The American healthcare system is sick — a story told in a runaway cost structure, subpar patient outcomes, frustrated physicians and what Sesame CEO David Goldhill called during a conversation with Karen Webster “315 million miserable stories about healthcare.”
“Every single American has had some terrible thing that happened to them … usually because of confusion, complexity [or] lack of accountability,” he said. “They happen at every level of income. They happen in every type of medical condition.”
Goldhill’s own story of systemic failure came in 2007, when his father walked into a prominent New York City hospital with pneumonia. He died five weeks later due to sepsis and other infections from pathogens he was exposed to while receiving care.
Goldhill isn’t a healthcare expert; his background is in the entertainment industry as former CEO of the Game Show Network and Universal Television. But watching what he said he believes are the healthcare system’s myriad deficiencies combine and result in the death of his father inspired Goldhill to develop an obsession with the industry. And more importantly, with finding ways to fix it.
How Healthcare Got Broken
Upon deep study, what Goldhill found is that the system we have for the early 21st century was designed for the middle of the last one. Urgent or emergency care was episodic by definition in the 1950s, and likely something many people only needed perhaps once a year (if that often). At that time, he noted, insurance was the payor in the system — consumers’ expended funds were low if they accrued at all.
But today, more than 80 percent of medicine spending covers chronic conditions, meaning the industry needs to design the bulk of care around a concept of being continuous, not episodic.
“The idea of this insurance-based emergency response that treats a pregnancy like a car crash isn't going to work anywhere in the 21st century,” Goldhill said. “We're just watching these systems fall apart.”
Reforming The System
Part of that falling apart, he said, is how consumers now pay for healthcare. High-deductible health plans mean many American pay healthcare expenses out of pocket, since all but the most serious situations rarely ever cross the deductible's threshold. If many consumers are paying cash for their healthcare, Goldhill said, then we need a healthcare system that’s built from the ground up with that reality as its cornerstone.
Goldhill said that Sesame was created to do that. It’s a marketplace where patients can connect with the care providers they need. These care providers are real doctors with active practices and patient rosters, many of whom also have specialties in the chronic conditions for which consumers need treatment. These doctors see patients as part of the healthcare system that Sesame was created to replace — paid by insurance companies for delivering that medical care and out of pocket by consumers who haven’t satisfied their deductibles.
These same doctors can now also log onto Sesame and allocate whatever time they wish — an hour a day, three hours on Wednesdays, from 9 p.m. to midnight Tuesdays and Fridays, etc., to see patients on Sesame.
The consumers who find those doctors on Sesame pay a transparent and radically discounted price upfront, a price already negotiated by Sesame and accepted by the doctor. The Sesame model, Goldhill explained, makes consumers more responsible healthcare buyers, but also ones who don’t have to sacrifice quality of care because the cost of getting it is dramatically less.
How A Healthcare Marketplace Works
The goal of building a marketplace model for healthcare, Goldhill told Webster, is to turn healthcare into a consumer good just like any other by making the public directly responsible for its purchase.
Like many shopping experiences on marketplaces today, consumers visit it with a specific purchase in mind. On Sesame, that’s a medical issue they want addressed, and Sesame designed its marketplace to get those consumers to the right care for that issue with full transparency on the cost of that service. That might mean a telehealth visit, or it might mean guiding them to a primary care physician for an office visit or even toward emergency specialist care. Once the consumer has settled on a healthcare provider, she schedules the appointment and prepays for the visit.
Unlike the typical insurance-reimbursed visit, that first payment to book the appointment is the only money due. There will be no mind-numbing explanation of benefits statement later, followed by a bill with hard-to-decipher balance owed.
Goldhill said the price patients see is the only price they’ll ever pay for that service, and it will generally be a much lower one than they’re used to seeing on their insurance bills.
He said Sesame makes its money by charging a 10 percent transaction fee, just like any other marketplace where supply and demand is matched in real time.
“Our goal was not to replace the middlemen in the healthcare system,” Goldhill said, but to make the process more efficient, and the layers associated with enabling care more streamlined.
What’s In It For The Doctors?
Sesame gives physicians the opportunity to get paid in cash directly from patients and in real time versus having to work through the labyrinth that is third-party billing systems and wait for payment weeks later.
“The average physician tells me they spend 10 to 15 percent of their work time on insurance issues,” he said. “Most physicians went into medical care because they liked practicing medicine, not because they really wanted to be insurance clerks and were looking for a backdoor way to get there.”
Goldhill said Sesame’s prepayment platform takes that burden off of doctors and gives them time back to treat patients. Moreover, he said it also gives physicians more space to be creative in their offerings because they aren’t bound by what they can fit into insurance company billing codes. For example, primary care physicians can offer subscription packages for patients, or specialists can create new care products for conditions like pre-diabetes.
“We think this [can] be about bringing the marketplace dynamics to an industry like healthcare, where right now the clinician never gets to define what they're selling and can never be innovative,” Goldhill said.
Why Patients Benefit
Consumers always want a good deal, but they aren’t sure that buying cheap healthcare is what they want. After all, people are looking for good healthcare, not cheap healthcare.
However, Goldhill said he believes they can have both despite what we’ve been told about a confusing U.S. healthcare payments black box that makes it impossible to understand costs, much less lower them, all amidst a labyrinth of incentives and subsidies that end up driving the cost of healthcare up, rather than down for the average American family.
Take the relatively common $5,000 deductible that many policies have — a number so high the average American family is never going to break it. For most consumers, they aren’t paying just the first dollars into the healthcare system; in many cases, they’re covering the only dollars going in.
He said that’s created today’s two largest blocks of U.S. healthcare consumers. Group One are those who are uninsured by choice due to the Affordable Care Act’s extended protections. These tend to be working-class families who’ve determined they can’t afford insurance in a world where both premiums and deductibles are skyrocketing.
Group Two are consumers with insurance, but whose policies have those $5,000 deductibles.
Goldhill said that for either customer, getting an MRI can mean paying an out-of-pocket final bill under the current system that’s likely to come in between $600 and $1,500. By contrast, paying in advance through the Sesame platform only costs $350 to $450.
Although the way Sesame prices healthcare is part of the company’s secret sauce, Goldhill explained that the cost structure is pure and simple economics.
“We're about bringing that magic of true marginal cost to healthcare,” Goldhill explained.
Why Change Needs To Happen Now
Goldhill said Sesame isn’t designed to serve all 315 million Americans, all of whom will be healthcare consumers at some point in their lives. Instead, he said Sesame simply gives both patients and providers another option when it comes to accessing care.
Odds are that the vast majority of consumers — those without chronic conditions or a major medical emergency to contend with — are paying for the bulk of their care out of pocket no matter what — and paying quite a lot. At the point that the patient is both their own care manager and payor, he noted, they deserve to have choice and transparency when it comes to what they’re buying.
“We think [that if Sesame] can build a vibrant marketplace in a corner of healthcare, we can bring to healthcare those incentives around transparency and accountability that we see in everything else.”