February 11, 2015

The Healthcare Innovator's Dilemma

Travis Good, MD

Co-founder & Chief Technology Officer

Clayton Christensen coined the phrase “innovators dilemma” in his aptly named book with the same title. He went on to co-author a book specifically addressing opportunities for innovation and disruption in healthcare. Both of those books are worth reading. Though not specifically a subject of either book, we’ve uncovered, time and time again, that innovators in healthcare face a common dilemma. The dilemma, highlighted in our Innovation Series interview with Dr. Mark Chasin and our interview with iTriage co-founder Dr. Wayne Guerra, is that new technologies and tech-enabled services in healthcare need to provide an ROI in two drastically different health systems - 1) our current, still dominant, volume-based system (fee for service) and 2) our fast growing, but still minority, value-based system (accountable care).

I remember hearing members of the HCA executive team discussing this same topic a few years ago at a conference. HCA is a massive, for-profit health system, and has money to invest in new technology (it has a venture fund and also recently acquired PatientKeeper), but it also realizes what keeps the lights on today - volume of care, or more care, not less. On the panel executives at HCA talked about how they fully realized the direction healthcare incentives are going but also know where those incentives are today. They talked about investing and planning for a different health system future so the organization would be prepared to basically flip a switch when the scales tip in favor of value over volume. Not all organizations have the resources to prepare this way.

Healthcare, despite being a massive industry, does not have high margins. At least most provider organizations don’t have high margins. Putting current provider revenue at risk by making the system more efficient (less duplicate testing, reduced readmissions and ED visits, etc), while probably the right thing to do, could close the already small gaps hospitals have between revenue and costs. Thus, healthcare innovators, both inside and outside the enterprise, need to find ways to help keep the lights on today while preparing systems for tomorrow as they go about building new technologies and tech-enabled services.

While not always easily done, there are a few examples we’ve seen of successfully adding value today while fitting very well with the incentives of tomorrow. In some cases, it’s simply a matter of choosing the right target areas (conditions, episodes, etc) and messaging.

  • Bundled payments. Bundled payments align value and quality with reimbursement. For select procedures, health systems can elect to receive a certain amount, a bundle, of payment for each patient. The health systems succeed when the care they provide limits follow-up and complications, ultimately lowering their cost and improving the quality of care. Services that enable this, such as Healthloop, are well placed to expand beyond bundled payments when health systems begin to feel the broader pressure of more risk in payer contracts.

  • Readmission prevention. This is similar to bundled payments. Technology and services that reduce the number of readmissions, for certain conditions, protect health systems from penalties. The goal is preventing readmission within the first 30 days of discharge. Beyond 30 days, there’s good data that a large percentage of patients are readmitted within 60 days, 90 days, 180 days, and within 1 year of readmission. In an accountable care world, services with a foothold preventing readmissions can expand to prevent extended readmissions, or maybe just admissions, that would cost the system.

  • Concierge medicine / direct primary care (DPC). There are a few aspects of subscription-based medicine (concierge or DPC) that align with trends coming to healthcare. The first is that subscription medicine has incentives to keep patients happy so they don’t churn, or leave the practices. Unlike most of healthcare today, customer service matters here. The second reason is that subscription medicine is largely provided by primary care providers. These providers work hard to prevent catastrophic, or really any form, or expensive care because many patients that use subscription medicine have high deductible insurance plans.

  • Analytics. This is a broad bucket with many meanings. In the future, analytics will ideally help to reduce the cost of care while improving the quality of care. Today, analytics can be used to suggest and maximize covered (reimbursed) care, increasing revenue for health systems. In doing so, theses services overcome hurdles of access to data and can easily flip from promoting more care to reducing the amount of care, or appropriating care to the right populations.

  • Telemedicine. Telemedicine represents a major shift in the way care is delivered. Today it can be used to generate new revenue from patients willing to pay out of pocket for convenience or to make systems more competitive for certain desirable populations. In the future it can be used to reduce the cost of care for accountable care patients and maybe even prevent more expensive forms of care.

  • Patient portals. Patient portals address a core requirement of Meaningful Use (MU) by providing patients with access to their medical records. Today this helps health systems get incentives from the government. In the future, these portals can be used to expand services to patients and maybe become the hubs for patients accessing digital health services. That’s a big maybe.

There are undoubtedly more examples. We’d love to hear from you about the ones we missed, or from those with experience selling ROI today and tomorrow.

tag Company


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