Disruptive innovation for health care

I’m interested in all sensible, good faith efforts to improve our health care system. Whenever I encounter a new idea I try to take it seriously. You’ll have to trust me on this one: I also check my ideology at the door. I evaluate reform ideas with two criteria: They have to (a) be consistent with what we know about the health care system and (b) tell us precisely how we get from here to there. I also tend to insist ideas be politically viable, but I’m willing to hold that one in reserve just to see if an idea passes the laugh test.

With that in mind, I took a look at the web page about the ideas of Christensen, Grossman, and Hwang to which Reihan Salam referred readers in a recent post, writing that “they’ve written the most lucid treatment of the issues I’ve seen so far — one that goes beyond cliches about paying-for-quality, etc.”

I encourage readers to take a look at the ideas for themselves. Please tell me what you think. In fact, please try to explain to me how they are supposed to work. (I’m serious. I want to know.)  Here’s what I take to be the guts of it:

Health care delivery remains dominated by the business models of general hospitals and physician practices – both of which rely heavily on expensive, highly-skilled experts to create value by diagnosing and treating the most complex medical problems. Until now, this has largely been done through what is essentially a trial-and-error process that is costly, error-prone, and inconsistent. However, little by little, molecular and imaging diagnostics is slowly transforming the practice of medicine by removing much of the uncertainty involved in clinical practice. As a result, diseases can be diagnosed more precisely, and patients can be prescribed predictably effective treatments. As parts of health care reach this realm of precision medicine, new disruptive models of care delivery can arise that employ new types of providers and different venues of care that are affordable and accessible. Understanding this natural progression of an industry over time allows innovative companies to predict where new areas of growth will be in the future and to ensure their business models will appropriately match the inevitable changes in technologies and the needs of customers.

Let’s reality check this. Help me. I have three specific questions:

  1. For my physician readers, are new diagnostic technologies really “removing much of the uncertainty involved in clinical practice?” (Actually, that’s not even the crucial point. This is: do they remove the opportunity and incentive for over-provision of care that is of low clinical value?)
  2. For my economist readers, let’s assume for the sake of argument that the answer to question 1 is “yes.” Does this imply that the care will be delivered for lower cost to the consumer? (Hint: what determines prices? Please don’t say “costs.”)
  3. For health systems experts, does this strike you as the “natural progression” of the health care industry (precision diagnostics and lower consumer cost)? If not, what would promote it?

If question 3 is too hard, then we can turn to Christensen, Grossman, and Hwang for their answer:

The truth is that these changes have already begun. Coherent solution shop hospitals (or divisions of hospitals) that focus on multidisciplinary approaches to complex care, focused specialty hospitals and ambulatory surgical clinics that only perform a limited set of procedures, and retail clinics in which nurse practitioners deliver basic care in convenient locations are all examples that have grown rapidly in the past decade. Health savings accounts and personally-controlled electronic health records are gaining users as well. On the other hand, many more disruptions are waiting to be introduced, and, not surprisingly, many incumbent health care organizations have lobbied against their threatening intrusion. Thus, it is important to note not simply when we can expect to see these disruptions, but also where we might expect them. And it will be in areas of significant non-consumption where obstructive regulations will be easiest to relax or circumvent, simply because the next best alternative for patients usually is to receive no care at all. This means that individuals living in developing nations will likely be the first beneficiaries of most future disruptive innovations in health care.

Ambulatory surgical clinics! Do those represent examples of more affordable care? (Hint: see the 2008 McKinsey report. I’ll have more to say about that report next week. Short story: convenient, outpatient and ambulatory surgical care is the single largest driver of excess health spending.) Also of relevance, David Cutler finds little evidence of cost-lowering, quality-enhancing innovation and the associated productivity gains in the health care sector (see my post or his paper on this). So, if “these changes have already begun,” the empirical evidence of their positive effects are not evident. (I really do insist on a body of compelling evidence. We can’t just take this stuff on faith.)

Most of the rest of this doesn’t sound coherent to me, but there are a few sentences in here that make sense. I agree that shifting more cost sharing to consumers (provided those costs are income sensitive and commensurate with the value of treatment) is in our future and a reasonable way to reduce moral hazard and wasteful health spending. I agree too that more changes can and should be made and that powerful stakeholders have done and will do everything in their power to block them.

Nevertheless, the way forward has to be spelled out much more comprehensibly than Christensen, Grossman, and Hwang have done. And it has to make sense.* I’m not getting what these guys envision or how it is consistent with the world in which we live and the evidence we’ve seen. Do you? Please explain it to me. (I’m serious.)

*One could say to me, “Go read their book.” If they send it to me, I will. But, in all seriousness, if they’ve got sound ideas, they should come through in a summary. They should make sense to someone who understands our health system. They should pass the laugh test. As far as I can tell, they don’t.

Later: A reader shares two other reactions to the ideas of Christensen, Grossman, and Hwang. They are worth reading because they shed far more light on those ideas than I did.

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