Innovation has been a driving force behind health care from the beginning, yet with the U.S. health care system in the midst of an unprecedented transformation and a focus on lowering costs, many are asking, “What will become of innovation?”
The answer to that question is also a potential solution for hospitals facing financial pressures – a solution that has the power to improve patient care as well.
A growing number of hospitals are looking to develop a new revenue stream through the commercialization of medical innovations. They’re not doing it alone.
Just as Cleveland Clinic collaborates with other health systems on cardiovascular or cancer care, Cleveland Clinic Innovations has formed a national Innovation Alliance network to collaborate on the commercialization of medical innovations.
Cleveland Clinic Innovations, the corporate venturing arm of Cleveland Clinic, has a track record of converting and commercializing medical expertise, creating 55 spin-off companies and more than 300 licensed technologies that began as doctors and researchers’ ideas. Those companies have received nearly $700 million in equity investment.
In the 1960s, Texas Instruments developed the first handheld calculator. It could display up to 12 digits while performing addition, subtraction, multiplication and division. And it cost $2,200.
Since then, the calculator has come a long way. Competition forced continuous innovations, and today’s models are more lightweight, have longer battery life, are capable of performing more complex computations –all at a dramatically reduced price point.
That’s the typical cycle in virtually every sector of the American economy. Innovations are introduced, competition forces design improvements and cost reductions and products are continually improved until the next big thing comes along to start the process over again.
But that’s not the way things work in healthcare.
Like the calculator, Medicare was first created in the 1960s.
But even though the practice of medicine has changed dramatically over the last 40 years, the Medicare program has stayed largely the same. And, since most commercial insurers tend to follow the government’s lead in terms of payments and benefit design, even private markets have played a role in limiting innovations in the way we pay for healthcare.
Technology is transforming health care in many ways. CEOs of health care businesses think the biggest transformation in the next few years will come from making patients, doctors and health-care workers more communicative and collaborative.
They foresee patients with the same rare diseases coming together in online social networks where they can discuss their symptoms. They see overweight consumers building mutual support networks to share diets and praise exercise. They anticipate that knowledge will be shared so that nurses, pharmacists and social workers can often perform tasks that today are handed to doctors by default.
Every year, IBM surveys hundreds of CEOs from around the globe about a variety of issues. Among 1,700 CEOs surveyed this year there were 58 who head hospitals, medical practice groups and insurers.
The CEO perspective is interesting, because most outsiders don’t think of collaboration as being a key outcome of medical technology. Most of us think of laser-guided surgical instruments or designer drugs or computerized analytics that spot hitherto unnoticed disease-causation chains.
The CEOs overall see technology as a way to open up their organizations to create value through collaboration. Making the organization more transparent makes it easier to share cultural values and goals. And that makes employees more receptive to tough changes, because they understand what’s behind the plan.
Disruptive leadership. That’s a thing now? I’m told that this is a kind of leadership—I thought it was a market dynamic.
What does it take to be a “disruptive” leader?
Does it mean talk like a pirate when explaining how the company will be cutting benefits?
Does it mean dress like Ali G and try to imitate him but only muster a WASP accent?
I suppose it does…but that’s the easy part.
Job #1 in leading a true market disruptive: FIND AND FERTILIZE THE HIDDEN RAGE AT THE STATUS QUO THAT LIES WITHIN ALL OF US. Find it in yourself and feed it and then find it in others and attract them to work with you.
I’m constantly looking for change in my personal life. For example, I just bought a Tesla. My other car is a 1983 Land Rover. Why? Because in 1983 you didn’t need to sell cars with a seatbelt dinger and airbags in the front seat andD because Tesla is the first ATTACKER disruptive car maker to make it past the fetal stage in my entire life. I must feed them. I HATE the established car industry! I have been trapped inside a small number of culturally (and occasionally financially) bankrupt brands that have lost any interest in fighting the over-regulated morass that constraints.
There’s a big discussion going on in the health tech community about a controversial keynote speech given by Vinod Khosla at the Health Innovation Summit (HIS), in which he stated that 80% of what doctors do could be replaced by machines.
If you’re a doc like me who has no idea who the heck Vinod Khosla is (he’s a venture capitalist and co-founder of Sun Microsystems), why he’d be a keynote speaker at a healthcare event and what the heck HIS is, well, that’s the point of this post. You see, there are a whole lot of folks like Khosla out there – investors, entrepreneurs, tech types – who are attempting to redefine healthcare according to their own personal vision. Where we see a healthcare system in crisis, they see opportunity – just another problem with a technological solution. Computer-driven algorithms are the answer to mis-diagnosis and medical error, IPhone apps can replace physician visits, video connectivity can increase access.
Where we see illness and distress, they see a market.
And what business folks like to call disruption in the marketplace. Think about what happened to downtown small town USA after the first shopping mall opened. Or what happened to movie houses when Netflix started offering DVD rentals online. Or where all the independent bookstores went when the first Borders opened up, and what happened to Borders when the Kindle hit the market.
Out with the old, in with the new.
If Khosla is right, the we docs in our offices and hospitals are the old downtown department stores, the bookstores and the bricks and mortar businesses in an online revolution. We’re replaceable. At least most of us.
While the nation has been focused on the recent Supreme Court ruling on the Affordable Care Act, innovations in hospitals and physician practices far from Capitol Hill have been triggering an historic transformation of our health care system. Propelled by a mix of urgency and vision, innovators at hospitals, physician groups and companies are remaking American health care by demonstrating that more effective and affordable care is achievable quite apart from statutory changes in Washington.
