Why are patients terrible consumers of sickcare?

Patients are terrible consumers of sick care services. Most attribute it to the lack of price and quality of care transparency and the incentives to make rational purchases. However, as behavioral economists have learned, consumers are not rational but, instead, are driven by strong psychological and emotional factors that explains patterns of consumption. What's more, understanding personal spending v spending on the common good gets even more complicated and difficult to understand. 

A recent study shows that between 60 and 80 percent of patients aren’t forthcoming or even lie to their physicians. Consequently, they might be contributing to an incorrect diagnosis or treatment recommendations.

Some would argue that as value becomes more transparent to patient customers, we won't need all the brokers, middlemen and intermediaries to do it for them. However, don't be so optimistic. The trend is to make the cost of sick care services more transparent. Publicizing hospital prices didn't help in New Hampshire.

If offered two versions of a new product—one priced at $45 and the other at $7—most rational shoppers would choose the cheaper one, as long as both items were legitimate and more or less the same.

But when consumers have the choice between a product in its traditional or tangible form vs. the same product in app form, the math becomes very different. Most people won’t spend nearly as much money for an app as they will for, say, a board-game or computer software, even if the app essentially offers the same experience at a much lower price. Why? Because of anchoring (expecting an app to cost nothing), loss aversion (I don't want to pay more than I have to) and hassle factor (download, log in, payment, password, etc)

Here are some basics of behavioral economics that might help frame the conversation:

1. Frames of reference matters a lot

2. Each person's spending depends in part on what others spend

3. The costs of failure to keep pace with community spending norms go well beyond mere hurt feelings

4. Positional concerns spawn wasteful spending, even when everyone is well informed and rational

5. Private wasteful spending exceeds public wasteful spending

6. Life is graded on a curve

7. There is no Moore's Law in sickcare

8. Cognitive ease and cognitive strain determines decision outcomes

9. People would rather do things the easy way instead of the hard way

10. Success in life depends on exercising delayed gratification. Most patients and doctors eat the one marshmellow instead of putting it off so they can get two later.

11. Like everyone else, patients buy emotionally and justify rationally

12. Patients are interested in paying less for more, regardless of the price.

A UCSF, UCSD study finds few patients downloading health records via smartphone apps and changing from a take care of me sickcare system of systems to a take care of yourself healthcare system will require a big cultural change. That said, the shift is occurring to various degrees in various countries.

Another consideration is that value factors differ from patient to patient. Some want convenience, others want "the best" and still others will take "good enough" as long as they don't have to pay out of pocket for services.

We also need to rethink the IoT and "smart" environments.

Depending on informed, rational patients to bend the cost curve will fail without understanding the other, more subtle motivations that drive consumers. We all consume emotionally and justify rationally.

Arlen Meyers, MD, MBA is the President and CEO of the Society of Physician Entrepreneurs on Twitter@ArlenMD and Co-editor of Digital Health Entrepreneurship and the Life Science Innovation Roadmap