of AAL is Koala. Koala was set up in 2006 as a joint initiative of health insurer Menzis, home care organization Thuiszorg Groningen and telecom company KPN, in the North-eastern part of the Netherlands. Since Koala, development of AAL solutions among the pioneers has continued. Two of the pioneers which have made a lot of progress in implementing AAL into their organization are ZuidZorg, located in the southern part of the Netherlands, and Aveant, located in the central part of the Netherlands. Both make use of a central ICT platform, for ZuidZorg this platform is VieDome1 and for Aveant it is PAL42. VieDome and PAL4 are currently the most widely used systems for AAL services of healthcare organizations in the AAL network.
1
www.viedome.nl, AAL services offered by home care organization ZuidZorg 2
9 1.3 Problem statement
In this section the problem statement will be defined. The problem statement consists of three elements; the research objective, the research question and the research conditions (De Leeuw, 2000).
1.4.1 Research objective
According to De Leeuw (2000), the research objective defines why it is important or useful that the knowledge which is the outcome of the research is produced. This entails defining the clients for which the research is done and the reason why this research is useful to them.
The objective of this thesis follows from the need of Actiz and the pioneers in the AAL network to find a more permanent funding solution to be able to continue to offer and develop AAL solutions. In order to discuss possible funding structures, clarity is needed about the costs and revenues of AAL in the longer term. The concept of AAL covers many different services which are suitable for many different clients. Main focus of this thesis however is on the effects of costs and revenues on home care organizations offering AAL to care clients. Moreover, in order to be able to perform a more in-depth research I decided to narrow the focus of the study to three of the pioneers of AAL in the Netherlands; Koala, ZuidZorg and Aveant.
The objective of this research is therefore formulated as follows;
10 1.4.2 Research question
De Leeuw (2000) describes the research question as the knowledge that the research intends to produce. This can be formulated as a question that needs to be answered or (more often) as a definition of a needed design or concept.
The research question is formulated as follows;
How can the integration of AAL into home care organizations in the Netherlands be economically evaluated with a financial model by studying Koala, Aveant and ZuidZorg?
The research question can be subdivided into three sub questions. The research is conducted by means of an exploratory case study. The sub questions are answered by studying data from the three AAL projects selected.
The sub questions are formulated as follows:
1. What is the business model that is currently used and how can this be further developed?
In order to determine the possible costs and benefits, the structure of the organizations needs to be known. The business model describes the operations of the organization; among other things it describes the customer segments, product or service offer and partner network. The business model also explains the organizations’ revenue flows and cost structure.
2. Which costs and benefits arise from introducing AAL into a home care organization?
To answer this sub question the different possible costs and benefits (financial as well as non-financial) have to be identified. These follow from the identification of the value drivers of AAL. A value driver is defined by Koller et al (2005) as “an action that affects business performance in the short or long term and thereby creates value”1 The benefits are subdivided into two parts; the financial benefits and the non-financial benefits. The financial benefits lead to an increase in revenues directly. These can for example be substitution benefits. Substitution benefits are cost savings which occur because the traditional way of giving care can be substituted with a new way of
11
giving care at lower costs. An example of this is when less physical visits of the home care nurse are needed because they can be replaced with screen-to-screen contact. The non-financial benefits cannot easily be quantified however they may lead to increased revenues as well because of a higher willingness to contribute by clients. Non-financial benefits can for example be an increased feeling of safety or a decrease in loneliness.
3. How can the costs and revenues of introducing AAL into a home care organization be
modeled?
The final step in reaching the research objective is modelling the estimated costs and revenues that have been found in answering the second sub question. One model will be developed which presents the constructed example of a home care organization introducing AAL. For this constructed situation it is assumed that the experimental phase (which is the current phase during which the pioneers develop and test the AAL solutions) has ended and that the home care organization can use the knowledge gathered by the pioneers.
1.4.3 Research conditions
The research is constraint by certain conditions which have to be met.
The study has to be completed between September 2009 and February 2010.
The end product should provide a methodologically sound approach and should meet the scientific requirements as formulated by the Faculty of Economics and Business.
The end product must be of practical relevance for ActiZ and must comply with its requirements.
1.5 Research design
12 1.5.1 Research concept
Johnson et al (2008) argue that a successful innovation often is caused by a successful innovation of the business model. Therefore I propose the conceptual model presented in figure 1.1, which indicates the four components of a business model according to Johnson et al. (2008) and the way in which this business model leads to a financial model.
Figure 1.1: Conceptual model
Business model
According to Johnson et al. (2008) the business model consists of four components.
The customer value proposition (CVP), which is the (bundle of) products or services which are of value to the client. In the case of AAL this entails the care package offered to the clients. It has to be determined which service offerings are of value to the clients.
The profit formula defines the way in which the organization makes its profit. For a home care organization the goal is not to make a profit but to cover the costs. Their profit formula consists of the revenue model and the cost structure.
The key resources are the assets needed to deliver the value proposition to the customer (e.g. people, technology, products, facilities, equipment).
13
And finally, the key processes are the operational and managerial processes that are needed to deliver value repeatedly and increasing in scale. Such processes can for example be training, development, budgeting, planning etcetera.
