Making the healthcare system work better for everyone.

Many industry professionals are still wondering what Atul Gwande, MD is up to at Haven Healthcare because there hasn’t been much written about the company since its founding.

I read Better again recently for more insights. Better is Dr. Gwande’s observations and findings about the business side of healthcare. First, note the title is Better not Disrupt.

While I am very familiar with the issues described by Dr. Gwande’s stories, he provides additional insights and color from a physician’s perspective that are valuable.

Accountable Care Organizations [ACOs]

In Better, Dr. Gwande shares insights from his discussion with the founder of the Matthew Horton Health Plan. An early prototype of a healthcare ACO.

The issues he describes are similar to the Integrated Delivery Systems [IDS] of the 90’s and the challenges of the modern version – the ACO. How do you get physicians to work together? How do you align their financial incentives to adequately reward them for their knowledge, skill and the extraordinary risk they take everyday treating patients?

Collaboration + Culture

The Matthew Horton Health Plan reportedly worked really well when it was essentially a startup. Physicians were paid a salary. They worked together to treat the patients under their care, contracted with specialists as needed and with input from the specialists improved their screenings and workups. Only patients who needed to see a specialist were referred.

Problems started when they tried to take the Health Plan to scale. As more physicians were added it was harder to get the physicians to work together, attract specialists at the same pay and get everyone invested in the model.

Healthcare is not unique in this challenge. Most startups have similar problems when they try to scale the company. It’s hard to avoid creating the functional silos that result in turf wars. That’s why many founders and CEOs such as Tony Shea, CEO of Zappos are always tinkering with their organizational structure and culture. Zappos is now part of Amazon.

Compensation + Pricing Transparency

Did you know that on average people with a Masters in Business Administration [MBA] realize a 10% higher ROI on their educational investment? Yet physicians are often demonized for making a lot of money. 

Most physicians are not comfortable talking about their compensation. In Better, Dr. Gwande shares his experience of trying to figure out what his annual salary should be for his first job. Like many of us would do, he approached his peer group for insights but got nothing from them. 

The only person that was willing to speak with him was a General Surgeon who works entirely out-of-network and making from my best estimates about 6-8 times Medicare rates. That’s often the range for gross charges. In-network providers accept a much lower amount. 

There is no wrongdoing in this particular case. The physician wasn’t contracted, patients knew in advance but were willing to pay a premium for his services. If requested, patients were given the information needed to bill their insurance company.

Reportedly, the hospital was uncomfortable with this surgeon discussing his rates. Physicians, and more broadly speaking, the healthcare industry doesn’t like to be perceived as greedy.

Putting aside some of the fast money strategies, you can see why Pricing Transparency is not a good cultural fit for the industry and why it has taken more than 20 years to implement healthcare consumerism.

Malpractice + Oversight

Many of us in the healthcare industry have deep respect for physicians because as Dr. Gwande puts it, they are “doing something special” and held to high standards for their work.

In Better, Dr. Gwande sheds light on the malpractice insurance industry and the standard to which physicians are held for errors. Many are falsely accused of issues that have nothing to do with their work and yet incur tens of thousands of dollars to defend themselves in those cases. The number of valid malpractice cases is surprisingly low.

There are similar issues in Corporate American but few people spend the time and money to defend themselves. They simply move on to the next opportunity. It’s not that easy for physicians because the issues more clearly effect human life.

Haven Health

So if you’re wondering what Dr. Gwande is up to at Haven, he’s likely trying to figure out the right answer for these issues to make the system work better for some and then everyone.

My guess is that he is also trying to figure out what issues Haven should own versus the founding companies. The healthcare industry is taking on issues that are somewhat out of scope and are failings of the broader market. 

Bill Gates recently acknowledged, “my $109 Billion net worth shows the economy is not fair”. It’s clear that the country needs to make some policy and tax changes to take pressure off the healthcare system for it to work better.