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Healthcare’s Cost-Obsessed Race to the Bottom

We are such a soundbite-driven society. Give us a quick nugget we can get our head around and then run with it ad-nauseam.

Case in point: look at all of the headlines associated with healthcare related costs. The noise level over costs has reached new heights even as the myriad solutions are raining upon us like a tidal wave. Regulation. Price transparency. Hidden incentives. Transparency. Cheaper drugs. Cheaper surgeries. Cheaper. Don’t get me wrong, costs are important. Very important. But cost isn’t really the problem, it’s only a symptom.

In our wildly flailing efforts to commoditize healthcare, we fixate on price as if it’s the Holy Grail – the end-all be-all to solve all that ails our massively complex and expensive healthcare system. If only we knew how much this procedure costed us. If only we knew how much we spent last year. If only we knew what someone else was paying. If only we knew how much those evil PBM’s earned on rebates. If only we knew.

But that’s what we do. We break things down into their smallest parts, parse them, quantify them, and then try to compare them. From there, it’s simple copy and paste. Why not? It works well with copper, oil, and pork bellies, right? Of course, the consumer in us wants to be able to compare so we know what we’re getting relative to available options. Fair enough.

Compared to What?

However, it is in our comparison process that things really start to break down. What is our reference point? How do we evaluate differing options? Where does quality, availability, support, and any of a myriad of alternative priorities fit in? What do we do with all of this information?

The easy answer is…the easy answer. Cost is an easy variable on which to base a decision. Thus, the massive wailing and gnashing of teeth over transparency. No argument here. When it comes to healthcare or anything else one plans to purchase, one should know what one is paying. But that is just the ante to the game. It is only a starting point and thrashing around in search of the price of something seems like a cry of impotence. Why isn’t it easier to know what something costs?

Ah…now we’re getting warm. Why indeed. One simple answer is complexity. Put another way: it depends. It depends on payer. It depends on market. It depends on provider. It depends on provider. It depends on risk, timing, and the particular orientation of the sun, moon, and constellations this month. Out system is built upon a universe of complexities and your particular constellation does in fact make a difference in what you pay.

Pitchforks and Complexity

Back to the headlines for a moment. You may have noticed headlines blaming hospitals for egregious acts of gouging in their pricing of life-saving procedures. Employers, get your pitchforks! It’s time to take down those hospital monsters who are crushing the souls of your employees and your P&L. Mr. or Mrs. Hospital, why do you charge so much?

Hospital exec, “Good question. Before I can answer, please let me know what network you are a part of.” Network? Whatever do you mean? We come to find out, the “network” holds the contract with the hospital. Who is the network? A better question is: who owns the network? It seems that there are a variety of networks, built over the years by big insurers (spelled BUCA) that provide patients with access to providers.

The argument is that the big insurers are able to negotiate better rates with providers due to their scale. It is arguably true. However, that doesn’t mean that those savings are passed through to the payer/plan sponsor. In fact, the opposite is true. It seems that scale makes a huge difference and those savings are converted to profits that then become the expectation of quarterly analyst calls. Shareholder exuberance must be maintained.

A Better Way

We love to focus on cost because it is easy and should be obvious. However, obfuscation on pricing schemes, misaligned incentives, navigation, quality, and a host of other comparatives make the system highly opaque. Tack on the sheer scale of our health system and the endless options, it is no wonder that we need an entire industry to help us navigate it, hold vendors accountable, make decisions, justify decisions, and pay for it. We all know that we need a better way.

The good news is that alternate approaches have emerged and the system of the future is being built on top of, around, and over our existing healthcare morass. Some things are getting refreshed and repurposed while new models, services, providers, and technology are also appearing.

In some ways, we are seeing a new ecosystem forming to respond to the complexity and the frustration it fosters. At its most basic level, it is a simplification to directly purchasing the services that comprise healthcare and the health benefits world that encompasses it. Employers and private plan sponsors are driving this new ecosystem as they take a keener interest in the inner workings of healthcare and realize that it is too strategic to leave to entrenched incumbents.

Pieces and Parts

The direct care movement has started by breaking the complexity up: primary care, surgery, emergent care, specialty care, musculoskeletal, occupational health, mental health, infusion, and pharmacy. Next, the mechanisms for funding and administering these pieces have been deconstructed and reformed into new plans/models. In between the old and the new lie myriad hybrid versions of all of the above that range between status quo and innovative. Cost savings can be found. Better ways are there. Great ideas rest hidden with. However, it is still wildly complex and expanding rapidly.

The Next Wave

On the horizon, beyond the pieces and parts of direct care, rests the potential for something different. An entirely new way of experiencing healthcare and health benefits. A new ecosystem built on direct relationships, localized health models, patient and payer centricity, innovative technology, real-time data, and simplicity of navigation and consumption. Sure, costs are still important but the future will be built on value in novel ways. Stewardship becomes the standard of measure and we all begin to look at all of it quite differently.

We begin by imagining. As patients, we understand the system and how to navigate it. We connect directly with care givers and get sound counsel on courses of action. We get timely care and never doubt its quality. We understand costs and our responsibilities. We get support when needed and always know where to turn. We have options when the worst happens and rest easier knowing we there is a way forward.

As employers, we understand the health and risks associated with our employee population. We have strategic and tactical support for overall population health – sound guidance on how best to support and manage it. We know the costs and implications of care; including influence at the point of care with providers able to guide patients when most needed. We have real-time data with meaningful insights as well as potential courses of action. We are still cognizant of costs and risk, but they now exist within a world that we can see clearly and we have mechanisms to help manage both. We are able to be good stewards of our resources and most effectively support the overall health of those working with us.

Not the Primary Issue

Pie in the sky? Not at all. Not if we are willing to dream boldly and make definite plans to make them a reality. We are spending massive energy on chasing costs when the real problem is the system and all of its complexity. The complexity hampers our ability to make decisions, see possibilities, get the results we want, mitigate the risks we face, and manage the escalating costs that are the ultimate result. We race to the squash cost but it is a race to the bottom as we fail to address the underlying issues.

Join us in the effort. Join us in the discussion. Join us as we walk with intention toward the horizon and its reimagined possibilities. The bridge to the future is being built and it promises to be an exciting journey.

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