The realization came on a flight back from San Diego. We had just met with a potential investor who was incredibly interested in our startup, but who ultimately balked when he learned how long it takes health systems to make purchasing decisions. True enough, but a little oblique of our actual business model... Ah rejection, like a pair of fuzzy bunny slippers.
Anyway, I was ruminating on the challenges the healthcare industry has in accurately quantifying and measuring outcomes. May seem like a weird thing, but as a company with so much vested in price transparency and otherwise helping consumers make smart purchasing decisions… well, it’s kinda a big deal. All of a sudden, it occurred to me. We’ve got this all wrong.
We will NEVER be able to effectively measure outcomes. We may do better in some areas than others, namely those where feedback is immediate and the consequences severe, like surgeries. Even here, it’s doubtful that we will do much better than just looking at the total number of specific procedures performed by different providers and facilities over a specific time-frame.
If we DO figure it out, it’s going to take 10 years, and no one will understand how to interpret the data, least of all the average consumer. Furthermore, nearly every doctor in America will fall within one standard deviation of every other doctor. Why? Because that’s the kind of country we live in (you know, that place right between a warm cuddle and an obscenely frivolous lawsuit). And, it may even be true. When you factor in the rigorous educational and training requirements, I suspect there is far less deviation between doctor quality than among other ranks of professionals. Sure, the Butcher of Seville is out there, but I doubt he’s going to reveal himself in the resulting gold-star system the industry eventually concocts. (Psst, spoilier alert: everyone’s a 4.7 out of 5)
Mind you, none of this pertains to the actual insight, which is - consumers don’t think this way.
I had just recently used Airbnb for the first time, and the whole experience was fresh in my mind. What an odd concept - that people flying to another city will pay money to stay with a total stranger. Actually, I think that was my thought when I originally heard about Airbnb a year or two ago. Given more recent financial developments, my perspective has evolved to, “sheer genius!”
In all seriousness, Airbnb is a genius display of how consumers evaluate and make decisions. After all, who in their right mind would place their life in the hands of a total stranger using 5 or 6 data points? Uh, last I checked Airbnb is tearing it up, so apparently I’m not the only one.
But really, is Airbnb a good comparison to how we make decisions about our healthcare providers? I’ll give you that one. We are actually infinitely more sophisticated and discerning in picking a couch to crash on then our “medical-centered home” provider, for instance.
Having helped build a medical practice from 0 to over 10k patients, I can tell you that the process an average person goes through in selecting their doctor… scratch that. There is no process. It’s as random as choosing the teller we see at the bank. We stand in line and wait until there’s an open window, and we go where we are told.
At least that is how it has been done as long as we have been operating under a fee-for-service system, or one which is dictated by the rules of CMS and private insurance providers. If you remove the shackles of the continuously “stratisfying” and confusing array of insurance and provider networks, along with their arcane set of indiscernible rules, it becomes incredibly simple to reimagine a better way of doing things.
But who am I kidding? I didn’t reimagine anything. I just took a look at Airbnb and said, “hey, why can’t we do that?”
If healthcare is becoming “cashified” as I previously discussed, and I am buying healthcare services on my own - I want an experience like Airbnb.
If one of my daughters has a sore throat, for example, I want to tap into the list of providers in my local market willing to provide a “sore throat/strep visit” for a cash price. I want to be able to sort them based on a few different variables - price, distance, availability, customer ratings. I also want to see pictures of the office, the providers, and the staff.
I don’t expect these doctors to bid on price, because price is only one attribute I value. For the same reason, I wouldn’t expect every available bed in Boston to go for $122. In fact, last time I looked, I could find something from as low as $45 to as high as $400 per night. Why the variance? Of course this is obvious, but I’ll humor you. One place is a gorgeous brownstone in South Boston, another is a broken futon in what appears to be a derelict dugout in Newton. And is there a market for both? You betcha.
On Airbnb, people set their own prices, but of course the market quickly helps them learn how to adjust that price to find an appropriate equilibrium of demand.
The exact same rules apply to healthcare. For instance, I may be willing to pay $5 more for one doctor over another based on proximity to my house. I also may have a preference for free-standing offices over strip malls, gold painted walls vs. white, friendly smile vs. stick-in-the-mud.
The bottom line is that the market should be setting the price, not insurance companies, and most definitely not the federal government.
Offices will quickly learn that same day cancellations represent opportunity. Because in all of healthcare, there is nothing more valuable than an open appointment right now. This is something the airline industry has mastered, and something a good colleague from a large health system has stressed to me on multiple occasions - healthcare, like the airline industry, is the business of putting asses in seats. I could not agree more.
In fact, when doctors list the services that they are willing to provide for a cash price, they should also have the opportunity to set automatic triggers. For example, my list prices are X provided appointments are scheduled two weeks or more out. If I have an available slot that remains open, automatically increase the price of the visit by 25% during the next week of availability. If it’s still open a week out, go ahead and increase the price another 25%. Finally, If my appointment is still open the morning of, bump it up another 50%. Why? Because it’s fair, and there’s a market for it.
Well run offices with courteous staff and doctors with great bedside manner will start to differentiate themselves in the market, and we will reward them accordingly. And how will we decide who’s doing a great job? It will be based on the reviews of verified patients with closed-loop transactions.
In other words, the data will be real and credible. This is precisely why I am comfortable staying at a stranger’s house based on the feedback of only a handful of reviews. By comparison, to generate the same level of confidence from unverified customer reviews on sites like Yelp or Amazon, I’d probably need to increase the sampling size by a factor of 100, and even then, I’d still be suspicious. (Seriously, how does this Doug Johnson from Mumbai get around to so many different restaurants?)
While there are a number of companies leaning towards the Uber model for on-demand health services, we are much bigger fans of the Airbnb approach, not the least of which because we see cash-based services as an emerging business line for otherwise stifled healthcare providers.
This approach allows doctors and provider organizations to continue doing what they are doing (picture hamster wheel), while gradually exposing more and more availability to a higher-value market segment, until they eventually cast aside the yoke of insurance. Kind of like one of my partner’s friend whose full-time job has become renting out his rent-controlled bedroom in San Francisco to Airbnb'ers. I won’t tell you what he does with his day, but I’m quite certain he feels liberated.
Seriously, just imagine...