The Real Lesson from the Downfall of Theranos: We Need to Nationalize the Healthcare System

Tech startups will never be the answer to the healthcare crisis—their business model is opposed to making care equitable and accessible.

Natalie Shure September 28, 2018

Theranos founder Elizabeth Holmes, once a rising star in the healthcare tech field, now faces possible criminal charges. (Andrew Burton/Getty Images)

Ther­a­nos — the blood-test­ing start­up that in 2014 hit a $10 bil­lion val­u­a­tion on its promise to rev­o­lu­tion­ize the health­care sys­tem as we know it — has final­ly com­plet­ed its long fall from grace. As report­ed ear­li­er this month by John Car­rey­rou in the Wall Street Jour­nal, the so-called uni­corn” firm is final­ly set to dissolve.

The real way to revolutionize our highly privatized healthcare sector is through decommodification, nationalization and redistribution across the industry.

The company’s founder Eliz­a­beth Holmes raised hun­dreds of mil­lions of dol­lars from investors enchant­ed by her pitch, honed over years of pow­er­point pre­sen­ta­tions, keynotes and busi­ness meet­ings. Unlike tra­di­tion­al diag­nos­tic blood test­ing, her company’s device required nei­ther doc­tors’ orders nor nee­dles — it could turn around accu­rate results based on a few drops of blood. As she put it in her 2014 TED Talk, Imag­ine a world in which con­sumers were empow­ered to take any blood test, when­ev­er they want­ed, allow­ing them to access to cru­cial infor­ma­tion at the moment it real­ly mat­ters.Holmes’ vision was a con­vinc­ing one: In 2014, the then 30-year-old helm­ing the Valley’s hottest biotech start­up was called the next Steve Jobs” — a com­par­i­son she may have striv­en to evoke with her clos­et­ful of black turtlenecks.

What hap­pened next is laid out in exquis­ite detail in Bad Blood: Secrets and Lies in a Sil­i­con Val­ley Start­up, Carreyrou’s new book about the saga. Ther­a­nos’ pro­pri­etary tech turned out to be error-prone junk, a fact the com­pa­ny seemed to spend more resources lying about and lit­i­gat­ing over than actu­al­ly try­ing to fix. Once Car­rey­rou exposed the fraud, Ther­a­nos began a free-fall that today seems near­ly com­plete: Its val­u­a­tion has bot­tomed out, cor­po­rate part­ners and investors have been left in the cold and what’s left of the com­pa­ny is fac­ing heavy cen­sure by fed­er­al reg­u­la­to­ry agen­cies. Mean­while, Holmes and her co-execs face pos­si­ble crim­i­nal charges.

Bad Blood offers a cau­tion­ary fable warn­ing against huck­sters all-too-eager to feign the sort of genius capa­ble of bust­ing cul­tur­al par­a­digms to trans­form soci­ety as we know it. 

But for all its insight into the fake it til you make it” cul­ture of Big Tech’s gold rush, Bad Blood leaves out the same crit­i­cal point that’s missed in most main­stream media dis­course about Sil­i­con Valley’s race to dis­rupt” the health­care sec­tor: It will nev­er, ever hap­pen, and human his­to­ry offers us no rea­son to believe that it will. These com­pa­nies’ busi­ness mod­els mon­e­tize the fail­ures of our sys­tem, and there­fore have a vest­ed inter­est in for­ti­fy­ing the struc­tur­al bar­ri­ers to the uni­ver­sal and equi­table dis­tri­b­u­tion of care.

That the U.S. health­care sys­tem is mas­sive, unwieldy, and uni­ver­sal­ly dis­liked imbues it with just the kind of fric­tion” tech evan­ge­lists anoint them­selves to solve. And with health­care spend­ing top­ping $3 tril­lion annu­al­ly, the prize they stand to win is obvi­ous. But the things that make the sys­tem so hor­rif­ic are not things the tech indus­try — with its insa­tiable dri­ve for prof­it — is capa­ble of chang­ing. Our sys­tem doesn’t lack inno­va­tion,” it lacks coher­ent, equi­table pub­lic stew­ard­ship — the com­mon fea­ture of uni­ver­sal health­care sys­tems. Sil­i­con Valley’s dis­rup­tions” can only amount to changes that, in the inter­est of mar­ket via­bil­i­ty, depend on and repli­cate the same struc­tures that make health­care in Amer­i­ca so mis­er­able in the first place.

If you don’t believe me, take it from the would-be dis­rup­tor her­self. Sys­temic short­com­ings were baked into Holmes’ busi­ness mod­el. As Bad Blood relays, Ther­a­nos zeroed in on Ari­zona for its ill-fat­ed roll­out into Wal­greens stores not only because of the state’s loose reg­u­la­to­ry régime, but because of the high num­ber of unin­sured res­i­dents. The log­ic was that peo­ple with­out health­care cov­er­age would be enticed by the oppor­tu­ni­ty to bypass doc­tors to mon­i­tor their own health on the cheap. Such a deci­sion begs the ques­tion: What were these patients sup­posed to do with their diag­no­sis once they had it? An actu­al office vis­it and diag­nos­tic blood work are more expen­sive than they should be, but bare­ly make a dent in the over­all cost of being sick in America.

