The Third-Party Problem: Why Healthcare's Incentive Structure Is Broken

After 30 years in healthcare, I can tell you that third-party reimbursement sits at the very top of my list of concerns.

It's the real issue that drives almost everything else that's broken in our system. To be clear, I don’t think this is the insurance industry’s “fault”. I also don’t think you can place the blame on the Hospitals, doctors, or any providers. My main thesis is to put the “buying power” back in the buyer's hands and create “catastrophic insurance” when the cost exceeds what they can afford. It would work similarly to today, with deductibles, but we would have our own accounts, could decide what to buy and where to shop (or not), and negotiate our own services rather than have prior authorization approve or deny them.

We say healthcare is a fundamental right, yet we feel a sense of or actual loss of control when we can’t get the drugs or services we need, only to find out the costs are drastically overpriced or denied for some arbitrary reason. Again, it’s easy to play the blame game. What I’m suggesting is a pilot program to see if this idea would work. I believe in the power of millions. 

And here's the hard truth: I don't think it can be fixed easily, and we won't be able to change it anytime soon.

The Incentive Problem

Healthcare, as we know it, has the wrong incentives. Here's what I mean:

Folks like me only get paid when something is wrong with us. Think about that for a minute. The entire system is built around sick care, not healthcare. Preventive care is an afterthought.

Secondly, the end user isn't the one who actually writes a check to the person providing the service. Patients buy insurance in advance, and then the insurance company pays for the healthcare we consume. This creates a bizarre disconnect that doesn't exist anywhere else in our lives.

Once we've met our deductible, we want the Rolls-Royce of healthcare when a good Buick would do. In fact, we want 10 Rolls-Royces because we feel entitled to them. We've paid our deductible, right? We demand it. We never even price shop.

We Don't Shop for Healthcare Like We Shop for Everything Else

When we shop for anything else that expensive—a car, handbag, shoes, college, computer, or anything over the price of lunch—we price shop. We compare. We ask questions. We look at reviews.

However, we rarely price shop for our healthcare. We simply want to know if the provider is in our "network" and what our max out-of-pocket is. That's it. 

The actual cost? Someone else's problem.

This isn't how markets are supposed to work. And it's not how we create efficient, effective systems.

The Maintenance Problem

Here's another thing that keeps me up at night: we also rarely think of healthcare until we need it.

We take our car in for oil changes, tune-ups, and tire rotations. Yet, we are very bad about getting mammograms, endoscopies, colonoscopies, prostate exams, or any other preventative maintenance.

Perhaps it's the cost. Perhaps it's access. Or is it simply the underlying fear?

We spend much more time and money on vanity than on health. The outside of our car looks pretty good, while the engine is about to blow a gasket, or the undercarriage is rusting and falling apart from the inside out.

Men are twice as bad as women about preventative maintenance. They think they are "tough," yet the statistics prove that they die out way quicker, become dependent on their wives for caregivers, and miss the best years of their lives—or spend them in the doctor's office for "sick visits" because they didn't get "well visits."

I've been guilty of this myself. We all have.

What Needs to Change

We need to change the system completely so everyone benefits. And I'm not talking about just reducing costs or shifting who pays. That's treating symptoms, not the disease.

We need to explore other solutions. We need to educate patients on how insurance policies actually work. Most people have no idea what they're buying or how it functions until they need it.

We need to align incentives so that keeping people healthy is more profitable than treating them when they are sick. We need transparency in pricing so people can actually shop for care as they shop for everything else. We need to make preventative care accessible and normal, not something we avoid until it's too late.

The Reality

After 30 years in healthcare entrepreneurship, from Winyah to Palmetto, and now Interim, I've observed this problem from every angle. I've worked with incredible partners and teams who care deeply about solving these issues.

But until we fix the fundamental incentive structure and third-party reimbursement, we're just rearranging deck chairs.

This is the kind of systemic challenge that needs real leadership. Not just executives managing teams, but entrepreneurs willing to think differently and challenge the status quo. This is about succession, too—building systems that outlive us and actually serve the people they're supposed to help.

I don't have all the answers. But I know this: the current system isn't working for patients, providers, or payers. Maybe a pilot project would be a great test to give some trust back to the patients?  Time is our most valuable asset. Maybe it's time we started treating our health like it.

If you're working on solutions in this space or know of companies tackling these fundamental problems, I'd be glad to connect.