Start-Ups Are Helping Consumers Make Better Health Care Purchases

Start-Ups Are Helping Consumers Make Better Health Care Purchases

Harvard Business Review

For years, one prescription to health care woes in the United States has been to shift costs to consumers. The logic is simple: Because patients currently do not bear the expense of most of their decisions, shifting expenses to them will cause them to make more rational, cost-effective decisions and will ultimately help bring about a more functional health care market.

As this experiment plays out in real life, however, a different reality is unfolding. While patients are paying more and more out of pocket for care, key challenges stand in the way of them operating as effective consumers. Fortunately, a number of innovative start-up companies are arising to address this problem.

Three obstacles. The first reason shifting costs to patients alone won’t work is many care decisions have short-term financial implications and long-term health implications. In most other purchases, consumers receive some form of immediate feedback or signal about their decisions, good or bad. In health care, the decision to forgo a colonoscopy or use one medicine over another has implications that play out over several years, if not decades.

Second, most health care purchases are complex, and there still is a severe lack of good information on the quality of services and products. When information on outcomes is available, it often is hard to digest, focuses on volume rather than quality, or lacks specificity. A surgeon might perform more operations than his counterparts, but how do those operations relate to the one that I am having? Consumers may have more power, but they lack the information they require to appropriately exercise that power and have few ways to contribute their own insights to others.

Third, cost is still not transparent to patients. The complexity associated with deductibles and arcane benefit structures for different types of services means that consumers might be more empowered and cost sensitive, but no less confused about the impact of a decision on their personal bottom line.

Reconceive the market. To truly unleash the power of consumers in health care, we must reimagine the health care market — much in the way that Uber reconceived the transportation market. By this, I mean we must create platforms that allow patients to be more quickly rewarded for healthy behaviors and to provide feedback that leads to rapid improvements in services and products.

Rather than simply rewarding patients for seeking lower costs, we must reward them for making good decisions or taking actions that lead to such choices — for example, demonstrated understanding of their health care decisions and their personal implications, adherence to medications and care plans, and participation in high-value preventive services such as vaccines or colonoscopies. Patients must be engaged in rating and evaluating the quality of services they receive and sharing these insights with other patients.

Absent that linkage of reward and behavior, we might face a type of race to the bottom in which cost-sensitive patients forgo necessary care at the appropriate time (e.g., in the early stages of a disease that would reduce the costs of treating them over the long run). We would also fail to take advantage of one of the most powerful tools we have at our disposal to improve care: patient insights.

To be successful, this market also must be liquid in terms of both suppliers entering and exiting it and the incentives applied to different types of behaviors. (Health care currently suffers from stultified benefit designs and closed networks that prevent new entrants from offering services.) As insights are generated about what improves health, the market should adapt to reward those types of behaviors and make it easy for new entrants to freely enter and offer services. As data clarifies which suppliers and services lead to better health, the market should more clearly signal these data to consumers. Absent this type of mechanism, patients are left making blind decisions.

Finally, the market must make transparent the real cost of services to the patient in the context of his or her health plan benefits. Without this type of information, patients will continue to struggle to make cost-effective choices that result in the best health outcomes.

Innovative start-ups are leading the way. Fortunately a number of start-ups are beginning to work to chip away at the complex problems I’ve described. Here are three examples.

Castlight Health is beginning to make costs more transparent to patients, and there is evidence that this transparency is driving better decision making. A recent JAMA study showed that households that used the Castlight tool to select a site of care for imaging studies saved over $100 per study. In aggregate, such savings and true price competition could yield billions of dollars in real savings.

Better, the personal health assistant, aims to help patients navigate the true costs of care in the context of their insurance. Through a combination of automation and live access to nurses, patients receive a thorough review of insurance and their benefits and help in resolving problems with medical bills or insurance.

Vital, a company I have been advising, aims to “provide the right medicines to patients at the right time for the lowest cost.” Vital aggregates patients’ purchases of medications and negotiates with manufacturers and service providers to secure lower out-of-pocket costs for patients. It hopes to expand into other health care services. Vital also helps patients receive the monetary benefits of healthier behaviors now — as opposed to later when they accrue.

Remaking the health care market with the aim of optimizing the long-term health of the patient rather than just costs will be a difficult and will require flexible thinking — something that won’t come easy to an industry that is comfortable doing business as usual. But with the massive reform of the health care system that’s underway and the new emphasis on improving the amount and quality of health care data that’s available and the ease with which it can be shared, the time has never been better for entrepreneurs to tackle the challenge.

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