Going Digital: The Future of Healthcare in Japan
With the formal establishment of the Digital Agency fast approaching, Langley Esquire is launching a new series of articles covering digital transformation in Japanese industries. The articles will examine government and industry initiatives, and the different perspectives between the public and private sectors.
In the first installment we look at the digitization of the healthcare industry, detailing the numerous areas where digital transformation is occurring, the changes proposed and the opposition they face.
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The Future of Healthcare in Japan
Japan’s first Digital Agency is expected to be formally established in September 2021. Initially conceived as a means to achieve a single administrative framework, a standardized digitization approach and modernize government services, the avenues that a government-led digital transformation offers for multiple industries are enormous.
The Cabinet has so far adopted six bills related to the creation of the Digital Agency, which will be formally established in September 2021. The digital bills, which contain around 60 amendments to other existing laws, aim to expand the use of the My Number social security system, standardize information systems and assist in the formation of a “digital society.” The agency will be able to make recommendations to ministries, agencies and local bodies regarding digitization, while it creates the basic pillars of a digital society through a bill that replaced the now defunct IT Basic Act (enacted in 2000). New principles in the Basic Bill for the Formation of a Digital Society include the abolishment of hanko requirements, linking My Number cards with smartphones and bank accounts, and revisions to the protection of user data.
The agency will operate with a budget of 8.13 billion yen (personnel expenses and infrastructure system development), with over 300 billion yen dedicated to the consolidation of the government’s entire IT system. It will be staffed by about 500 people, 100 to 120 of whom will be drawn from the private sector.
There are multiple avenues where the government can lead a digital transformation. One of the industries with the highest potential, but where there is much resistance, is healthcare. Japan’s healthcare industry is worth approximately 43.4 trillion yen. With the new coronavirus pandemic, healthcare’s economic and strategic importance is expected to further increase, and the government estimates it will grow to nearly 100 trillion yen by 2040. Apart from designating various sectors from the industry as pertaining to national security (meaning that foreign penetration is resisted), the government has highlighted the importance of digital healthcare in its Basic Policies for Economic and Fiscal Management and Reform (Honebuto Houshin) by making it a key principle, recognizing the potential future yield of significant socioeconomic benefits.
In the healthcare field, the government will be dedicating specific funds to the promotion of digitization of data in the long-term care (3.6 billion yen) and disability fields, setting up a system for digital prescriptions (6.1 billion yen) and the digitization of welfare services.
This article looks at areas where the government is pushing for digitization, the main changes being proposed, and some of the obstacles these efforts may face in the near future. Areas explored include telemedicine, telepharmacy, medical apps, devices, medical data, AI hospitals and insurance reimbursement.
One of the areas in healthcare that has changed drastically due to the pandemic has been telemedicine. At the start of the pandemic last year, the government temporarily eased restrictions on remote medical care (by increasing the number of illnesses that can be treated remotely), allowing doctors to attend to patients either by phone or online visits. According to Japanese law, except those living in remote islands, only a few patients were allowed to receive remote medical treatment until 2015 due to the Ministry of Health, Labour and Welfare’s (MHLW) conservative approach to digital health technology. One of the previous government’s key policies had been the deregulation of the healthcare industry (as a part of its growth strategy). However, despite the rapid increase in digital technology, in 2018 only about 5% of the public used telemedicine services. The Suga government wants to advance the digital transformation of the industry, meaning that there have been signs of change within the Health Ministry and the ruling party.
2018 guidelines created by the Health Ministry defined ‘online diagnosis’ and clarified which consultations were to be included in the National Healthcare Insurance System. Separate from this, a revision to the Medical Practitioner Act stipulates that a doctor is now able to run two medical facilities at the same time, allowing doctors to run an online consultation even when the doctor is not present in the clinic. However, where doctors were not able to be constantly present for face-to-face consultations it was hard to implement telemedicine (there are some exceptions ‘with merit’ that allowed online consultations) until the pandemic came.
To make the “temporary” deregulation of telemedicine services permanent, the MHLW has launched a discussion to designate the scope of remote services approved by the ministry. Following an agreement with both the Minister in charge of regulation reform and the Minister of Digital Transformation, telemedicine will be available permanently after the pandemic ends. The Council for Promotion of Regulatory Reform will draft a framework for the permanent introduction of telemedicine by the summer of 2021, centering the discussion on social security reimbursement and the diseases that can be treated remotely (even though the range of diseases has already been temporarily increased). Discussions will follow at the Central Social Insurance Medical Council, whose members have been looking at the impact on medical fees and safety.
