Unlike any other sector in the US, demand and supply are decoupled in healthcare:
Demand-side Challenge: Self-insured employers provide health coverage to a third of the US population and spend $75-90B on planned surgeries, such as joint replacements, in a highly inefficient market. Such surgeries are fairly standard but price and outcomes vary tremendously across providers. In addition, for every dollar spent by self-insured employers on health benefits, forty cents are spent on the payment administration under the antiquated fee-for-service model.
Supply-side Challenge: Providers carry tremendous unutilized capacity. The average capacity utilization of US urban hospitals is 64% and rural is 43% (OECD average: 78%). Traditional fee-for-service payor contracts cannot dynamically adjust prices to match capacity.
A few large employers (e.g., Walmart) identified the issue and began directly contracting with high-value providers (e.g., Cleveland Clinic) disintermediating all middlemen, leading to 30-50% savings and significant volume gain to providers.
However, this direct contracting model is not scalable to most employers and providers as there is no standardization leading to high set-up and ongoing costs. In addition, most employers don’t have the purchasing power to negotiate directly with providers.
Carrum Health solves this problem by leveraging the concept of Bundled Payments to make the direct contracting model accessible to all employers and providers. By doing so, we cut-down the healthcare cost of inpatient and outpatient surgeries by up to 50% while dramatically improving quality outcomes and the member experience.