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“The Innovator’s Prescription”: Christensen’s Book Offers Insightful Dx, Unrealistic Rx

Ip Being big fans of Clay Christensen and his theory of disruptive innovation (DI), we have been awaiting his just-released book The Innovator’s Prescription: A Disruptive Solution for Healthcare .  The book is co-authored by Dr. Jerome Grossman and Dr. Jason Hwang.

We have mixed reactions.

The book is mistitled. It should have been titled “The Innovator’s Diagnosis”. The book does a fantastic job at diagnosis (Dx) of problems in the U.S. health care system. It presents many new, innovative analytical frameworks and lenses through which to view the U.S. health system.

However, it’s weak on prescription (Rx): many of the proposed solutions are speculative, ungrounded, and/or defy political reality.

We understand that the very nature of disruptive innovation implies inevitable resistance from organizations that benefit economically from the status quo. But at some point a proposed solution becomes so disruptive that you have to suspend reality to believe that it could be adopted or implemented — and many proposed solutions in this book enter that realm.

The book applies Christensen’s general theory of DI specifically to the health care system. It addresses questions such as:

  • What is DI?
  • Why is it important to create an environment in health care where DI can flourish?
  • How can we create the right environment in health care for DI to flourish?

The introductory chapter of the book is available here at no charge (right column under Downloads). It’s a great overview.

Dx on Target

The authors present many insightful ways to analyze and understand the dysfunction of the U.S. health care system. A few that we found particularly useful include:

  • Describing the two major enablers of disruptive opportunities in health care — 1) technologies enabling less skilled individuals to do tasks that previously required specialized expertise, and 2) business models allowing care to move from centralized locations (hospitals and doctors offices) to distributed environments (home, work and community).  See slide 8 here for a helpful visual presentation.
  • Explaining the critical role of standardized personal electronic health records
  • Introducing a new terminology around intuitive medicine, empirical medicine, and precision medicine
  • Describing three key elements for DI: technological enabler, business model innovation, and value network
  • Explaining in detail the need for systemic integration in health care
  • Describing the type of medical practice required to diagnose and treat a range of chronic diseases

…and many, many others

Rx Misses the Mark

Christensen has been on the road talking about this book since January 2008. Unfortunately, the book reads as if it were released then (January 2008) even though the book was made available in December 2008 and the publication year is 2009.

There is no mention of economic events of the past year or the national political context in which health care finds itself today.

There is no mention of the 2008 election, that Obama and the Democrats won the election handily, that Wall Street and credit markets have self-destructed in past months, and that health care reform appears likely to be a front-center legislative target for 2009.

To be fair, the book does not portend to provide advice in context for today’s health care political reality. That said, we think not speaking to today’s political context is a missed opportunity.

In many sections of the book, the authors are extremely sensitive to political and historical context; there’s a 10 page discussion of the history of health insurance markets over the past 100 years.

However, in light of the current importance and visibility of health care as a national reform issue, the authors miss a major opportunity to provide timely advice…and as we’ll discuss below some of the advice they do provide is completely out of sync with a coalescing Democratic vision for reform. With a little tweaking and updating, this book could have provided invaluable advice to the Obama health reform team.

Much (not all) of the Rx provided in the book is not based in reality. The recommended Rx — even when intellectually persuasive — is short on details and sometimes politically infeasible. We’ll briefly discuss three examples relating to physicians, hospitals, and insurance reform.

1) Disrupting the Business Model of the Physician’s Practice
. Christensen’s provocative and unique Dx is that the typical primary care physician’s business consists of four different categories of health care.

