12 Jan 2012, the Tbird Entrepreneurship Winterim (#eWinterim) visited with Dr. Richard Merkin, of FasterCures, and Kimberly Fowler, Founder of YAS (Yoga & Spinning). Both came from very different professional backgrounds (Richard, trained as an MD, and Kimberly as an attorney), but ended up as entrepreneurs in areas they are passionate about. The commonalities in their stories relate to the “do what you love” theme, and also that prior educational and work training positioned both of them to apply themselves in new and relevant ways as entrepreneurs later in life. My first in this two-part blog edition covers Faster Cures, while part two of two will cover YAS.
Richard’s session focused on several problems currently existing in the healthcare industry, and how he has set out to solve them. The first issue revolves around motivation in the healthcare industry. What motivates doctors? What motivates patients? What motivates hospitals? What motivates insurance companies? Well, apparently all different things. But in theory, the motivations can and should converge–this convergence of disparate incentives and motivations is one of the key goals that Richard’s business, FasterCures, focuses on. As an example, on the doctor side, the input, the way money is managed, greatly affects the output, patient care (treatment). If the doctor is reimbursed on a cost plus basis, he or she has the incentive to order as many tests as possible, and take the longest possible time (and greatest expense) to effectively (or even semi-effectively) treat a patient. Richard pointed out that this actually is to the benefit of under-performing doctors and to the detriment of the better doctors, because the better doctors typically cure patients faster on average, but in doing so make less money on a cost plus basis; the corollary is that less competent doctors take more time and money to cure a patient, but get paid more for this. However, if a doctor is given a fixed budget per patient, the doctor that is more clever benefits—he or she must innovate in order to cure the patient, use the money wisely, and is able to keep the excess money. Here, he or she is rewarded for treating a patient in a fast, efficient manner.
What wasn’t mentioned, however, is the negative side effects through this kind of fixed-cost motivation–corners will be cut in many cases in order to pocket more money, and tests will not be run that maybe need to be run if the only incentive structure is the remainder of a fixed budget to manage. What is needed here also is a measure of treatment success, where the doctor gets rewarded additionally on whether or not the patient returns for a linked issue that wasn’t initially detected. Therefore it balances a lack of care with too much care. Incentive structures can make all the difference, as we have also studied in our MBA cases. In particular I remember a thought exercise we did on fast food chickens. If you incentivize the workers on sheer volume, such as chickens per hour being processed through the restaurant, other things will suffer—quality, wastage (chickens will be pushed through before they are ordered and will sit, and go to waste), etc. Multiple incentives pulling at opposites sides of the behavioral possibilities are needed for effective balance.
Some additional insights included his thoughts on the guild structure within the medical profession. Guilds dictate how much training is needed for a given medical specialty. For example, podiatrists can perform foot surgeries after 4 only years of college, whereas a hand doctor needs an extra 6 years of training after college, even though fundamentally hand and feet have the same muscle structures. Similarly, pharmacists know more about drugs than doctors, but can’t prescribe. He says this must change in the future to keep the medical industry relevant and operating efficiently. It was also interesting to hear that the best and brightest students these days aren’t going in to medicine any more. In fact, doctors are advising their children NOT to go into medicine at all (they are telling them to go into Wall Street instead). I wonder what our international student body would have to say about this in their home countries? Is it similar or different? Feel free to comment with your views here.
As I mentioned in the beginning, please also read part two of two coming up next, covering YAS.