We are accelerating towards a healthcare financial crisis in the US. For many families, it’s already here. In the last 10 years, US healthcare prices are up 22% (vs 17% for the general economy). US Healthcare expenditures are up 45% (vs 28% for the general economy). We have institutionalized a dangerous marketplace known for a lack of competition, obscure pricing and contracting, high administrative costs, and the consumer’s willingness to pay without asking questions or having answers.
The winners have leveraged the current design to profit in an irrational market. Pricing variation, over-consumption and administrative waste are all someone’s profit margin. These companies are emboldened by the infrastructure-heavy business processes that persist in healthcare. These models rely on centralization of data and business models that aggregate and leverage consumer data for profit.
This will not continue another ten years. The government, employers and patient customers are at a breaking point. There is a crisis of confidence in foundational healthcare systems. There will be a dramatic shift, either forced or voluntary.
In March, Alex Azar of the HHS outlined his policy that focuses on empowering patients with their data, transparent pricing, value-based market structures, and removing government influences that impede value-based health. He told the Federation of American Hospitals, “There is no turning back to an unsustainable system that pays for procedures rather than value. In fact, the only option is to charge forward — for HHS to take bolder action, and for providers and payers to join with us. This administration and this President are not interested in incremental steps. We are unafraid of disrupting existing arrangements simply because they’re backed by powerful special interests.”
In response to these pressures we have discovered a potential answer. Recently entrepreneurs and incumbents in the healthcare industry have embarked on an inviting new conversation that has the potential to, over time, fundamentally change our healthcare delivery model. A growing community sees the chance of a lifetime to improve how healthcare is accessed, delivered and paid for. Work is underway to transform delivery through the convergence of healthcare blockchain, IoT, AI, machine learning, mobile devices, telehealth and precision medicine. This technology cocktail leverages a disruptive combination of trust, transparency, behavioral economics, big data and automation. The hope is that we may enable the restructuring of inefficient, ineffective, corporate-focused value chains in healthcare. Doing so could change the market structure under the feet of healthcare companies around the world.
Blockchain provides the foundation for this change. Most people see blockchain as a new technology, often referred to as the “Internet of Value.” What most people don’t understand is that its power for value-transfer disruption lies in the enablement of new business models and the blockchain’s ability to embed belief systems in to the software itself. This combination of open source technology innovation, business model innovation and governance innovation makes it challenging to get right, yet potentially very rewarding for those who use it effectively.
Most people have not spent the time and energy to fully understand the convergence that is happening. It takes a lot of work to fully understand the opportunities presented when you bring together new business models, new technical models and new governance structures.
With all the hype, it’s healthy to be skeptical. Whether or not you believe in the technology, you have to admit that emergence of blockchain is creating an amazing opportunity to collaborate in new ways. Collaboration begins with communication around ideas. These ideas represent a refreshing new conversation in healthcare. It gives us a chance to imagine a world where we can stop repeating the mistakes of the past and stop repeating the same conversations around the obstacles that stand in the way of empowering patients, transparency, interoperability, value, and irrational market forces in healthcare.
For good reason healthcare is resistant to change. Transformation won’t be easy. In fact, it has never been done before. It will require us to shift our paradigm from a model that rewards the centralized business models that underpin many of the largest healthcare companies today. It will require us to double-down on the shift from volume to value. It will ask us to trust software protocols where we formerly trusted companies and middle-men.
In return, we can expect to see new ecosystems in healthcare arise that are in line with the needs of patients, employers and other communities. These ecosystems will center around new types of market structures that provide more efficient access to health resources. These new markets hold the promise of rationality and transparency. Consumers can make choices based on information, cost, and a seller’s reputation for delivering value. Innovative offerings can be listed on new exchanges by innovative sellers that reflect the needs of innovative buyers like the VA or Amazon, JP Morgan, and Berkshire Hathaway.
To succeed, we will use a variety of new distributed and decentralized protocols that embody the belief systems of their creators who come together around solving the industry-level problems borne of centralization. These parties (new and old) have already begun to collaborate and offer an alternative to healthcare’s current value chains that keep us locked in 1990’s-era pipelined processes where rent-seeking rules the day. We are already building ground-up economies that use programmable value transfer to automatically respond to behavior, quality and outcomes. We will no longer need to depend on infrastructure (ex. claims) that is not designed to support the important relationship between cost and quality.
The winning innovators will differentiate themselves based on trust, value and collaboration. Across the globe, “minimally viable networks” are coming together to test production systems that solve old problems in new ways. The early use cases focus on physician identity, patient identity, claims adjudication, consent, supply chain and payments.
Experts will tell you it’s just a matter of time. It will happen network-by-network over the next ten years or so. The decentralizing forces that have been unleashed cannot be held back. Hiding from these realities is akin to hiding from the internet in 1999, but even more dangerous. In the 90’s we were changing the container of the flow of information. Today we are changing the container of the movement of value and digital assets. That’s a much bigger story that could shift the landscape in dramatic ways. There will be companies who ignore the shifting market structures under their feet, possibly resulting in a new corporate extinction event in a relatively short period of time.
That might be what it takes to right-size a system that has outlived its design. It also just might be our only viable alternative to the next US financial crisis.
John Bass is the Founder & CEO of Hashed Health, a healthcare innovation firm that focuses on using blockchain and distributed ledger technologies to solve unmet needs in healthcare.