The four components of a business model as described by Johnson et al. (2008) summarize the key elements of a business model and their relationships as developed by Osterwalder (2004) and presented in figure 1.2.
Figure 1.2: The business model ontology, Osterwalder (2004)
The definition of AAL as used in this thesis (all forms of healthcare in a clients’ home that are not offered by a physically present care giver) is rather broad and includes a range of products and services which can provide value for a number of different target client groups. Hakansson and Gavelin (2000) argue that because so many different definitions and applications of AAL exist, these applications should be examined individually.
14
Financial model
The financial model will be developed using the results of the business model. The model will consist of two components. First a Cost-Benefit Analysis (CBA) will be performed. This CBA gives an overview of the possible costs and benefits of the introduction of the AAL for a home care organization. These costs and benefits will be then used to develop an Excel model which calculates the resulting costs and revenues. The financials will be discounted using the Net Present Value (NPV) method.
Figure 1.3 shows the CBA analysis of AAL which affect the costs and revenues of the home care organization introducing AAL. The term funding is used in the healthcare sector for financial resources made available by governmental or other organizations to cover costs made. These financial resources form the revenues of the home care organization.
Figure 1.3: CBA and costs and revenues of AAL
This model is limited to the costs and revenues for home care organizations introducing AAL for care clients. It therefore does not consider the benefits for other stakeholders (except clients) and society. These benefits should be taken into account when developing a social business case1.
15 1.5.2 Research process
The research will be conducted by means of an exploratory case study. By studying the information from the three selected organizations in detail, preferably more general conclusions can be drawn.
With respect to Koala, academic research has already been performed. The findings of this research are discussed in chapter 3. To be able to complement the findings of this research, information is collected from home care organizations ZuidZorg and Aveant. Both organizations have taken part in the monitor research about AAL of the NIVEL1. Because of this, information about the projects has already been collected. Moreover, as part of the “Network AAL” the organizations are familiar with research being done and are open to participating in it. Furthermore, of the pioneers, Aveant and ZuidZorg are one of the furthest in integrating AAL into their organization, thereby evolving to a more mature phase. In addition the three projects are geographically dispersed and together they cover a relatively large part of the Netherlands. Finally, they all have their own unique focus in introducing AAL. Koala, supported by research of the University of Groningen, focuses on the economic and business side of AAL. Emphasis is for example placed on the internal reorganization needed and the economic evaluation. Aveant focuses on pre-care cure clients by assisting clients to cope with their chronic illnesses. ZuidZorg emphasizes on cooperation with municipalities, technical partners, other healthcare providers and other service providers to adjust clients’ homes to allow them to remain living in the comfort of their own homes.
In the final part of the research the information gathered by studying literature and the information from the organizations is used to develop a financial model and to draw conclusions about the costs and benefits of introducing AAL into home care organizations in the Netherlands.
1
16 1.6 Data requirements and data availability
Several data sources are used to be able answer the research questions and to achieve the research objective. Because of the nature of the research (an exploratory case study), the data required is mainly qualitative. The gathering of the data can broadly be divided into two phases which will be described below.
Desk research
The research starts by studying the available secondary literature with respect to the subject. By studying this literature ideas are gathered about the way in which costs and benefits can be measured in the healthcare sector and the problems researchers have come across in the past. An overview of the literature studied is given in chapter two. The desk research also consists of studying the available documentation of the three projects on which this research is focused and the information available from other AAL initiatives in the Netherlands.
Field research
During this phase interviews are conducted with parties involved in the different projects. From these interviews a more in-depth understanding of the projects can be gained. During the interviews focus will be on identifying the different parts of the business model of the project as shown in the conceptual model. Table 1.2 specifies the interviews held. In addition several meetings discussing the development of AAL in the Netherlands are attended, during which general background information is gathered. The interviews with Annemarie van Hout and Toon van der Looy were semi-structured based on the list of questions in appendix B. Following the interviews, quantitative data is collected on the costs and revenues of these organizations.
Name Position Information
Peter Stevens Project manager AAL Network1, ActiZ General background information about
the pioneers. Information about current and possible future funding structures.
Annemarie van Hout Project manager AAL2, Aveant General information, business model,
financial data from Aveant
Toon van der Looy Project manager VieDome, ZuidZorg General information, business model, financial data from ZuidZorg
Liesbeth van Rijkom Project manager, Thuiszorg Groningen (TGZ)
Background information adding to the research done.
Table 1.2: Methodology overview 1
Projectleider Netwerk Zorg op Afstand, ActiZ
2
17
1.7 Methodology
Table 1.3 indicates what research frameworks are used in executing this study.
Research topic Research method Research framework
1. Business model Desk research, interviews Business model framework
Exploratory case study 2. Costs and benefits Desk research, interviews Exploratory case study 3. Financial modeling Desk research, data on costs
and revenues
Financial valuation methods
Table 1.3: Methodology overview
1.8 Planning
The following time schedule gives a general indication of the time frame in which the study has been conducted.
September 1st – October 1st Develop research proposal (chapter 1) October 1st – October 18th Chapter 2 (literature review)
October 19th – November 1st Interviews and desk research case projects November 2nd – November 15th Chapter 3
November 16th – December 6th Chapter 4
18
2. Literature review
This chapter gives an overview of the research that has previously been done on the costs and benefits of the introduction of AAL in the Netherlands. It becomes apparent which efforts have already been made to measure the financials for an AAL project. This information will be used when evaluating the three focus projects in chapter three.
