From The Editor | May 28, 2013

Can Entrepreneurs Save Healthcare?

ken congdon

By Ken Congdon

By Ken Congdon, Editor In Chief,
Follow Me On Twitter @KenOnHIT

I love to hear Jonathan Bush speak. Say what you will about his agenda as president and CEO of EHR vendor athenahealth, but the guy is a charismatic, passionate, and persuasive public speaker. When you hear Bush give a keynote, it’s clear he’s inherited much of the political swagger that runs in his bloodline (former president George H.W. Bush is his uncle and George W. Bush is his cousin).

Most of Bush’s lectures focus on promoting free market healthcare. He’s a strong advocate for taking bureaucracy out of the healthcare system and giving entrepreneurs more freedom to develop innovative solutions to the problems that plague our industry. Most recently, I saw Bush give his TED Talk at TEDMED 2013. In this speech, Bush examines the undeniable culture that has emerged in the coffee industry. He appropriately credits entrepreneurs (e.g. Starbucks, Seattle’s Best, etc.) for developing an entirely new billion-dollar industry around a bean-based beverage that has been a popular part of American diets since the inception of our country. Bush then argues that the same type of cultural transformation can’t occur in healthcare because the “profit motive is trapped in a weak marketplace.” To Bush, healthcare entrepreneurship is currently impeded by government regulations and there is little competition and transparency.

Bush continued this argument in a recent article he wrote for Techonomy. In this post, Bush calls the nearly half a billion dollars in health IT VC funding received so far in 2013 “tragic.” He states that these figures are but a fraction of what the $30 billion the federal government has ponied up in support of health IT and pale in comparison to VC funds raised for biopharmaceuticals and medical devices.

To Bush, one of the main reasons health IT is getting the “short shrift” from investors is because consumers don’t currently “shop” for healthcare. In this article, Bush compares healthcare to the consumer electronic industry, arguing that insatiable consumer interest in iPhones and other gadgets has fueled constant innovation in this sector. Bush argues that since the same economy is not in play in healthcare, innovation is limited.  Furthermore, he asserts that the biggest buyer of healthcare (the U.S. government) stifles innovation because it rewards caregivers based on a narrowly defined set of activities, which limits the appetite for provider differentiation.

I concur with many of the points Bush makes in support of free market healthcare. It’s hard not to, considering he delivers his point of view in such a convincing fashion. However, the more I reflect on Bush’s argument, the more hesitant I become to jump completely on board with his line of thinking. My reluctance stems from the fact that there is a fairly glaring detail that could threaten the success of a free market healthcare system. It’s a detail that Bush failed to address in his TED talk or the Techonomy article, and it is directly related to the comparisons he made between healthcare and the coffee and consumer electronics industries. The detail is this: People like coffee. They want coffee. Similarly, people like iPhones, and they want the newest and coolest gadgets. People don’t want to get sick. They don’t like to go to the doctor. Outside of cosmetic surgery, people don’t want to buy healthcare services. Most of the time, it’s a necessary expense that people would avoid if they could (like gasoline and electricity).

I question how much innovation would actually arise from a free market healthcare system given the fact that consumers ultimately don’t want the product. Sure, once an individual is sick, they want (and are willing to pay for) the best medical care, but there’s a definite ceiling to this consumer market depending on the condition and treatment. Also, remember, the end goal is to cut healthcare costs and improve patient care. While a free market healthcare system may drive down provider charges by increasing competition and making prices more transparent, will that inherently meet these objectives? I’m not so sure.

One of the key ways to reduce healthcare costs and improve patient care is to keep people out of the hospital and ER. Will this be accomplished if consumers are 100% financially responsible for their own preventative care (regardless of how competitively priced it is)? Think about it — how many people would hold off on getting a physical, colonoscopy, or blood work if they were required to pay for these services out of pocket? This move could actually lead to more hospital and ER visits because many illnesses won’t be detected early enough for outpatient treatment.

While aspects of a free market healthcare system have merit, I’m not sure if this entrepreneurial approach is the answer to our healthcare woes.  In some instances, a level of bureaucratic involvement makes sense. To me, the key is striking a balance where both innovation and wellness are encouraged; and healthcare providers, entrepreneurs, and government officials all play a part in improving the health of U.S. citizens. Unfortunately, I don’t know what this system would look like, or if it is even attainable. Maybe Jonathan Bush can help clear things up for me when I get the chance to see him speak again at Health Datapalooza IV next week.