Despite the government’s enthusiasm for the digitization of medical consultations, not all players within the industry have been receptive to the change proposed by MHLW. The Japan Medical Association is firmly against making telemedicine permanent and will resist any move away from the status quo. However, it remains to be seen whether specialized groups in the ruling Liberal Democratic Party (LDP) or industry players can resist the moves digitizatize numerous industries, including healthcare.
The pharmaceutical industry is also expected to be affected by the government’s digitization drive. The pandemic brought temporary change here too, which allowed pharmacists to provide medication guidance remotely. However, medical institutions still had to print, stamp and send original prescriptions to the pharmacy. The Medical Practitioner’s Act requires prescriptions to be given physically by doctors (some exceptions for telepharmacy are granted), while the Pharmaceuticals and Medical Devices Act requires face-to-face instructio. The above mentioned Basic Policies for Economic and Fiscal Management and Reform also highlights the roll out of electronic prescriptions, which authorities hope to implement by the summer of 2022. Within the Health Ministry, there are also calls to slash the face-to-face requirement for medication guidance, as has been done during the pandemic. However, pharmacist associations see the government’s push as one that would ultimately favor generalist drug stores.
CureApp’s smoking cessation app became the first therapeutic mobile application to be granted health coverage. However, the Health Ministry has made it clear that it would not categorize apps as medical devices for reimbursement prices, but instead create a new technical fee. Discussions about the creation of a policy regarding medical fees for software programs are ongoing. The product, which will serve for future software applications, has been categorized as a C2 medical device, which does not fit existing reimbursement price categories. There have been heated discussions at the general meetings of the Central Social Insurance Medical Council from both payers and healthcare providers, with healthcare providers calling for the creation of a new evaluation system for price reimbursement. The Health Ministry will need to find a balance between optimizing the healthcare system through the digitization of services and holding down medical spending.
The pandemic also saw a rise in the use of remote monitoring devices by local authorities and hospitals to check with coronavirus patients at home or at designated facilities. The government of the Kyoto Prefecture has been using ‘shirts’ technology for patients recuperating in hotels, while other local authorities have been distributing pulse oximeters to patients recovering at home or at designated facilities. However, market entry in Japan for such technology is quite complicated as wearable medical devices have to comply with the Pharmaceutical and Medical Devices Act, which, as with medical software, requires long approval times and clinical trial periods. There is also a risk averse mentality among healthcare professionals who refuse to adopt digital tools for fear of misusing them. This all hinders Japan’s competitiveness and attractiveness for medical technology. If the government is to further digitize the industry, it must ensure healthcare professionals are eager to use new technology, as well as reduce barriers to the introduction of digital devices in the healthcare sector.
Although the Cabinet and the MLHW are working to build a national database of medical and nursing receipts, as municipalities manage various data, including vaccination history, collaboration will be needed to integrate data for effective use in preventative medicine. To standardize the various regulations governing personal information among national and local governments, revisions to the Act on the Protection of Personal Information are underway. Municipalities like Kobe City have worked ahead of the government to launch the nation’s first healthcare data collaboration system that aggregates various anonymized data from citizens, including medical and nursing receipts, health data, and vaccination status to be used for research purposes. While the “Medical Big Data Act” (Next Generation Medical Infrastructure Act) enacted in 2018 sought to boost the use of patient data for research in pharmaceutical companies and other organizations by enabling authorized entities to aggregate separately managed medical information in local governments, hospitals, and nursing facilities into one place, the certification process requiring oversight by different agencies, including the Cabinet and the Ministry of Education, Culture, Sports, and Technology (MEXT), has largely hindered the creation of a healthcare big data. The Digital Agency is anticipated to streamline the standardization processes to further promote the integrated data needed for a big health data platform.
There are proposals within the Cabinet Office to advance the idea of “AI Hospitals,” whereby hospitals integrate AI services into patient treatments, surgeries, doctor visits, examinations, the use of data, and so on. The government feels that hospitals could do more to digitize their facilities: many do not have 5G connections or regularly use digital services. Many hospitals also do not have a cybersecurity framework in place. As hospitals become more digitized and more reliant on cloud services, it is to be expected that a heavier reliance on cybersecurity protocols will be needed to protect sensitive patient data, such as that collected in diagnostics or patient history, as seen in the section above.