2.1 Measuring the financial feasibility of healthcare projects
Literature distinguishes several general methods for the economic evaluation of healthcare projects. Important literature to be reviewed in this respect is that of Drummond et al (1997). Three different methods for the economic evaluation of projects in the healthcare sector prevail. First the cost-effectiveness analysis (CEA), which compares two (or more) alternatives by comparing their costs in monetary units with their score on one common effect (e.g. less hospital visits or longer life). The second method described by Drummond et al. is the cost-utility analysis (CUA) in which costs in monetary units are compared to the change in quality-adjusted life-years (QALYs), thereby taking into account the value that patients place on the care provided. The final method described by Drummond et al. is the cost-benefit analysis (CBA). In contrast to the two methods described above, this method does not assume constrained maximization (i.e. how to best allocate the existing budget). CBAs measure both the costs and benefits of alternatives in monetary units. However as can be imagined, benefits such as quality of life or length of life, are not easily translated into monetary units. The methods described by Drummond et al. (1997) are summarized in figure 2.1.
Figure 2.1: The economic evaluation of healthcare projects1
19
Several studies have looked into the financial feasibility of AAL, with mixed results. Whitten et al. (2002) give an overview of some of the research done in the past years. They find little evidence that telecare is a cost effective way of offering care. Dansky et al. (2001) on the other hand find that although AAL requires additional expenses, the cost savings are substantial and exponentially increasing with the increase in the duration of care needed. Moreover, they find that AAL does not compromise the quality of care given.
Internationally the study of individual AAL projects has provided several positive results. Jerant et al. (2001) compared three groups of CHF patients which were recently discharged from the hospital in the US. Group one received home telecare with an integrated electronic stethoscope, group 2 received home care by nurse telephone calls and the third group received the usual outpatient care (including hospital visits). They conclude that by using home telecare for post hospitalization monitoring, substantial reductions in hospital readmissions, emergency visits and costs of care might be achieved.
2.2 Characteristics of the Dutch healthcare sector
20
In the Netherlands, the revenues of home care organizations largely consist of contributions from the AWBZ1. The AWBZ covers the costs of exceptional healthcare costs which are not covered by the health insurance. The AWBZ applies to all Dutch residents.
By this law, home care organizations receive an amount of money for the hours spent on providing care to a client. To be entitled to this care, the client needs to receive an AWBZ-indication which shows that the care is needed. The indications are divided into groups which show the level of care that is needed. The AWBZ covers the following five indications2;
Personal care; for example assistance with showering, dressing, shaving etc.
Nursing; for example care of injuries, giving injections or teaching clients how to do so themselves, advice on how to deal with diseases.
Guidance; for example assistance in structuring the day or controlling the living situation and house keeping.
Treatment; for example care in case of an disorder, such as rehabilitation after a stroke. Intramural care; when it is not possible to remain living independent, another living situation
has to be arranged. This can be necessary because of dementia or because continuous supervision is needed.
Peeters and Francke (2009) indicate that of the clients receiving screen-to-screen care from organizations within the AAL network approximately 55% has an AWBZ indication.
The structure of the AWBZ currently does not provide an incentive for home care organizations to introduce AAL. If AAL reduces the number of hours spent on giving care, this means that less hours of AWBZ compensation are rewarded. The NZa therefore now has introduced the screen-to-screen regulation, which compensates organizations that introduce AAL, for this decline in income3. However the screen-to-screen regulation is temporary (running from January 1st 2007 until June 30th 2010) and a more permanent solution is needed.
The Dutch healthcare infrastructure regulation4 is another temporary funding arrangement which offers a compensation for the technological facilities needed to offer unplanned care on demand with a high frequency.
1
Algemene Wet Bijzondere Ziektekosten (AWBZ), General Law for Exceptional Healthcare costs 2
College voor zorgverzekeringen, 2009 3
Nederlandse Zorgautoriteit (NZa), Beleidsregel CA-290 Experiment screen to screen zorg 4
21
2.3 The introduction of AAL into Dutch home care organizations
In 2007, ActiZ, an organization for entrepreneurs in the healthcare sector, has initiated the program; “AAL, nearby”1 in which it supports home care organizations in developing and testing AAL solutions. Within the programme 12 healthcare organizations (pioneers) participate in the “AAL Network”2. These pioneers can use the program as a platform to discuss their findings among each other, learn from each other and together develop a fitting strategy for the implementation of AAL. The findings of pioneers can be used in implementing AAL on a larger scale. The findings of these parties are therefore carefully monitored. Initially pioneers often set up pilots or projects for AAL, these pilots gradually transform to become an integrated part of the regular care offered by the home care organization.
