April 10th, 2010 by Christian Seebode

This is a difficult issue. Facing economy in healthcare references some unsolved problems. If not unsolved then maybe only untreated or covered by daily practices which were not precisely developed with an economic perspective. Doing healthcare aims to literally take care of the health of the patient. Humanity may claim that the life and health of a human being justifies any cost. But this passes no reality check. Like it or not, in healthcare delivery the life and health of a person is always associated with cost. But how much is this and why? Explosion of healthcare cost is daily business and the amount of people and intelligence involved in this issue is just amazing. Why is it such a hard problem? Frankly, I don’t know. I don’t know because I really don’t have an answer; it’s not a rhetoric response. But I may contribute some observations that seem to have some relationship with healthcare cost with the aim to reconsider some dependencies in healthcare delivery. I kind of feel reluctant to do draw a purely financial picture because health is more than just an economic value. But there is something to think about and there are factors in healthcare that act according to pure economic values. So let’s focus on some economic points. The big picture is:

‘Everyone gets the best treatment and there is enough money to pay it’

My first observation is treats the ‘enough’ in my big picture. How much money is enough? From a patients perspective it’s the money he or she can access. From a provider perspective it’s the amount for the effort done (plus earnings). The task is to align these perspectives. Given the fact that on provider side are many, many influences on effort and cost usually there is only one main influence from the patient on the provider cost: the state of health of the patient. This condition represents the demand for service in many cases and it is issued by: the healthcare provider. Why is that so? In a situation where patients are without knowledge about their situation all tasks to determine the demand and the resulting effort are carried out by the healthcare provider. Further, within a complex treatment plan there may be several parties involved which are not coordinated in the many cases. And the patient is not involved in treatment planning. At most he is asked about some alternatives but maybe without really understanding why. So basically this is a situation where a patient has no choice for whatever reason.

First observation: The patient has almost no influence on the effort a treatment comprises

This is like a monopolistic market scenario. Prices and efforts are dictated and this is sometimes exactly the situation. And it is even worse. Because there is no real sense of competition the effort done does not have to be justified for economic reasons. This is a bad situation even if we wish it would be OK. Life and health should be worth any effort. Or should it?

The use of technology is often justified by scientific and not by economic reasons. But does this really influence the quality of health outcome on a global scale? Technology binds lots of funds inside healthcare effort and sometimes patients are subject to technological procedures even if there’s no need because their individual health process needs to support the operation of machines and not vice versa. In fact there is a paradox within the technology related costs in healthcare. Whereas in other sectors technology is responsible for falling prices, in medicine the opposite is true (http://www.thehealthcareblog.com/the_health_care_blog/2010/03/the-paradox-of-technology-in-healthcare.html). So the effect of this price structure is that money isn’t used effectively enough to the welfare of all patients. Far too much money is used for too few patients and part of the reason for this is an inadequate price structure for technology. But technology can do better.

A second observation follows from the last argument:

Second observation: The best treatment sometimes is not the best choice

Why not? Medicine is an empirical science after all. The knowledge about what is best is drawn from experience and trial. Even if already common practice a treatment accessible to a few patients still carries a higher risk than one accessible for many patients. In order to be accessible for many patients a treatment has to be cheap or cost effective. Cost Effectiveness in healthcare is a huge area of research. The value is under debate. People that still believe that health is a ‘priceless’ jewel are among the offenders as there are companies and physicians which are related to high effort treatments (http://economix.blogs.nytimes.com/2009/03/13/cost-effectiveness-analysis-and-us-health-care/). At the same time it is difficult to assess cost effectiveness because prices of treatments may not only relate to production cost but are also influenced by policy decisions, even more on a monopolistic market. In the end expensive treatments or diagnostics which are a blessing for some patients may be an obstacle for progress.

My conclusion from all this is to seed more competition. There is one vital ingredient to competition: the customer. Patients being customers change the picture. Customers do have a choice and pay for services. But the key factor for patients to become real customers is to enable them to value services offered to them. A patient too often sees him- or herself in a humble position to plead for help instead of being a customer able to select adequate offers from a market. Sometimes indeed health conditions don’t allow to be very picky. But I’d say the vast majority of patients are in a position to make choice possible. Only that it lacks of the necessary resources to make an educated choice. Patient Centered IT systems are able to connect medical, educational and economical information in order to support real market scenarios.

Because there’s competition and transparency lacking it is not easy to build sustainable business models in healthcare. This changes if the market allows patients to become real customers. Information becomes an important part of the value chain and even of therapies (http://www.ixcenter.org/ ) in patient involvement scenarios. But every improvement introduces new risks. Quality has to be assured for information sources like for any other party in healthcare delivery. But this is not the topic of this blogpost. So the main idea is that with Patient Centered Information patients are able to participate in healthcare delivery and will play the role of negotiating customers. In fact they are allied with their physicians to get better prices for technology or drugs.

Consider a simple example where a patient is undergoing a percutaneous coronary intervention. To keep it simple: the decision to make is between bare metal stents and drug-eluting stents that reduce the rate of future revascularization. Given that the two variants are not differing in the final patient outcome, the only difference is that you buy a lower frequency of a percutaneous coronary intervention for a considerably higher price (http://www.ncbi.nlm.nih.gov/pmc/articles/PMC1764790/ ). Of course it is a better quality of life having fewer interventions and reduces the risk of intervention related risk too. But who decides that? I believe the patient could and should guided by information and his physician. In the end prices will be reshaped according to the demand.

This example shows that patient decisions may be very particular and happen in the context of specialized scenarios. Specialization increases because it offers considerable improvement and progress for patient outcomes (http://journals.lww.com/annalsofsurgery/Abstract/2009/05000/The_Impact_of_Surgeon_Specialization_on_Patient.4.aspx ). But at the same time specialization means more knowledge and complexity. The idea of medicine being a generic tool for everyone is not working on a specialized market with real customers. And this is exactly what happens in medicine today. With increased specialization the need for information specializes too and this leads to increased market segmentation. But this is exactly the domain for specialized information sources and systems. Every treatment scenario is supported by only a finite number of parameters whereas in general medicine this number would be infinite. Concerns about patient data security decrease if patient data is segmented according to specialized market segments. I’m not talking about the importance of a family doctor having access to all patient data. I’m making the case for a meaningful application of specialized information systems for patients. Sometimes reality is not the best advice for improvement.


Competition for patients being customers on healthcare markets is advantageous for all participants. It allows for transparency, cost control and better outcomes because of patient involvement. Patient Centered IT systems deliver its benefit best in specialized market scenarios where they support carefully designed business cases.


Patient Data Segmentation

Specialized Decision Support

Information Therapy

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