Is healthcare overpriced? Hell yes. Is it bankrupting us? Yep. Does everybody hate the painful experience of going to the doctor and getting ridiculously costly and complicated bills? Of course. All of this stems from one main incentive— the more doctors do the more they get paid from a payor beholden to shareholders who wants to pay as little as possible. Over the years, today’s cat and mouse processes inevitably evolved to maintain complexity and not add value. In 1988, Joseph Tainter wrote a book called “The Collapse of Complex Societies,” best summed up in this 2010 post from Clay Shirky:
When the value of complexity turns negative, a society plagued by an inability to react remains as complex as ever, right up to the moment where it becomes suddenly and dramatically simpler, which is to say right up to the moment of collapse. Collapse is simply the last remaining method of simplification.
I believe healthcare in America as we know it today is on the verge of collapse in the next decade or two. It’s pretty obvious our leaders can’t fix this for us. Fixing healthcare will be a grassroots movement over the next two decades.
So how do you fix it?
Redefine what care is.
Redesign the process of care to support the new definition.
Reduce the complexity.
First, let’s redefine care.
Today’s definition of care is maximizing office visit and procedure widgets irrespective of quality or outcome. Care must be redefined as:
Successful, efficient, convenient project management (your pneumonia is a project to be managed over time) via the most appropriate form of communication
Because if it’s not a procedure, healthcare is literally just communication.
Second, let’s redefine the process of care.
Today’s traditional process involves:
- A physical space
- Almost exclusively in-person communication
- Technology that consumes ~40% of a doctor’s day to document that in-person communication
- And, on average, 4 support staff (nurses, front office staff, billers, etc.) per doctor.
But after 7 years of practicing exclusively Virtual Primary Care, I know that 70% of issues never need to be seen in-person, if you give an exclusively online doctor/care team the ability to:
- maintain a relationship with a patient throughout an issue
- make communicating during that time as simple as firing off an email
- allow that doctor to confirm hunches with tests
- have the care team easily objectively monitor progress
When an online doctor can do all of those, they can manage 95% of what a traditional office-based PCP can do. That’s because the physical exam is a blunt tool and it’s rarely the missing piece of a diagnosis or necessary to monitor ongoing management. Also, high quality photos taken by the patient replaces many physical exam use cases. This means a new care process/a new kind of physical space must be designed for primarily easy online communication supplemented by the occasional office visit. But for the 30% of situations that need more than virtual primary care, our 7 years of data says:
- 55% need specialist care (70% of these visits will be virtual (because 70% of specialist care, too, doesn’t need to be done in-person) and 30% of them will be in-person)
- 30% need an urgent care center (because there’s an urgent, more complicated matter that may involve inexpensive imaging and a simple procedure)
- 5% need an ER (because it’s a true emergency)
- 5% need a retail health clinic (because it’s a simple issue that urgently needs an in-person test or simple exam)
- 5% need a traditional in-person office-based PCP (because the level of complexity they have requires this)
This means a newly redesigned process needs a new platform (part Slack, part Pivotal Tracker and part Highrise) that powers
- primarily online communication between patient and care team (think Slack and since online communication is 95% of the time asynchronous text-based messaging (not a synchronous conversation like a phone or video chat), the text-based messaging IS the documentation, freeing up ~40% of the care team’s day they were previously using to document oral conversations)
- project management tools (to manage your pneumonia over time…think Pivotal Tracker or Basecamp)
- Care coordination with local in-person professionals and facilities (think a CRM like Highrise but for local healthcare resources)
This platform isn’t designed to power in-person widgets, like today’s electronic medical record systems. Sherpaa has built the core of this platform over the last 7 years.
And finally, let’s eliminate as much complexity as possible.
Healthcare jobs are booming (~210,000 last quarter!). Every new healthcare job is created to support increasing complexity. Every new job also increases your premiums. The goal is to reduce the complexity of care and, therefore, reduce the necessary human capital, and reduce everyone’s premiums. So, how do we do that? Healthcare is overwhelmingly people-powered. All of these people exist to maximize visit and procedure widgets and maintain the complexity of ensuring reimbursement for each unique thing that happened during the widget.