In 2005 the NIVEL started with a yearly monitor of the ActiZ program3. The objective of the monitor is to get an insight into the way the introduction of AAL progresses and what the effects are on clients, informal care takers and professionals. The information is gathered by administering interviews and sending questionnaires to the clients, informal care takers, service centre employees, employees of the pioneers and managers of these organizations. During the extensive monitor of 2007 (Peeters et al. 2008) the respondents consisted of 254 clients, 136 informal care takers, 38 service centre employees, 11 employees of the home care organizations and 7 managers (the monitor was carried out for 7 pioneers). Peeters et al. (2008) have send questionnaires to all clients of the participating organizations who were connected to a video communication system in November 2007. They thereby make no distinction between different target groups. A different part of the research has studied the results for clients who receive telesupport (34 responding clients).
Results of the monitor have shown that in order to be able to expand the use of AAL, broadening and intensification are needed. Broadening is defined as the offering of expanded care package with more services and products focused on a larger target group. The concept of intensification is used to indicate the need to look into the needs and wishes of specific target groups in more detail.
1
“Zorg op afstand, altijd dichtbij”, ActiZ 2
Netwerk Zorg op afstand; Activite, Aveant, Beweging 3.0, Careyn-zorggroep, Het spectrum, Koala, Orbis Medisch en Zorgconcern, Proteion Thuis, Thebe, Vierstroomzorgring, Zorgcentrum St. Jozef, ZuidZorg. 3
22 2.3.1 Revenues of AAL
Peeters et al. (2008) indicate that managers of the organizations within the AAL network, in general have highly optimistic expectations about the number of (new) clients. In determining the budget one has to consider that although management is highly optimistic about the possibilities of AAL, this may not necessarily be true for clients and care givers. Peeters and Francke (2009) report that in 2008, the participating home care organizations together had about 1,021 clients who were making use of AAL. Of these clients 765 had video communication equipment; the remaining 256 clients received telesupport.
Although clients indicate that they are generally positive about the video communication services offered, use of the equipment is limited: 26% has contacted the medical service centre in the week before participating in the research and 12% indicates they (almost) never contact the centre.
In their recent report on domotica the review board for the healthcare sector1 emphasized that a thorough evaluation of the effects of the use of domotica on clients and on the organization is needed. The report states that many healthcare organizations that introduce domotica, do not clearly describe in their plans, which technology is used for a specific client and what the goal of using this equipment is.
With respect to possible substitution benefits, Peeters et al. (2007) find that 61% of the responding clients expect to be able to remain living in their own home for a longer period because of the screen-to-screen network. Moreover, 19% of the respondents indicate that they need less professional care because of the screen. Finally, 51% of the informal care takers feel that they are better supported because the client is part of the screen-to-screen network. This may cause an increased participation of informal care takers.
Although many respondents indicate they would like to keep using the screen-to-screen equipment after the trial period, there is uncertainty about the willingness to pay a contribution. Some clients point out that they have low incomes and already pay a fee for their personal alarm. Others state that they are not willing to pay for the use of the system.
1
23
Grin et al. (2008) explain that an innovation such as AAL requires a system innovation, in the way that it needs different structures (infrastructure, rules, collaboration etc.). This complicates the introduction of AAL and also complicates its economic evaluation. Grin et al. therefore find that funding of AAL projects is a problem. The required investments for the development and adjustment of the organization are high, especially for healthcare organizations which generally have a limited budget. They find that costs relative to benefits are especially high in the starting phase of the project, when it’s not yet possible to reap the benefits of scale advantages. Moreover they observe that the current system of funding healthcare does not yet consider AAL.
The Dutch national auditor1 has recently (June 2009) published a report about AAL. The report concludes that funding becomes a major bottleneck for a significant share of the initiated projects. Although several possibilities exist for the temporal funding of the projects, during the start up phase, more permanent funding can often not be arranged.
From interviews with the managers of the organizations in the network, Peeters et al. (2008) indicate the following points, which according to these managers are necessary to be able to fund the costs of introducing a screen-to-screen network;
• Improved regulation and use of the healthcare infrastructure regulation2
• Broadening of the client target group thus creating a larger number of connections
• Funding by means of a contribution by the client or means from the AWBZ-Wmo
• A clear picture of the needs and wishes of clients with respect to the services, in order to be able to convert these into actual demand for services
• Collaboration with other parties
24
There are a number of issues in the current healthcare funding structure that make it unsuitable to collect permanent funding to recover the costs of AAL.
First, as discussed before, the current structure of the AWBZ is such that healthcare organizations can claim their costs for the hours spent actually giving care. An increase of efficiency causes the number of hours of care given to decrease, which means lower revenues from the AWBZ.
The screen-to-screen regulation offers a compensation for this decrease in revenues; however this regulation is only temporary. Moreover, part of the target clients for AAL do not have an AWBZ indication. Other revenue sources have to be found to recover the costs for these clients.
A third issue with respect to funding is the so called production ceiling1. The current procedure is that the AWBZ budget is divided over the healthcare providers in the region. Every healthcare provider receives a limit for the total care that the organization can claim (the production ceiling). The healthcare provider has to ensure that the care provided remains within the limit, or pay for the additional care itself. Peeters et al. (2008) indicate that increasing the number of clients of a home care organization may be necessary for recovering the costs of AAL; however, the production ceiling limits the possibilities.
Finally, because the benefits of AAL are not limited to the home care organization and its clients, it is possible that costs are made by one organization while another collects the revenues. An example of this is telesupport given to clients in the pre-care cure group. This form of AAL could result in less hospital visits or shorter admissions. In this way the home care organization pays for the costs of AAL, while the hospital benefits from the lower costs resulting from AAL.
