The Consumer Driven Disruption of the Health Care Status Quo
Innovation is already disrupting the health care industry. The only question is how far it will go.
I admit to being surprised when they asked me to deliver a keynote address at the Texas Association of Health Plans conference.
“Are you sure you want me?” I asked.
The Association is the lobbying group for the big insurance companies that operate in Texas. Its members include the BUCAH old guard: Blue Cross Blue Shield of Texas, Aetna, Cigna, UnitedHealthcare and Humana. Meanwhile, I show employers and working Americans how to stand up to the old guard in my book: Never Pay the First Bill.
The Association’s leaders assured me that they welcomed provocative speakers. So, there I stood yesterday at its “Texas Covered” conference in Austin. They were a gracious audience.
I called my speech, The Consumer Driven Disruption of the Health Care Status Quo. This newsletter sums up some of my main points. Here’s my thesis: The disruption of our health care system is already starting, and it’s delivering better benefits at a lower price for employers and working Americans. It’s gaining traction – and it’s accelerating.
Disruption is defined as “radical change to an existing industry or market due to innovation.” It has happened to lots of industries that didn’t see it coming: hotels, travel agents, taxis and more. I saw it myself when I started working as a newspaper reporter in 2001. Newspapers were beginning to launch websites and some journalists scoffed at the Internet. They didn’t see the threat, or the need to adapt their business model, and the Internet’s disruption shuttered thousands of U.S. newspapers.
The big players in an industry often miss the warning signs that they are about to be disrupted. I love how Columbia Business School professor Rita Gunther explained it in the Harvard Business Review:
There’s always very early evidence that a business model is in trouble, but it usually gets ignored or dismissed. That’s because at most companies the people at the top got there because of their success with the current model—so they have very few incentives to question its durability. So you get a denial reaction initially, followed by desperate attempts to eke just a little more time out of the existing model. The recognition that things must change happens only when it is far too late.
Disruption has become common enough for experts to identify key characteristics of industries that are likely to be disrupted. I pulled five of them from sources like Entrepreneur, Forbes, and the Harvard Business Review. All five are present today in the health care industry.
Characteristic one of an industry that’s likely to be disrupted: Inconsistent pricing
Health care prices are absurdly inconsistent for working Americans. Hospitals are now required to post their prices on their websites. So I looked up the prices for a colonoscopy at Dell Seton Medical Center at the University of Texas, in Austin.
As you can see, a patient covered by Blue Cross Blue Shield would pay $834 more for a colonoscopy than a patient covered by Aetna. Nonsense. Even more surprising, the patient getting the best deal would be the one paying cash!
I’m not picking on Dell. Similar inconsistent and unreasonable pricing exists at hospitals across the country. Grab their data from their websites and see for yourself!
Characteristic two of an industry that’s likely to be disrupted: It’s unaffordable to the masses
You already know that health care has become unaffordable for working Americans. But it’s hard to overstate just how unaffordable it has become. Experts now estimate that 100 million Americans are burdened by medical debt. A Commonwealth Fund survey found that two of five working age Americans do not have stable health coverage. It found that one quarter of adults in employer sponsored plans are underinsured.
Put simply: working Americans would embrace disruption that delivers affordable health care.
Characteristic three of an industry that’s likely to be disrupted: High levels of inconvenience caused to the customer
Our health care system often doesn’t put the patients first. Let me list some examples. Patients rarely see the prices up front, and the prices are often unreasonable. They can’t get reliable information about the quality of care. Care isn’t coordinated. Medical errors and adverse events are common. Billing errors are rampant. Patients often get sent to collections and they are sometimes even sued by hospitals when they can’t pay a medical bill. The system is often cruel to patients.
I could keep going but you get the point. The American public would embrace disruption that made health care more convenient for patients.
I highlighted two additional characteristics of an industry that’s likely to be disrupted: power is consolidated and there’s an opaque cost structure. Oh yes, health care is characterized by both of those attributes.
The disruptors are already at work. I shared in my speech how two benefits advisors — Adam Berkowitz and John Clay — are helping their employer clients provide better health benefits at a MUCH lower price. And I could have highlighted scores of other examples. These “wins” are a major theme in my book and the video curriculum based on the book: The Never Pay Pathway. Individuals are saving hundreds or thousands of dollars per health care encounter. Employers are saving exponentially more - while providing better benefits.
I closed my speech to the Texas Association of Health Plans audience with two big questions.
What do these early signs of disruption mean for the individuals and companies that make up the current status quo?
First, I hope the early signs of disruption will spur them to do better on behalf of the employers and working Americans who are paying the tab. If that’s not possible from inside the system, they may need to leave their current positions and join the disruptors. There will be winners and losers here. Once people in the industry recognize there’s a better way, they may jump ship. Many of the today’s top disruptors are former industry insiders.
How far will this disruption go?
The current disruption is in the early stages. It’s not mainstream. It could grow, and upend the system as we know it. Then again, maybe the entrenched status quo will continue to prevail. I predict that the disruption will continue to grow, and it will accelerate. (I’ll dig into the reasons why in a coming newsletter.) It would not surprise me if it transformed the way working Americans get their health benefits — for the better.
That’s how it works with disruption. One day the titans of industry are laughing all the way to the bank. Next thing you know they are the laughingstock.
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I have a $370,000 EOB for a pacemaker surgery I had in February. (Good thing it has a defib.) The story I get is that the hospital failed to get a new prior auth when the surgery switched to the combo cardiac cath/surgery suite. I don't know what really happened or why the price of a Zillow listing is sitting next to my name. The hospital has not sent me a bill for that amount, and I hold my breath every time I look at my insurance portal or get a bill from the hospital.
How about we all start with this: patients are people? Thank you for all you do, Marshall.