January 31, 2022
By Boe Hartman, Nomi Health CTO on May 2, 2022
Banking is not typically the first place we look to for bleeding edge innovation, but compared to healthcare, traditional banks look like trailblazers. Healthcare needs a crash course from the banking industry to not only learn from their many mistakes, but also to take note of how innovation and evolution in established, traditional industries is indeed possible.
During my former life, I led product innovation for Barclays and Goldman Sachs. Having lived through a similar crossroads in banking’s fintech evolution circa 2010/2011, I see some important correlations between my former industry and where the healthcare industry sits today.
Having lived through a similar crossroads in banking’s fintech evolution circa 2010/2011, I see some important correlations between my former industry and where the healthcare industry sits today.
Banks (and now the healthcare industry) suffered from product, organizational and technical debt. Personalized products were not a part of business roadmaps for traditional banks and executives were shrugging off the fintech threat. They arrogantly assumed fintech startups could never unpack the regulatory environment. They were wrong. The day JP Morgan Chase’s CEO Jamie Dimon stood in front of a Congressional House Committee to answer questions about industry practices, banking miraculously got simpler. Transactions started working in real-time and fees became much more transparent. Suddenly customers were presented with banking products that “understood their needs” and could actually help them.
Up until that hearing, banking was intentionally vague. The nearly overnight simplification underscored an ugly truth: some industries are unaccountable and complex because they choose to be. When that is the case, a swift kick in the bottom line may be the only path back to serving customers and doing the right thing.
The COVID-19 pandemic was that swift kick for healthcare. In my opinion, COVID-19 is healthcare’s digital transformation officer for the last two and a half years. The pandemic poured gas on a burning problem — the growing inability for doctors to provide services at a fair price. Thanks to lockdowns, demand was destroyed while prices went up. As a result, way too many providers have made ridiculous concessions just to stay in practice. They’re creating consortiums to find cash flow, stretching equipment past its prime and overbooking patients just to keep the lights on.
Now is the time for healthcare to heed some important lessons from their evolved counterparts in the banking industry. In doing so, they can simplify so many of the issues that keep healthcare lagging behind even the slowest industries:
Whereas bank transactions used to lag for days and fees were almost always a surprise, today’s apps prompt you to approve fees and show real time transactions and account balances.
In healthcare, billing and payment should happen at the point of service — not six months later. A patient should receive a bill the day of the visit, confirm receipt of services, approve or dispute a bill and move on.
The objection to this is of course — we can’t pay the bill until we run it through the claims process. Which leads me to the second lesson.
Today, banks must pay charges instantly. Obviously, no human can keep up at that speed, so banks rely on decision logic and workflows to automate the process end to end. They deploy sophisticated platforms to mitigate risk and make real time decisions about whether a charge is valid. For example, if I charge a meal in Thailand, they may review other related transactions such as air travel purchases that help them confirm my location or they may send me a text to confirm with me directly. Either way, it’s instant.
Healthcare payers aren’t required to do anything instantly. The breakdown is in the payment decisioning. In most instances payers still rely on humans to process or adjudicate claims. By the time the patient gets the “right bill.” they’ve forgotten why they went to the appointment in the first place. Furthermore, even if 90% of the bill is correct, one line item can stall the entire payment transaction for months or worse — it can trigger a refund payment from the provider back to the payer.
Healthcare payers need to be held accountable for real-time decisioning and payment to providers. When there is a discrepancy on the bill, the default should not be “pay all or nothing,” but rather pay the undisputed portion and resolve errors within an agreed upon number of days.
Today, banks compete with customized products as long as they meet standards. For example, in the electronic payments space, consumers can choose between a variety of players such as Venmo, PayPal, Apple Pay, or a traditional bank owned product like Zelle. If a product provides tokenization, it can compete.
In healthcare, payers wield all the control. They dictate the network, set the fees, design the products and give providers zero choice on how they get paid.
Providers should have more control over the fees they charge for their services. They should be able to forecast their business and budget for staff, equipment and other office overhead. Most importantly, they should have some say in when they actually receive payments.
Today, banks mine their data to customize credit products that actually create value. Whether it’s better rates on a small business loan or expanding a personal home equity line of credit — they know what risk their customers can afford so they design appropriate products to help them reach their goals.
Similarly, healthcare can and should do more with patient data and analytics. Providers should be able to lower overall costs with predictive (and preventive), data-driven care recommendations. Patients should be able to avoid bankruptcy by having more agency over their healthcare journey and they should be given more treatment plan options that work within their financial means.
Over the last two years, COVID-19 has continued to expose that healthcare isn’t actually “broken”, as the popular saying goes, but rather it’s intentionally complicated. As patients and providers become increasingly aware that bureaucracy, bloated contracts and red tape are unnecessary, the healthcare industry will have to make a choice: heed the lessons from those that have innovated and evolved, or face their own day in front of Congress.
Boe Hartman is a seasoned banking executive who led innovation within Goldman Sachs via its Marcus platform. Today, he is co-founder and CTO of direct healthcare company Nomi Health. Based in Austin, Hartman has also led senior leadership roles within Barclays and Capital One.