2.3.2 Non-financial benefits
As was argued earlier, the benefits of AAL projects reach beyond the direct revenues of the project. In identifying the benefits of implementing AAL projects one should take into account the non-financial benefits as well. These non-non-financial benefits may lead to increased revenues, for example from client fees. Werson (2002) argues that a purely financial business case is often not relevant when one evaluates an investment to transform and improve the organizations’ operations. According to Werson there are three characteristics that distinguish investment decisions for transformations from more classical investments for replacement or expansion. The first is that the project usually starts with an investment in IT. However, because the introduction of this new IT system has its effect on the entire organization, it also requires changes in operating processes, task structures and employee relationships. The second characteristic is that these investments often
1
25
concern large parts of the organization and take years to complete. Finally, the “end situation” is often not clear and can only vaguely be described.
Peeters et al. (2008) show positive responses of the users of AAL. They indicate for example that 32% of the clients feel more independent because of video communication (25% for telesupport clients). Moreover, 71% of the clients state that their sense of safety has increased because of the use of video communication devices (32% for telesupport clients). Of the clients 66% would like to keep using the devices.
Peeters and Francke (2009) further find that screen-to-screen care does not only have the potential to substitute part of the face-to-face care given, it also gives home care organizations the possibility to deploy the hours of care more flexible (e.g. 4 times 15 minutes a day instead of an hour of face-to-face contact during hours when there is less traffic).
2.3.3 Costs of AAL
Peeters et al. (2008) distinguish two categories of development costs; organizational costs and technical costs. The organizational costs consist among other things of project management, recruitment, public relations and organization of the service centre. To the technical costs belong; equipment at the clients’ house, development costs for software and costs of a show house.
With respect to the service centre, Peeters et al. (2008) have collected the background characteristics of the responding service centre nurses. Of the respondents 44% has completed an education in nursing or care at the vocational level1, while 46% has completed a college education2 in nursing. The service centre nurses are generally highly experienced, on average they have worked 20 years in the nursing profession.
Peeters and Francke (2009) interviewed managers of 11 home care organizations offering AAL services. Two of them have established a service centre specifically for the introduction of AAL. The other nine organizations use the service centre of an other home care organizations or use their own existing service centre. Seven of the participating organizations are reachable 24/7 themselves while four can offer 24/7 availability by using the service centre of an other organization.
1
MBO, Middelbaar Beroeps Onderwijs 2
26
3. Focus projects review
This chapter will describe the analysis of the three organizations which were selected as focus organizations for this study. As stated these are; Koala, which was executed in the area of Groningen, Aveant, which operates in the area of Utrecht, and ZuidZorg, from the Eindhoven area. Appendix B gives an overview of the topics discussed during the interviews which were held with both organizations. This chapter describes the information gathered from these interviews. Also a short introduction of the projects is given.
3.1 Koala
Koala1 has been selected because of the extensive research that has been conducted, concerning the relatively large number of participants of Koala. Moreover the research has contributed substantially to the economic evaluation of AAL making it a good starting point for the rest of the thesis.
The Koala foundation is a joint initiative of health insurer Menzis, home care organization Thuiszorg Groningen and telecom company KPN, which was founded in 2006. The objective of Koala is to use ICT to make healthcare more effective and efficient. Koala offers AAL by using the living room television. By means of a camera, the patient can contact the Medical Service Centre (MSC) 24 hours a day. Besides the camera, Koala offers diagnostic equipment such as blood pressure, weight and ECG equipment. The MSC can therefore, in close collaboration with the patients medical care givers, offer a constant monitoring of the patient in their own home.
During the start up phase, 1500 clients in the province of Groningen were included into the experiment. Koala distinguishes between two groups of patients; care and cure patients. New is that both patient groups are served by the same MSC, possibly leading to synergy effects. Koala Care focuses on clients of home care organization Thuiszorg Groningen (TZG), in particular clients with an AWBZ-indication whose care can partly be replaced by AAL. Koala Cure focuses on three client groups; clients with Congestive Heart Failure (CHF), Diabetes Mellitus (DM) and Chronic Obstructive Pulmonary Disease (COPD). In their study, Boonstra et al. (2008) also make a distinction in the results between these different target groups.
1
27
Customer Value Proposition
The offering differs per target customer group. With respect to care patients, Koala is used to revise clients’ care plan by substituting part of the face-to-face care with screen-to-screen care. AAL can only be used in situations when physical care giving is not necessary. Two AWBZ-categories were indicated which can be suitable for replacing part of the activities by AAL; monitoring of the client and “supporting guidance”1. Of the 11.000 clients of TGZ, about 400 were found to be suitable for Koala considering the restrictions set to the target client group. An extension of the target group could lead to more clients being suitable. Koala Care offers 24/7 contact with the Medical Service Centre (MSC) by means of a camera connected to the living room TV. Services that can be offered are; advice, support, assistance, motivation, referral to specialists and informing of other care givers. More specifically these can for example be; checking whether medication is taken, night inspection, answering medical questions. The video connection that is offered enables nurses to assist clients faster and often also better because they can see the clients’ condition. Moreover, clients tend to be more personally connected with the nurse. According to Boonstra et al. (2008), the services that can be offered by Koala Care were not clearly communicated to the clients and the nurses, this initially caused the general enthusiasm for Koala Care to be relatively low. They for example find that part of the research population had a need for additional care with respect to social-emotional aspects. Koala can play an important role in this respect but has not communicated this possibility clearly to its clients. Instead, Koala Care was positioned as an addition to the care given, which was meant for use in times of emergency only. Moreover because employees knew Koala was a trial, nurses often did not want to end their current practices to substitute these by Koala care.