His Rx is to break out the discrete tasks of primary care:

  1. Rules based precision medicine should be done by nurse practitioners and physician extenders practicing in retail clinics
  2. Oversight of chronic disease should be handed to networks of professionals who assist in disease management (e.g., Healthways)
  3. Wellness examinations will remain in the province of primary care physicians
  4. Primary care physicians should focus on disrupting specialists in the practice of intuitive medicine. This is “propelled by technology that enables economical on-site testing and imaging, and online diagnostic road maps that integrate large bodies of research to bring more and more diagnostic capabilities to primary care physicians.” [p. 114]

What about the medical home model around which primary care physicians have been coalescing over the past four years? The authors discuss and dismiss the medical home model all in one paragraph:

Still others have encouraged the notion of a patient-centered medical home…. We have concluded, however, that assigning this role to an independent primary care physician’s practice is a bad choice. It forces those practices into comingling business models…[p. 129]

Physicians have worked hard to develop strong political acceptance of the medical home among employers and on both sides of the Congressional aisle. The medical home in some form is almost certain to be part of national reform efforts. For example, the recently released Baucus reform plan mentions the term “medical home” a total of 29 times.

After reading the book, do we believe physicians, legislators, and employers will say: “Now we get it. The medical home is 180 degrees from where we need to be headed. Let’s shift course immediately.”

Not going to happen.

And as to the Rx for chronic disease, did anybody on the team notice that the disease management (DM) business model has imploded in the past year? The book references Healthways DM approach as a favored solution to the primary care problem and the chronic disease problem; however, there’s no mention or discussion of the fact that the company’s stock has fallen from $67 last January to $11 today. Rightly or wrongly, Medicare seems to have concluded that DM doesn’t work, and has refocused its effort on the medical home model.

As regular readers of this blog know, the issues around the medical home and chronic disease management are complex.  We’ll continue to explore them further in future postings.

2) Disrupting the Hospital Business Model .
Christen insightfully provides the Dx that today’s hospitals are really two inherently conflicting business models trapped in one organization:

When the same hospital seeks to fulfill these two very different value propositions, the consequent mandate for two types of business models creates extraordinary internal incoherence. The resources and the essential nature of the processes inherent in the two business models are different. So are their profit formulas. Solution shops need to get paid on a fee-for-service basis. Their fees cannot be based on outcomes, because many factors beyond the accuracy of the diagnosis affect the results. In contrast, value-adding process business can routinely sell their outputs for a fixed price, and they can guarantee their results.

What’s the recommended Rx?

Hospitals need to deconstruct their activities operationally into the two different business models: solution shops and value-adding process activities.

While Christensen acknowledges that “achieving these disruptive changes to our hospital system will be extraordinarily complicated”, the book is short on specifics. Just how are we going to bell this cat?

3) Disrupting the Reimbursement System
Using a “jobs-to-be-done” approach, Christensen’s again insightful Dx is that the multiple roles that health insurance has to play are complex and often conflicting.

The centerpiece of Christensen’s proposed Rx is Health Savings Accounts (HSAs) combined with High Deductible Insurance (HDI). We both believe that the HSA/HDI option has merit and could be one element of a reformed health system. It’s unfortunate that the HSA/HDI option has become politically divisive.

The HSA/HDI prescription is a political non-starter in January 2009. The HSA/HDI option was the primary thrust of George Bush’s health reform efforts. Recommending this approach to Obama planners will fall on deaf ears and lower the overall credibility of the book.

Would We Recommend the Book?

Yes. Despite our reservations about the Rx, we strongly recommend the book. The ideas are powerful and the framework is based on a broad perspective and insightful analysis of how change has occurred in other industries.

Is the book half empty or half full? We prefer to look at it as half full — a great start to the debate and dialogue that needs to occur around creating the right environment for disruptive innovation in health care.

Vince Kuraitis JD, MBA is a health care consultant and primary author of the e-CareManagement blog where this post first appeared. David C. Kibbe MD MBA is a Family Physician and Senior Advisor to the American Academy of Family Physicians who consults on healthcare professional and consumer technologies.

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EldenRoy FeagueScott Shreeve, MDSkepticalinchoate but earnest Recent comment authors
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Elden
Guest

Empericial Medicine? So we’re stepping back 100 years with our methods of medical practice….

