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Disruptive Innovation in Health Care:Identifying Areas of Future Growth
Jason Hwang, M.D., M.B.A.Executive Director, [email protected]
The Disruptive Innovation ModelPe
rfor
man
ce
Time
Performance that customers
can utilize or absorb
Pace of
Technological
Progress
Sustainin
g innovat
ions
Disruptive innovations
Incumbents nearly always win
Entrants nearly always win
Disruption is driven by an asymmetry of motivation
Time
Disruptive In
novations
Perf
orm
ance
Time
Sustaining
innovatio
nsIncumbents nearly always win
60% on$500,000
45% on$250,000
40% on $2,000
20%
Entrants nearly always win
Diff
eren
t mea
sure
Of P
erfo
rman
ce
Non-consu
mption
The growth of angioplasty
0
200
400
600
800
1,000
1,200
1,400
1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001
Source: United States Centers for Disease Control and Prevention National Hospital Discharge Survey; Innosight analysis.
Estimated Inpatient Cardiovascular Procedures, 1979‐2002000s of procedures
‐
Balloon Angioplasty/Stenting
Bypass
CAGR1995‐2002
‐1.51%
15.69%
2002
“Asymmetries of motivation” in angioplasty
“When angioplasty was introduced, it captured the imagination of cardiologists and surgeons differently. Surgeons were skeptical about this new procedure. They were used to seeing small arteries in the operating room and questioned how one would be able to introduce a small catheter into the femoral artery, negotiate it via the left main coronary artery into a distal vessel, and dilate it. Cardiologists saw this as an incredible opportunity to treat patients with ischemic heart disease.”
—Chief, Division of Cardiothoracic Surgery, Miami, Florida
Cardiac
Surgeo
n
Cardiolo
gist
General
Medicine
High
Low
Complexity of
diagno
sis an
dtreatm
ent
Time
High
Low
Centralization followed by decentralization: Computing
Centralization followed by decentralization is common
Long-distance telecommunicationHigher educationMusic recording & distributionMovies / videoRetailing
Decentralization is disruptive, and is hard to catch
Perf
orm
ance
Time
Sustaining
innovatio
ns
Disruptive Innovations
Time
Non‐consumers:Targets for NewMarket Growth
The decentralization that follows centralizationis only beginning in healthcare
Surgical
suite
s
Laborat
ory serv
icesImaging services
Data co
llection
and
wareho
using
Clinical research and training
Specialty care
Non‐consumers:Targets for NewMarket Growth inHealth Care?In Pathology?
The pursuit of profit and differentiation in head‐on competition among similar business models adds functionality and cost
Disruptive decentralization is the mechanism that reduces cost and spurs widespread adoption
Information as a Disruptive Technology
Disruption is not just about minicomputers, steel mills, and
vacuum tubes
Rules‐Based
Disruption is facilitated when historically valuable (and expensive) expertise becomes commoditized
Experimentation& problem‐solving
ProbabilisticPattern Recognition
PrecisionMedicine
IntuitiveMedicine
EmpiricalMedicine
Imaging & molecular diagnostics
Specializedsolution shops(fee for service)
Focusedvalue‐added process
clinics (fee foroutcome)
Retail clinics(fee for outcome)
User Networks(fee for membership)
High‐deductibleinsurance & healthsavings accounts
Primary carephysicians
Employer‐negotiatedpricing
Pharmacists
Personalelectronic health
record
Electronic Health Records and the Medical Home
Electronic Medical Records: Organizing Principles
• Must help users do a job that they’re trying to do. Records themselves create no value – they sit on a disk drive instead of in a file drawer.
• Patients and providers need to pull the records into use. If EMRs are pushed upon them they will not be used.
• Data must be open‐source, readable by all. Proprietary applications that help patients and providers do the jobs they need to do can then be built upon the data.
• Problems must surface before the problems can be solved. Interoperability problems, in particular, will be resolved only after they are encountered.
Market Understanding that Mirrors how Customers Experience Life
“The customer rarely buys what the company thinks it is selling him” ‐ Peter Drucker
When jobs overlap, products and services will converge
• The jobs of cell phones and PDAs
• Why financial service firms are interested in your health
• LIS, RIS, and PACS will converge
• Radiology and Pathology will converge
The substitution of one thing for another always follows an S‐curve pattern
% new
% new% old
.001
.0001
.01
0.1
1.0
10.0
09 11070503 13 15
Past and Future Substitution of HSAs & HDI for Conventional Private Health Plans