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Free Markets and Consumer Healthcare: Hashing Out a Solution

It’s a well-known fact that U.S. health systems function in a very disjointed way. Consumers get little or no information enabling them to make informed decisions about their care. Moreover, they are often enmeshed in health delivery networks that give them no self-directed choice. Cost and quality data is non-transparent and access to specialized care is tightly controlled

Patients then receive a bill replete with undecipherable medical codes and acronyms, all while failing to show the value of services rendered. In the end, it’s about how many procedures were done, not whether the patient’s medical condition was fully addressed. 

Now, among new attempts at health reform, there are renewed calls from Congress for efforts to explore whether a more robust set of market incentives around consumer choice should be introduced in the process. This reflects a free market approach that’s often unfairly hitched to the term “capitalism,” a label implying a profit motive at the expense of others.  

An alternative and more utilitarian way of viewing a free market is as a voluntary exchange of goods and services. With respect to healthcare, this would involve patients holding the power to make choices that they deem best for them. Here, tax credits and self-directed health saving accounts where consumers can shop for their own medical services are among the solutions commonly discussed. 

In the 2006 book Redefining Health Care: Creating Value-Based Competition on Results, authors Michael Porter and Elizabeth Teisberg offered eerily profound market-based foresights about the future of healthcare. They state that the U.S. healthcare system is in crisis, with quality of care for millions of Americans and the financial well-being of individuals and employers adversely impacted by soaring costs — all on top of uncertain state and federal budgets. 

Based on an extensive study of the U.S. health care system, they assert that a largely under-recognized cause of these problems which persist today is that competition occurs at the wrong level of the healthcare continuum — within health plans, networks and hospitals — rather than with key metrics of medical value involving diagnosis, treatment and preventative strategies for health conditions. In other words, insurers, health systems and the like accumulate bargaining power, transfer costs and compete in a zero-sum manner versus fostering the true endgame which is value for the patient. 

The authors conclude that unlike a true free market system, the healthcare model they’re prescribing would still function as a public benefit that is highly regulated and relies more on consumer incentives. 

In a more recent 2016 article in Harvard Business Review, healthcare researcher Amitabh Chandra and others showed that consumers and medical systems can benefit from market forces and incentives. It was found that higher-performing hospitals that deliver exquisite value do accrue higher levels of market share over time. People are attracted to quality outcomes and seek them out. 

Hashing Out a Solution

The big elephant in the room can be summarized by this question: Can market incentives consistently boost consumer engagement and choices in healthcare systems?

First, there is the economic component to this question, namely, can market forces enhance quality of care while reducing costs? And then there is the behavioral one, which involves determining whether people really want to take a consumer-centric, self-directed approach to their care versus offloading it to the larger healthcare delivery ecosystem

Emerging as a major player in these discussions is Hashed Health. Headquartered in Nashville, TN, this collaborative healthcare company strives to solve concrete business problems that continue to bedevil the industry. 

A key element to their approach has been working with leading healthcare enterprises committed to advancing distributed ledger solutions that address unique issues facing the healthcare marketplace. Active projects will take place involving supply chain, claims lifecycle, payments, medical records, insurance and other use cases.

“In some cases they work,” said John Bass, founder and CEO of Hashed Health, in response to a question about the efficacy of market incentives in healthcare. “Bundled payments and pay-for-performance do seem to influence behaviors. There are examples of smoking cessation programs that work. I think we are learning a lot about how to design programs to be effective. Even in the bundled payments world, it has taken seven years to really begin to understand how to create incentives that surgeons pay attention to.”

Bass added that on the patient incentive side, there have clearly been a lot of attempts at wellness incentives that have not proven valuable. 

“We’ve seen far more failures than successes as it takes time to understand the true drivers of behavior change and the true effects of a program,” he said.

Bass believes that incentives are a tool to use in the contexts of a relationship or a network (for example, a patient/physician relationship or a payer/provider relationship).  The context of time also matters.

“If you receive an incentive a year after the event, that incentive can be less meaningful,” Bass said. “I think we are learning that incentives that exist without regard for time and the network generally struggle.”

In terms of Hashed Health’s ultimate contribution to a more market-based, consumer-oriented system, Bass said that empowering consumers with their data is perhaps the most important example — a project that Hashed Health and many of its partners are interested in.  

“If we can put health data in the hands of the consumer, it has the potential to change the flow of information in the market,” said Bass. “I believe this sort of project would need to be governed outside the corporate structure as a sort of a ‘blockchain-based, grass roots’ program. We have such a big opportunity and responsibility here to help the everyday healthcare consumer by approaching it from a collaborative, social perspective.”

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