What Can the U.S. Healthcare System Learn from the Farmer's Market?
For millions of Americans, experiences with farming are confined to picking up some local produce at the cute little farm that’s hung on at the edge of town. Or maybe it’s the annual pumpkin purchase for Halloween. But let’s be honest: that means “zero experience.” While the agricultural economy in this country is enormous, the average non-farming American pays little mind to the world’s best agrarian supply chain.
But without bumper crops, who is going to buy all that large machinery synonymous with American farming? That’s not a question John Deere or AGCO leave to chance. They work with the farmers to ensure that they might need just a bit more than a yoke and some oxen to get the job done. How far do they go? Quite far for the success of their customers. Technology has taken over. Agricultural machinery companies provide geo-coordinates to farmers where they want soil samples taken. The farmers collect the samples and send them in for analysis. Then, the equipment provider tells them, based on the type of crop grown in that soil, what supplements need to be added along with other variables to ensure a productive crop. A little potash here, some potassium there…voila. A bumper crop is had.?
With this approach, farmers can accurately forecast pricing and crop quality. Imagine it – you have a 1,000-acre farm, four different crops, massive combines and harvesters, and you have a pretty good handle on cost, pricing, and the forecasting of both, barring natural disaster. Furthermore, production data is aggregated and used for analytics and benchmarking. Each year, the analytics get better and better at forecasting supply and price.
Put the tractor in reverse and now back up to U.S. Healthcare.?
If our healthcare system were to treat patients like equipment manufacturers treat farmers, healthcare would get a lot of business done, and customer focus would be its beacon of success. The hospital would provide the patient with information on the surgeons and implants available, along with the offer to do a study of the patient’s physiology, the ergonomic demands of their environment, and financial standing to put together a proposal with transparency, optimization, and efficiency. While that sounds like a lot of service and cost, that’s what farmers must have thought before their tractor salesperson provided tailored, geological studies transforming their efficiency and output for free.
A few years ago, research from University of Iowa was published in JAMA regarding the cost of total hip replacements. The study found that hospitals estimated the cost of a hip replacement for an uninsured senior to be anywhere from $12,000 to $126,000. Over 300,000 hips are replaced every year in this country, and the best answers Americans can get are somewhere between “Put off buying a new car for a bit” all the way to “It’s a great time to re-finan…do you have any equity in your house?” Unfortunately, that answer doesn’t seem to be changing anytime soon.
Imagine potato farmers telling you a potato is going to cost anywhere from $1 to $10, but you won’t find out exactly until after you eat it.
?Earlier this year, CMS put its new pricing transparency rule into effect, mandating hospitals to make available the price of every item and service they provide – uninsured, negotiated, contract, no contract.?Two things have been incredibly disappointing about this rule. For one, hospitals hemmed, hawed, and even threw a lawsuit into the mix to stop this from happening. To boot, they are failing to comply miserably. Secondly, CMS has stipulated the file be made available in a machine-readable format i.e. data that needs to be drawn into additional software to be viewable. It has required that pricing be made available in a user-friendly format too…but just for 300 services. So, if you are one of the lucky few to suffer the right ailment, you just might avoid surprises when the bills start rolling in from your care.?300,000 hips a year, and we can’t get a straight answer on cost?
The real problem is that we don’t have an efficient market for U.S. Healthcare because it’s made up of buyers, sellers, AND payers. Imagine what that would look like in the agricultural market…
A customer walks up to the farm stand and says they were told they needed food for the week and hands the farmer a list they did not write. The customer then leaves with the food and someone else comes in and pays for part of it.?The customer also has no idea how much of the bill that certain someone is going to cover. So, there it is: The customer has no idea what’s been ordered for them, how much any of it costs, how much it should cost, how much of it they need, or how much they are going to owe. That’s what every American faces in procuring healthcare services.??
Once you separate buyers of goods and services from the prices of those goods and services, disaster ensues. If U.S. healthcare were an efficient market, a bumper crop with plummeting prices would be had by all. Market transparency and value for patients would bloom faster than potatoes in potassium. And who knows, maybe that total hip replacement device would come with free post-op PT and a durable medical equipment gift card.?
Written by: Stephen Lichtenthal