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163. Joe Matarese: Entrepreneurial Solutions To Medical Tyranny (Part 2, The Solution)

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The medical care industry is so restrictive of individual freedoms — those of both of doctors and patients — that we can legitimately classify it as tyrannical. As is always the case, the solution will come from entrepreneurship, the creative and innovative response of individuals, doctors and teams and firms and their new business models to the dissatisfactions of patients and users of today’s system.

Joe Matarese is one of those innovative individuals. In episode #162 of the Economics for Business podcast, he described the nature and cause of the problem. In episode #163, he surveys the entrepreneurial solutions, some of which are beginning to emerge and some of which still lie in the future.

Key Takeaways and Actionable Insights

As with all entrepreneurial solutions, the consumer is in the driving seat.

The consumer — in this case, the patient — are clear in what they want, and what they don’t always get: quality care, accessible and convenient, at an affordable price.

Their definition of quality includes the alignment of interests between medical professionals and patients. Accessibility and convenience result from timely response to patient needs as opposed to lines, waiting rooms and delays. Affordable prices will arise when pricing is open as opposed to hidden behind the veil of insurance, co-pays, and healthcare-as-a-benefit rather than as an economic good.

Direct Primary Care is the business model that aligns doctor and patient interests.

The new emerging model of membership-based primary care (see BigTreeMedical.com) is a doctor or a small team of doctors setting up an independent practice and recruiting a customer base of subscription-paying patients. In return for a monthly or annual subscription, the patient enjoys access, and one-on-one consultations on demand (usually via tele-medicine visits). The doctor is often networked into a pharmacy (or the practice obtain a pharmacy license) so the patients access to drugs is facilitated, and the prices of drugs to the patient can be lowered.

Most importantly, the patients are able to build a strong relationship with their primary care doctor. Health monitoring can be closer and more personalized, and early treatment — one of the most important variables in medical care efficacy — can be facilitated.

The direct primary care practice is networked into specialists and treatment centers so that the doctor and patient together can choose the treatment pathway that is best for the individual — tailored to individual circumstances and needs.

Personalized technology supplements the Direct Primary Care model, greatly enhancing the health outcome benefits for the patient.

The direct primary care model and one-on-one patient-physician relationship provide the ideal conditions for the deployment of modern personalized technologies. Condition-monitoring watches and wristbands and other wearable or portable consumer electronics can provide the doctor with monitoring data and send an alert for any change in condition or abnormal reading. The doctor or patient can call for an immediate diagnostic consultation.

A direct primary care practice can be networked into an imaging center and a testing center for supplemental data acquisition — many of the new devices are mobile and can come to the patient, rather than vice versa, or can provide more immediate and convenient accessibility.

Personalized networked tech provides a new infrastructure for patient-directed monitoring and analysis (whereas the Obamacare “standard of practice” protocol predetermines what tests and diagnostics a patient can access, locked behind a bureaucratic gateway).

An entrepreneurial ecosystem of services will emerge to support the Direct Primary Care model.

The opportunities for entrepreneurs in the new medical care ecosystem are, to use Joe Matarese’s word, endless. He cited, as an example, the Surgery Center Of Oklahoma (SurgeryCenterOK.com), which posts cash prices for surgeries online (no hidden fees), and can usually provide service within 24 hours. They take no insurance and patients pay cash. On a broader geographic scale, medical tourism destinations with open pricing give patients the opportunity to find best pricing and provide the latest equipment and top doctors.

There are cost sharing services such as Sedera (Sedera.com) that offer new ways for patients to pay for healthcare in a peer-to-peer sharing of large unexpected medical costs. Sedera’s Cash Pay Directory provides educational resources and shopping tools to “help members become savvy healthcare shoppers”.

There are negotiation vendors who help patients to get fair pricing on medical bills from the big hospital conglomerates. There are online pharmacy vendors, like Mark Cuban’s Cost Plus Drug Company (CostPlusDrugs.com), to help patients shop for the best drug values.

There are entrepreneurial services like Freedom Health Works (FreedomHealthWorks.com) to help Direct Primary Care doctors with billing systems, office tech and the business infrastructure for a modern practice.

In the entrepreneurial world of healthcare, entrepreneurs compete to provide the best and most affordable services ecosystem so that patients can enjoy the best healthcare.

