Five Foundational Transition Cornerstones
The one thing all successful healthcare innovators have in common is a belief in five core principles—cornerstones essential to meaningful and sustainable reform.
Consumers must be empowered to make value-based healthcare decisions.
Consumers should be empowered and motivated to consume and pay for healthcare based on value, just as they do with every other product or service. Patients make purchasing decisions according to quality, satisfaction, and cost—that is the definition of value.
Until patients have the ability, information, and incentives to make value-driven decisions, the system will remain inefficient.
Healthcare providers must compete on value and take on real risk.
Providers must compete on value, not volume. That means shifting meaningful financial risk from payers to those who actually deliver care, and that risk must be substantial.
Providers must be willing to:
Stand behind their clinical quality
Improve patient satisfaction
Lower costs
And more importantly, they must guarantee all three.
Guaranteeing clinical outcomes, patient satisfaction, and cost is the highest expression of value-based healthcare because it requires providers to accept real downside risk.
Healthcare’s current fee-for-service world is the only place where numerous perverse incentives are allowed to exist. You would think incumbent health insurance companies—Blue Cross Blue Shield, Anthem, Cigna, UnitedHealthcare, and others—would welcome providers taking on significant downside risk.
The fact that they don’t is itself proof of the perverse incentives that permeate today’s healthcare system.
Technology will drive the next wave of innovative transformation.
“Technology” is often an overused word, but in healthcare, it is indispensable. Most agree that true transformation is impossible without it. Technology enables:
Wellness and prevention
Alternative treatment pathways
Consumer engagement
Clinical integration
Artificial intelligence
Human genomics
and it allows providers to manage substantial downside risk
All of these components are essential to meaningful innovation and sustainable transformation.
Legislative and regulatory bodies must pave the way for reform.
Federal, state, and local governments play a critical role in shaping an environment where innovation can thrive. When crafting legislation or regulation, policymakers should consistently ask four key questions:
Are we empowering patients and doctors? This requires patient control over their health records and true price transparency. Today’s transparency laws fall short; meaningful pricing is still nearly impossible to determine.
Are we turning the patient into a genuine healthcare consumer? This is only possible when high-deductible plans are paired with fully funded health savings accounts.
Are we promoting competition among healthcare providers? Competition reliably leads to higher quality and lower costs.
Are we creating an environment that fosters innovation? Increased competition and a level playing field always spur technological advancement.
What legislative and regulatory bodies must do next to support real transformation. Specifically, policymakers must:
Ensure consumers own their health records and are empowered to make informed healthcare decisions. Phase II of “Meaningful Use”—focused on patient-centered portability and ownership—must become a reality.
Strengthen and enforce price and quality transparency, requiring every provider, including hospitals and physicians, to post simple, universal pricing.
Create incentives that encourage patients to care about cost, helping mitigate “moral hazard” caused by third-party payment structures.
Increase flexibility and contribution limits for HSAs and HRAs, and remove unnecessary restrictions.
Remove regulatory and licensing barriers that stifle innovation, including restrictions on direct primary care (DPC) and facility licensing categories.
Pass federal ‘any willing provider’ legislation, allowing any provider who meets value criteria to participate.
Eliminate the prohibition on physician-owned hospitals, which is blatantly anti-competitive and undermines the physician’s role in value-based transformation.
Repeal anti-competitive state laws, such as Certificate of Need (CON) regulations, which primarily protect incumbents—not patients.
Reform the pharmaceutical regulatory ecosystem, including closing the revolving door between regulators and the industry and prohibiting private biopharmaceutical funding of government regulatory agencies.
Prioritize medical education reform, with greater emphasis on nutrition, prevention, and lifestyle interventions.
Shift the system’s incentives away from treating illness and toward improving long-term individual and population health outcomes.
Without bold legislative action, innovation will continue to be throttled by the status quo.
Incumbents must stop resisting change and fighting innovation.
Hospitals, health systems, and other provider executives must accept what is already obvious: their current business model is becoming obsolete—as outdated as taxi cabs in the era of Uber, or malls in the era of online shopping.
Insurance companies and health plan sponsors should support any model that delivers better outcomes, improves patient experience, and lowers costs—even if their own legacy systems and cultures are too antiquated to fully embrace it.
A striking example: few, if any, insurance companies will contract with physician providers under substantial-risk or warranty-based models, despite overwhelming evidence that these models offer better value to consumers and purchasers.
For our country to remain strong, we must have a strong healthcare system—and that requires innovation. Incumbents have had decades to fix the system. They have not. Now it’s time for them to partner with innovative, entrepreneurial leaders and help transform the system, despite the short-term disruption to their business models.
The Major Obstacle: Special Interest Protectionism
Transformation is possible—but there is one massive obstacle standing in the way: healthcare special interests spend more on lobbying than any other sector in America, including Wall Street and the defense industry.
Between 1988 and 2018, the top five healthcare industry groups spent $11 billion lobbying the federal government.
Pharmaceutical companies, hospital systems, device manufacturers, and other medical interests devote staggering resources to influencing legislation in ways that preserve their business models and protect the status quo.
Innovation Carries Risk—But Doing Nothing Carries Far More
The counterarguments presented by incumbents have all been acknowledged. Everyone understands that innovation carries risk. Even the innovators themselves expect to pivot, adapt, and refine their models in the face of real-world challenges.
But innovation always disrupts the status quo—and that disruption can be painful. In some cases, it can be fatal to outdated business models.
Yet none of that comes close to the pain we will face if we choose to do nothing.