The government is investing over 10 billion yen in the creation of AI hospitals over the next five years. It aims to establish 10 model hospitals by the end of 2022 in collaboration with the private sector and researchers. Efforts are currently being coordinated by MEXT, METI and the MHLW, following a basic working framework passed a few years ago. AI hospitals are expected to shift doctor’s time into patient care while cutting medical spending on tests and diagnosis, helping to address the lack of doctors and nurses in many of Japan’s sparsely populated areas. This will also allow Japan to become a leader in testing medical technology: according to research by Fuji Keizai, AI-related treatment will reach about 15 billion yen by 2025.
However, these projects have not always gone smoothly. In one of the most recent initiatives to innovate hospitals, MHLW has attempted to install a framework that allows for My Number cards to be used as public health insurance cards. Under the framework designed by the Health Ministry, medical institutions and pharmacies will be able to scan My Number cards using a card reader and facial recognition technology to verify patients’ identity and check their treatment eligibility. The government will provide facial recognition card readers for this initiative, as well as subsidies to change computer systems of up to ¥2.1 million for hospitals and ¥430,000 for clinics and pharmacies. The ministry had initially planned to launch the system by the end of fiscal 2020, but it has seen many rejections stemming from hospitals that are reluctant to digitize. A trial at 54 medical institutions and pharmacies in 24 different prefectures saw a number of cases where people were not able to confirm their personal data. Trials showed instances where records did not match or did not exist, and errors arising because health insurance associations incorrectly entered people’s information. MHLW is looking to gradually increase the number of medical facilities in the trial phase, but only 54 out of the 500 designated institutions actually participated in the trial proposed by MHLW. The ministry argues that the use of the new cards will drastically simplify administrative procedures and has pushed back its introduction back until October.
Medical facilities are reluctant to change their administrative procedures for a card used by only 25% of the population. Only 31% of 228,000 medical institutions have so far applied for the system. The National Insurance Medical Institution is opposed to the use of My Number cards for health insurance because of risks of personal data being leaked or stolen. The National Federation of Health Insurance Societies has also so far opposed the change, and asked for the introduction date to be pushed back to avoid confusion. The Japan Medical Association also backed a delay in the introduction of the government’s plan. However, the LDP is willing to eliminate health certificates by transferring information into My Number cards, but bringing hospitals in line with the latest digital technology may prove difficult.
Another issue that may become increasingly difficult with the advent of digital healthcare, and which has already stirred debate within MHLW, the Finance Ministry and the government, is that of insurance reimbursement. Just recently, the government passed a plan to raise medical fees for people aged 75 and above for out-of-pocket expenses. The government also submitted a battery of legislation on social security during the 2021 ordinary Diet session. How much of digital health treatments and equipment are to be treated by insurance remains an open question. Little is still known within the government how much revenue the new services can generate, creating a sense of insecurity among companies. If not included in universal healthcare insurance, and available as out-of-pocket expenses, patients may be unwilling to pay for new services. However, while pressure to cover such expenses may be high, insurance coverage may decentivize the development of new technology and of a competitive landscape in the country. To become a hub in digital health, Japan may need to explore further initiatives if it is to keep the basis of its national healthcare insurance system. Whatever the decision, innovators will need to convince the already conservative Finance Ministry.
To become a digital health hub, the government has several challenges that it needs to address in the coming years in multiple fields within the healthcare sector. It will face varying degrees of resistance (both political to financial) in each of them. The most immediate initiatives, due to the pandemic, have been those relating to telemedicine and telepharmacy, and they face a great amount of opposition from industry bodies. Other initiatives have been in the works since long before the pandemic and face less resistance. However, now that the medical urgency of the pandemic has been quieted, focus within the government may shift elsewhere. The Digital Agency, to be formally established in September 2021, is likely to concentrate on many of the above issues. Whether it is able to make an impact in the numerous fronts of digital health remains to be seen.
With the creation of the Digital Agency, the Japanese government will embark on an ambitious drive to modernize outdated industries and transform the country into a leading technological player. The government will need to work with creative, cutting-edge private-sector partners with ambition and expertise. If you would like to learn more about how to position your company in leading Japan’s digital transformation from the policy-front, please contact us by clicking on the button below.
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Langley Esquire CEO Timothy Langley was quoted in Nikkei Asia on Japan’s incipient digital agency and the challenges it will face — both from the private sector and other government bodies.