Open pricing and cash payments are an important component of the new system.

A big problem, perhaps the biggest problem, with the current medical care system is that the price system is not able to work in the way that it works in free markets. As Joe put it in episode #161, medical care system is “price-less”. Because payments are made by a third-party payer and not by the individual consumer, pricing becomes opaque to the user and economic calculation is rendered impossible. The third-party payment veil has resulted in price escalation and price manipulation and multiple prices for the same procedure at the same facility depending on whether the payments are immediate or deferred and the degree of bureaucratic and regulatory involvement.

If patients were to pay cash for treatments, they could make better decisions about exchange value. Catastrophic insurance for unexpected and rare events would make the use of insurance more like its application in car insurance and fire insurance — a properly priced optional spreading of risk for unexpected future events.

Consumers and physicians will collaborate in the creation of a parallel system for medical care.

Joe Matarese believes the status quo medical care edifice is too rigid and entangled to reform. The solution lies in a parallel system. If consumers activate their demand for improvements in quality, accessibility, convenience and payments systems, entrepreneurs will respond with new market-based offerings. Customers will flock to them because of the benefits they perceive in contrast to the current system. Market feedback loops of satisfaction and dissatisfaction will rapidly fine-tune the new parallel system to a higher level of value and acceptance. Joe estimates that to will take only 5-10 years for the new system to take over.

Additional Resources

“Entrepreneurial Solutions to Medical Tyranny” (PDF): Mises.org/E4B_163_PDF

Medicus Healthcare Solutions: MedicusHCS.com

162. Joe Matarese: Medical Tyranny and Its Entrepreneurial Solutions (Part 1, The Problem)

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Medical care in the US exemplifies how the perverse effects of accumulated, self-reinforcing economic errors can render a system dysfunctional for consumers. As CEO of Medicus Healthcare Solutions, Joe Matarese has seen the current system from the inside — working and interacting with thousands of hospitals and thousands of providers, primarily doctors, around the country, dealing with processes, bureaucracies, government reimbursement procedures, and the full gamut of the producer side of the medical care system. In Part 1 of a two-part podcast series, he gives us the informed insider’s view.

Key Takeaways and Actionable Insights

Many forces combine and interact to produce the medical care system we experience today.

Politics: As in almost all cases of market destruction, politicians are highly responsible. They have decided that the medical care of individual citizens is an appropriate field for their interventions, and they meddle in their usual ignorant and incompetent fashion. Dr. Scott Atlas of Stamford University was one who documented some of this glaring incompetence and its resultant creation of the crisis response to the COVID-19 pandemic in his book A Plague Upon Our House. The impact of political incompetence on individuals’ experience of medical care is not limited to COVID-19, but Atlas’ book provides one excellent example.

Regulation: Politicians don’t just meddle; they legislate and regulate. The Affordable Care Act of 2011 is a particularly significant milestone. It created a regulatory environment in which it became virtually impossible for independent physician groups to function. Smaller and rural hospitals could not survive the regulatory burdens imposed, and many closed or were acquired by larger hospital groups. The resultant consolidation and anti-decentralization led to centralized decision-making (particularly evident in the COVID-19 pandemic, but much more broadly impactful than just that event) to the effect that individual doctors are told how to practice and how to treat their patients. The one-on-one doctor-patient relationship that flexibly exercises the experience of the doctor on behalf of the individual needs of the patient and their particular condition Is no longer operative. Doctors now apply a centrally designed pre-determined “standard of care” (and are even told by the AMA what “woke” language to use when interacting with their patients).

Bureaucracy: With regulation comes bureaucracy. Central to the medical care system is the CMS bureaucracy — The Centers For Medicare And Medicaid Services. (You can visit the behemoth at cms.gov — it’s instructive to see the breadth and depth of its reach.) This is the home, for example, of the code lists that govern medical care billing and payment policies. Every doctor must code every patient interaction and every procedure, and the code triggers a specific billing amount. The care that doctors can give patients is governed by these codes and standard-of-care protocols rather than the heuristics an experienced doctor uses to treat individual patients in individual circumstances.

Perverse incentives: Out of the regulatory bureaucracy comes a cascade of perverse incentives. The billing code system leads to one of them: hospitals and doctors will lean towards treatments and billing codes that result in the best billing and revenue outcome for them, rather than what is best for the patient. Similarly, with the fee-for-service model of the Affordable Health Care Act, there’s always the incentive to provide the service or procedure that generates the best fee.

