Healthcare’s Structural Flaws (and How We Plan to Fix Them)

February 27, 2023
Michael Lee

Healthcare’s structural flaws (and how we plan to fix them)

A better healthcare system.  A better way.  Abett.

We envision a world in which everyone has access to high quality, affordable, and timely healthcare.  Our mission is to deliver innovative solutions that bring transparency, competition, and accountability to the healthcare system.

Treat the disease, not the symptoms

We all know that the $4 trillion healthcare industry in the United States is fundamentally broken.  It is a system that is rife with misaligned incentives and abusive business practices.  Sadly, it is heavily tilted in such a way that many American families are pushed into financial hardship or bankruptcy due to industry participants’ predatory practices. American families and the employee benefits plans who pay for their care have been losing the war for good affordable healthcare in this country.

If we are serious about wanting to solve this monstrous problem, we must force ourselves to address the deep structural and root cause issues that have led America to this predicament.  As every reputable medical school trains its physicians to think: “treat the disease, not the symptoms.”  American ingenuity has produced plenty of innovations to address many difficult medical puzzles. Consider titanium joint replacements, remote robotic surgeries, drug-eluding stents, gene therapies and mRNA vaccines; the industrial engine that powers American research and development has provided no shortage of treatment “solutions” to our sicknesses, and yet we pay more and get less for our healthcare relative to any other industrialized nation, as illustrated in the chart below.  If the issue is not lack of innovation in treatments, then what other problems are at play?

Health expenditures vs. life expectancy

Anyone who has taken an introductory course in economics will recall that the core principle of that discipline is that competitive and free markets are “efficient.”  In other words, all products and services are priced fairly and no one company makes “excessive” profits.  American healthcare is built on the foundation of our free-market economy and nonetheless resulted in several immense market players with behemoth levels of both market share and profitability.  Meanwhile, healthcare consumers have hardly attained optimal outcomes.  Why and how did we let this happen?

If you remember that bit about free market efficiency, you might also remember two key conditions required to support that principle: 1) information symmetry, or the idea that both sellers and buyers have the same information about the market in order to make fair trades; and 2) adequate competition, meaning there are many buyers and many sellers on both sides of the trade (i.e., no monopolies).  It turns out that neither of these conditions is meaningfully true when it comes to American healthcare.  Healthcare in America has fundamental structural flaws in its lack of transparency, competition, and accountability.

Information asymmetry and lack of transparency

Since the dawn of time, healthcare has not had any meaningful information symmetry between buyers and sellers of care.  From the day of the earliest village doctors, a sick villager did not have much ability to know if their shaman or herbologist was offering to sell an effective cure or snake oil.  Similarly, they had no way to judge if the asking price for a concoction was fair or exorbitant.  Nonetheless, given the choice between hoping the malady would pass naturally or a brew that might buy themselves or their loved ones more time on earth, of course most who had the means would pay the price for whatever care or medicine was available, regardless of whether the price was “fair”, and whether the treatment had any significant effect.

In modern times, of course, we have scientific methods for evaluating what treatments are effective against disease but, sadly, the same information asymmetries largely persist today as they did in ancient times.  A mother rushing to check her feverish child into a hospital has no idea how financially vulnerable she is the moment she signs her name on the payments waiver at the emergency room check-in station.  She has no idea what illness is causing her child’s condition, what treatment if any is medically necessary, what the hospital will bill her, or what her insurance, if she has any, will cover.  Soberingly, that one signature could potentially put her into personal bankruptcy.

Even employers and health benefits plan sponsors have to wage intense protracted legal battles against the healthcare industry to obtain access to fundamental and basic data about the prices that healthcare insurers and providers charge them for medical care, as evidenced by this recent class action lawsuit.  And when employers do succeed in compelling their vendors to share data, the data usually flows very poorly, often with severe latencies that can stretch out for months after procedures are rendered or claims are paid.  These data streams are often extraordinarily messy and incomplete, rendering them practically useless if not prohibitively expensive to maintain, manipulate, and analyze.  Benefits professionals would be rightfully angry and aggravated at how hard it is to gain control of and manage their plan data.  How can they make good business decisions when they are so fundamentally blinded to the information required to inform their choices?  

Clever business leaders have come to realize that data control equals economic power.  They have gone out of their way to design systems and write rules that allow them to horde data and restrict its flow solely within the sandboxes and siloes that they themselves define.  Those who have succeeded in these strategies have seen their revenues and cash flows flourish tremendously while they exploit their customers’ data.  There is no better example of this dynamic than in American healthcare where providers of healthcare service and health insurance consistently withhold healthcare data from their customers.  Carriers and large provider networks play a “shell game” over meaningless gross list or “billed amount” pricing and discounts that muddles the true costs that consumers and employers pay for care.  When asked to divulge information on how or where benefits plan dollars are spent, carriers refuse or evade, arguing that such data are proprietary and confidential.

The balance of power over healthcare data in America is heavily tipped in favor of providers and insurance carriers, leaving employers and their plan members vulnerable and severely disadvantaged.  Employers and consumers who are trying to win the war on healthcare costs without meaningful control of healthcare data are showing up to a multi-trillion-dollar gunfight wearing blindfolds.  Solving this structural flaw in the industry requires fundamentally disruptive change.  While Federal mandates and legislation such as the Affordable Care Act, the 21st Century Cures Act, and the Transparency in Coverage rules are critically important steps in the right direction from a regulatory perspective, these alone are not enough.  The industry still requires innovative tools that will help to bring the balance of power with respect to healthcare data back in consumers’ and employers’ favor and restore information symmetry to the marketplace.  