Overall, the CPV of Koala Care can be defined as care that is given by means of a video connection as part of the care plan of the patient. Clients mention several important benefits gained from using Koala Care among which are; safety, independency, optimize healthcare and social issues. Clients state that they were highly satisfied with the care provided by TZG, both before and after the introduction of Koala.
For Koala Cure the offering differs. Besides the video equipment, the service consists of monitor equipment adjusted to the type of condition of the client. Some general notes about Koala Cure will be made here. The monitor equipment allows clients to measure their own health situation. The measured values are automatically sent to the MSC. Whenever the levels fluctuate outside the
28
certain boundaries, the MSC can contact the patient or refer the patient to the hospital or general practitioner. Koala Cure offers frequent and lower cost monitoring, which has several advantages. First, by monitoring more constantly problems can sooner be detected which causes them to remain more manageable. This can prevent or shorten admission to the hospital and prevent hospital visits and contact with other care takers (e.g. the general practitioner, GP). Second, frequent monitoring has the consequence that patients get a better insight into their own condition, causing them to be better able to participate in their own care process.
For Koala Cure the constant monitoring, with accompanying advantages, is the real value added to the patients. The video equipment can be useful but is often not even used because contact by phone proved to be easier and just as effective.
The implementation of Koala is complicated by the involvement of different parties who each have their own goals with respect to Koala;
The Koala project organization; to realize a large number of Koala-connections in a limited time frame and with a limited budget
Menzis; to make healthcare operate more effectively thereby lowering the costs of healthcare. Moreover they have the intention of making the healthcare sector more transparent, making it easier to forecast supply and demand.
KPN; to develop a competitive advantage with respect to other telecom companies. In the future the system can be expanded to include not only care services but also other activities. TZG; to operate more effectively while maintaining the current quality of care. Aim is to (within the current agreements and tariffs received) deliver the same care in less hours worked and also to save on the non-productive hours (e.g. less travelling time).
All parties have the intention to use Koala as a learning project to gain experience with AAL on a larger scale.
Profit formula
29
With respect to Koala Care the amount of substitution benefits depends on the percentage of visits that can be substituted, the length of a visit (including travel time) and the costs for TZG of a visit per hour. Substitution of visits by a GP are also included as substitution benefits. In the case of Koala Cure, substitution benefits also include the costs saved because of a decreasing number of hospital visits and a shortening of the period of hospital admission.
The costs of Koala consist of; installation and maintenance of the Koala-connection and equipment and building, equipment and staffing of the Medical Service Centre. The costs of the MSC however were not fully accounted to Koala since the MSC was set up from the existing telephone centre of Thuiszorg Groningen and the employed nurses performed other duties which were not accounted to the Koala project.
The report compares the substitution benefits to the costs of one Koala-connection. Considering this, the frequency of the contact moments per month has to be relatively high in order to cover the installation costs. The report finds that in the test population, the costs can only be covered in the case of a limited number of high frequent users or for clients living in a remote area.
Koala does not only offer substitution benefits. As explained by Boonstra et al. (2008), complementary benefits are observed as well. These can for example be; an increased feeling of safety or more independency. These complementary benefits have not been taken into account in the economical evaluation of Boonstra et al. In addition, Boonstra et al. have not included the benefits for clients and their employers which are caused by time savings for hospital visits and admissions.
Key resources
The key resources needed to offer Koala to the clients can be divided into three categories;
Infrastructural; A secured internet connection including technical support was provided by KPN.
30
Medical Service Centre; Because of the 24/7 accessibility of Koala, a Medical Service Centre had to be set up. Besides a building and Koala equipment the MSC also needs staffing. During the Koala-period a maximum of 15 nurses were employed by the MSC. Because the number of calls was relatively low and the variety of questions was high, the MSC was staffed with highly qualified nurses.
Key processes
In order to be able to deliver the added value of Koala repeatedly and on an increasing scale, the following key processes need to be developed;
Training. The nurses employed by the MSC need to possess a large variety of skills of medical as well as technical and social nature. They for example have to be able to effectively communicate with the clients and other care givers, be able to operate the systems and perform administrative tasks. For Koala Cure it is especially important to have a good knowledge about the specific conditions. Boonstra et al. (2008) find that the majority of the skills needed for a MSC nurse can be trained.
Technical development. For the Koala services to be valuable to clients, the equipment and connection have to be reliable. Clients have to be able to trust that their measurement equipment works and that they can contact the MSC when needed. During the Koala trial period this was not always the case. Technical development also includes the development of new innovative AAL solutions.