Financial Engineering: The worst financial engineering of the medical care system is the tying of health insurance to employment, and the general misuse, misunderstanding and mispricing of insurance that results. Insurance is appropriate for classes of events (like car accidents or house fires) which are known to have distributed incidence but unknown in terms of where and when they will take place. Individuals pay into an insurance pool that can be drawn on when an unlucky individual encounters an incident; we all hope we will never have to draw on it. In health care insurance, individuals pay for coverage which they know they will draw on. They expect insurance to pay for routine things they should really pay for out of individual income or savings. Medical insurance coverage is appropriate for rare or catastrophic events, but not for everyday health maintenance. In fact, insurance totally obscures the market for health care.

The combined result of all these forces is the elimination of economics from medical care.

No free market: Medical care is the epitome of interventionism. There are no unregulated voluntary exchanges between buyer and seller, in this case patient and doctor. Every interaction is regulated, bureaucratized, coded, and distorted by financial engineering. Most importantly, there is no free market pricing. Prices are the indispensable signaling and information exchange mechanisms of markets; when they are suppressed, markets can’t function. The medical care system is, as Joe Matarese puts it, price-less.

No entrepreneurship: The function that solves consumer problems in markets is entrepreneurship. Entrepreneurs identify customer dissatisfactions and devise and present solutions for consumers to choose from. Entrepreneurship can’t operate in regulated healthcare. It is suppressed. Joe pointed out that, in the few corners where an entrepreneurial breakout has occurred — he mentioned medical tourism, Lasik eye surgery, cosmetic surgery, and The Surgery Center Of Oklahoma (SurgeryCenterOK.com) — prices have been lowered, quality increased and value spread wider and wider in the market, reaching more and more consumers.

Repressed Innovation: A major output of freely priced entrepreneurial markets is innovation. Entrepreneurs bring improvement in the form of new services and offerings, improved processes, and the application of new scientific discoveries. The innovation process is highly repressed in US Health Care, as in, for example, the FDA’s long and arduous bureaucratic process for approving new drugs resulting in delays in their adoption costing millions of lives.

Replacing the free market is an edifice of massive, plodding, constraining entities.

The top of the monstrous pile can probably be assigned to Big Pharma. The massive amount of funds flowing through the pharmaceutical companies empowers their commandeering of the medical community. Government healthcare agencies such as CMS, FDA and VA take up their entwined cronyist positions related to Big Pharma and Big Hospitals. Big Insurance is the financial engineering for the edifice. The bureaucracy regulates them all, but from a position of having been captured through the lobbying process. The patient sits at the bottom of this stack, squeezed by its weight, restricted by its rules, and constrained from receiving individualized care even though doctors and nurses are capable of providing it.

The COVID-19 experience was an instance of the negative consequences of regulated, bureaucratic, perversely incentivized and politicized medical care.

The standard four pillars of a medical response to the COVID-19 pandemic would have been:

  1. mitigation
  2. early outpatient treatment
  3. hospital treatment
  4. vaccination

Instead, we were bureaucratically and politically accelerated towards a mass vaccine solution, satisfying the perverse incentives of Big Pharma.

Mitigation could have embraced healthy lifestyles, nutraceuticals, and some stratifying of risk by patient age. Instead, it was botched with ridiculous and useless mask mandates and pointless (and damaging) lockdowns.

Early outpatient treatment for those infected would have recognized the “golden window” of outpatient treatment in the first two or three days of the case to reduce the need for later hospitalization, as documented by Dr. Serafino Fazio and others in a published paper (see Mises.org/E4B_162_Paper), with drugs like ivermectin and hydroxychloroquine, but these were ridiculed, and their use repressed. By the time hospital treatment is needed, the condition has changed from one of inflammation and clotting to pneumonia and lung infection, with potentially worse outcomes. The use of remdesivir was centrally authorized, and this drug is much more expensive and risks worse side effects than the early treatment drugs.

The four pillars were abandoned for the centrally planned decision of mass vaccination.

There is a pathway out of medical tyranny.

