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Solving healthcare's disruptive innovation dilemma

Brian Eastwood | May 8, 2014
If you need any evidence that the United States needs to rethink its healthcare model, look no further than the typical hospital.

If you need any evidence that the United States needs to rethink its healthcare model, look no further than the typical hospital.

Within each building, says Clayton Christensen, the Harvard Business School professor who defined the concept of disruptive innovation, you tend to find three competing business models, each with its own profit model. There's the fee-for-service R&D and diagnostics "solution shop," the fee-for-outcome process businesses that conduct medical procedures, and the fee-for-membership facilitated networks that provide long-term care.

"Typical hospitals are not complicated," Christensen said at the recent Better Health Boston forum. "They are impossible."

It's no surprise, then, that healthcare needs disruptive innovation. What remains to be seen, though, is how soon that innovation will arrive and what kind of impact it will ultimately have.

Today's Hospitals Too Centralized for Disruptive Innovation

American healthcare's primary problems can be boiled down to two key issues, Christensen said at the event, sponsored by healthcare IT vendor McKesson and consultancy Innosight. Innovation has been sustaining as opposed to disruptive, he says, while the process remains largely centralized. Hospitals offer the value of solving any problem for any patient, he says, but the overhead of that complexity leads to tremendous costs. (The same is true of higher education.)

On top of that, most care is provided using what Christensen calls a modular, open architecture. This works for Samsung in its efforts to take down Apple, as it's a model that emphasizes speed, responsiveness and customization, but it doesn't work in healthcare. The industry needs a closed, interdependent, decentralized and integrated system, he says, one in which facilities focus on doing a particular job very well.

If that's the case, then the disruption may already be happening. Retailers, building on the success of their rewards programs and advertising campaigns, are starting to use that influence to try to catalyze behavior change. Walgreens, for example, can use its product recommendation technology for healthcare recommendations and reminders, says Brian DeMay, CIO for enterprise architecture at Walgreens, who spoke at the recent Oracle Industry Connect event.

Traditionalists may scoff at the idea — but Walgreens sees 6 million patients a day, DeMay says, and the retailer uses data from wearable tech such as the FitBit to offer coupons to customers who achieve fitness goals. That data, combined with additional records, lets Walgreens produce a Wellness Index to help fill gaps in the longitudinal medical record, which is based less on physician-patient encounters and more on a patient's overall healthcare experience and wellness needs.

'Morally Wrong' to Focus Healthcare on Anyone Other Than Patients

That approach to the patient experience represents another disruptive innovation. Organizing healthcare around doctors and insurers as opposed to patients is both morally wrong and a driver of out-of-control costs, says Alexander Packard, chief operating officer at Cambridge, Mass.-based Iora Health.

 

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