More thoughts on consumerization in healthcare

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A few weeks ago I wrote my thoughts on whether consumers could be good shoppers in healthcare. I asked you all to submit your thoughts, and I got some really good ones.

I’ll say that I’m pretty surprised that 90% of the responses were no, considering the entire theme of thought leadership pieces and VC investing in the last decade was that healthcare was becoming more like a consumer product. I can’t tell if people’s sentiments have shifted because most of the consumerization projects hit a wall, or if people have felt this way the whole time.

All memes and commentary added by me.

How Consumerized Health Works in India

“My 2 cents on this topic with fair experience of retailization / consumerization in diagnostics in India. 

Many diagnostic companies in India give commissions for referrals. I run a chain of imaging labs and instead of giving referral commissions, I reduced the price and went straight to patients and took a bet on their "choice". My experiences below:

• Diagnostics CT, MRI scans are semi commoditised. Scan machines' image output are pretty standardised. Radiologists interpretation of 95% of scans are nearly the same. 
• Most patients first ask their family and friends where to go for a scan, then google around a bit to check the price and convenience and of course the reviews. 
• Nearly 90% of our business is walk-in patients who are "referred" to other diagnostic centers. But the patient prefers us because of price and convenience. 
• When we ask the patients in a phone call, when they are booking the appointment, how did you come to know us - 60% is word of the mouth referral (friends, family), 20% is google ads, 10% is direct referral by their doctor and 10% is google research
• Yes, patients can be good shoppers if the service is commoditised or semi-automated.”
  

-Dr. Arunkumar Govindarajan

[NK note: India is the one of largest and most developed healthcare systems that is mostly cash pay. The referral aspect of this is particularly interesting - in the US we have anti-kickback/Stark laws that prohibit this kind of “pay for referral” scheme. However, critics of that talk about how it gives much more leverage to larger companies that can either figure out weird legal workarounds to still enable referrals or to large hospitals that then just buy practices so they can refer patients to themselves. 

So while it may seem bad to prevent referral commission, trying to stop it yields its own issues. In fact, having this referral commission leaves the opportunity for companies like this one to lower the prices for consumers and potentially compete away the commissions.

We talk about how India compares to the US in the US healthcare 101 course (starting in October 1st!)]

Behavioral Econ vs. Healthcare Consumerization

“Great topic this month - I feel like the digital health industry has spent years (a decade?) pushing the consumerization angle and I feel like what we wanted to push is actually having some level of user-friendliness as opposed to what we got which is direct-to-consumer.

I think healthcare has three fundamental challenges related to consumerization (beyond lack of data/transparency):

• Lack of feedback loop/slow feedback loop: I think consumerism works best when there is a rapid feedback loop that you can learn from.  So you have preferences but you can also see how the product actually aligns to those preferences (think buying shoes from Payless and Saks - I'll probably get a feel for shoe quality within months.).  In most consumer areas, those repeated interactions are in place...and relatively low cost.  In healthcare, the feedback loop on experience is fast (you go to visit) but on quality and outcomes slow/non-existent.  That makes it both hard to learn and also may drive decisions based on feel vs. value (i.e. more and more ostentatious hospital foyers...)
• Future value discounting: We know that in general people discount future value in ways that are ultimately not what they prefer (thus an entire industry on how to address retirement savings).  In healthcare, so much of the value is distant and uncertain - our cognitive biases literally set us up to be bad with this.  I think there has been a belief that there would be more "preventative" activity if people paid for themselves, but I don't know how true this is in aggregate.  I think there would be more "feel-good" preventative activity but would there be more colonoscopies?

• Base Rate discounting: We all think we're unique...and so while I should look at medical treatment that I need based on my population - i.e. x year old of y race in z income bracket, we all think we're different, especially on emotional areas like health and death.  I think that is another reason people defer care (e.g., hearing aids, screening, etc.).  This one feels the most solvable especially with technology/AI - you can give people a real feel for their age and needs but the reality that people don't actually have a good sense of what their personal health evolution will look like and that means they are not actually buying for their likely needs (it's like a new couple buying a home with zero thinking on whether will have kids or elderly family, etc.) that need support
  

I think we need to move away from the idea that there is a "perfect" structure that makes everything better and move more toward solving in the existing structure.  To me that means generally pushing for more consumer/user-friendliness in current interactions (e.g., access to price, records, focus on ratings that support clear language), increased focus on consumerization in things where information is clear and low cost (e.g., dental cleanings, vaccinations, etc.) paired with a better system approach/incentives for *both* consumers and companies on preventative care.”

-Elina Onitskansky

[NK note: This is always my question. Will someone pay their own hard earned cash for a tube to be stuck up their butt? What about in a healthcare context?