Principles of Austrian economics can help us find the way out of the current situation. Some of the principles we might apply include:

Let free markets operate: The medical care edifice refutes and represses free markets and market pricing. The first step in a solution is to restore markets to medical care.

Customer sovereignty: Markets are built around the consumer as “the captain of the ship”, determining the purpose and direction of the voyage. Consumers would exercise their sovereignty in a one-on-one relationship with their primary care physician.

Decentralization: Decisions in markets are made close to the customer and not via centralized bureaucracies.

Network versus hierarchy: Austrian economics views markets as networks of specialized nodes connected by 2-way information flows and provider-consumer interactions. The medical care edifice is a hierarchy not network.

In Part 2 of “Entrepreneurial Solutions to Medical Tyranny,” Joe Materese will identify some specific ways that we can build a parallel system outside the edifice to bring back consumer sovereignty and free markets.

Additional Resource

“Entrepreneurial Solutions to Medical Tyranny” (PDF): Mises.org/E4B_162_PDF

Medicus Healthcare Solutions: MedicusHCS.com

145. Christopher Habig: How Understanding Subjective Value Will Revolutionize the Medical Care Industry

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The field of medical care is so ripe for new entrepreneurial solutions. As is always the case, solution design begins with understanding subjective value, both for customers (patients) and providers (doctors) Christopher Habig of Freedom Healthworks (FreedomHealthworks.com) joins Economics For Business to explain how an Austrian, subjective-value focused approach is bringing market freedoms to medical care.

Key Takeaways and Actionable Insights

Step 1: Like many entrepreneurs, Chris Habig started a revolutionary business from a place of familiarity and existing knowledge.

The so-called effectual process in entrepreneurship begins with two straightforward questions: what do I know and who do I know? Chris Habig grew up in a family where both parents are physicians. This vantage point gave him the opportunity to observe the critical doctor-patient relationship first hand, as well as the way in which modern bureaucratized medicine imposes obstacles and complexities that strangle the value generation potential of that relationship.

Step 2: Assessing the subjective value gap.

From his Austrian analytical perspective, Chris was able to identify the subjective value gap. For customers (patients) it is the loss of the positive feelings that they associate with the doctor-patient relationship. Chris summarizes them as advocacy, access and affordability: my doctor is on my side and looking out for me; my doctor is always available to me; I will not be excluded for economic reasons. These feelings are negated by bureaucratic medicine.

There’s a subjective value gap on the physician side, too. Research shows that doctors are stressed, and no longer find fulfilment in their work. Their mental health declines and there is an increasing rate of defection (leaving the industry) and even suicide. It’s a sign of a dysfunctional system to exert such an effect on its human capacity.

Step 3: Identifying the barriers to remove.

Value generation often consists in the removal of barriers to the realization of the desired experience. Chris identified two major barriers: insurance and government. The current approach to medical insurance actually hampers the market for what customers truly desire, which is the positive feelings of the doctor-patient relationship. Now it’s a patient-insurer relationship: will my visit / test / procedure be covered? Will there be a big bill in the mail?

And, of course, the participation of government to enforce the current system through legislation and regulation perpetuates the barriers.

Step 4: The entrepreneurial solution.

The solution is to free the system from its constraints through entrepreneurship. The physician is the entrepreneur on the supply side. Via a new business model called Direct Primary Care (DPC), the physician-entrepreneur creates a new value proposition for customers. Access is provided via a subscription model, and this financial innovation enables the thriving of a practice composed of a small number of patients to whom the physician can devote more time per visit, more attention, and more personal and individualized care. The physician is networked into a web of complementary secondary and specialist services that can be orchestrated for the individual patient’s need. All the associated business services are clustered around the DPC practice, and the physician does not need to be bound by a hospital system bureaucracy.

The new financial model enables the customer to take charge of their medical expenses, paying cash for current needs and reserving insurance for catastrophic events, which is the way it should be used. Consumer prices are lowered throughout the system.

Lives are improved on both sides of the doctor-patient relationship.

Step 5: The support system for the entrepreneurial model.

We live in an age in which distributed entrepreneurship can be embedded in an enabling system of digital infrastructure. Part of the innovation that Freedom Healthworks brings to the renaissance of the doctor-patient relationship is the platform on which the DPC business model can run.

