by governments. Let's imagine one of these new health-care shoppers has a problem with her eye. Something's blurry. She lives near me, in Massachusetts, and goes to one of the many great doctors we have. He tells her to get an MRI. She has a super high deductible, which means the price is going to be coming out of her pocket. So she shops. She finds that some places charge three times as much as others. But still, even the cheap ones cost a lot, about $600 for a single MRI. She does more research and learns that the state government actually forbids new companies from setting up shop and offering competing services. Why would this be? The justification is that they don't want society to over-invest in certain technologies. We shouldn't build more than we need.
Think how different that is from restaurants. There might be six eateries on a single block, and a seventh opens up because that entrepreneur has the hope, the belief (and often the delusion) that he or she will create something better, that this seventh restaurant will outperform the other six. This is wonderful for consumers. Sure, it has its destructive side. More than half of restaurant start-ups go belly up in year one, and according to a study by the Perry Group, 70% of those that make it past the first year are shut down within five years. The free market claims plenty of victims while creating value for consumers. State laws that shield imaging centers and hospitals from competition deprive the public of the one force -- competition -- that would drive down prices and improve service. We need a lot more death in the provider space.
And don't get me started on state lines. They undermine the promise of a national health-care market. They run across the economy like so many fences, dividing the market into fiefdoms, which almost always hurt the consumer. Let's say you live in New Jersey and find a better insurance plan across the river in New York. Sorry. You're out of luck. But don't worry, you're told. Your state insurance regulators are doing their job, upholding standards and protecting your interests. Naturally, they can't protect you in another state. So you pay more.
This makes little sense. You regularly cross the Hudson River for dinner on the town -- and entrust your health to New York restaurant regulators. You drive through a tunnel and count on highway safety as regulated by New York's Department of Motor Vehicles. But out-of-staters cannot buy insurance there. Ask yourself this: Who are those laws protecting?
These geographic limitations also subvert the promise of the information economy. Let's say someone in Wyoming develops a pink lump under the skin on his forearm. He doesn't know that it's an aggressive skin cancer called Merkel Cell Carcinoma, which strikes only 1,200 Americans per year. Chances are, the local radiologist in Cheyenne, Cody, or Detroit, for that matter, has never seen such a lump. But with a cloud-based service, the patient can send this image to a specialist, perhaps in Florida or the back woods of Maine. This expert focuses exclusively on subcutaneous lumps. She sees hundreds of them every day, from all over the country. She gets constant practice and develops world-class expertise. She identifies the carcinoma. In this example, the network provides scale to build human expertise, which serves up the answer, just as it should.
But wait! Before this expert looks at the image, one question: Does she have a license to practice in Wyoming? Believe it or not, in cloud-based diagnostic centers today, each image must be entrusted only to experts licensed in the state where the patient lives. This adds cost and slows down the growth of services that would benefit all of us. Couldn't states agree to cross certify? Sure they could. But it might undermine their local businesses. So once again, inefficiency is protected, a local job or two is saved, and the public is denied the best possible service.
Underlying much of this legislation is a fear that some devious companies will be benefitting from their relationships with patients. Profiteers will emerge. Of course, this is absurd, given that all sorts of companies, from pharmaceutical giants to "non-profit" hospitals, earn a good living in protected fiefdoms (and channeling a portion of this lucre into campaign contributions). Still, despite all of the wealth sloshing around in health care, there's a resistance to market activities that are commonplace -- and essential -- in other industries.
You might think that there would be one exception, one government initiative I'd be crazy not to love. That would be the original 2009 HiTech Act, part of the economic stimulus package, which provided an initial $19.2 billion to underwrite the switch to electronic health records (EHRs). This spurred a surge of tech investments, by hospitals and medical groups, and it no doubt benefited athenahealth, as well as our competitors.
But you know what? If the industry were open to real market competition, companies would have to make those investments just to survive. Have you ever noticed, for example, that every McDonalds and Burger King runs on computers? Those companies didn't need any incentives. The idea of providing great service without this technology is unthinkable. A restaurant chain that relied on shouted orders, hand-written notes and file cabinets would be dead within a month.
In health care, by contrast, many practices had no compelling reason to switch to digital systems. Many doctors grumbled about them. More important, they weren't facing agile Internet-based competitors. So why change? Sure, patients complained when they were given a clipboard and a pen and asked to fill in the same information for the 10th or 20th time. But the resistance from doctors counted more than gripes from patients. Plus, there were vague privacy concerns about electronic health records. So the status quo stuck.
Now if medical businesses received a clear sign from the marketplace that going digital was the key to survival, they presumably would take the decision with great rigor. A faulty system, after all, could sink them. They would study the alternatives, and figure out which option fit their business model. They would work to turn a glaring vulnerability into a comparative advantage. They'd have to, or they'd die.
But that wasn't the message. With the HiTech act, the government was literally paying them to go digital. So most of them complied. Some subscribed to services like ours. Others went into buying mode. They ran to the companies they knew, the ones that had sales forces and golf outings, and they bought a lot of technology that pre-dated the Internet. For many, it didn't make much difference, because it didn't come with a commitment to change their business operations. Some of what they bought provides some value. But a lot of it is technology they never really wanted, which they'll eventually throw out.
Excerpted from "Where Does It Hurt? An Entrepreneur's Guide to Fixing Health Care," by Jonathan Bush with Stephan Baker, in agreement with Portfolio, an imprint of Penguin Random House. Copyright (c) athenahealth, Inc., 2014.
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