Zen and the Art of Consumer-Driven Healthcare

Zen & the Art of Consumer-Driven Healthcare

When Robert Pirsig’s classic book Zen and the Art of Motorcycle Maintenance:  An Inquiry into Values was finally published in 1974 it became a cultural icon in short time.  What most don’t know, however, is that it was rejected by 121 publishers before seeing the light of day.  It does not take the reader long to understand why Pirsig had so much unwavering determination in getting it published; he had some pretty heavy stuff to sort through to those willing to listen and absorb.  The biggest topic in the book revolves around the narrator’s inability to define ‘Quality’ (a topic that is always front and center in healthcare).  Contrasting world views between the Romantic and Classical philosophical frameworks eventually drove the books’ narrator (Pirsig) insane in his effort to reconcile the two.  Pirsig eventually concludes that humans should embrace both a classical (science, technology, reason) along with the romantic understandings as a way to attain increased happiness.

What does this have to do with consumer-driven healthcare?  First, Pirsig gets right to the root of his plight – he smacks the reader in the face with a force that amounts to a literary smack in that you as the reader are going to have to do some thinking to truly appreciate why he is taking you on this journey.  It’s not the typical trashy novel you throw in your beach bag and pick up after two hours of day drinking on the boat.  But once you get through it, it will only get better when you read it again.

The world of consumer-driven healthcare needs to be embraced with the same level of commitment as would be commanded by one who has read, and re-read Pirsig’s masterpiece.  To use a sports metaphor, one must ‘leave it all on the field’ if the goal is to actually become a ‘consumer’ of healthcare services.  If there is no commitment, consumer-driven healthcare (CDH) will remain a corporate buzz word and twenty or thirty years from now consumers will be just as anxious about affording their healthcare expenditures as they are in their halfhearted effort towards planning for retirement savings.

The second connection to Pirsig’s novel is less editorial and more linked to his classical vs. romantic duality.  The classical understanding is based on logic, reason, & science.  Form follows function.  Drug trials.  The scientific method.  Consistent process of elimination.  The beauty of creation and discovery is steeped in the reasoning behind it and the dedication to a structured approach.   The romantic understanding is less interested in structure and is more likely to act on intuition or feeling.  Spiritual.  Mystic.  Artistic.  Feeling.


We would argue that providers of healthcare need to move towards the center from a point of classical understanding while consumers need to move towards the center from a point of romantic understanding.  For example, consumers take their doctor’s word as gospel despite being handed $3,250 radiology referrals, which may not be entirely necessary.  If the procedure is necessary, consumers rarely think that they have any options but to “take the doctor’s orders”.  Consumers can start by simply asking questions.  “What are my options?”  “Why should I see this particular provider?”  “How much will it COST ME?”    At the end of the day consumers need to get their head out of the clouds and become more pragmatic and probing.  We’ve all seen the studies pointing to an inexorable rise in out-of-pocket expenses.  But consumers do have options.  Health savings accounts are without a doubt the most consumer-friendly act of Congress to emerge in decades.  With a little research and education, consumers can be put on the right path towards a long-term objective of staying healthy both physically and fiscally.  Indeed, there is a massive quiet convergence underway between retirement income planning and healthcare planning.  As we as a company evolve, the retirement income theme will become more front and center.

So we as a society revere physicians.  And most of the time, for very good reason.  They are intelligent, well-intended, and have earned the right to be respected.  But guess what?  The average happiness of physicians is on the decline in a massive way.  Mired in paperwork, barraged by the stress of having to consolidate practices to maintain bargaining power against the insurance companies, and inundated with patient loads, they are exasperated and beaten down.  Imagine spending all those years in training – countless sleepless nights during residency, only to have some middle manager from an insurance company attempt to cut reimbursement rates while they raise premiums.

So what should providers be doing different?  For one, physicians should put their analytical and scientific minds to work towards more entrepreneurial thinking.  Ask a doctor how much a procedure will cost.  Nope.  They already have enough on their plates.  Ask the folks at the front desk if they have a cash price for a procedure.  The look of confusion will say it all.  There needs to be a mechanism whereby the consumer and the provider can interact directly.  There needs to be less paperwork, less wrangling, and more communication directly between consumers and providers.  We don’t pretend to be experts on managed care, but we do know that the trend today is consumer cost sharing is skyrocketing.  Physicians and consumers both lose unless there are efforts on both sides to strike a new contract of engagement.  We read about the massive consolidation going on with hospitals and medical groups.  We dare say this needs to be shattered by physicians hanging a shingle and opening specialty boutiques.  Of course that will not work in all cases, but to the extent one’s expertise is in an area that lends itself well to specialized outpatient medicine, where the cost of an average visit falls below the rising deductible levels, its worth considering.