Chris has identified 158 steps for the set-up, operation, and maintenance of a DPC business model. These can all be hosted, enabled, and implemented on the physician’s behalf. Finance, technology, operations, marketing, and vendor relationships can all be systematized and partially or fully automated. The doctor can focus on the relationship component of interacting with patients.

Step 6: Scaling.

Can entrepreneurs build out a fully-functioning cash-based direct care system to rival and ultimately replace the government-insurance company nexus? It’s already happening. As each DPC practice proves itself, more entrepreneurial physicians will make the transition and momentum will build.

DPC is an important example of the future of entrepreneurial economics.

Additional Resources

“Enabling A Direct Primary Care Practice” (PDF): Download the PDF

“FreedomDoc Launch Process” (PDF): Download the PDF

Healthcare Americana podcast: View Podcast Archives

Visit FreedomHealthworks.com and FreedomDoc.care

137. Murray Sabrin’s 7-Point Entrepreneurial Solution to the Medical Care Crisis

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Entrepreneurs solve problems for customers. There are few problems bigger than the horribly perverse medical care system under which patients suffer in the US. The system has evolved over time, with the stimulus of bad decisions, bad actors, and bad incentives. Entrepreneurship can solve the system problem with specific actions at the component level, each of which are practical and do-able, and can interact to create a new outcome at the system level.

Murray Sabrin has studied both the system and the component solutions, and he joins the Economics For Business podcast to enumerate his proposed actions.

Key Takeaways and Actionable Insights

Healthcare is a consumer good, and a consumer responsibility. Medical care is a provider proposition.

Consumer sovereignty is a cornerstone concept in Austrian economic theory. Consumers determine what is produced as a result of their buying or not buying. Does this principle apply in healthcare?

To answer requires us to differentiate between healthcare and medical care. Healthcare is an individual choice and a personal responsibility: we do everything we can to maintain a healthy lifestyle of eating and drinking, exercise and sound physical and mental health practices. In the internet age, there is plenty of knowledge available to help us in our decision-making. Medical care is what we turn to when sound healthcare proves to be insufficient to keep us off medication and out of hospital.

How do consumers realize value from medical care providers? To do so is very challenging due to (among other barriers) price fixing, price opacity, price inflation, monopolistic and duopolistic market structures, the misuse of insurance, bureaucratic management, perverse incentives, government intervention, and barriers to entrepreneurial entry.

Are there potential solutions in the face of this systemic dysfunction? Yes: solutions that come from the best countervailing source — entrepreneurship.

Entrepreneurial Solution #1: Direct Primary Care — Restoring the doctor-patient relationship.

Murray Sabrin recalled the $5 doctor visit of the past, characterized by a personal relationship with no bureaucracy or insurance forms. Entrepreneurs are now re-establishing that relationship via Direct Primary Care. DPC is retainer fee-based access to unlimited doctor visits, including office-based testing and additional services, with no insurance forms. DPC doctors have fewer patients in their practice and can consequently provide more time and attention. Stronger relationships are built, which is the essence of entrepreneurial value-generation.

Entrepreneurial Solution #2: Transparent versus distorted pricing.

Pricing is one of the most important bulwarks of free markets. In medical care, pricing is opaque to the point of invisibility, distorted, and inflated. It is unresponsive to the normal choice-based supply-demand mechanisms, and not indicative of value.

Some entrepreneurs are acting to change these pricing conditions via what is termed fee-for-service: transparent pricing for specific services. An often-cited example is Surgery Center of Oklahoma, where specific prices for specific surgical services are openly posted on their website. Other members of the Free Market Medical Association provide similar price transparency.

One of the results is revelatory price comparison: Murray told the story of a DPC practice patient who identified a 75% price reduction at Surgery Center of Oklahoma compared to a local South Florida hospital.

Entrepreneurial Solution # 3: One stop shopping at local non-profit clinics.

Murray described the launch and success of several non-profit local and regional clinics, including one for which he was the founding trustee. These are philanthropically established and funded local clinics with volunteer staff, providing a range of services. Equipment and pharmaceuticals may be fully or partially donated by the manufacturing companies. The combination of direct primary care doctors and specialists can make these clinics one-stop shopping solutions for patients seeking quality medical care. With a little philanthropic assistance, they could eliminate the need for Medicaid.

Entrepreneurial Solution #4: Direct Contracting.