At the end of the day, it’s the time-to-value aspect of healthcare that I think is what makes it such a hard purchase. For most other things, we feel the value of what we bought nearly immediately. For healthcare that’s not the case, so we’re guessing a lot. Plus, if we ARE actually getting value out of what we bought…it’s probably because we’re in a bad health situation which is also still not great.

I do think there’s something interesting about how we can take ideas from other industries like finance which seem to have some solutions for things like future value discounting if you look at 401ks and retirement plans.]

Healthcare Consumerization in Kenya

“I think about this question a lot, because in our setting in Kenya, we are much much more consumer driven than in the US, with most patients paying out of pocket for most things.

In general, I think this is a good thing for patient care, aligning incentives of patients and providers, and also good for reigning in healthcare spending.

Two problems come to mind:

1) Our patients LOVE original brand drugs, and in my opinion, waste too much of their little money when they could have the same outcome with generics.  The pharma lobby and advertising is problematic here.

2) Patients love scans -- even my friends in the US always want MRIs "just to check things out" -- terrible use of healthcare resources and not evidence-based at all.  Probably worsens outcomes in most circumstances unless you are working up a specific problem the patient has.”

-Anonymous

[NK note: Kenya just like us fr fr. I’m actually genuinely pretty surprised that the branded drug debacle is something that also happens outside of the US. I would have assumed that if customers are more exposed to the price of the drug, they’d end up choosing the cheaper one. I guess branding and perception really do matter. Kenya believe it?]

Buying Health Insurance Is Not Designed For Consumers

“ It's an interesting topic and one that should be addressed for future planning efforts at both insurance companies and government programs like Medicare and the ACA.

Here are my thoughts:

1 - As someone who works directly with consumers on the Marketplace I can tell you they think they want choice, but they really don't. Similar to your MA example, if the premium is "reasonable" and the person's doctor is in network, then they are set. Trying to explain the out of pocket max, deductible, day 1 coverage vs not, high deductible health plans w HSAs is just information overload and they don't care because they don't see how it applies to them. I don't know if we ever see a system where the patient is truly educated on health jargon to make informed decisions.

2 - The current market (and I'm speaking to both ACA and MA where the consumer has a plan choice), have just as many terrible plans as they do decent plans. For example, with ACA, the government requires half of their plan options to be what they called "standardized", offering a set cost sharing, deductible and actuarial value. The rest can be a free for all. Even this regulation is garbage though. I remember I was astonished that the MLR calculation that CMS uses for each MA plan's filing, is not even how you calculate true MLR. It was based off of a scenario that would never be true, a subset of the members and a specific plan year. So how can they even regulate these plans?!

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3 - Brokers are the main source for people to choose plans. People are putting their trust and a nice chunk of their finances in a broker. Brokers in general have a bad rep, and we use them for everything, health, real estate, financial planning, other types of insurance, etc. I think people like the idea of talking or meeting with a person. That's why call centers still exist. But with the younger generation being tech savvy, eliminating unnecessary expenses, and wanting to minimize their contact with actual humans, I honestly think we see newer models like Thatch but for the consumer. For my business, I have developed a very personal relationship with businesses to make it possible to cut out the noise and nonsense in fees and bias, but it can be hard to scale. Can we just get some more educated, ethical brokers? Highly unlikely.

[NK note: I think AI agents might be great replacements for brokers. 

In so many slices of the economy, brokers have become the de facto way to buy a product (insurance, homes, etc.) and offer expertise to buyers. However, brokers are generally influenced by the commissions from the products they're selling, which usually isn't clear to the buyer.

If AI can provide expertise to buyers so they don't need to rely on brokers to make purchases, it could better guide people to products that are actually good for them vs. provide the best commissions to the broker]

4. Your dentist example resonates for sure. Dentists are one of those niche markets where they aren't under the scrutiny of all the regulation that a doctor goes through, so they have more freedom to practice how they'd like. They also aren't working to address the whole person or partner with other clinicians in any fashion so they really are more like an ER doc to just save the tooth and move on, not make sure the infection didn't spread throughout the rest of the body. This is an area that I am wanting to do more digging into honestly. I think there is an opportunity here to integrate into the medical system in a new way and I think the disparate clinics, different insurance and claims processing systems, is only adding to the problem of our broken system.”

- Myranda Cleary

Are Consumers Good Shoppers In Other Industries?

“My first thought when reading the question, "Can patients be good shoppers of healthcare?" was, "Are consumers ever good shoppers of anything?" 