Development of protocols. The intention was to make healthcare delivered by Koala to be an integrated part of the care plan managed by the coordinating district nurse1. However communication between MSC nurses and the coordinating district nurses where not always clearly set out. Moreover, not in all situations did the MSC nurses know what to do. Protocols are defined in more detail with respect to cure patients. Because of the large variety in questions and needs of care patients, the development of protocols is more difficult. However by developing clear protocols it becomes easier to define the role each party plays in the executing of these protocols, which enables the integration of AAL into the care plan.
1
31 3.2 Aveant
Home care organization Aveant is located in the city of Utrecht. The organization is a pioneer in AAL and has performed several AAL pilots. In 2006 Aveant decided to cooperate with other healthcare organizations in the development of AAL. Aveant, Zorggroep Utrecht-West, Zorggroep Zuid-Gelderland, Opella and Focus Cura (a company which provides technological innovations for the healthcare sector) initiated the foundation of PAL4. PAL4 (Personal Assistant for Living) is an open platform in which stakeholders can cooperate with respect to infrastructure and development. PAL4 consist of a central database, a central service centre and an internet platform on which participants (healthcare organizations) can offer their own personalised services. PAL4 offers a basic package of screen-to-screen contact by television, personal computer or touch screen. In addition additional packages can be added based on the clients particular situation. Currently over 30 organizations have joined PAL4 and it is used by 6 of the participants in the AAL network.
Customer Value Proposition
PAL4 offers the following product and services categories; Wellbeing services
Equipment with respect to alarm, domotica, sensor technology, telemedicine and acces to the accommodation
Video connections with a service centre for AAL
Own television channel for organizations (e.g. “church television” or “Health TV”) Observation techniques (for example used in case of dementia)
Video conferencing equipment for GP’s or in hospitals Virtual counters at public locations
PAL4 has been established to oppose to pure technical developments in healthcare. In the view of the initiators, healthcare services are the focus, the technical equipment is used to support these services and therefore needs to be reliable. Aveant participates in PAL4 projects which have a connection to their core business. The organization has started three projects with respect to AAL within PAL4; PAL4 COPD, PAL4 Diabetes and PAL4 home care.
32
COPD and PAL4 Diabetes offer patients a treatment protocol in which parts are substituted by AAL. The services entail interactive information, monitoring by means of questions about the health situation that have to be answered and possibly support by means of a video connection. The clients receive the “Health Buddy”, a small device which allows them to be monitored and supported without care takers being physical present. The device requires the daily answering of a number of questions related to their health status. The answers are sent to the service centre employees who evaluate them and contact the client if needed. Aveant’s objective for AAL services for clients with chronic conditions is to improve the health of the client by efficient and more frequent monitoring, creating more self-awareness and independency and by effectively activate clients to take the needed measures. This may result in prevention or shortening of hospital admissions and visits and less required contact with the GP.
While Aveant participates in PAL4 projects with respect to care and pre-care cure clients, PAL4 has a broader target, focusing on the overall wellbeing of the client. With a wide range of wellbeing services, PAL4 enables clients to be part of a community. The objective is to increase the contact clients have with others, thereby decreasing their feeling of loneliness.
In its AAL projects, Aveant cooperates closely with Portaal, the housing corporation in the area. This has the advantage that Portaal can already install the needed connection for AAL into the houses they build.
Profit Formula
When starting AAL projects, Aveant has made the decision that their costs should fit into the normal funding regulations applicable to home care organizations. Aveant receives compensation for the hours spent giving care from the AWBZ. The care infrastructure regulation offers compensation for the purchase of the equipment. The screen-to-screen regulation can then be used for any additional costs. Moreover part of the investment costs can be covered by provincial subsidies. By using these additional regulations, Aveant so far has managed to cover their costs for AAL projects.
33
indication only receive funding for care for which physical presence is needed (e.g. help with housekeeping, washing) and that the funding for care with communication (e.g. advise, assistance) is limited.
Focus of the Aveant profit formula is not so much on saving costs in the short-term and thus on fast recovery of the investments. Aveant is convinced that AAL will offer long term added value to their clients and that ICT will play a large part in the healthcare sector of the future. In addition, cost savings may occur on the longer term.
Although PAL4 has a clear focus on the healthcare sector it became apparent that clients often highly enjoy the wellbeing and fun related services offered. These services (for example the ability to have screen-to-screen contact with family and friends) were often reasons for clients to agree to installation of PAL4. These services may therefore also increase the willingness of clients to contribute for the use of AAL.
Key Resources
The key resources needed to offer Aveant to the clients can be divided into three categories;
Infrastructural; Aveant uses ADSL internet connections to connect clients to the service centre.
Equipment; The camera, monitor equipment and other equipment to be installed at the clients’ house. Supply of this equipment has been outsourced by Aveant and is now provided by a specialized firm.
Service Centre; The service centre has to be staffed 24/7. However, PAL4 offers a central service centre for all partners enabling them to share the costs.
Key processes
In their report of the first AAL project of Aveant (“Buuf”), which later transformed into PAL4, Aveant mentions several key processes needed for the success of AAL;
Technical assistance; one central contact point needs to be communicated which clients can contact with technical questions about the use of the equipment.
34
The fun-factor. Aspects such as contact with other users, games and internet access proved to be important reasons for clients to participate in the project. The level of use of these options also turned out to be high.