Insurance companies purposefully inflate medical care prices to fund their business model. Murray told the story of a large (4-500 employees) company that contracted directly with a service that brought a vehicle with an MRI machine to the employers location, and charged $400 per MRI to the employees. The same vehicle was utilized by a nearby hospital that charged $6,000 for the same MRI. Direct contracting saved $5400 per unit cost, or 90%.

Direct contracting has the potential to significantly reduce costs in the Medical Care system, while opening access and increasing convenience.

Entrepreneurial Solution #5: The 3-tier household medical care budget system.

Murray has a well-constructed and eminently practical household medical care budget system. There’s a version for families with at least on member in employment and an alternative for those on Medicare today. There are three elements:

  • Direct Primary Care for a monthly fee, covering unlimited office visits and routine tests.
  • A Health Savings Account to cover costs of specialists, prescription drugs, medical equipment, major tests and brief hospitalizations.
  • Catastrophic insurance coverage for major operations and hospitalizations and long term care.

Greater detail is provided in Murray’s book, Universal Medical Care From Conception To End Of Life.

Download our corresponding PDF, which features an adapted table from Murray’s book: Download the PDF

In a system of personal responsibility, we would all manage our household medical care budgets with these kinds of tools.

Entrepreneurial Solution #6: Voluntarism And Mutualism.

Voluntarism has a long tradition in America. Mutual aid societies were prevalent before the New Deal. Ethnic, religious and trade groups joined together for mutual support. The Federal Government co-opted these functions and now people look to Washington DC to solve their problems.

But young people today are more interested in voluntarism and non-political social activism. 30 years ago in the Wall Street Journal, Peter Drucker argued for the non-profit sector to replace the welfare state. Creative and innovative people find ways to surmount institutionally-erected barriers in all phases of life, and medical care is certainly one of those. There’s a liberating and energizing sense of acting as the custodian of one’s own life and helping others who need it. It’s the entrepreneurial ethic.

Entrepreneurial Solution #7: Distributed Knowledge.

There is so much available knowledge today about healthy life habits and about the symptoms and characteristics of various medical conditions, and about options for treatment. We as individuals are free to explore, and responsible for gathering our own store of knowledge. The outcome of the research may not be definitive, and we may find ourselves making a choice between alternatives. But doctors and hospital administrators make choices too, and they are not infallible. It may be possible for an individual to gather more knowledge about their own specific condition from the internet than any single doctor can know, simply as a consequence of concentrated effort. Each of us can take responsibility for our own life.

Summing up: Murray Sabrin’s prescription:

  • Eliminate employer-based insurance.
  • Make a single exception for the case in which the employer pays the direct primary care fee for the patient.
  • The resultant employer savings are deposited in employees’ health savings accounts.
  • Employees determine their best medical care options.
  • Phase out Medicare and Medicaid.
  • Let young people create super health savings accounts so that they don’t need Medicare in the future.
  • Hospitals price at realistic market pricing, not insurance-inflated prices.
  • All prices are transparent.
  • Get the government out of medical care — it’s none of their business.
  • Free up resources from the medical-pharmaceutical-insurance complex and redirect them to savings, investment and philanthropy.

Additional Resources

Read Murray’s book, Universal Medical Care from Conception to End of Life: The Case for A Single-Payer System: Buy It On Amazon – It’s self-published and all proceeds go to charity and non-profits.

“Individual Single-Payer Alternative For Employer-Based Insurance” (PDF): Download PDF

Surgery Center Of Oklahoma: surgerycenterok.com

Forward: goforward.com

Direct Primary Care Coalition: dpcare.org

Volunteers in America: vimamerica.org

111: Shawn Needham: How Consumers and Entrepreneurs Co-navigate Value Uncertainty in Healthcare

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Austrian economics provides new insights into value: what it is, how it is created, and who creates it. The insights are summed up by Professors Per Bylund and Mark Packard in our E4B podcast episode #108. One of the most vivid images they paint is the picture of entrepreneurship as “the two-sided navigation of radical value uncertainty, both by producers and consumers, in that never-ending quest towards higher value states”.

