The Care Equation

Healthcare is the largest industry in the world and one of the hardest in which to build a business. The United States alone spent about $5.3 trillion on health in 2024, nearly a fifth of its economy. Some companies have turned that spending into lasting value: integrated systems that keep their members healthier, devices that changed how surgery and diabetes are managed, drugs that reshaped whole diseases, and, in places such as India and West Africa, models that bring care to people the system had left out. Many more have not. Well-funded start-ups have built products that clinicians would not use, programmes whose savings vanished under a randomised trial, insurers whose growth outran their underwriting, and roll-ups whose profits came from a gap in a payment formula until someone closed it. Some of the most admired companies in other industries tried to fix healthcare and left within three years.

The difference is rarely the technology alone. This book argues that a healthcare business creates durable value only when four things are true at once, and that the factors multiply rather than add: if any is zero, the result is zero. The care must improve health or lower its cost. There must be a payer willing and able to pay for it, from a budget that renews. The company must be able to reach that payer for less than the payer is worth. And the proof must be strong enough to survive contracting and regulation. Around those four factors sit two forces that no company controls, reimbursement policy and capital cycles, which behave like weather: they do not decide whether care works, but they decide how long a company has to show that it does. In healthcare the patient is rarely the buyer, the person who chooses is often the clinician, and the payer is usually an insurer, an employer or a government. Most of the failures in this book come from treating one of the four factors as given rather than earned.

The twenty-five chapters develop that view. Part I sets out why healthcare is not a normal market, how it became a business, how money flows from premiums and taxes to hospitals, doctors, insurers and drugmakers, and how value and evidence are judged. Part II follows the markets one by one: hospitals, physicians and outpatient care, insurers, government as payer, drugs and the pharmacy chain, devices and diagnostics, and care in the home and for the mind. Part III examines what it takes to build products that work, from the electronic record and digital health to artificial intelligence, business models, selling into healthcare and value-based care. Part IV covers investing, private equity and consolidation, regulation and privacy, prices and reform, and health systems around the world. Part V turns to people: the clinical workforce and how to build a healthcare company and its team. Part VI reads five cases for the decisions behind them. Each chapter opens with a case, explains the mechanics it illustrates, and closes by naming the factor of the equation on which its case turned.