S+B: If disruptive approaches are going to be so powerful, what do you advise the incumbents in the industry to do, especially if they want to see the system improve?
HWANG: Disruption is not the only way to improve the health-care system. Many sustaining strategies can make the existing system better without disrupting the current business model. For example, pharmaceutical companies can innovate and develop drugs faster. Payors can process their claims faster. Hospitals can deliver their acute care better and help more patients survive. These would all be great things.
But we just have to keep in mind that these sorts of innovations, which incrementally improve the existing way of doing things, tend to increase the cost of care, for less and less marginal return. In health care, competition does not necessarily lead to lower prices. For example, if a hospital buys a new surgical robot, it will advertise and say, “Look, we have the best technology. Come see us.” When the word gets out, the hospital down the block will find a way to buy that same surgical robot so it doesn’t lose patients. You’re delivering marginal increases in improvements in care as a result, but often at an extraordinary cost to the system overall.
The system has the potential to provide better service, broader reach, and lower cost all at once. But to achieve that potential, we’re going to need a different set of innovations — a kind of disruptive integration — that lowers the cost so everybody can afford to get the care they want.
- Gil Irwin is a New York–based senior partner with Booz & Company who leads the firm’s information technology work for health- and insurance-services clients.
- Art Kleiner is editor-in-chief of strategy+business and the author of The Age of Heretics (2nd ed., Jossey-Bass, 2008).
- Joyjit Saha Choudhury is a principal in Booz & Company’s New York office. He advises health-services clients on corporate and business unit strategies.