As a doctor and businessman, I know my expenses for taking care of my entire patient panel. It’s pretty simple. I know my salary, my staff’s salary, my operating expenses, how many widgets I’ve done, and my total revenue. It’s Business 101. But those values represent today’s processes. So after redefining care and redesigning the process of care, we quickly see most of today’s processes and roles disappear. You no longer need the billers, the front office staff, and most of the support staff. For example, we’ve discovered that for every 10,000 patients we need 4 doctors and 1 medical assistant. Contrast this with today’s processes where there are 4 support staff per doctor.
In today’s process, every single office visit widget has a different price because that’s the game doctors and insurers play. There’s a way to call a truce. And we’ve got to think in terms of Commodities and Quests.
Most acute issues, predictable procedures, tests, and medications, are commodities—simple things with an extremely predictable cost. Commodity costs should be easy. What if we said, “you know, it costs me $99 to solve the average acute problem and 95% of problems last less than 30 days?” Any acute problem that lasts longer than 30 days is an outlier and it’s baked into the $99 cost per acute problem.
Quests are, by nature, an unknown cost, but predictable at the population level. And what if we said, “on average, it costs our team $400 per year per person to project manage each person with a chronic illness?”
As you can see, when billing is reduced from a hundred thousand things to ~2 things (commodity or Quest), complexity, and therefore costs, are massively decreased. Everything is either an average “Commodity” price or an average “Quest” price. Billing would be massively simplified and with today’s payment platforms (think Stripe, the payment platform that powers Lyft and thousands of others), payment for care is almost immediate. Once all the nonsense that currently exists to support that billing/reimbursement complexity goes away, people that power all that complexity also go away, and premiums decrease. This also means most physical healthcare spaces (like urgent care centers and PCP offices) in local neighborhoods transition into something else, similar to how Blockbuster Video stores are now occupied. Physical spaces in local areas need to support and supplement what is primarily virtual primary care powered by online communication. These physical spaces should be of two types:
Testing and simple pharmacies
Targeted testing centers (“After talking with you online, I need to order a quick, inexpensive chest x-ray or abdominal ultrasound, or some blood work or a quick point of care test.”) that also dispense pre-packaged common medications ($4 per medication)
Outpatient surgical centers
For simple non-acute procedures.
This infrastructure solution would work for 90% of the population. The more complex 10% of the population would need intensive care like you find in today’s ICUs, ERs, and cancer centers. But the physical infrastructure needed to support those spaces would be 10% of the size of today’s hospitals.
About 5 years ago in Phoenix while I was speaking at Google’s Zeitgeist conference, I took a 20 minute ride in a Google self-driving car.
Google’s strategy was to create a fully autonomous car all at once and they had the tech 5 years ago. The automobile industry thinks otherwise. They’re gradually staging in autonomy with one or two new features every year. Meanwhile, the auto industry has the luxury of car prices that don’t double every 8 years, like our health insurance premiums do. Based on today’s average premium for an employee with a family of $23,000, in 8 years that will be $46,000. I don’t think healthcare has the luxury of staging in a new process of healthcare delivery. It’s honestly now or the whole thing blows up and nobody can afford care. I’m 42 and I’m very worried about what care will look like when I’m 80 and in need.
A decent amount of capital, with a 20 to 30 year return requirement, will eventually be necessary to hit reboot on our nation’s healthcare (mostly due to difficult to scale new kinds of physical spaces). But if Starbucks can do it, so can healthcare. And, it can start small today with:
- Visionary leaders (service and product designers).
- Visionary providers (today’s 35 year old doctors are almost digital natives and there are tech savvy doctors in every generation plus most doctors everywhere, if given the option, want to simplify their daily lives…the point is, you don’t need a ton of doctors to create a hyper narrow nationwide network).
- Visionary payors (not today’s insurance companies but more like self-insured employers in industries extremely pinched by their healthcare costs (not the Apples and Amazons)
- Visionary investors (not traditional VCs expecting a 7 year, 5-10x return on their investment…This will take a different kind of investment structure with a much longer term.
On September 3, 1967, the traffic in Sweden switched from driving on the left to driving on the right. They called it Dagen H. The country decided it needed a massive change all at once. So they did it. I’m not suggesting a country-wide reboot on healthcare, but I am suggesting that is exactly what’s needed for certain groups in America. This transition won’t happen overnight. But it needs to happen and I’ve been ready for the last 10 years to play my part in bringing this to life. Let’s go. Who’s in?