The discussion around reforming healthcare tends to focus on progress the industry makes against prescribed numbers-lowering the rate of the uninsured, boosting productivity, and improving metrics around new payment models. While these high-level measurements are important for tracking performance, they distract from the understanding of the true causal mechanism of how industries become more affordable and accessible.
Nearly a decade ago, The Innovator’s Prescription showed how disruption could transform healthcare. Yet unlike other industries, healthcare has been largely immune to the forces of disruptive innovation. Whereas new technologies, new competitors, and new business models have made products and services much more affordable and accessible in fields ranging from media, telecom, finance, and retail, the U.S. healthcare sector keeps getting costlier, and is now by far the world’s most expensive system per capita, about 2X higher than the U.K., Canada, and Australia, with chronic conditions such as diabetes and heart disease now accounting for more than 75% of total spending. At the same time, there has been a widening disparity in the quality of care Americans receive depending on their income and where they live.
Regulatory changes have aimed at shifting costs and risks around the system yet have largely missed the true nature of the problem-the fundamental disconnect between what patients need in order to maximize their health and what they actually get as consumers: more services and treatments that generate revenue. Due to this disconnect, even the shift from fee-for-service to value-based care, while helpful, has not yielded the expected benefit.
While it’s taken longer than expected, we can now point to promising solutions in the marketplace. In Part I, we set the context, focusing on why disruption has not taken hold in the delivery practices of hospitals and physicians groups. In Part II, we zero in on how disruptive solutions have begun to improve health while lowering costs for significant populations.
Those solutions lead to our key recommendations:
- For providers: The business model of extended care teams that include health coaches is driving the ability to deliver holistic primary care tailored for each individual-lowering costs and hospitalization rates. We recommend developing and leveraging new mechanisms for scaling this model.
- For payers: Medicare Advantage has become a successful marketplace that provides the context for disruption. We recommend scaling its cost-saving pilots like the Diabetes Prevention Program that improve health by helping avert or manage chronic conditions.
- For legislators: Instead of shifting rising costs among different stakeholders, focus on enabling models of care that lower costs by maximizing population health. Continue to support the shift to value-based payments and fostering a robust individual insurance market to motivate health plan innovation around consumer needs.
- For all innovators: Understand how urgent imperatives are changing the basis of competition-driving all stakeholders to develop new strategies, business models, and innovation capabilities
Clayton Christensen is the Kim B. Clark Professor of Business Administration at the Harvard Business School and is the architect of Disruptive Innovation. Clay was named the World’s Most Influential Business Management Thinker in 2011 and 2013.
As Senior Research Fellow for the Christensen Institute, Rebecca’s research focuses on a number of critical healthcare issues ranging from business model conflict to changing demands on leaders and consumers.
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