The Theory of Disruptive Innovation, defined by Harvard Business School (HBS) Professor Clayton Christensen in 1997, explains the process by which simple, convenient and affordable solutions become the norm in industries historically characterized by expensive and complicated ones. Examples of disruption include TurboTax tax preparation software, which disrupted accountants, and Netflix, which disrupted retail video stores and is now giving Hollywood film studios a serious run for their money.
According to Christensen, a critical condition of disruption (but not the only one) is an “enabling technology”—an invention or innovation that makes a product or service (or “solution”) more accessible to a wider population in terms of cost, and ease of acquisition and/or use. For instance, innovations making equipment for dialysis cheaper and simpler helped make it possible to administer the treatment in neighborhood clinics, rather than in centralized hospitals, thus disrupting hospital’s share of the dialysis business.
However in an interview in Working Knowledge, the online newsletter highlighting HBS research, marketing Professor Thales Teixeira asserts that it’s not innovative technology that disrupts a market. Rather, it’s companies recognizing and addressing emerging customer needs sooner than incumbents. “…In many industries, both the disrupter and the disrupted had similar technologies and similar amounts of technology,” he points out. “The common pattern was that the majority of customers in those markets had changing needs and wants, and their behavior was changing.”
Well that’s interesting. Does Teixeira’s view on the role of technology in disruption, at least as summarized in the interview, contradict Christensen’s groundbreaking work? Not at all. In fact, Teixeira effectively reinforces an oft-overlooked nuance of the latter: disruption is not just about the innovative solution, no matter how novel, dazzling or slick the technology it may employ. It’s about using the solution to do a job for consumers that makers of incumbent solutions are ignoring—usually in a cheaper, simpler and more accessible way; and maximizing likelihood of success by aligning the innovator’s whole business model toward that end.
A few weeks ago, I saw a young patient who was suffering from an ear infection. It was his fourth visit in eight weeks, as the infection had proven resistant to an escalating series of antibiotics prescribed so far. It was time to bring out a heavier hitter. I prescribed Ciprofloxacin, an antibiotic rarely used in pediatrics, yet effective for some drug-resistant pediatric infections.
The patient was on the state Medicaid insurance and required a so-called prior authorization, or PA, for Ciprofloxacin. Consisting of additional paperwork that physicians are required to fill out before pharmacists can fill prescriptions for certain drugs, PAs boil down to yet another cost-cutting measure implemented by insurers to stand between patients and certain costly drugs.
The PA process usually takes from 48-72 hours, and it’s not infrequent for requests to be denied, even when the physician has demonstrated an undeniable medical need for the drug in question.
WTF Health – ‘What’s the Future’ Health? is a new interview series about the future of the health industry and how we love to hate WTF is wrong with it right now. Can’t get enough? Check out more interviews at www.wtf.health.
I guess he warned us that Teladoc was feeling ‘A-quisitive’ — the question now is are they done? A few weeks ago I spoke with Jason Gorevic, Teladoc’s CEO at the new HLTH Conference about consolidation in the telehealth space and what’s next for the virtual care giant.
Although he was mum on the company’s $352M mega-buy of Advance Medical, there was a shopping list of other solutions that seem to have caught Teladoc’s eye — everything from tech that turns Alexa into a telemed access point to NLP plug-ins and any number of shiny devices that make remote monitoring easier, less expensive, and more effective.
Perhaps an indicator of where they’ll look next as they continue to sweep up market share? Listen in on some of the details about their CVS partnership (VIRTUAL Minute Clinic, anyone?) and the VERY interesting talks he’s having with the country’s largest payers on redefining benefit designs to push virtual care first.
Who will be the first to take integrated health care delivery national?
A few years ago, the best bet might have been an established provider with a nationally compelling brand and a growing affiliate federation such as Cleveland Clinic or Mayo. Instead, Optum – just a decade ago three separate services largely focused on serving United’s health benefits business – has entered care delivery and — by a constant stream of acquisitions big and small — built up beachheads in a majority of markets and is – via ongoing big acquisitions, tuck-ins and greenfield expansions – laying the foundations of a national integrated ambulatory system.
Particularly in light of the latest rumors about the role of clinics in driving the value of a potential AET-CVS combination, it is timely to take a look at what Optum has put together, size its geographic reach and discuss some strategic implications.
Last week, pharmacy giant CVS agreed to purchase Aetna this week for an astounding $69 billion dollar sum. The company allegedly plans to reduce health spending by developing an integrated system touted as “a new front door for health care in America.” This merger is actually an acquisition, entailing transfer of ownership. The central aim of an acquisition is to increase market share, expand the scope of services provided, and improve financial stability. CVS hit the jackpot on all three objectives. While Wall Street investors celebrate, many of us knowledgeable in the delivery of healthcare services are wondering who will bear the responsibility for the patients harmed by this experiment?
Aetna has compiled vast amounts of data from 22 million health plan members. CVS provides pharmacy benefits management to nearly 90 million consumers. Together, with 10,000 stores and 1,100-minute clinics already in the CVS network, this acquisition will create a ‘Walmart for Healthcare’. Applying bulk-purchase business strategies to the sale of merchandise is one thing, while providing healthcare services by ‘trial and error’ to human beings is another matter entirely. Bypassing physicians to deliver healthcare by protocol categorically jeopardizes patient safety.
Executives at Aetna-CVS plan to utilize pharmacists and nurses in the evaluation of acute illness and management of chronic disease. If an insurer, drugstore, and pharmacy benefit manager unite as one, it will usher in an era of medical “segregation,” with segregation defined as the isolation or separation of a race, class, or group by enforced or voluntary restriction, by barriers to social intercourse, by separate educational facilities, or by other discriminatory means.
On March 20, 2013, the media picked up a story about CVS Caremark’s latest wellness program. In summary, CVS will be requiring all of its employees to complete a health screening in order to qualify for a reduction in their health insurance premium. For those employees who participate, the employee’s screening data goes to a third party, and CVS never sees it.
Such wellness financial incentives are commonplace and have been around a long time. And if that is how the media had described the CVS program, it’s doubtful anyone would have even paid any attention to it. Unfortunately, that’s not how the media ran with the story. Let’s look at how the media sent the wrong message – using ABC News as an example – and why it matters to get the message right.
Sending the Wrong Message
ABC’s Good Morning America segment was emblazoned with the headline, “Who’s Watching Your Weight – CVS Employees Required to Disclose Weight.” Their website ran a similar headline, “CVS Pharmacy Wants Workers’ Health Information, or They’ll Pay a Fine.”
Target, Walgreens and CVS have recently started medical clinics in their stores. Opening up these “retail clinics” seems both potentially profitable and, at first blush, somehow pushes the lines on our tradition view of where medical services should be located. Giving the concept of retail clinics some thought might reveal store-based providers to be convenient and cost-effective, or alternatively full of conflicts of interest and potential harms. Should we be worried about retail clinics turning into the Walmart of medicine?
The retail clinic industry appears to have grown rapidly over the last few years. Most of these clinics are run by three large chains–Target, Walgreens and CVS–but there are also a mix of smaller providers branching out of existing chains like the Mayo Clinic. Their primary use seems to be the treatment of acute “urgent care” conditions such as symptomatic treatment of upper respiratory tract infections (lots of sore throats), or providing simple preventive care such as vaccinations. Most patients who visit these retail clinics will see a nurse practitioner. According to a recent study that tracked the growth of these clinics from 2007 to 2009, there was a four-fold rise in the number of these clinics, such that there are now over 1,200 retail clinics that see almost 6 million visits per year.