These organizations are working to achieve the Triple Aim: improve the health of the population; enhance the patient experience of care (including quality, access, and reliability); and reduce, or at least control, the per capita cost of care. This approach, developed by the Institute for Healthcare Improvement, is a sharp break with the traditional focus on single encounters with patients within the strict walls of health care delivery, typically addressing only the most immediate problems.
In 1932, the Committee on the Cost of Medical Care identified rising medical costs as a threat to the financial security of millions of Americans. In a series of studies that created the field of health services research, the Committee recommended several strategies for cost containment that reads like a blueprint for today’s cost containment efforts: prevention, price controls, capitation, elimination of unnecessary care, and integration. If it sounds like a précis of my previous two blogs – cut prices and cut quantities – it should. We have known for a long time that those are the only ways to cut spending. And yet here we are, 80 years later, facing a spending crisis that threatens to take down the entire economy.
In my lifetime, we have been subjected to a steady drumbeat of rising medical costs. There have been respites – for a couple of years after Medicare introduced DRGs and for about five years in the 1990s during the heyday of HMOs. While DRGs and HMOs shifted costs down, they did not seem to reverse underlying growth trends, although HMOs did not thrive for long enough to be certain.
Not for lack of trying have medical costs continued to increase. We promote prevention, regulate prices, capitate providers, and review utilization to eliminate wasteful spending. We have seen horizontal integration that led to market power and higher costs, and vertical integration that more often than not created unmanageable bureaucracies. Most of today’s proposals for cost containment can be encapsulated by two words: “Try harder.” The Affordable Care Act gives us free preventive care, stricter price controls, ACOs, and the Comparative Effectiveness Institute. We need radical change but all we get is creeping incrementalism. I will take creeping incrementalism over the do-nothing approach of the previous decade, if only because we could use another respite. But the ACA is no permanent fix.
Here at THCB we really can’t think of many lectures we’d rather sit in on than Peter Thiel’s Stanford course on entrepreneurship. And we can’t think of a better guest to catch than Netscape co-founder Marc Andreeson. In this talk, Andreeson talks about how healthcare IT is changing in the Facebook and Big Data Era era, the privacy issue and how the cloud may or not be eating software.
Is Software Eating the World?
Marc Andreessen’s most famous thesis is that software is eating the world. Certainly there are a number of sectors that have already been eaten. Telephone directories, journalism, and accounting brokerages are a few examples. Arguably music has been eaten too, now that distribution has largely gone online. Industry players don’t always see it coming or admit it when it arrives. The New York Times declared in 2002 that the Internet was over and, that distraction aside, we could all go back to enjoying newspapers. The record industry cheered when it took down Napster. Those celebrations were premature.
If it’s true that software is eating the world, the obvious question is what else is getting or will soon get eaten? There are a few compelling candidates. Healthcare has a lot going on. There have been dramatic improvements in EMR technology, healthcare analytics, and overall transparency. But there are lots of regulatory issues and bureaucracy to cut through.
Education is another sector that software might consume. People are trying all sorts of ways to computerize and automate learning processes. Then there’s the labor sector, where startups like Uber and Taskrabbit are circumventing the traditional, regulated models. Another promising sector is law. Computers may well end up replacing a lot of legal services currently provided by humans. There’s a sense in which things remain inefficient because people—very oddly—trust lawyers more than computers.
It’s hard to say when these sectors will get eaten. Suffice it to say that people should not bet against computers in these spheres. It may not be the best idea to go be the kind of doctor or lawyer that technology might render obsolete.
In a piece just posted at TheAtlantic.com, I discuss what I see as the next great quest in applied science: the assembly of a unified health database, a “big data” project that would collect in one searchable repository all the parameters that measure or could conceivably reflect human well-being.
I don’t expect the insights gained from these data will obsolete physicians, but rather empower them (as well as patients and other stakeholders) and make them better, informing their clinical judgment without supplanting their empathy.
I also discuss how many companies and academic researchers are focusing their efforts on defined subsets of the information challenge, generally at the intersection of data domains. I observe that one notable exception seems to be big pharma, as many large drug companies seem to have decided that hefty big data analytics is a service to be outsourced, rather than a core competency to be built. I then ask whether this is savvy judgment or a profound miscalculation, and suggest that if you were going to create the health solutions provider of the future, arguably your first move would be to recruit a cutting-edge analytics team.
The question of core competencies is more than just semantics – it is perhaps the most important strategic question facing biopharma companies as they peer into a frightening and uncertain future.
One of the few health policy issues that receives bipartisan support is the need to dramatically alter the way providers are paid, shifting from “paying for volume” to “paying for value” to alter the trajectory of health care spending while improving health care quality.
To facilitate this shift, the Affordable Care Act equipped the Centers for Medicare & Medicaid Services with a range of cost-cutting and quality-enhancing tools―the most significant of which might be its new Center for Medicare and Medicaid Innovation. In this blog post, we share insights from recent research funded by the Robert Wood Johnson Foundation on the Innovation Center’s new role, organization, and model selection criteria.
Based on interviews with senior leadership, it’s clear the organization sees its role as two-fold: complementing existing efforts to innovate; and delving into new ideas.
Most of the Innovation Center’s efforts to date have focused on the former―implementing congressionally-mandated demonstrations or ideas that Congress or policy experts have already conceived (e.g., accountable care organizations). More recently, the Innovation Center has begun to seek new ideas from innovators across the country and to promote bottom-up innovation―primarily through its Innovation Challenge.