The Japanese healthcare system is a shining example of strength and resilience. At an average lifespan of 84 years, the Japanese society is not only the healthiest but also the "oldest" in the world. However, the challenges presented by an ageing population pose serious threats to the sustainability of the Japanese health system. Frost & Sullivan's recent research, Strategic Direction for Healthcare Reform in Japan, outlines underlying social challenges and constraints hindering Japan's progress towards health system modernisation and provides strategic insights.

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Resource consumption in the Japanese healthcare system is disproportionately high compared to other OECD countries. Japan spends 11.4% of its gross domestic product (GDP) on healthcare, which equates to $4,519 in per capita healthcare spending, less than half of the US. At this level of spending, the country provisions hospital care for almost 2% of its population every day.

While the idea of a government taking full responsibility of its people's health and wellbeing is admirable, its long-term sustainability is questionable. By 2025, 30% of the Japanese population will be older than 65. This impacts country productivity and the ability to contribute to social spending negatively, in addition to having a significant positive impact on healthcare costs and service demand. There are over 100,000 general practitioner (GP) clinics across the country, yet 60% of hospital revenue is generated by out-patient services as industry regulations feed a fee-for-service model for reimbursements.

While Japan is the second-largest market for pharmaceuticals and medical technology products globally with an increasing demand for high-tech health services, the digitalisation of healthcare services has been slow. The penetration of electronic medical records (EMRs) is limited to large hospitals (greater than 600 beds) and there is poor information sharing outside the hospital. As a result, quality and continuity of care suffer greatly and concepts like care management and team-based care are virtually non-existent.

Much like any other country's policy reform, Japan has lagged behind technology evolution and consumer maturity. The reforms instituted so far can provide only incremental benefits. Japan needs to redesign its health system to meet the needs of the future. It needs to critically analyse what "value" means to healthcare stakeholders in Japan and then align policies and health system metrics. This will involve evolution of care delivery models, payment mechanisms and the roles of both physicians and patients. It will create room for outcomes-based contracts from pharmaceutical and medical technology companies, telehealth and home monitoring-based care delivery models, and alternative payers, such as private insurers.

Strategic Direction for Healthcare Reform in Japan is part of Frost & Sullivan's Global Digital Health Growth Partnership Services program.

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Frost & Sullivan, the Growth Partnership Company, works in collaboration with clients to leverage visionary innovation that addresses the global challenges and related growth opportunities that will make or break today's market participants. For more than 50 years, we have been developing growth strategies for the global 1000, emerging businesses, the public sector and the investment community

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