Roy Feague
Guest

This review seems to criticize the book because it makes proposals that don’t match the way the winds are blowing, and is therefore “unrealistic”. Do we really want to be told what direction the trends seem to point? Isn’t it better to discuss what direction we _should_ be going? We’ve seen plenty of course changes in healthcare in the last 20 years. It would be short-sighted indeed to squelch good conclusions based on incompatibility with current political trends.

Skeptical
Guest
Skeptical

I appreciate the optimism and have been a big fan of Clay Christensen’s work since he started with his analysis of the disk drive industry years ago. But unlike disk drives and similar industries, health care is an intensely regulated industry with large entrenched interests whose goals in influencing future legislation will be to create more barriers to entry to protect their $200B in annual profits. But I hope you’re correct, and I’m wrong. The slim hope I have is influenced by Christensen’s fellow HBS professor Michael Porter’s work which contemplates that large companies may become so fed up with… Read more »

Skeptical
Guest
Skeptical

I appreciate the optimism and have been a big fan of Clay Christensen’s work since he started with his analysis of the disk drive industry years ago. But unlike disk drives and similar industries, health care is an intensely regulated industry with large entrenched interests whose goals in influencing future legislation will be to create more barriers to entry to protect their $200B in annual profits. But I hope you’re correct, and I’m wrong. The slim hope I have is influenced by Christensen’s fellow HBS professor Michael Porter’s work which contemplates that large companies may become so fed up with… Read more »

Scott Shreeve, MD
Guest

Skeptical, I don’t share your pessimism: “what ought to be done becomes moot when the test is “what is politically possible?”. And the answer to that is “very little” given the political clout of entrenched interests. There may be change, but the result will be more bureaucratic, more expensive, more complex, and more administratively onerous on individuals than what we have now.” Innovative disruption can help, as it has in every other industry, to help increase access to products/services, lower costs, and improve quality. Health care has some novel twists, that will require the theory of DI to bend, but… Read more »

Skeptical
Guest
Skeptical

The discussion of conflicting business models and what ought to be done becomes moot when the test is “what is politically possible?”. And the answer to that is “very little” given the political clout of entrenched interests. There may be change, but the result will be more bureaucratic, more expensive, more complex, and more administratively onerous on individuals than what we have now.

inchoate but earnest
Guest
inchoate but earnest

Matthew, “Most health care costs are incurred way beyond the deductible” – but not way beyond your out of pocket expenses – if your preference for care is somewhere in the 50 states. You can find examples – not a lot, but enough – where care of fine caliber for some significant treatment procedures can be had elsewhere, for $ amounts within the OOP you might experience for US treatment. As with the transistor radio, the technology is not for everyone, but it may be for enough “ones” to sprout a market, & so sprout change. So Christensen is ignoring… Read more »

Matthew Holt
Guest

docannon has it right. If there isn’t latent demand for the innovation (e.g. people who had vaccum tube radios but would happily buy a transistor radio if they knew what one was) then innovations die. The problem in health care is that because costs are unequal by a huge factor (the 80/20 rule) docannon’s phrase about “until the deductible runs out” is the key issue. Most health care costs are incurred way beyond the deductible, and — as has been pointed out ad nauseam on this bl — for a whole slew of reasons the “purchaser” beyond the deductible doesn’t… Read more »

docanon
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docanon

I’ve heard Dr. Christensen and his colleagues speak on DI numerous times. The reason they’re wedded to HSAs, I think, is that they draw lots of analogies to DI in other industries. These analogies are convincing until you realize that in every case, these industries operate in free markets, with prices for goods and services (and inputs) based on free-market laws of supply and demand. Health care prices are absolutely not set by free markets. The Medicare administrative price schedule dominates all medical prices, and this schedule is a political construct. Therefore the analogies to other industries fall apart. So… Read more »