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Published: March 1, 2010

 
 

When Disruptive Integration Comes to Health Care

For primary care, the field is moving in two directions. With new technology, some primary care doctors ought to be doing more of what only specialists can do today. At the same time, a lot of people see primary care doctors as essential coordinators of care, focused on wellness, prevention, and the facilitation of quality medicine. Admittedly, this argument could have featured more strongly in our book, and it remains to be seen whether current proposals like the patient-centered medical home (a team-based approach guided by primary care providers) will do enough to preserve the wellness-oriented aspect of primary care medicine.

S+B: What interest do you see among industry leaders for moving in the direction of reform?
HWANG:
The short answer is that there is interest, but putting disruption into action is quite difficult when you’re already a successful health-care company. When we talk to incumbent hospitals and payors, for example, we try to point out niche areas we think are appropriate for investment. We also point out that by entering these disruptive areas, they may be creating new business models that could eventually put their existing approaches out of business.

Of course, that makes many incumbents uncomfortable. Hospitals and payors are very good at protecting their core markets in the existing system, and they constantly optimize their services to help those core patients. As Glenn Steele, the CEO of Geisinger Health System, once put it, there’s almost a gravitational pull any time you introduce a new business or a new technology into the health-care system. It gets sucked into the orbit of the old hospital-centric approach, and all the care still gets delivered in ways that drive people toward more expensive hospital care.

One of the most telling cases is when CVS opened its first MinuteClinics in Massachusetts. It took a while for CVS to break into that market because the state wouldn’t allow nurses to prescribe drugs. But when regulators finally acquiesced (only after the MinuteClinic concept had proven its worth in many other states), CVS moved in.

Then one of the largest hospital systems in the state decided to open its own retail clinic. When we tried to find out why they were doing this — because usually incumbents don’t want to create new operations that would substitute for their established, higher-earning practices — it became clear that they didn’t see it as a disruptive model at all. Instead, they saw it as a way to direct new patients into their core hospital business. In fact, that’s how other ambulatory services, like primary care clinics, urgent care clinics, and emergency rooms, work: They are often money-losers in themselves, but they refer patients to the hospital, so that (with expenses covered by insurance) no beds go empty.

Meanwhile, in some other states, an independent retail clinic has proved to be a viable alternative business model to traditional clinic-based care, at least for basic needs. But the way the Massachusetts hospital system saw it, the only value of retail clinics was to serve as yet another entry point to drive patients into its hospitals.

S+B: Who are some of the new entrepreneurial players threatening today’s incumbent players with disruptions?
HWANG:
We’ve seen disruptive innovation happening commonly among new companies that are targeting patient-centric care. For example, online communities such as PatientsLikeMe allow people with common problems and disparate experiences to share knowledge in ways that the health-care system normally doesn’t enable.

S+B: For example, if you link 10 arthritic patients together, they know more about how to open a jar than the caregiver can teach them.
HWANG:
That’s right. Entrepreneurs are also finding ways to reach disenfranchised patients. These can be people who are in the “non-consumer” segment — essentially patients who may not have money, insurance, or the knowledge to access the services they need in the current health-care system. But new business models of care delivery have found novel ways to circumvent these barriers, much as retail clinics have managed to deliver convenience. Online communities are a direct assault on the traditional barriers to accessing health care.

 
 
 
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