Costs. Aveant has not requested a client fee for participating into the project, especially because of its experimental nature, during which the offering was still in the development phase. Moreover many participants pointed out that they have a low income and are not able to contribute much.
“AAL promotion officers”1. After several trial projects, Aveant has now reached the phase in which AAL projects are integrated into the organization. For this purpose Aveant has appointed AAL promotion officers per district. These officers are home care nurses who are enthusiastic about AAL and are given the responsibility to increase the knowledge and interest of clients of AAL solutions.
3.3 ZuidZorg
Home care organization ZuidZorg is located in the Southern part of the Netherlands and has made AAL one of its primary focus points. Along with technical partners, ZuidZorg has developed its own ICT platform for AAL called VieDome. According to Peeters and Francke (2009), ZuidZorg is one of the two pioneers who has reached the stage in which AAL has been fully integrated into the regular care process. This integration consists of adjusting the operating processes and formulating protocols and procedures with respect to AAL.
VieDome provides clients with a screen in their homes which allows them to contact the service centre, service providers, family, informal care takers and other users of VieDome. Depending on the personal situation more equipment can be installed like a personal alarm or movement detectors.
VieDome currently has approximately 500 clients who are connected through screen-to-screen equipment. Of these clients approximately 200 have an AWBZ-indication, 100 are clients of a different healthcare provider and 200 live in one of the senior houses which provide VieDome. In addition approximately 13.000 clients make use of a personal alarm2 which is also connected to the service centre of ZuidZorg.
1
Aandachtsfunctionarissen voor Zorg op Afstand 2
35
Customer Value Proposition
VieDome offers a number of products and services which in agreement with the client can be offered based on the clients needs. The services can be classified into the following categories;
Contact from home. VieDome allows clients to communicate with other VieDome users, family members, informal care takers and service providers by using a video connection. Service and Convenience. VieDome allows clients to contact their partner PuntExtra. This
firm arranges a variety of services like a gardeners, handyman or grocery services. Rabobank is also a partner of VieDome, allowing clients to contact their bank for advice and services. Moreover VieDome offers domotica solutions such as automatic light switches.
Information and Advice. VieDome provides clients with local information, for example about activities within their neighbourhood. Clients can also contact PuntExtra for advice and information concerning living, care and wellbeing in their municipality.
Safety. VieDome offers a number of solutions concerning clients’ safety. These are for example; fire protection, burglary protection, personal alarm and video system at the door. Care. VieDome offers a range of AAL services. Clients can be contacted daily on an agreed
time to check how they are doing. They can also receive a reminder call whenever they have to take their medicine. Moreover they can contact the service centre of ZuidZorg 24 hours a day.
VieDome currently has a clear focus on the care clients. Services for cure clients can possibly be offered in a later stage when VieDome Care has been developed further. At this point ZuidZorg has decided to focus on care clients first.
36
Figure 3.1: Three major stages in the implementation process of AAL for ZuidZorg
Overall VieDome offers a customized package of products and services to enable clients to remain their independent living situation. In order to achieve this goal, clients are offered care services, safety solutions, convenience services and communication services.
Profit formula
Home care organizations primarily generate revenues by means of the compensation offered for each patient out of the AWBZ. By making use of temporary funding arrangements (such as the screen-to-screen regulation, the healthcare infrastructure regulation and subsidies) ZuidZorg has managed to recover the costs made with respect to AAL over the past years.
VieDome is free for clients that have an AWBZ indication for care and/or nursing and for whom VieDome Care can offer additional value. For other clients ZuidZorg requires a client contribution of €17,95 per month.
Key resources and processes
ZuidZorg is the home care organization in the Netherlands that is probably the furthest with implementing their AAL project into the operations of the organization. Many steps had to be taken in order to arrive at this point and the implementation process is still going on. The steps that were taken so far can be summarized into three major stages which are displayed in figure 3.1.
The first stage concerned the development of the technical equipment and the introduction of this equipment into healthcare practices. An important hurdle to be taken in this step is how to translate the technical innovations into solutions that meet the demands of healthcare clients. It has to be determined to which requirements the equipment has to satisfy to be of added value for the healthcare process. ZuidZorg has partnerships with different parties who are responsible for the equipment, infrastructure and other technical issues.
37
the introduction of VieDome. In order to convince the nurses of ZuidZorg of the relevance of AAL, a programme was started which provided information and training. Another approach in involving nurses into the process is to cooperate with educational institutions to give information, show demonstrations and provide educational material to learn future nurses about the relevance of AAL.
The third stage concerns the integration of VieDome into the healthcare chain. During the implementation process, ZuidZorg has developed the vision that the way to realise sufficient revenues for AAL is to bring in other partners such as housing corporations, municipalities and other service providers (e.g. banks). Their vision entails realising a platform on which all kinds of partners can offer their services (including other healthcare organizations). The network they envisage and have partly realised is displayed
in figure 3.2. Figure 3.2: Network as envisaged for VieDome
The intention is to offer clients a secured connection to a platform on which partners can offer their services. This platform should not be freely available to internet users but should be available for communication between healthcare organizations (e.g. hospitals and home care organizations). In the future ZuidZorg would like to spin off VieDome and this platform.