One last note on the consumer – moving towards more of a classical understanding involves having the willingness to think critically while employing an analytical approach to consumer-driven healthcare.  We must be borderline private detectives given the historical lack of price transparency that leads to a breakdown in any normal market mechanism.  While our site is not a panacea for doing all the work for you, we do possess content that is becoming increasingly valuable.  Our content comes from open data publishers.  In particular, our state-based content gem comes from the State of New Hampshire while our national content flows from the Centers for Medicare & Medicaid Services (CMS).  But in the future we want it to come directly from the providers!


Cost Transparency Case Study:  the small state of New Hampshire is by far the Nation’s Trailblazer for Consumer-Driven Health

As previously stated, a portion of our content comes from the State of New Hampshire given their forward-thinking law embracing transparency.  The average person most likely does not want to mine 1 terabyte of data on a zip drive, so we are doing our best to tackle the data and bring it to life.

In the context of consumer-driven healthcare, let’s use a case study of a patient in need of a cardiac ultrasound.  Let’s assume the patient is enrolled in a high deductible plan, which is attached to a health savings account and is an HMO plan.  Let’s also assume, for the sake of our analysis, that the patient is relatively familiar with seven of the leading hospitals in NH.  Let’s then assume they wanted to see what some options may be by browsing Healthy Hive NH – our dedicated site for healthcare consumers in the state.

While we would not bury you with an intense amount of data on the site as we will in this case study, below are the summary statistics we have for the cardiac ultrasound for 2014 HMO claims across 7 sample hospitals.Don’t bother reading this whole data dump.  We can sum it up:  you can drive a truck through the range of deductible amounts between the 25th percentile ($454.14) and the 75th percentile ($1,147).


2014, HMO, paid claims, point of sale = facility
2014, HMO, paid claims, point of sale = outpatient hospital facility, source:  NH CHIS, R programming language, HealthyHive.com


The average deductible was $806.52 and one poor soul paid a $2,000 deductible last year for this particular procedure.  If that consumer had done their homework, perhaps they could have saved $1,000 (a conservative estimate).  If that $1,000 savings were invested in a mutual fund returning 7% compounded over 15 years, the future value would be $2,759.  Assume that the $2,759 compounds for another 10 years at 7% because the consumer retired but did not need to draw on her HSA until she hit 75 – $5,427.  Let’s then assume that each year the consumer was able to sock away $1K per year by virtue of being an engaged consumer of healthcare.  By the time she retires, her future health care expenditures all of a sudden appear to be manageable.

Here is a summary of the out-of-pocket expenses for this one procedure in 2014 at the 7 sample hospitals broken out by gender (the vertical plot is dollar amount, not age, as denoted):

out-of-pocket by gender
out-of-pocket by gender.  Source: ibid

Total cost (what the insurer paid along with what the consumer paid) dispersion was also extremely high – inefficient marketplace??  The large medical systems will argue that quality metrics must also be considered.  In some cases this is a attempt at obfuscation while in others there is merit to the claim.  But the reality is, which will be discussed below, consumers actually do have access to some quality metrics.  (sourced by CMS on our site)

The total cost dispersion example is illustrated in the bar chart below.  Now in any normally functioning marketplace one would expect a much tighter band between the low-cost and high-cost provider.  And you’d certainly expect to see a clustering of the majority of the claims towards lower cost providers.  But this is not the case in healthcare.  While the total cost may be less interesting to consumers who only care about their share, it is still worth seeing:

Rplot - total cost dispersion


Let’s assume our consumer believed that the facility that performed the most of these procedures may have more skill based on experience.  So she wants to know the ‘market share’ for this particular cardiac ultrasound:


market share

Concord Hospital has done a bunch of these.  Are they lower price based on volume?

Price Dispersion at each Hospital

It does not appear so.  Exeter Hospital’s market share wasn’t high, yet from a price perspective, they appear to be competitive.  But what about quality??  There it is again, the Pirsig struggle.  Well, she see that we have quality metrics linked to the cost analysis profile.  While many of the quality metrics may not be relevant for a cardiac ultrasound, she does see that readmission data for cardiac events is below 1.0, meaning that the actual readmission rate was lower than projected based on risk-adjusted history:


What are some of the limitations of the HealthyHive data?  Perhaps the biggest is the state does not disclose pricing at the insurance plan level.  So the Anthem negotiated price will likely be different from the Cigna negotiated price.  This serves as a word of caution, and reiterates that the consumer still needs to do some investigative work with their health plan – but $1,000 is not pocket change.  Example of claims paid for one particular hospital.  The horizontal lines likely represent specific contractual pricing at the plan level:


We hope to do more of these case studies as a way to educate our friends in NH about consumer engagement in healthcare.  Please contact us at info@hiveaway.com if you have any questions.

Register at:  HealthyHive New Hampshire

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