To understand the benefits of market quality and how it can be achieved in healthcare, we sat down with CEO and Managing Director of Lorica Health Professor Mike Aitken AM to find out more. Mike founded Lorica but cut his teeth building fraud detection systems for financial markets.
Market quality occurs at the convergence of three critical elements: transparency, fairness and efficiency. Aitken explains that the absence of one or more of these features inhibits market quality. “If market quality can be achieved in healthcare, the biggest benefit will be optimal outcomes for patients and their agents, being private health insurers and Government (buyers),” he adds.
“In broad terms, a market consists of five fundamental elements, namely technology, regulation, participants, information and instruments/services,” Aitken says. “When one of these elements change (e.g. the introduction of the da Vinci robot (a new technology) or allowing greater transparency of information for payers (such as might occur through our product NeMo) it is incumbent upon the industry to seek evidence about the impact of those changes.”
Aitken explains this is the essence of evidence-based policy making, crucial to achieving an optimal allocation of resources. Does for example the use of the da Vinci robot improve the quality of outcomes for prostate cancer patients? To do this we need to define fairness and efficiency and build operational measures of both and then compare such measures pre and post introduction of the da Vinci robot into the market. “Only when we can do this on a regular basis do we have a well-functioning marketplace,” Aitken says.
Whilst market quality may be a novel concept in relation to healthcare, it is common ground in other sectors. Aitken acknowledges these three features (transparency, fairness and efficiency) are recognised by IOSCO, the International Organization of Securities Commissions, as essential to the quality of financial markets as evidenced in its Statement of Objectives and Principles. “They are not there yet but they are much further down the track than health markets are,” observes Aitken.
“There is a lot that can be learned from the experience of achieving market quality in financial markets,” he says whilst reflecting on his experience in financial markets where SMARTS (a trade surveillance tool used in financial markets across the world[1]) improved market fairness and Market Quality Dashboard improved both market efficiency and market quality.
The first step towards achieving market quality involves facilitating transparency of data, Aitken explains. Without transparency of data there can be no fair and/or efficient markets (collectively known as market quality). Commenting on the current state of healthcare in Australia, Aitken notes that, “… in Australia and most other jurisdictions, as a consequence of the lack of data transparency, we currently have a health system rather than a health marketplace.” A marketplace is clearly delineated, he says, by the extent to which it reduces the information asymmetry between payers and providers.
A fair health market is one which minimises the extent to which market participants engage in prohibited trading behaviours. Whilst the prohibited behaviours will differ by sector, the aim in health markets is to identify any fraud, abuse and errors. “Like any marketplace, the system has finite resources and it’s incumbent on custodians (whether that be buyers of healthcare such as insurers or the Government or providers of healthcare services) to ensure the resources are utilised in an optimal manner,” Aitken adds.
Lorica operationalises greater market fairness through a number of its products including HIBIS, Gamma and I+Plus, much the same way SMARTS has done for financial markets. “The key difference is the way we present and visualise data to compliance officers in each marketplace,” Aitken notes.
Finally, an efficient market is one in which it is cheap to trade (the cheaper the better) and the price at which one is trading reflects all available information. In financial markets this relates to minimising transaction costs of trading as well as information asymmetry between investors and companies. In health markets the equivalents are:
- minimising search costs for payers to identify and compare service providers and
- maximising the extent to which a provider’s price incorporates all available information such as the quality of service.
Aitken concludes, “Achieving market quality within healthcare will require a concerted effort by all stakeholders to remove current barriers in a way that continues to protect the healthcare recipient.” But far from being impossible, this has been achieved in financial markets with different parties having access to different levels of information.
Lorica Health has been providing software that improves the fairness and efficiency (market quality) of healthcare markets for over 8 years and has proven experience working across both the public and private sectors. Visit our product page to read more about each product.
[1] SMARTS was sold to Nasdaq in 2010 – read more at:
https://business.nasdaq.com/market-tech/market-participants/Sell-Side/Surveillance