• 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.

    • I think a “labor theory of value” is a better starting point for thinking about this issue. And the labor theory has both supply side and demand side questions. I’m not sure why, but this seems to have little traction out there in understanding these points. Disruptive technologies hits on that from the side (and yes, b-school profs mostly just don’t get it on health care, though some do, like Rob Huckman).

      Here’s a couple of analogies. Let’s say there are two types of docs, proceduralists (think surgeons) and prescribers (think internal medicine). The technology wars work back and forth on whose approaches “do better” at treating particular diseases (Cardiac surgeons vs. Cardiologists, Oncologists vs. Cancer surgeons, etc.). These are highly skilled people who are paid a lot of money for what they know. But what they know and what can be done is not static and the equilibrium is messy. If a disruptive technology favors Cardiologists over Cardiac Surgeons, what happens?

      If we’re trying to assemble a end-of-life care team, how does the importance of each team member get valued? If it is by how much they are paid, is it likely that the result will be best for the patient? Some docs presently (I actually saw this promoted at the recent AcademyHealth meeting) think that the best way to make patient centered, good quality end-of-life care is to have all involved parties, patients, family, physicians, nurses, everyone, sit around the bedside and debate the issues to decide what should be done. Does this make any sense? Who leads this discussion?

    • Austin,

      Consider that C/G/H may be more concerned with what system change does to health care value than to system cost. A slipperier subject, to be sure.

      That perspective might help you get more from their work. For example, you seem confused about how innovation of the sort C/G/H address happens. You want reform ideas to “be consistent with what we know about the health care system” and to be told “precisely how we get from here to there”, and for “the way forward … to be spelled out much more comprehensibly”. There’s just one problem: disruptive innovation doesn’t happen so neatly as that. The future is….different.

      This portion of one of the C/G/H passages you’ve quoted, which you’ve sidestepped entirely, must really have you confused:

      “…. 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.”

      I can’t really picture you spluttering, but if you did, you might splutter “but-but-but that will only increase total costs!!1!”

      Ask yourself this: what might such a development do for how people value health care? For you see, you’ve apparently assumed that C/G/H are primarily interested in what change might do to system costs, when what they more effectively address is the slipperier matter of value.

      It strikes me that a different type of innovation – “sustaining”, I believe C/G/H label it – follows the path you seem to have fixed in your mind. That type is neat, tidy, and almost irrelevant to the matter of overhauling health care in the US.

      Because let’s face it: change “consistent with” what “we” “know” about “the” health care “system” will not – practically speaking, CAN not – really amount to much, will it?

      • @i but e – Actually, I think increasing value per dollar (quality per dollar) is an admirable goal, and far more achievable than a reduction in cost growth. Yet, cost growth is a problem, or perceived to be by some. I think if C/G/H want to reach the masses they’ve got to be much more explicit about what the problem is they’re trying to solve and explain more clearly how they propose to do it. They’re too vague and it’s too easy to mistake what they are saying. The burden is on them.

    • Was on call last night working with a patient with an unknown primary that had eroded into a major blood vessel. So, no, we are nowhere near to #1 on your list. Are we closer than we were in the past? Yes, but we create new questions as we find new answers.

      I think that they are leading to the idea that we do not need physicians with comprehensive training, that we can function with people with more limited training. For example, an orthopedist might not need to know anything about cardiovascular disease, just how to cut bones and repair muscle. It would be cheaper to train such people. This might be true, but then you will need people to manage the medical issues that would ordinarily be handled by someone with a more general education. I am not sure where the tradeoffs would get us.

      Some people also seem to think that specialty hospitals would not need a broad range of physicians. If the specialty hospitals effectively screen out patients with other illnesses, this could be partially true, but you still need a way to handle complications. This is currently done by shipping patients to a full service hospital, at least in my area. A medical version of private profits and socialized risk.


    • My sense is that like all good B-school profs, CGH see a nascent trend, skillfully repackage it and then market is as a the next, new, new thing. This is really how you make money in health care these days — not so much solving truly messy problems. In a way, Porter and Teisberg do that, too.

      The nascent trend in this case has its origins in the medical technology industry’s desperate search for new revenue, giving that their markets in the developed world have been milked for all they could yield. Countries in the developed world all now have huge fiscal problems, putting pressure on government spending and hence on the traditionally huge profit margins of these industries in those markets. Given that incremental cost usually are far below total fixed costs, there is much room for margin pressure, and payers know it.

      But rather than fighting powerful vested interests in the developing countries, the designers and marketeers in these companies have quietly begun quite seriously to focus on emerging markets — India, China, Brazil, Latin America, and so on — where new, low-cost disruptive technology is welcome and easily introduced.

      GE, for example, already has a cheap, hand-held sonograph machine that can transmit good sonar prictures telemetrically to distant centers. GE is also working on low-cost MRI machines. I am sure other device manufacturers are doing likewise.

      So there is something to the trend CGH identify. In the end, countries like India and Brazil will teach us totally new, low-cost industrial processes for health care, using different types of labor other than just physicians. Desperate as we are getting, we may bite the bullet and learn from them, although learning from other countries goes against our cultural grain.

      At the same time, the HBS marketeers tend to oversell their product. It is what you must do to market yourself these days, and no one understands marketing better that B-school professors.

      The history of American health policy is rife with hyped, new, new ideas that never went anywhere.

      The latest new, new things are Accountable Health Organizations (ACOs — really the warmed over “virtual HMOs, inclduing provider-driven PHOs — coupled with “bundled payments.” Tons of conferences are being organized around the concepts, the hoped-for salvation of all our cost and quality problems.

      And, depending on which party pushes the ideas, they will be decried by Betsy McCaughey, Rush Limbaugh, Fox News and the WSJ as demonic mechanism to make physicians profits from rationing care and life years to patients. Furthermore, we shall find that they won’t go very far. At the moment, we have no cost-control instruments other than rationing more and more healht care by price and the patient’s ability to pay.

      I agree with Austin that the B-school types do owe the reader a more down-to-earth road map on how actually to get from here to there. I have not read CGH, so I cannot say whether they, too, fall short on this point, although the quotation Austin presents suggests that they are still high up in the stratosphere.

      The missing chapter in Porter and Teisberg’s overly long book, for example, is one on implementation, as several of us have pointed out in commentary in Health Affairs.