The Administrative Burden in Healthcare

The existing way your physician will be paid for providing service.

This past week Amazon, Berkshire Hathaway and JP Morgan Chase announced that they forming a joint venture to address healthcare costs. What this means is that they take on the management of their employees’ healthcare. They will likely contract with specific providers or even hire their own and funnel employees through these providers. They may even try to force people into next generation technology, such as telemedicine, where instead of going to a doctor or hospital the person connects to a provider electronically. They certainly will use their number of covered lives to negotiate favorable pricing with providers. All in the hopes of driving down overall healthcare costs. This is far from a groundbreaking approach to controlling costs.

Large employers have long since taken on the risk of self insuring their employees. According to Modern Healthcare article over 91% of large employers take on the risk of self insuring their employees. That amounts to over 101 million people making the 1 million people that Amazon, Berkshire Hathaway and JP Morgan insure not so formidable. And these large employers have tried all sorts of combinations of restrictions and steering patients to specific providers to try to control costs. Healthcare providers have long restricted their employees to their own hospitals providers. Employers have gone to high deductible plans to try to put more of the cost on the employee so that they will shop around for the best price. Each of these has had varying levels of success in cutting costs but even the combination of all of them has not been successful in stemming the rising costs of healthcare.

In my opinion this is because none of these approaches take all stakeholders into account and the primary approach has been to reduce utilization and cut payments.

All this has done is incentivize insurers to make it harder and harder to get healthcare services approved for payment. Between insurers trying to reduce spending and providers fighting to get paid, the level of distrust between payers and providers is ever growing. Therefore insurers are continuing to increase their expenditures on controlling access while healthcare providers are spending more and more resources to get paid for the services they provide the patient.

This distrust between all parties involved has driven administrative costs to an unprecedented level. According to this New England journal of Medicine article over 30% of healthcare costs are administrative. This means that 30% of every dollar spent on healthcare goes to non-value add activities of restricting access to drive down costs and providers trying to get paid for the work that they have performed. And no offense to the Amazon, Berkshire Hathaway, JP Morgan Chase group but an employer alone cannot influence this issue alone. Driving these administrative costs down can go a long way towards fixing overall healthcare costs.

The inherent benefits of blockchain technology allow these costs to be dramatically reduced. Because no one party controls the blockchain, it cannot be influenced by any one group in healthcare continuum. We will use blockchain technology to drive consensus on the rules of what should and should not be covered between employer, payer, and provider. This will allow us to automate a great deal of the administrative process and drive out a great deal of the administrative costs in healthcare. Driving these administrative costs out of the system will allow our healthcare system to focus its spending on the care that truly matters.