Q&A: David W. Johnson, 4sight HEALTH

RamaOnHealthcare May 31, 2024

Outcomes Matter. Customers Count. Value Rules.

Today, RamaOnHealthcare talks with David Johnson of 4sight Health. Mr. Johnson founded 4sight Health as a boutique media and advisory organization in 2014.

4sight Health operates at the intersection of healthcare economics, strategy, policy, and capital formation. The company generates an enormous amount of content on market-driven healthcare reform. And 4sight Health is a frequent contributor to RamaOnHealthcare’s content.

David W. Johnson, CEO of 4sight HEALTH

RamaOnHealthcare (ROH): Tell us something about your background and how you became a writer on market-driven healthcare reform.

David Johnson (DJ): I have an unusual background: English literature major at Colgate University; Peace Corps Volunteer teaching high school English in Liberia, West Africa; master’s degree in public policy from Harvard; and a long, successful career in healthcare investment banking.

As I was leaving banking in 2014 to launch 4sight Health, my coach suggested that I write a book. I thought he was crazy. Now look at me: three published books, another coming out later this year and yet another in the works.

Healthcare is such a large, complex, and nuanced industry that it defies easy understanding. Perhaps it requires a mix of literary sensibility, cultural sensitivity, public policy acumen, and market knowledge to grasp and explain healthcare’s proclivities and idiosyncrasies. Whether it does or not, I find myself shifting between these four lenses of literature, culture, public policy, and markets, in my writing. This multiplicity of perspective helps me see and make connections that a those more narrowly focused may not. At least, that’s what I tell myself!

One more thing. Good writing leads to good thinking, not the reverse. I use my writing to understand and explain how and why the massive yet dysfunctional healthcare marketplace operates as it does.

If Steve Jobs is right, that the dots in life connect in retrospect, then my life’s journey has taken me to this transformative moment in the healthcare industry. Once a Peace Corps Volunteer, always a Peace Corps Volunteer. I couldn’t possibly be more engaged in the effort to make U.S. healthcare work for all Americans.

ROH: You’ve been known to say that healthcare is evolving through bottom-up, market-driven transformation. Explain what you mean by that?

DJ: In natural evolution, there are genetic mutations. Most mutations die, but some take hold in response to changing environmental conditions. The most powerful mutations change species. This occurs through an organic, bottom-up process over multiple generations. Successful mutations demonstrate evolutionary “fitness” through adaptation and by amplifying their impact through reproduction.

What’s true for nature is also true for business. In the marketplace, individuals and companies have new ideas for business ventures. Most of these ideas fail to materialize. Some do gain market traction, and a very select few disrupt entire industries. Think about how Amazon has changed the way that most people shop.

Competition and market fitness separate winners from losers. Value-creating health and healthcare companies are changing healthcare’s supply-demand dynamics from the bottom up. Successful companies invite replication through copy-cat competitors. Their collective market power is formidable.

Incumbent payers, providers and suppliers cannot forestall innovative growth forever. It’s akin to fighting gravity – entrenched incumbents can maintain an unsustainable status quo for a while, but ultimately, they will come crashing back down to earth.

ROH: You mention healthcare strategy, economics, innovation, and capital formation. How do these work to create market-based solutions?

DJ: Based on my answer to the last question, you can see that I believe superior business solutions emerge through a demanding “market selection” process. Strategy, innovation, capital, and execution must come together to create value, beat competitors and attract new customers.

Most healthcare products and services are commodities. They should be subject to the laws of supply and demand. Given healthcare’s complex payment mechanics and perverse payment incentives, however, our system rewards market leverage more than value creation. This explains why revenue optimization is the primary force driving the business of healthcare.

Payment for activity, not outcomes, enables healthcare providers to charge excessively high prices for routine services. Supply drives demand rather than the reverse. Consequently, healthcare’s artificial economics drives our system’s subpar performance relative to other high-income countries.

America pays more for worse outcomes. This must and will stop. Bottom-up, market-driven reform will force the transformation.

ROH: How do you challenge conventional thinking in healthcare?

DJ: By and large, head-on. 4sight Health subscribers often compliment us on our unique perspective. I counter that there’s nothing unique about our perspective. We simply apply economics and business logic to an industry that’s operated within an artificial and anti-competitive marketplace for decades.

