Value-Based Care

Why Healthcare is a Squid Game

Squid Game

Biotech veteran Wah Yan made a big splash across digital health social media last week after putting out a fantastic article that explores how a playing field of well-intentioned actors has managed to turn healthcare into a Squid Game.

If you missed the wildly popular Netflix show, the article’s subtitle tells you everything you need to know: “why healthcare stakeholders keep trying to punch each other in the face”

Yan lays the foundation for the article by explaining how improving the US healthcare system is difficult due to the mismatch between how revenue is generated vs. how value is measured.

  • Revenue is commonly generated per “unit of economic activity” (i.e. per visit or per procedure), so that increasing revenue depends on increasing activity.
  • On the other hand, measurements of healthcare value (i.e. a healthier population) are often tied to decreasing healthcare activity (i.e. a healthier population = less visits).

While that might sound like Healthcare 101, Yan goes on to illustrate how this relationship creates an inherently hyper-competitive market because “the value of an innovation is often dependent on declining utilization of other products & services at the population level – even if they’re not in the same vertical.”

  • The value of new interventions – whether a drug, a diagnostic, or a service – is increasingly defined by its impact on total cost of care regardless of the reimbursement channel.
  • As a result, everything competes with everything else for revenue, regardless if the final payer is a health plan, employer, or patient (e.g. home care reducing hospital utilization, pharmaceuticals replacing procedures).

This hyper-competitive landscape is what Yan contends is accelerating a growing number of Squid Game dynamics, including a land grab for scarce resources and a tendency to favor control over collaboration (e.g. acquiring companies vs. remaining partners).

The Takeaway

Whether or not the shift to value-based care is creating a healthcare Squid Game, Yan’s article provides a great lens for looking at the incentives influencing stakeholder behavior (and vice versa). He goes into a lot more depth than we can cover here, so it’s worth checking out for anyone looking to understand some of the dynamics driving healthcare innovation.

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