CHIME: Healthcare needs more disruption, simplicity

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SAN ANTONIO—“If we simplify the problem, we simplify the development of solutions,” Clayton M. Christensen, MBA, the Robert and Jane Cizik Professor of Business Administration at the Harvard Business School, said Oct. 26 at CHIME11, the Fall CIO Forum.

In his keynote address, “The Innovator’s Prescription: A Disruptive Solution for Healthcare,” Christensen discussed disruptive innovation, as he has tried to understand “at a fundamental level how innovation works” and apply it to healthcare.

Success requires that technology become more affordable and more accessible, he said. Every industry has a different trajectory of technological progression “which almost always outstrips the ability of customers to use the technology.” Industry incumbents sustain the trajectory but disruptive technology “kills the leader.” It transforms the industry by introducing something cheaper and, therefore, more accessible.

New market entrants typically win with disruption, said Christensen. For example, in healthcare, first there was x-ray and then CT, MRI and PET imaging were introduced. The disruptive technology was ultrasound, which allowed caregivers to take imaging to patients. And, technologists can perform ultrasound imaging rather than more expensive specialists. Christensen pointed out that ultrasound technology was initiated by small companies new to the industry.

Christensen recalled the computer industry in the 1970s and 1980s. Several companies were very successful but then suffered a very rapid decline. “Every minicomputer company failed at the same time.” Changes in the industry and new entrants led to decentralization. “This decentralization that follows centralization is just beginning in healthcare.”

A disruptive healthcare system would bring technology to outpatient clinics, and then to physician offices and eventually to patients’ homes. We can keep driving technology to do more and more sophisticated things at lower costs, Christensen said. For the time being, he said that with better access to technology, primary care doctors should be doing more of the tests and procedures that they currently refer to specialists. In the future, nurse practitioners, pharmacists and other caregivers can utilize that same technology to further lower healthcare costs. “Healthcare is becoming affordable and accessible the same way everything else did.”

Getting to that point requires that we understand the job to be done and the system in which we are operating, he said. “Understanding the customer is the wrong unit of analysis,” said Christensen. “Rather, we need to understand the job the customer is trying to do.” There are so much data that should be accessible for caregivers to make good decisions.

The current healthcare delivery system “for 90 percent of Americans drives caregivers to defend and strengthen their silos,” said Christensen, rather than drive care toward lower cost caregivers and lower cost venues of care. The ability to perform a procedure correctly is embedded in the system and the technology, he pointed out. For example, a nurse practitioner can learn to perform a colonoscopy in about one month. However, the system and its regulations do not allow for this. The procedure also could be performed in the office setting. Again, providers and payors do not allow for this.

“We need a system perspective of patient health and the drive to lower cost venues of care and lower cost caregivers to improve profitability. Scientific progress that commoditizes expertise plays a critical role in disruptive innovation,” he added.

Christensen also pointed out that we currently use symptoms to make diagnoses. But, there are too many diseases for the symptoms. A set of symptoms can apply to numerous diseases. The ability to diagnose disease by cause rather than by symptom will reduce cost and improve quality. If we can “define disease more specifically, we’ll have therapies that are more effective. We’re moving toward this step by step, disease by disease but the system prevents taking advantage of progress.”

Every time the number of pathways is doubled, the cost of overhead increases by 30 percent because of the complexity of intersecting pathways. The average hospital has 110 different pathways, he said. Typically hospitals’ overhead is 85 percent of the total cost of business and only 15 percent goes to caregivers working to help patients.

Christensen exemplified Shouldice Hospital, located outside Toronto, which specializes in hernia repair. Shouldice’s overhead is $1,600 compared with $6,030 at a general hospital; the cost of supplies and labor is $700 versus $970; and the total cost for length of stay is $2,300 versus $7,000. New England Baptist Hospital in Boston is following a similar path by specializing in orthopedics. The facility can perform a hip replacement at 45 percent of a general hospital’s cost.

Christensen wrapped up his talk by reiterating the need for simplicity. “If we simplify the problem, then simple solutions will emerge. “