For these reasons we at Abett have built disruptive tools, like the Abett Lockbox, which allow employee health benefit plan sponsors to take control of their healthcare benefits data in ways not previously possible.  With real-time access to claims-level data, employers use the Lockbox to gain timely insight into what is happening in their plan.  The Lockbox automatically cleans, validates, and standardizes plan data to make it useful to benefits teams.  It allows benefits professionals to share plan data with key vendors in real-time, so they can create value for plan members, such as disease care management and fraud, waste and abuse solutions.  With the Lockbox we are unwaveringly pushing the scales back towards consumers and employers to bring unprecedented transparency to the healthcare industry.  It is time to shine a light where for too long there has been darkness.

Competition and lack of choice

No market can be efficient without meaningful competitive choice.  Imagine if we could only buy one brand of coffee, or automobile, or if there was only one airline that served the world’s airports?  Monopolies and their close cousins, oligopolies, are bad for consumers because they take away the power of choice.  Without the ability to choose an alternate supplier, consumers are forced to buy products and services from the one and only buyer available to them, irrespective of quality or price.

One can argue that there are plenty of choices in American healthcare.  After all, there are nearly one million active physicians practicing in the United States at thousands of hospitals, clinics, and other care facilities through the country.  There are multiple insurance carriers offering a variety insurance plans to choose from.  

In reality, American consumers rarely get to exert meaningful choice in healthcare. For routine (and relatively low cost) care, families generally do not switch their physicians unless forced to do so, and then only grudgingly.  Meanwhile, at the other end of the spectrum where care is likely to be most urgent and expensive (i.e., in emergencies or chronic cases) it is not possible to shop carefully for care.  The patient who is at risk of bleeding out from a car accident cannot afford the time to shop for the best-priced ICU in the market.  

Similarly, employers often have difficulty exerting meaningful choice when it comes to their healthcare plan vendors.  There are comparatively few national healthcare insurance carriers to choose from in the market and switching between the vendors that are available requires arduous and taxing multi-year requisition and implementation processes.  The proliferation of the number of point solutions available in the market has given employers more options when it comes to care delivery models, but has significantly increased the complexity of making changes to vendor portfolios.  

For example, consider a plan that uses a large number of point solutions, say a dozen or more, that all rely on a single medical carrier for claims or eligibility data.  If the plan sponsor chooses to deploy a new carrier, the benefits team must not only go through an RFP and implementation process to transition to the new vendor, but they will also need to reimplement the data feeds from the new carrier to each of the existing point solutions which may each require months if not years of frustrating legal wrangling (BAAs, NDAs, etc.) and tiresome project management.  Consequently, the switching costs of changing a medical carrier have grown considerably with the increasing popularity of point solutions.

At Abett we believe it is vitally important to preserve freedom of choice, reduce frictional costs, and promote more competition in healthcare.  The Lockbox functions as a plug-and-play data logistics solution for benefits teams so that all data created by the plan’s vendors flow into the Lockbox, and any vendors that require plan data may obtain it from the Lockbox.  With the Lockbox, benefits teams can directly control what data flows where and when. They are no longer held hostage by vendors whose interests and incentives are not aligned with the plan.  If a plan wants to change a vendor, the benefits team only needs to build one new data connection to the Lockbox, not one for every vendor in the plan.  With the Abett Lockbox, benefits professionals maintain the freedom to choose their vendors in the marketplace; they can make changes to the plan with the speed and nimbleness of 21st century cloud-centric software instead of at the snail’s pace of 20th century legacy incumbents.

Lack of accountability: the buck stops where?

With the lack of transparency and competition, it’s no surprise that the healthcare industry also fundamentally lacks accountability.  Investigative journalism has uncovered too many stories of fraud and abuse in the system to count.  Insurance carriers, who are supposed to be fiduciaries for their plan clients and tasked with detecting such abuse in the system, charge their employer clients “shared savings” fees for identifying claims they were not supposed to pay in the first place.   Employers have implemented numerous point solutions in their efforts to actively manage expense and member health and also reduce their reliance on insurance carriers. Yet, the proliferation of point solutions has also made the job of evaluating vendor performance and effectiveness substantially more complex and difficult.  With every vendor in the ecosystem using their own data language, silo and metrics, there is a fundamental lack of data interoperability in the system and no common yardstick with which to measure vendor performance and return on investment.  Consequently, benefits professionals often must rely on the vendors for outcomes reporting or else find themselves in a never-ending chase to track down, clean and standardize vendor data to perform their own in-house evaluations.

A common yardstick to hold the industry accountable requires a common language for data interoperability.  The Abett Lockbox is a Rosetta stone for healthcare data. It can ingest data from any vendor source, in any format or standard, and translate all plan data into a common data language.  With the Lockbox, benefits professionals now have a comprehensive and integrative tool to execute and evaluate their entire benefits strategy and portfolio on their own terms.  Want to see if utilization of your diabetes management point solution is resulting in lower pharmacy and medical claims at your PBM and medical carrier?  The Lockbox can handle that.  Want visibility on if patients at your new diagnostic testing service are engaging with your independent oncology care management vendor? No problem.  With the Lockbox as a single source of truth for benefits plan data, Abett turns real-time comprehensive vendor evaluation and accountability from pipedream to reality.

A better way, a better tomorrow

At Abett, we believe that affordable, quality and timely healthcare is imminently achievable, not just some quixotic fantasy.  We are building the innovative tools that will bring transparency, competition, and accountability to the healthcare industry.  Are you angry or frustrated with the incumbent establishment?  Do you want a better way? Do you see a vision of a better healthcare system on the horizon?  We are Abett and we do too.  Let’s connect.