Viewed from this perspective, it’s relatively easy to understand why healthcare treats its consumers so badly, why it’s overbuilt its acute care infrastructure, why it resists innovation, why it underserves large swaths of the American public and how it uses political leverage to sustain its anti-competitive behaviors. It’s also possible to see how the healthcare marketplace is reorganizing to drive better health and healthcare outcomes.

As Justice Louis Brandeis noted, “Sunlight is the best disinfectant.” At 4sight Health, we both recognize revolutionary thinking and call out bad behaviors. The healthcare marketplace needs both to understand the inevitability and character of the coming healthcare revolution.

ROH: What are two or three ways we could transform healthcare — and using what types of innovation?

DJ: 3D-WPH is the disruptive innovation that will cause the collapse of the massive healthcare industrial complex — known as Healthcare Inc. It stands for Democratized and Decentralized Distribution of Whole-Person Health.

Care Redesign is transitioning the delivery of healthcare services from reactive institutionalized care to proactive personalized care that emphasizes prevention, health promotion, and holistic service provision.

Care Migration is transitioning the delivery of healthcare services from high-cost, centralized locations (think hospitals) into lower-cost and more convenient settings, including ambulatory centers, community clinics, virtual modalities, and the home.

Together, Care Redesign and Care Migration are powerful enough to overcome the economic, political, and cultural barriers that stymie innovative and value-based business practices from gaining market traction. I predict U.S. healthcare will change more in the next 10 years than it has in the last 100. Watch out!

ROH: How do we improve, fix, or improve healthcare? What would that look like?

DJ: When I founded 4sight Health in 2014, I thought that industry transformation could come from the inside out; that industry incumbents could lead the needed change. I no longer believe that will happen. The coming transformation will come more outside-in. It will be messy. That transformation will be revolutionary, not evolutionary in scope; exponential, not incremental in its pace. Most incumbents will struggle to adapt.

By necessity, the industry will shift resources out of acute and specialty care into primary care, health promotion, chronic disease management, and integrated behavioral health services. When the dust settles, there will be abundant community-based health networks emphasizing, coordinating, and integrating vital primary care services into a whole-person-health care model.

There will be fewer hospitals and specialists. Managing their dislocation and repurposing will require significant public-private collaboration. The American people will be big winners. Healthcare Inc. will be the biggest loser.

ROH: How do we overcome the challenges? Who needs to work together who isn’t currently?

DJ: My biggest frustration with the business of healthcare is that large, self-insured employers, who pay premium prices for commodity healthcare services, haven’t demanded more value for their purchases. Sometimes it’s not their fault. They operate in markets where providers, suppliers and insurers have monopoly or monopsony pricing power.

Far too often, however, large employers fail to use their purchasing power to incentivize value-based care. Instead, they pass the costs of higher healthcare services to their employees. Their ability to cost-shift to employees, however, has reached its peak. Employees can’t afford to pay more. In response and by necessity, employers are becoming more cost-effective designers of health and healthcare benefit programs.

America won’t change the way it delivers care until it changes the way it pays for care. Nothing will change the healthcare marketplace faster than better healthcare purchasing by self-insured businesses and governments. Nothing!

ROH: You’re working on a new book about healthcare’s current state, and it sounds like the house is on fire. Where is the healthcare system now, and where are we headed?

DJ: It’s been an interesting progression. The organizing theory for my first book, Market vs. Medicine (2016), was that markets do a better job of allocating resources than governments. The book explored the causes of market failure in healthcare and strategies for overcoming them.

The organizing principle for my second book, The Customer Revolution in Healthcare (2019), was exploring why the healthcare industry fails to improve incrementally like other industries do. It’s not that there hasn’t been progress, but the overall pattern since the creation of Medicare has been negative.

As an industry, healthcare’s costs have increased as the American people have become sicker. The reason for this stunted operating profile is that U.S. healthcare is under the control of the largest and most pernicious industrial complex ever created by human beings. The Customer Revolution details the scale of Healthcare Inc.’s activities and identifies strategies for overcoming their value-depleting practices. https://www.4sighthealth.com/product/the-customer-revolution-in-healthcare-delivering-kinder-smarter-affordable-care-for-all/

The forthcoming book that I’m co-authoring with Paul Kusserow, The Coming Healthcare Revolution (2024), is a megatrends book. It identifies five top-down macro and five bottom-up market forces that are disrupting Healthcare Inc. in real time.

