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Whoever pays decides what happens
Lab testing was ruled out first. Even replacing Labcorp and Quest entirely would be about a $30 billion market cap, the ceiling for the largest company that could be built, and Curative's founder, Fred Turner, wanted a much bigger company coming out of Covid.
Next came buying hospitals, and Curative looked at one in Florida and one in Texas. Health systems have bought up many primary care offices, so the thought was that technology could transform care there. The payer mix was too broken up: about half of a hospital's customers are the government, and the rest are many smaller insurance plans that all want different things and change their minds every five minutes. That limits how much a hospital can change.
Preventative care and a primary care chain were also on the list. Each time, the answer came back to the payer. The insurance company is the one that drives behavior, so health insurance became the business to build.
How did Medicare payment change hospital behavior?
In 1983, Medicare began paying hospitals fixed amounts by diagnosis group instead of reimbursing each day of care. Hospitals then had a reason to discharge patients sooner. Average hospital stays for Medicare patients dropped in the following years. The change is a standard example of how a payment rule moves what providers do.
What is a payer mix?
Payer mix is the share of a hospital's revenue from each type of payer: Medicare, Medicaid, commercial insurers, and the uninsured. Medicare and Medicaid prices are set by government formulas, while commercial prices come from negotiations. MedPAC, which advises Congress, has reported that Medicare payments often fall below hospitals' costs for treating those patients. Commercial rates are often higher, and hospitals lean on them to make up the difference.
How does a fee-for-service system shape care?
Under fee-for-service, a provider is paid for each visit, test, or procedure delivered. More services mean more revenue, which gives providers no financial reason to hold volume down. Value-based contracts try to pay for outcomes instead. Medicare started testing such models after the Affordable Care Act created the Innovation Center in 2010.
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