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Our COVID-19 crisis has accelerated the adoption of telehealth to protect the safety of both patients and providers.   This disruptive transformation could have taken a decade, but instead has occurred in just a few months.  In this article, I discuss Clayton Christensen’s insights into disruptive innovation in other industries and his recommendations for healthcare. 

Need for Healthcare Innovation

We need breakthroughs in healthcare because it costs too much.  Total healthcare costs have increased from 7% of GDP in 1970, to 18% of GDP in 2019.  This year, Americans will spend $4 trillion on healthcare, or $12,000 per person.  According to Christensen, chronic disorders contribute to 75% of medical care costs, largely due to diabetes, congestive heart failure, coronary artery disease, asthma, and depression.  Ninety million Americans have a chronic disease and 25% of Medicare beneficiaries have 5 or more chronic conditions.

In other industries, Christensen found that leading companies innovate to improve their best products for their most demanding customers.  He contrasts this sustaining innovation with disruptive innovation, using technology to successfully address improvements in low profit-margin services.  Innovative services help people more affordably, swiftly, and effectively accomplish what they already had been trying to do.  Generally, the leading companies “become the victims of disruption, not the initiators of it”.

Christensen wrote a decade ago, “The need to transform expensive, complicated products and services into ones that are higher in quality, lower in cost, and more conveniently accessible is a challenge that is not unique to healthcare.”  Disruptive innovation has brought affordability and accessibility to other industries.  “Today’s healthcare industry screams for disruption.” 

Disruptive Innovation in Healthcare

The greatest opportunities for disruptive innovation are in low profit-margin services, such as primary care, mental health, and home care.  Innovators can help consumers to become and remain healthy and to achieve financial independence.  They can also help employers to attract and retain the best possible employees, making them as productive as possible.  Disruptive innovators will be paid to keep people healthy, with fewer trips to the hospital or emergency room.

Our current health care system was designed to provide “sick care”.  We now need innovative business models to improving health and managing chronic conditions.  We must address the social determinants of health, such as individual behaviors and genomics.  Our nutrition, exercise, sleep, and stress management are more important than medical care in maintaining excellent health.

The roles of primary care physicians (PCP’s) will change significantly.  Expanded care teams may include nurse practitioners, medical assistants, pharmacists, health coaches, and mental health specialists.  PCP’s will be more involved in managing and improving the way people work together in our healthcare system.  They will disrupt specialists in a significant way as we move more towards precision medicine.  PCP’s already prescribe most anti-depressants using a trial-and-error approach.  In the future, they will use genetic testing to improve medication management for depression. 

Innovative Business Models

In “How Disruptive Innovation Can Finally Revolutionize Healthcare”, Christensen discusses how Iora Health helps consumers to effectively manage their own health.  Their extended primary care teams include physicians, health coaches, nurses, and behavioral health specialists.  They provide primary care services to Medicare beneficiaries and receive capitated payments adjusted for severity of illness.  Iora Health developed their own EMR, Chirp, because the available EMR’s did not meet their needs.  Chirp was designed to support clinical teams caring for a population of patients, rather than to meet billing requirements.  By improving population health and patient engagement, they have reduced hospital admissions by 40%.

A decade ago, Christensen wrote that Personal Health Records (PHR’s) would be essential to efficient functioning of a low-cost, high-quality healthcare system.  He recognized it would be very difficult to establish EMR standards, after major health systems implemented competing proprietary EMR’s.  Christensen suggested that new technology would enable incompatible EMR systems to work seamlessly together, addressing the need for interoperability.

Christensen believed a “powerful player” would step forward to make the PHR a reality.  This integrating organization would make money by keeping people well.  Today we need to integrate information from EMR systems with personal health information from remote monitoring devices, such as FitBit and KardiaMobile.

Disruptive Innovators 

Which organizations are best positioned to be disruptive innovators?   Our health systems have suffered financially, with estimated hospital losses of $300 billion due to COVID-19.  Hospitals want to “get back to normal” by increasing volumes of their most profitable services and improving their bottom line.  Under our dominant fee-for-service system, they have limited incentives to improve population health and reduce utilization of hospital services.

Good candidates for disruptive innovation are: 1) Integrated health systems, 2) Major self-insured employers,  3) Big tech companies, and 4) Direct primary care providers.  These organizations can innovate to make money by keeping us healthy and reducing utilization of expensive hospital services.  Integrated health systems, such as Kaiser and Geisinger, provide both health insurance and medical services.  Therefore, they can improve their bottom line by reducing the utilization of expensive hospital and specialty services.  The self-insured employers can implement their own primary care clinics and chronic care management programs, such as QuadMed based in Wisconsin. 

Large tech companies are well positioned to develop a Personal Health Record (PHR ) system.  They want to expand into the healthcare market and will explore opportunities to make money by keeping us healthy.  Federal regulations will increase consumer access to their digital health information and development of more mHealth apps.  By combining the medical information from healthcare providers with remote monitoring data, they can utilize AI to quickly identify health concerns and engage consumers with relevant education.  However, they must establish consumer trust in their PHR security.

Direct primary care providers, such as Iora Health, are paid per-member-per-month (PMPM) adjusted for patient risk.  By improving population health, they are able to reduce the total costs of health care.  They are successfully addressing the needs of the Medicare Advantage program. 

Summary

Healthcare providers have suffered financially during the COVID-19 crisis because they have deferred elective services.  Health systems now want to “get back to normal” by increasing volumes of their most profitable services.  Disruptive innovators will use new business models and technology to make money by improving population health and reducing utilization of expensive hospital services.   Clayton Christensen found that the leading companies in other industries have rarely initiated disruptive transformations. 

Bruce Korus is the Founder of Korus Health Innovation.  Powering up primary care teams to better utilize telehealth and improve access to affordable health services.  Send your comments to bruce@korushealthinno.com