Let's take a look at a common big purchase: smartphones. These devices cost anywhere between mid-hundreds to over a thousand dollars, which is a lot of money for most people. (Even if they're buying it on an installment plan, that cost is still there...people do know how installment plans work, right?) When making this purchase,  do we really think most consumers know how much memory, storage, and compute power their device has compared to others at different price points? Even if they knew one of those specs, could they really describe the value difference between the 256gb iPhone and the 128gb iPhone? As a geek who used to build computers, I'll readily confess that my last phone purchasing decision tree was as simple as: (1) my then top-of-the-line iPhone lasted 4 years; (2) I don't like replacing expensive things often; (3) what's the current top-of-the-line iPhone; (4) okay, buy that one. (I didn't even look at reviews!)

Okay, but how about something simpler: clothes. We all need clothes because being naked isn't a practical option. Clothes are relatively simple. You've got price, size, cut, color, fabric material, and weave as variables to evaluate. Price is listed, you should know your size (but do you in this brand?), cut and color are obvious...but do you know what material it's made from and what weave was used? Can most consumers tell what the difference between natural and synthetic fibers, or when they'd want one over the other or a blend? How about the different types of weaves used to make fabrics? If we don't know this about things we buy regularly, can we really consider ourselves good shoppers of clothes? 

I've been in healthcare data analytics for over 15 years. I know the terminology. I know how the system works. I have personal friends who are doctors whom I can call for advice. I know statistics. I've had an HSA plan since they came out. I should be among the most informed consumers in the space. And yet, every year, all this gets me is the knowledge that I'm taking a wild ass guess about which insurance plan to select, which doctor to see, and which pharmacy might have the lowest cost for my prescriptions. 

Even if we radically improved transparency on pricing and quality, most healthcare consumers wouldn't be able to parse this information to make good decisions. Layer onto this the reality that many people have to make life-altering decisions about their care while sick*, and you get the sad mess that is the consumer's experience of the American healthcare system. 

*I don't know about you, but I lose 15 IQ points for the duration of a head cold. I can't imagine how badly a major illness would impair my faculties.”

-Sean Cofoid

[NK note: I don’t know about you but I can’t afford to lose the last 15 IQ points.

Regular consumer products are an interesting comparison. It’s true that I don’t know how all the components of the iPhone work, but I know how it makes me feel when I use it and I immediately feel it has utility. If you compare that against things like the AI hardware pins, Google Glass, etc. they focus on all the cool components but they don’t make me feel any kind of way when I use them. That’s why they don’t really seem to do well.

One lesson is that what consumers are buying is “does it feel good to have this” and “does it solve the problem”. From a consumer experience standpoint, healthcare probably could improve in those dimensions.

But I think one of the issues in healthcare is that feeling good about an interaction and solving the problem are different. You might go somewhere that has excellent amenities but the surgery was terrible. As a consumer you can evaluate the former but it can be way harder to evaluate the latter unless it went horribly wrong.]

Patients Shouldn’t Be Patronized

Patients should have total agency. It’s their life in the balance!
Complexity of healthcare is no excuse for taking away a person’s choices about their life. People make family v. me, short v. long term choices all the time – car maintenance, buying insurance, new shoes for the kids instead of a medical procedure, smoking… Given available information, people make rational decisions aligned with their values and financial situation. The more constrained your financial situation, the tougher your decisions are every day.

It's industry and government’s job to improve the information and financial feasibility of healthcare consumers’ choices. No market place will ever be totally consumer driven. Regulation and supply side actors always create constraints. I take guaifenesin and pseudoephedrine regularly for a chronic sinus condition. I’d love to put the generic 12-hour combo pills on Subscribe and Save! Unfortunately, Amazon Pharmacy doesn’t sell pseudoephedrine because of the regulatory tracking hassles, and neighborhood pharmacies often stock out of my preferred option, leaving me with sub-optimal cost v. convenience choices.

We should be moving beyond the patronizing, ptolemaic culture of healthcare. Competent adults are entitled to their choices. No one has suggested that someone else pick my cell phone plan for me. I can decide not to look at test results in a portal the same way I can decide to not read my email. Consumerization of healthcare should be about providing data and access so that people can navigate their care independently like other markets and choices. Consumerization should not be limited to the percentage of checks individuals sign or their ability to shop a market in which the supply side has undue power.

-Kathryn Bowsher

[NK note: Well someone does pick my phone plan for me because I’m still on my parents family plan. That’s how a real third-party payer should function, like my mommy.

I’m generally of the belief that we should allow consumers to take on more risk in healthcare and have lower cost choices in exchange for that risk. IMO the current regulatory regime is optimized for patient safety, and the tradeoff is less access/convenience/higher prices. 

I can see a world where the pendulum ends up swinging back, but it just takes one highly publicized story about someone dying due to laxness of rules and then we’ll over correct to deal with it.]

Thinkboi out,

Nikhil aka. “Consume deez”

Twitter: ​@nikillinit​

IG: ​@outofpockethealth​

Other posts: ​outofpocket.health/posts​

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