Financialization of healthcare

A new foundation for modern healthcare

On July 1, 2022, CMS's (Centers for Medicare & Medicaid Services) Transparency in Coverage rule went into effect, which mandates every health plan in the United States to list the cost of a covered item or service before receiving care. A similar mandate went into effect on January 1, 2021, for Providers to provide clear, accessible pricing information on items and services.

This is the foundation of what will become the financialization of healthcare. 

Let me dive right into what I mean by it.

Summary:

1. Market for comparing price, quality, and coverage 

2. Liquidity for services 

3. Arbitrage of care  

4. Pricing power for employers 

5. Complete transparency for patients

Details:

#1 Right off the bat, price transparency should create a market for comparing price, quality, and coverage. This will be accessible to EVERY stakeholder including patients. The challenge today is that outcomes aren't tied back to price transparency. This is the first opportunity. 

#2 Today, if you need care, you are on a flying trapeze of pre-auth and post-care surprise bills. Medical costs are the number one reason for personal bankruptcy in America. Price transparency can create a market for financial liquidity more evenly. Today patients resort to GoFundMe, but in the future, there should be several other ways to fund care without having to go bankrupt! Creating a secondary market for liquidity is an opportunity.

#3 The question of whether we will see an efficient payor priced market is to be determined, but in the meanwhile, there will be an opportunity to find effective care cheaper faster. This arbitrage needs to account for many variables at play - such as care team, expertise, trust, and coverage. This will be another massive opportunity.

#4 As an employee, selecting insurance every year is one of the most painful experiences. The system drowns you in meaningless PDFs without giving any certainty about your specifics. This is another opportunity to disrupt using price transparency. The bargaining chips must be with the employees, demanding their employers to get the right care.

#5 Finally, the most important change we want to see is complete transparency to you (patient or not). Transparency is also about Trust - that you are not overpaying. Trust in your coverage and that it is not changing on a whim. Trust that you will not get a sticker shock bill later. And trust that you cannot be censored / denied. This key opportunity here is to build a set of patient communities that have ownership and say in financialization.

We are seeing the system fight back to protect their moats. To us, this is a clear signal that we are onto something important.

Some might call us over optimistic to expect all these changes, but we are at a point where the building blocks to bring this change exist. The regulators and HHS have committed to affect a change which is a necessary condition (but not sufficient).

I am taking the liberty to slightly alter Alan Kay's quote:

"The best way to predict which ideas succeed is to go test it." 

This is what we are doing at Constellation Healthcare - managed and run by Kartik Thakore and Akshay Sharma.  We will build and test the new rails to speed up financialization of healthcare. 

In the next post we are going to go deeper on patient community ownership and economics of what we will be launching first at Constellation Healthcare. Our unique take on how financial transparency will have to play out.