The misaligned incentives that govern healthcare
Lots of successful businesses and entrepreneurs want to disrupt healthcare. It makes sense — healthcare is a recession proof business in much need of disruption and it’s always gratifying to work in a business that can make a real difference to lives. However, healthcare is not really like most other businesses. And one of the main contradictions to deal with is the misaligned incentives that govern the different players within healthcare.
To illustrate this better, imagine that you (or someone you know) develop fever and need to visit a local doctor.
Your priority is to get well soon, pay as little as possible and get back to life right away.
Your doctor examines you and feels he needs to run some tests to rule out a serious infection. In the process, he discovers you are hypertensive and diabetic (grr!) so asks for some more tests and prescribes some more medication. He prescribes an antibiotic (at your insistence!) even though he disagrees with its need. Your doctor calls you back for an additional consult in a week and then once every quarter, if all else is well. You are now paying for the tests for the fever as well as for diabetes and hypertension), the additional medication and the extra visits.
The hospital that your doctor sits in is happy that they are caring for you. Maybe you might be one of those patients that might need an expensive heart procedure in the next 5–10 years! Maybe you’ll be happy with the experience and recommend the hospital to your family and friends. All adds up to the money needed to run the hospital.
The laboratory doing the tests is happy about the extra business and will hope you keep coming back for more every month. Because regular testing is a great way to monitor your conditions.
The pharmaceutical company is happy that you are on an antibiotic as well as medication for diabetes and hypertension. They will want you to complete the full course of medicines and be regular with your diabetes and hypertension medication. Because adherence to your medicine is very important to prevent future complications.
Your insurance company (if they cover the cost of your tests and medicines) is unsure about the outcome. In the short term, the money spent on managing your fever, diabetes and hypertension is a cost. In the medium — long term, diagnosing your diabetes and hypertension may allow them to price the additional risk into your premium, and maybe, just maybe, reduce your health costs in the long term.
All you wanted was a quick treatment for your fever and to go back to work. But your fever, and the health needs of millions around you, powers 6–18% of your country’s GDP (depending on where you live), millions of jobs and thousands of businesses. All the people we discussed above want you to be healthy — it would just be nice if your health also funded their business model.
All the disruptive health entrepreneurs would do well to consider how your innovation can navigate the misaligned incentives that underpin how we consume healthcare.
