Silicon Valley has been talking about how “broken” U.S. healthcare is for years. Tech companies haven’t been shy about promising to “transform,” “disrupt,” and “revolutionize” the current system. But so far, they haven’t made much of an impact, despite Americans spending $3.8 trillion, or nearly 18% of our GDP, on healthcare in 2019.
What prevents tech companies from changing this important industry that affects every single person in the U.S.? Most solutions aim to treat the symptoms instead of the underlying disease in American healthcare. Startups have raised billions of dollars to develop technologies that make healthcare organizations more efficient and reduce friction for patients. While these solutions might solve real problems (and generate revenue), they don’t address healthcare’s core dysfunction: a fundamental misalignment of incentives.
The three primary stakeholders in healthcare—medical providers, insurance carriers, and patients—have opposing goals. Providers succeed by maximizing the price per service and delivering as many services as possible. Insurers profit by spending fewer premium dollars on healthcare, which they achieve by negotiating lower rates with providers, denying coverage, and passing costs along to members and employers. Patients win when they receive high-quality care, avoid unnecessary services, and spend less money out-of-pocket.
For any one of these stakeholders to achieve their goals under these existing incentives, the others must fail. No wonder healthcare tech companies struggle to “fix” the system. Digital solutions may solve individual problems for one of these players, but the underlying dysfunction persists or even accelerates as a result of newly-gained efficiencies. In spite of the current reality, I’m hopeful for the future of healthcare and the technology companies supporting this industry.
This hope stems from a somewhat unlikely place: the federal government. Over the past two years, regulators have introduced three substantive new pieces of legislation designed to better align incentives across providers, carriers, and patients. The Hospital Price Transparency Rule, which went into effect in January 2021, mandates that hospitals publish service costs for hundreds of “shoppable” (non-emergency) healthcare procedures.
The Transparency in Coverage Rule, which goes into effect starting in January 2022, requires price transparency from carriers and employers offering group health plans in the form of public data files and online consumer tools. And the No Surprises Act, which also goes into effect next January, prohibits gag clauses in carrier contracts and surprise bills for unplanned out-of-network services that prevent employers and patients from understanding how much healthcare actually costs. These regulations provide an initial shift toward greater accountability and consumer focus in healthcare that will gain momentum in the coming years.
[pullquote]Tech companies have a huge opportunity to come alongside healthcare’s three key stakeholder groups and support rapid industry evolution.[/pullquote]The combined impact of these new regulations is significant. No longer can medical providers and carriers hide costs from the people who pay for healthcare. Carriers and employers offering health plans will be fined up to $100 per person per day for noncompliance. While hospital penalties are more modest and compliance has been inconsistent so far, that will likely change over time. In addition to penalties, there are also monetary incentives to publish prices and help patients make better choices about where to get care. Carriers or group health plans that are able to reduce costs reap the benefit of shared savings for them and their plan members.
Through these regulations, both providers and carriers take on greater accountability to reduce costs or justify higher-priced services with additional value in the form of improved care quality, clinical outcomes, convenience, and patient experience. This brings healthcare one step closer to obeying traditional market dynamics in which cost and value are correlated—a huge step forward for us as healthcare consumers, and for the industry as a whole.
As the market adjusts to these new requirements, tech companies have a huge opportunity to come alongside healthcare’s three key stakeholder groups and support rapid industry evolution. Our organizations can apply our expertise with data, technology, consumer design, and system integrations to solve meaningful problems that stem from what’s actually broken in healthcare. We can help providers develop new, innovative business models that put patients first and reduce waste. We can collaborate with carriers and self-insured employers to provide more negotiating power with providers and prevent low-value spending.
And we can develop solutions that support patients with data to make the best choices for their health and their wallets. No one can “fix” healthcare overnight. Changing the status quo in a huge, slow-moving industry won’t be easy—it hasn’t been so far. But if we direct our energy, resources, and creativity toward addressing the systemic root issues in healthcare instead of surface-level symptoms, we will make progress toward the change we all want to see.
David Vivero is co-founder and CEO of the healthcare guidance platform Amino.