The relationship between health care providers and insurers is one of the most commonly debated categories of business strategy in the United States.
Insurance companies are intermediaries between the providers of services and the consumers of those services. The role of these insurers in health care cannot be overstated. These insurers not only finance a great deal of a patient’s care but also often play a role in deciding which care will be covered.
Consider this example from our Health Care Economics course: Health care is not like broccoli. For many goods and services (such as broccoli!), the cost of the product doesn’t depend on who buys it. In health care, the cost of the product does depend on who’s purchasing it, on whether or not they have insurance, and on what kind of insurance they have.
We see this frequently in the news with the cost of prescription medicine. One patient may pay thousands of dollars for the same medicine that another patient receives for free. The difference in these payments is because of the coverage, or lack thereof, from insurance providers. Insurers and their intermediaries negotiate with pharmaceutical companies to determine how much the insurer and the patient will pay for drugs, ideally settling on an amount that allows all of the stakeholders to capture value.
Health care in the United States is a complex system of patients, payers, and providers. There are over 6,600 biotech companies in the country working on innovations to solve complicated medical problems and save more lives. Similarly, $44 billion was raised globally in health care innovation, a phenomenon explored in our Digital Health course.
Competition among health care providers increases quality, reduces prices, and can increase a patient’s access to cutting-edge, life-saving care.
Health care leaders face choices every day: How can we put our resources to the best possible use to capture value and stay in business? And, if we are to treat our operations like value-creating businesses, what are the determinants of how much value is captured?
Investing in health care is important and vital. But can innovation in health care truly be equal when it hinges on financial transactions? We can work towards a more equitable future by continuing to employ strategic decisions in life-saving care.