Commoditization, Retailization and Something (Much) Worse in Medicine and Healthcare

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I have worked more than three decades in healthcare and medicine, and throughout all that time, it has been pretty much a mess when it comes to third party payment. I’d actually wager a guess that the hourly reimbursement for psychotherapy is pretty close to the same as it was when I stared clinical practice. On the bright-side, most everything else has improved — technology, evidence-based practice guidelines, training, and so forth.

The phenomena that are getting people’s attention, as well as headlines, are the curious potential disruptors of Walmart buying Humana or the seemingly odd triumvirate of Amazon, Berkshire Hathaway and JPMorgan getting into the healthcare business.


Years ago I recall making the shift from “my optometrist” to a franchise chain. I experienced a greater selection of frames and options, ubiquitous locations that were all easy to get to, and lower cost. Honestly, I did not miss having “my optometrist.” Fees are transparent, and in my case, I pay out of my (HSA) pocket as I do not have insurance coverage for such.

In a related vein, was the President signing into law the Food and Drug Administration Reauthorization Act of 2017 which included the Over the Counter Hearing Aid Act (also known as the “do-it-yourself model for hearing care”). This, for the first time in history, allowed individuals the ability to directly buy their own hearing aids without having to first be seen by a physician or audiologist. This did not make those providers very happy.

But what about other health care? I can see a nurse at my local Walgreens if I want to. While a convenience for me, I’m not sure that having a nurse sit by the pharmacist is adding a lot to their bottom-line. On the contrary, I suspect that it is Darwinian-market forces that are driving the various orthopedic and cosmetic options popping up next to the local Burger King.

Even the distinction between elective and non-elective procedures are starting to blur in the retail landscape as pediatric care and urgent care storefront franchises are popping up in a strip mall near you. I get coupon flyers offering discounts on my carpet, roof repair, cool sculpting, and Lasik surgery on a weekly basis. Some have called this empowering for the patient; it just seems a bit weird to me.


With such ubiquity of healthcare and medical options sprouting about, I think one of the natural results, or consequences, is that of commoditization. This can lead to the slippery slope of the proverbial “race to the bottom” vis-à-vis buying based on price.

Does this trivialize healthcare or democratize it?

Once a product or service seems to be of about the same quality (and outcome), and is abundant/convenient, the differentiator becomes price. Once price is in the equation, and there is competition, there is then margin squeeze.

Going shopping…?

With the retailization and commoditization of medicine comes the obvious question of going shopping. Indeed, price transparency is gaining greater momentum in medicine. In April, the Centers for Medicare and Medicaid Services publicly announced that “…it may require that hospitals post charge information as part of the proposed 2019 Inpatient Prospective Payment System rule…” online for all to see. Companies like Castlight have been working with employers to help inform their employees as to costs and provider quality as a means of more informed decision making when it comes to their medical needs — in the context of financial cost and benefit design/coverage.

A number of states already have such information publicly available as was noted in a paper published in the Journal of the American Medical Association which found that “…as of early 2012, there were 62 patient-oriented, state-based health care price websites” which note hospital, drug, and nursing home pricing.

But even with transparency, there is no guarantee that healthcare costs would decrease. A New York Times article by Austin Frakt found that very few patient-consumers bother to use such tools. This could be due to confusion as to what’s actually going to be done, various additional costs (medications, additional providers, consumable medical supplies, etc.), difficulty in understanding insurance coverage and benefit plans (including co-pays, deductibles, in- and out-of-network benefits, etc.), and general complexity around not only medical service provision in a facility, but also one’s insurance policy’s coverage.

Ikea versus Artisanal

I know that when I go to Ikea to buy something, it will not be an heirloom to be handed down through the generations. It is sort of like informed consent — I knowingly trade off quality for low cost. Fair enough. The same is true when I choose to pop for that five star hotel room over the Motel 6.

But in medicine and healthcare the cost/quality/value formula is out of whack, and that’s true even before the confusing noise of third party payers comes into play. A study conducted via a systematic review of the published literature examining the relationship of cost and quality in healthcare found rather unsatisfying results: “Most studies have found that the association between cost and quality is small to moderate, regardless of whether the direction is positive or negative.”

The Ultimate Disconnect

By the nature of my work, and throughout most of my career, I look at clinical outcomes. In my examinations, I try to divine causal aspects of what seems to be most effective. Often such findings are difficult to deduce as there is a certain significant artificiality in what I study. What I am referring to is the influence and impact of a patient’s insurance coverage. HMO or PPO? In-network or out? Co-pays or not? Deductible reached yet? Know what an EOB is? In a wonderfully provocatively titled piece by one of my favorite writers, Milton Packer, MD, entitled…

“Are Payers the Leading Cause of Death in the United States?”

…he makes the point: “We live in a world where payers — not physicians — determine what drugs and treatments patients receive… Treatment decisions are not being driven based on a physician’s knowledge or judgment. They are being driven by what payers are willing to pay for.” And I would like to remind you that it is we and our employers that are ultimately the ones paying for our premiums to the insurers, whose job it seems is too often to restrict coverage and iatrogenically exacerbate a problem rather than support the best options for care.

So while a great deal of medicine and healthcare is going retail and commercial, and becoming cheaper and ubiquitous, there is another aspect that is hamstrung and out of the control of healthcare providers or consumers — insured care.

It is very, very difficult to foresee and forecast the unintended consequences of complex systems. I’m sure that no corporate leader of an insurance company thought that their refusal to cover more expensive pain medications that were not addictive over the cheaper, albeit highly addictive alternatives, would have sparked the opioid epidemic that we are in the midst of today.

But as Packer concludes “It is far cheaper for payers if physicians continue to prescribe opiates than if physicians enrolled a person into a drug addiction program…. Do you want to blame the high cost of drugs? You can do that, but if you do, you will be missing the point. We should expect better drugs to be more expensive than less effective ones. But we do not expect to have a company decide that we will get the inferior drug simply because they want to make a profit.”

As payment systems and models evolve, I remain hopeful that clinical decision making can become more about foresightful approaches to care that are patient-centric, clinically collaborative, and funded via innovative methods. The harbingers of such innovations may be perhaps seen in capitated, direct contract, and shared risk approaches. And as the mega-retailers like Walmart and Amazon are now focusing more so on healthcare, I am sure we will see even more creative experiments put into action.

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