Your “house on fire” description is accurate. Like a phoenix emerging from the ashes, a new and better system of whole-person health will replace the dysfunctional, transactional system currently inflicting enormous harm on the American people.

ROH: In your 4sight Health interview series “How Healthcare Revolutionaries Think,” News Editor David Burda talks to people who are working on innovations in healthcare and how they are making a difference. What are some ideas you’ve heard from revolutionaries that you think could positively impact both value and patient outcomes?

DJ: There are too many to count. The beauty of this moment in the healthcare industry is that thousands of innovative companies are placing their strategic bets on value-creating business models. They’re striving to deliver better outcomes at lower costs with exceptional customer service.

I don’t want to pick our favorite revolutionaries because we love them all. What they all have in common, however, is a passion for helping beleaguered consumers. They skew toward health over healthcare. They believe in better outcomes and welcome competition. They are unafraid. Collectively, these revolutionaries will remake the healthcare ecosystem.

ROH: What insights or advice would you have for current and aspiring leaders within healthcare?

DJ: Channel your inner Gandhi. Be the change that you want to see in the healthcare world. Avoid the allure of profiting from failing and/or non-productive business practices. Stand up for value. Help all Americans get healthier together.

ROH: The 4sight Health Roundup podcast comes out every Thursday, featuring you and Julie Murchinson from Transformation Capital. You call it “The best 20 minutes in healthcare.” What do you two talk about every week?

DJ: News Editor David Burda, who moderates our podcast conversations, describes Julie and me as the equivalent of sports broadcasters for healthcare. Julie provides the play-by-play, and I provide color commentary. He’s onto something.

As you can tell, I’m by design and inclination a macro thinker. While Julie is too, she is remarkably effective at detailing concrete evidence of market trends. We’ve been at this for several years now and can almost finish one another’s sentences. It’s really fun.

No topic is off limits. In fact, the more contentious an issue, the deeper we dig into it. We’ve got a loyal and growing following of listeners that keep us on our toes. Subscribe and become a regular listener:

Spotify: https://podcasters.spotify.com/pod/show/4sight-health
YouTube: https://www.youtube.com/@4sighthealth
Linktree: https://linktr.ee/4sighthealth

ROH: Tell us about 4sight Health. What makes you different?

DJ: We collectively wake up every morning and endeavor to fix America’s broken healthcare system. It’s joyful work. Agree or disagree with us, our audience gets our unvarnished opinions. We don’t have any hidden agendas. Our very visible prime directive is to promote better health and healthcare services for all Americans.

The U.S. was already sick before COVID-19 hit. The pandemic illuminated the massive structural flaws that plague the current delivery system. At the same time, the industry moved remarkably fast to advance virtual care, ease burdensome regulations and unleash the American innovation engine to create powerful and effective vaccines.

We can fix U.S. healthcare. It’s difficult but doable. The obstacles are more political and bureaucratic than operational. Our hope at 4sight Health is that by fixing healthcare and helping our population lead healthier lives that we can recover America’s mojo and work together to tackle other big challenges confronting our nation.

4Sight Health advances market-based healthcare reform through:

• Thought Leadership
• Strategic Advisory Services
• Capital Formation

More about David Johnson. He is CEO | Healthcare Keynote Speaker, Author & Podcast Host, Healthcare Strategic Advisor.

4sight Health provides the following:

• Regular commentary on market-driven reform
• Public speaking
• Board education
• Strategic advice
• Capital formation design and execution
• Advancing organizational change
• Venture investing: strategic partnerships; capital funding; product/service design

For more information, please read our weekly insights here: https://www.4sighthealth.com/insights/

Join the revolutionary healthcare leaders who receive weekly healthcare opinions, insights, and news from 4sight Health. Subscribe here: https://bit.ly/30CppDL

The collection of commentaries, podcasts and interviews with healthcare revolutionaries is available to all for free on its website https://www.4sighthealth.com/. Subscribe here for weekly access: https://www.4sighthealth.com/subscribe/.