Between producers and consumers, you’ll find a cadre of professionals who broker deals, facilitate transactions, and move goods and services along.
They’re called middlemen, and they thrive in virtually every industry—from real estate and retail to finance and travel services. If not for middlemen, houses and blouses wouldn’t sell. Banks and online booking sites wouldn’t exist. Middlemen are the reason a tomato grown in South America makes it aboard a ship headed for North America, passes through customs, reaches a local supermarket and ends up in your basket.
Middlemen do all of this, for a price. Opinions differ among consumers and economists as to whether middlemen are nasty parasites, necessary for modern living or both.
While the debate goes on, one thing’s for sure: Middlemen are plentiful and prosperous in American healthcare.
The many middlemen of medicine
Before middlemen entered the picture, doctors and patients formed personal relationships and made direct payments.
A 19th-century farmer with an aching shoulder would request a house call from his family physician who, in turn, would perform a physical exam, make a diagnosis and provide painkilling medication. All that in exchange for, say, a chicken or a small sum of cash. No middleman required.
That began to change in first half of the 20th century as the cost and complexity of care became problematic for many. In 1929, the year the stock market crashed, Blue Cross began as a partnership between Texas hospitals and local educators. Teachers paid a 50-cent monthly premium to cover the hospital care they needed.
Insurance brokers were medicine’s next middlemen, advising people on the best health plans and carriers. And when insurance companies began offering prescription drug benefits in the 1960s, PBMs (pharmacy benefits managers) emerged to help contain drug spending.
In today’s age, middlemen dot the digital landscape. Companies like Teledoc and ZocDoc were created to help people find a physician, day or night. PBM offshoots like GoodRx entered the market to negotiate drug prices with manufacturers and drugstores on behalf of patients. Mental-health services like Talkspace and BetterHelp sprung up to connect people with physicians licensed to prescribe psychiatric medications.
These kinds of point solutions help patients better navigate a dysfunctional healthcare system—making care and treatments more convenient, accessible and affordable. But as patients have become more reliant on middlemen and their services, American healthcare has developed what I call the middleman mindset.
What is the ‘middleman mindset’ in medicine?
Imagine spotting a lengthy crack along the surface of your driveway. You could have the asphalt lifted, the underlying roots removed and the entire area resurfaced. Or you could hire someone to pave it over.
Regardless of the industry or problem, middlemen maintain a “patch it” mindset. Their goal is to solve a narrowly defined problem without regard for the related (often structural) issues that underly it.
So, when patients can’t find a doctor, Zocdoc or Teledoc can help with booking a visit. But these companies ignore a more important question: Why is it so hard for people to find an available physician in the first place? Likewise, when patients struggle to afford drugs at the pharmacy, GoodRx can offer coupons. But the company doesn’t concern itself with why Americans pay twice as much for prescriptions as people in other OECD nations.
Because middlemen don’t address these kinds of big, thorny, systemic issues, American healthcare keeps getting progressively worse. To borrow a medical analogy, middlemen palliate life-threatening conditions. They don’t try to cure them.
Who’s in charge here?
To be clear, the problem in medicine isn’t the existence of middlemen. It’s the absence of leaders who are willing and able to fix healthcare’s broken foundation.
This lack of leadership is exemplified by U.S. healthcare’s prevailing “fee for service” reimbursement model, which pays physicians and hospitals based on the number of services (tests, treatments and procedures) they provide. This do-more-earn-more method of payment makes sense in most corporate industries. But in healthcare, the consequences are costly and counterproductive.
With fee-for-service, doctors are rewarded comparably more to treat medical problems than to prevent them in the first place. They’re incentivized to provide more medical care—regardless of whether it adds any value.
Our nation’s reliance on fee-for-service helps explain why healthcare spending in the United States has risen twice as fast as inflation over the past two decades while life expectancy has virtually plateaued during that same period. The U.S. now lags all other industrialized countries in clinical quality with child- and maternal-mortality rates double the other wealthiest nations.
You might think healthcare professionals would be mortified by these failures—that they’d push to replace this ineffective payment model with one that focuses on the value, not the volume, of care provided. You’d be wrong.
Pay-for-value models require physicians and hospitals to assume financial risk for clinical outcomes. To them, taking the leap to a prepaid approach is fraught with financial danger. So, rather than taking the chance, they too embrace the middleman mentality—opting for small, incremental changes to minimize risk.
Because doctors and hospitals resist pay for value, private insurers and the federal government have resorted to “pay for performance” programs, which represent the very acme of middleman thinking.
These incentive programs reward doctors with a few extra dollars whenever they provide a specific preventive service. But since there are hundreds of science-based ways to prevent disease (and only so many incentive dollars to go around), preventive actions that aren’t tied to incentives frequently go ignored.
As a result, the healthcare quality needle barely budges.
Leadership mindset vs. middleman mindset
The middleman mindset thrives in dysfunctional industries, diluting the influence of leaders and suppressing change. Thus, the sooner U.S. healthcare revives its leadership mindset, the better.
Leaders step forward to solve big problems with bold actions. Middlemen apply Band-Aids to cover them up. Leaders accept responsibility when things go poorly. The middleman mentality pins the blame on someone else.
So it is in American medicine: The purchasers of care blame the insurers for high costs and poor health. Insurers, in turn, blame the doctors. The doctors blame patients, regulators and fast-food companies. Patients blame their employers and the government. It’s a vicious cycle that never ends.
Of course, there are plenty of people in healthcare—CEOs, board chairs, medical-group presidents and so on—with the power and ability to lead transformative change. But the middleman mindset fills them with fear, narrows their focus and prompts them to pursue small, incremental improvements.
Baby steps won’t be enough to overcome healthcare’s worsening and wide-ranging woes. As long as the healthcare solutions remain small, the consequences of inaction will grow bigger.
The anatomy of healthcare leadership
American healthcare will need strong leaders to cast aside the middleman mindset and inspire others to embrace bold action.
Success will require leaders to use their hearts, brains and spines—the three (metaphorical) anatomic areas needed to drive transformative change. Though the anatomy of leadership isn’t taught in medical or nursing schools, the future of medicine depends on it.
The next three articles in this series will focus on these anatomic parts and offer steps leaders can take to transform American healthcare. Step one: discard the middleman mindset.
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This article was originally published by Dr. Robert Pearl.