Download The Episode Resource Navigating Healthcare Uncertainty – Download

The market for healthcare provides us with a pertinent example of co-navigation of radical value uncertainty. For consumers, there is no certainty available — they can’t know which doctors or providers will give them the best experience, they don’t know the right means to choose to attain their end (health), and they can’t use the usual market price signals in the search for value since the price of healthcare is not visible to them. They don’t purchase the product, they purchase insurance, a different financial product than the healthcare experience they really need.

Thus, the healthcare market is a natural medium for the co-navigation of value uncertainty that Professors Bylund and Packard described. In E4B podcast episode #111, Shawn Needham, a healthcare entrepreneur dedicated to helping the consumer in their navigation task, lays out 6 principles for entrepreneurs.

Key Takeaways & Actionable Insights

1. Help consumers to be proactive about their own health.

The healthcare system wants consumers who are sick. Chronic sickness is their most profitable line. A good way to help consumers is via what Shawn calls Pro-Health: encouraging the consumer mindset and commitment to actively make good health and lifestyle choices in diet, exercise, quality sleep and stress reduction. Entrepreneurs can share valuable knowledge and tools to help good decision-making, and to facilitate health creation by consumers.

2. Enable consumer sovereignty via cash, pay-out-of-pocket options.

It’s hard to discern the operation of consumer sovereignty in healthcare systems. End-users can become locked-in to a limited set of choices. Entrepreneurs can help by developing more choices, so that expressed consumer dissatisfactions can be actualized as new options.

Examples that are already in motion include Direct Primary Care (DPC), an arrangement whereby doctors charge a set monthly fee for access to primary care, and consumers pay cash in return for an improved experience, including more time with the doctor, easier scheduling and lower cost prescriptions.

DPC doctors are healthcare entrepreneurs who are enabling consumer sovereignty, having alertly discerned the signals of consumer dissatisfaction.

3. Entrepreneurial empowerment in employer health financing options.

Employers offer ways for employees to finance traditional healthcare insurance, usually via benefits programs. In episode #109, Professor Desmond Ng described the Austrian-inspired movement among employers to empower their employees to be more creative and entrepreneurial and less centrally-directed: he called the movement Entrepreneurial Empowerment.

Entrepreneurial empowerment can be granted to employees to unleash their creativity in searching for financing options for their healthcare. The use of Health Savings Plans provides consumers with an alternative approach to meeting healthcare expenses through dedicated savings. There may be other ways to re-direct the funds devoted to funding healthcare insurance through centrally-directed employer programs, such as freeing employees to opt out of company-paid insurance premiums, and to take the same amount as a deposit into a 401K, leaving the employee with a freer choice in healthcare financing.

4. When the consumer pays the bill, the benefits of free markets can emerge.

Another pay-out-of-pocket option development is Cash Fee For Service, which is a straightforward payment whenever a specific service is required. We’ve highlighted Surgery Center Of Oklahoma as a pioneering example.

When the consumer pays the bill, lower prices tend to result because of competitive free market processes, and the quality of care tends to increase for the same reasons. In his book, Shawn Needham cites cosmetic surgery and lasik eye surgery as two examples of free market forces at work to generate higher quality and lower costs.

5. Entrepreneurial initiative combined with consumer search for betterment can create new solutions.

Shawn identifies medical cost sharing programs as an innovation emerging from the consumer-entrepreneur co-navigation of value uncertainty in healthcare. In medical cost sharing, a voluntary community pools funds so that any unexpected major medical cost can be shared across the community. The firm that co-ordinates the community typically also offers services such as bill negotiation, concierge medical services, health coaching, and discounts on health-promoting resources. There’s a greater degree of consumer sovereignty than is typical in healthcare arrangements, such as a freer choice of which doctors and labs to use. Similarly, doctors who participate in these programs are freer to set their own rates and to compete for patient trust in lasting relationships.

The healthcare market is a process.

The healthcare market may appear to be an inflexible structure, built over many years to impede organizational innovation. But viewed in an Austrian way, as a process governed by consumer sovereignty and responsive entrepreneurial creativity, it is possible to discern emerging trends in favor of greater consumer choice, market flexibility, and the inevitable role of the price mechanism to disperse blockages and lower barriers to better consumer experiences.

Additional Resources

“Navigating Healthcare Uncertainty” (PDF): Download Here

A Sickened: How The Government Ruined Healthcare And How To Fix It by Shawn Needham – Download Here

The Austrian Business Model (video): https://e4epod.com/model

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