A Disruptive Solution for Health Care

Source: February 23, 2009, BusinessWeek, USA
By Clayton M. Christensen and Jason Hwang

President Obama has advocated spending $20 billion to modernize the medical records and information systems of health-care providers, the vast majority of whom remain tied to their error-prone and inefficient pen-and-paper systems of yesteryear. The benefits of updating our health information infrastructure seem clear: It will reduce preventable medical errors, avoid the costs of unnecessary or duplicate testing, and cut into some of the paperwork and red tape that continues to drive frustrated clinicians out of practice.

And the power of health IT goes beyond simple record-keeping. The ability to mine vast amounts of data much more easily would be a boon for research and development of new therapeutics, as well as post-launch monitoring. It was 's expansive clinical database that allowed its researchers to identify problems with Merck's (MRK) Vioxx well before the drug was pulled off the market in 2004.

Why Providers Resist Change

Indeed, President Obama's ambitious initiative could be framed as yet another important step toward fixing some of the deadly systemic problems highlighted by the Institute of Medicine in 1999, which revealed that medical errors caused as many deaths as the crashes of 200 jumbo jets each year. But how can we best ensure success in upgrading a health-care system that, despite constantly adapting to new medical technologies and therapeutics, paradoxically seems unable to step into the digital information age? And will $20 billion even begin to make a dent?

The answers lie in understanding the concept of disruptive innovation, which explains how successful and dominant businesses can be completely upended by new players that enter the marketplace using markedly different business models. First, it's important to understand that incumbent businesses have every incentive to maintain the practices and processes that made them successful to begin with. Any attempt to alter the way things are done, particularly if change threatens profitability, is almost always met with resistance.

Yet this sort of change is exactly what most health IT "interoperability" and "standards" proponents are asking hospital systems and physician practices to do. Nearly all of these providers have figured out a path to succeed in the existing system—their personnel, their work routines, and their budgets have all interlocked together to form business models that work. Very few of them are clamoring for a health IT system that does not fit with their existing resources and operations. Cajoling reluctant providers to modernize their health IT systems is an exercise sure to result in tremendous frustration among all stakeholders and waste far greater amounts of money than the huge sums already put forth. It's akin to trying to convince all the professional sports leagues to begin scoring their games in a uniform way. Everyone would likely agree that keeping score is important, but such a change would so fundamentally alter the way games are played within each individual league that it would be impossible to introduce—despite its potential benefits.

Start with Excluded Customers

So if change is so difficult, how does an industry ever introduce greater quality, efficiency, and affordability? Disruptive innovations have been able to do this over and over in a myriad of industries by initially taking root and introducing change in areas of "nonconsumption." As I outline in The Innovator's Prescription: A Disruptive Solution for Health Care, these are markets or tiers of customers that are normally ignored by the leading incumbents because they don't have the money or skill to purchase and use their products and services.
But by specifically targeting these customers who have been excluded from the traditional marketplace, disruptive business models can first establish a foothold outside the normal competitive space before moving in to compete against the incumbent firms.

Consider tools made by SimulConsult, which help physicians make diagnoses that previously required referrals to costlier specialists. SimulConsult's online medical-decision support tool analyzes information from physicians about a patient's condition, and then suggests likely diagnoses, based on information about diseases collected in a wiki-like fashion from a large peer-reviewed community of experts. Similar systems for consumer use are being developed to help patients decide when it's time to seek medical care.

Similarly, we expect health IT to make its initial impact not via a nationwide, interoperable system based on open standards, but rather in the nonconsuming periphery of the health-care provider value network. Retail clinics, fitness centers, nutrition stores, health spas, beauty centers, and alternative medicine facilities are all entities that are typically excluded from discussions about health IT, but they have strong incentives to move upmarket and mesh their offerings and data systems with traditional providers. These business models also often work outside of the constraining environment of insurance and reimbursement, dealing directly with patients and through cash transactions. This creates fertile ground for personally controlled electronic health records, as patients would have much greater reason to manage their data in addition to their dollars.

Forget the Top-Down Approach

A growing number of health information systems, such as PAMFOnline from Palo Alto Medical Foundation, already give patients electronic access to their data. The systems let people retrieve test results, verify prescriptions, and double-check doctors' recommendations online. Now mainly used for one-way communication, these tools will eventually give patients greater leeway to contribute to the data themselves. Google (GOOG) and Microsoft (MSFT) have created tools that help patients generate and maintain health records online, removing one of the biggest obstacles to switching providers.

Upgrades to our health IT infrastructure will happen soon; the advantages of business models that employ innovative health data models make this a certainty. But while the government tries to implement a universal solution from the top down, it will quickly discover that homegrown solutions are already bubbling up in all sorts of places.



Christensen is the Robert and Jane Cizik Professor of Business Administration at Harvard Business School and co-founder of Innosight and Innosight Institute. Hwang is a doctor of medicine and Senior Strategist for the Healthcare Practice at Innosight and Executive Director of Healthcare at Innosight Institute. They are co-authors, with the late Jerome Grossman, of The Innovator's Prescription: A Disruptive Solution for Health Care