For the unin­sured — a pool of peo­ple with­out the mon­ey for insur­ance pre­mi­ums, let alone treat­ment — Ther­a­nos wouldn’t be dis­rup­tive, but, more like­ly, preda­to­ry. Even dia­betes, Holmes’ go-to exam­ple of a con­di­tion that could be reversed if patients knew they had it, befalls the poor dis­pro­por­tion­ate­ly not because they fail to proac­tive­ly mon­i­tor their health through blood test­ing, but large­ly because the lifestyle changes that com­bat the dis­ease demand time and mon­ey the likes of which the poor are less like­ly to have.

And yet the fall of Ther­a­nos has hard­ly cleared the field of aspir­ing health­care dis­rupters, many of whom rack up fawn­ing press cov­er­age and mil­lions in fund­ing. Last month, Google’s par­ent com­pa­ny Alpha­bet sunk $375 mil­lion into Oscar Health, an insur­ance start­up that has debuted such inno­va­tions as nar­row provider net­works, a strat­i­fied claims pro­cess­ing sys­tem and an advanced app. It seems as though angling to become a slight­ly-bet­ter-run for-prof­it insur­er holds neg­li­gi­ble dis­rup­tive poten­tial — insur­ance com­pa­nies aren’t abysmal because they’re inef­fi­cient dinosaurs; they’re abysmal because their busi­ness mod­el is at odds with their pur­port­ed sole func­tion: pay­ing patients’ stag­ger­ing health­care costs.

Insur­ers are explic­it­ly incen­tivized to avoid pay­ing for pol­i­cy­hold­ers’ care, which is why they hire so many admin­is­tra­tors to pore over claims in search of tech­ni­cal­i­ties on which to deny them. That’s an inher­ent ten­sion no app can fix, not even one that promis­es the ease and trans­paren­cy that Oscar Health’s does. Just as Ther­a­nos framed pre­ventable deaths as indi­vid­ual fail­ures of dili­gence, so too does Oscar frame sur­prise patient bills as fail­ures of research. 

Oth­er entrants from the tech world striv­ing to make the health­care expe­ri­ence smoother are sim­i­lar­ly con­strained by faulty frame­works. Uber’s intro­duc­tion of Uber Health promised to shut­tle patients to appoint­ments and strat­i­fy the piece­meal non-emer­gency med­ical trans­porta­tion indus­try, a $3 bil­lion drop in the buck­et com­pared to what the com­pa­ny stands to save in employ­er-spon­sored insur­ance costs by clas­si­fy­ing its work­ers as inde­pen­dent con­trac­tors. Over­hyped tele­health star­tups’ like Snap­MD and MD LIVE’s entire exis­tence is premised on mak­ing sure in-per­son doc­tors’ vis­its are both expen­sive and inac­ces­si­ble. Efforts to over­haul elec­tron­ic med­ical records have been stalled by the lack of any prof­it incen­tive to share data across providers and risk los­ing lucra­tive patients. Not only are these play­ers doing noth­ing to com­bat the struc­ture of the U.S. health­care sys­tem, but their share­hold­ers are active­ly prof­it­ing off of its shortcomings.

Inge­nu­ity isn’t what our health­care sec­tor needs. We have plen­ty of it already, and it hasn’t man­aged to stop poor peo­ple from dying over 10 years ear­li­er, on aver­age, than their wealthy peers. Mate­r­i­al con­di­tions have a far more dra­mat­ic impact on pop­u­la­tion-based health than do the indi­vid­u­al­ized cut­ting edge inter­ven­tions that attract ven­ture cap­i­tal. So it’s iron­ic that Car­rey­rou frames Ther­a­nos’ fraud­u­lent inven­tion as some­how too good to be true,” when the thing that was actu­al­ly too good to be true was a health­care sys­tem that could be democ­ra­tized with a sin­gle tech­no­crat­ic tweak. That would be a far eas­i­er prob­lem to solve.

The real way to rev­o­lu­tion­ize our high­ly pri­va­tized health­care sec­tor is through decom­mod­i­fi­ca­tion, nation­al­iza­tion and redis­tri­b­u­tion across the indus­try. Any pro­duc­tive solu­tion to a gross­ly unequal, prof­it-hun­gry health­care sys­tem can­not also make share­hold­ers rich. The notion that those two things could ever be com­pat­i­ble is how we got here in the first place.

Natal­ie Shure is a Los Ange­les-based writer and researcher whose work focus­es on his­to­ry, health, and politics.
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