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Technology can cure the American healthcare system

Why is the global economy affected by the shortcomings in the American healthcare system? America’s healthcare costs currently exceed 18 percent of GDP. This contributes to financial instability in America and on a global scale as America is a leading global economic force. The social and economic failure of this system has increased steadily over the past few decades and has peaked during the Covid-19 pandemic. Like other countries struggling with their response to the pandemic, Covid-19 showed the gaps and weaknesses in a system that has not worked for some time.

Healthcare in the United States is first and foremost a business: it is the largest industry in the country, employing one in eight Americans. It is not sustainably expensive and the quality of the care offered corresponds to that offered in many OECD countries. The current American healthcare system has been built in the spirit of the free market with a strong lobby protecting the interests of existing interest groups such as healthcare providers, insurers, and pharmaceutical companies. This approach left hundreds of millions of insured persons in inefficient market forces with misaligned incentives. Although many American workers are insured through their employers, they still face high deductibles and therefore often forego essential treatment, including preventive care. As a result, many Americans develop health conditions deteriorating. The economic difficulties of the insured and the unwillingness of employers to finance high quality long-term provision have resulted in a system that is reactive rather than proactive. Worse still, most service provider compensation is based on an outdated “time and materials model” also known as a service fee. Therefore, the system serves their interest in expanding the patient panel and offering costly treatments to their patients. It’s no surprise that Caesarean sections are as common in America, three times higher than in many depository countries like Israel. Behind every caesarean section there is a care organization that earns many times more money than a regular delivery.

Vim co-founder and CEO Oron Afek.  Photo: Eyal Toueg Vim co-founder and CEO Oron Afek. Photo: Eyal Toueg

Despite the ingrained nature of this complex system, efforts have been made in recent years to break the mold and create more openness and parity. For example, the Affordable Care Act provided health insurance to residents who could not afford insurance or who had not received it through their employers. However, the way employees are insured through their employers has not changed. While some groups are trying to establish a payer system in America, the strong financial incentives and political climate have created uncertainty about how long it will take to achieve a true payer system, if at all.

Given the challenges of overcoming a system that involves multiple payers and competing incentives, it is evident that technology can be a prime catalyst to transform the face of American healthcare. The aim is to build a national, Amazon-like marketplace for healthcare services that transparently offers policyholders, service providers and insurance companies the range of medical treatments, including cost and quality metrics, with which they can be compared and informed decisions based on real-time data. The technological challenge in building such a market is immense, since medical databases from the 1990s onwards are distributed across many historical systems without APIs being able to be connected. These obstacles will not stop the vital need to change the face of the American healthcare system for a long time as it must adopt forms of sophisticated competition by technological means.

Unsurprisingly, Covid-19 has made a significant contribution to the realization of the entire healthcare ecosystem that the existing situation cannot continue. Many doctors lost their customer base during the pandemic, and the number of bankrupt doctors was the highest in American history. The shock of the past year and the realization that more epidemics are to be expected in the future drove the value-based care model forward. Through this model, both doctors and insurance companies share economic incentives to maintain the health of patients and members through quality treatments. Over the next three years, health care providers plan to increase the scope of value-based care contracts tenfold from the current small percentage.

Therefore, the American healthcare market is facing an inevitable revolution that will be based on innovative and safe technologies and changes in corporate culture due to Covid-19. The coming revolution is a great opportunity for Israeli entrepreneurs to showcase their proven creativity and innovation, and respond to the many opportunities in areas where Israel excels: AI and data analytics, digital transformation of historical systems, telemedicine, and more. The entry into Israel of health care venture capital firms Optum Ventures and Anthem Venture Partners could help many Israeli entrepreneurs enter the American health care market in the coming years, where breakthrough solutions will be required.

The time has come for a fundamental change in the American healthcare system. The effects of Covid-19 have accelerated the adoption of value-based care, and advances in technology will revolutionize an outdated system. Aligning the incentives creates healthy competition between market participants and restores power to patients and members through access and information. This will create transparency and trust in the American healthcare system for the first time.

The author is the co-founder and CEO of Vim