The Patient, Payer, Provider Triangle.
by Timothy Schmidt
Hey Look, another Healthcare Conference!
It is true that I am once again sitting at a conference on the future of healthcare delivery. We just hit the mid-part of the day and after the first 2 sessions and the Payer, Provider, Patient triangle has made its appearance is just about every presentations deck.
If you have not seen it it looks something like this:
The general idea is that the Patient’s role (that is you) is to give their money to the Payer (insurance). The Payer will be the financial advisor of the care you will get from the Provider (doctor).
The Conflict:
The conflict that exists in this triangle are quite apparent if you take a moment to think about it.
The Payer’s first priority to its shareholders is to maximize profit while at the same time, arbitrating a level of care that is meets the minimax (1) standard of care.
The Provider wants to maximize the amount of care they can provide up to (and at times exceeding) the prayers guidelines to pay.
The Patient wants to minimize the initial outlay and maximize the care.
The Incentive Missmatch:
So, I thought for a moment about the what is the best case for each of the actors.
For the Payer the best case scenario is pretty straight forward. Take in the maximum premium they can charge in a pure demand side market. Followed by paying out the least possible amount the can in claims.
For the Patient the best case scenario is also pretty straight forward. Receive the highest standard of care available on the planet at the lowest cost.
These economic models very straight forward. They variables are pretty straight forward.
The Messy Part:
The Provider system is where the incentive problems are most complex. There are hundreds of incentive mismatches every time a Patient touches this system. All the choice points in this system are mind boggling. Take a simple check up. First off, should you even have one at this very time? Next, if so, what test should be performed? How much interview should the each provider from the front desk to the nurse’s aid to the RN to the Physician’s Assistant to the Physician spend with you to identify your current state of of being. And all of this before there is any indication that the Patient has a condition that needs to be treated. You can repeat this at each an every Provider point of service, from the way a counter is set up at your local drug store to how the most technically advanced Neurosurgical center is set up.
The Politics:
As, I illustrated the incentives for the Patient and Payer are fairly straight forward economic model. This also seems to be the focus of the competing theories of reform. Whether conservative or liberal, most people agree that some sort of external pressure needs to be exerted on the Provider system to improve care and improve efficiency (some might confuse these as mutually exclusive ideas).
The general political difference is the more conservative view is Patient market drivers on the Provider system will lower cost and improve outcomes.
The moderate view (our current ACA, also called ObamaCare) is a model that regulates the economics that exist for the Payers, by requiring them to work more closely with the Providers of all types to fix/improve the inefficiencies. Additional pressure is supposed to come from the Patient on the Payers to do the ‘right thing’ as the financial advisor/arbitrator for them in the provider market. (Just a note: this has not been implemented yet.)
The more liberal view is to remove the current Payer as a commercial economic player all together and replace it with a single Payer that is governed by the Patient through representation.
Until We Change:
The irony is that the current system has placed the most of the responsibility for arbitrating the economic conflict between Patients and Payers squarely on the system that is most complicated economic system in the triangle… The Provider.
Timothy Schmidt 