The Innovators Prescription
How innovation from the world of business can fix healthcare.
Health care is arguably the most extensively debated problem in the United States. For many years now, a debate has gone on between those who support the system of HMOs as well as private insurance and those that would prefer a system that’s more publicly controlled. The debate definitely became more intense when President Obama had brought forth the Affordable Care Act.
However, are we actually just paying attention to the wrong things when we talk about health care? Instead of looking at public in comparison to private, what we should actually be looking at are the innovations that are happening in the business world. If we end up taking the right pointers from that sphere and put them to practice in the health world, there’s a possibility that the outcome would be a much more affordable and effective system. However, how can we make that possible? Keep on reading to find out.
You will find out:
- How come we need to look at IBM when we want to make healthcare better
- How come creating more hospitals doesn’t mean that the service will get better
- How come getting doctors to do less would be more beneficial to everyone
Disruptive technology could make health care more accessible and affordable.
One of the biggest issues that Americans deal with is health care. It’s very difficult to obtain and getting it can cost you an arm and a leg. In other words, there’s a lot of room for growth.
You can do this one of two ways; either handle health care just like any other company or take advantage of disruptive technology in order to make it simpler and less expensive to get access to. Although you may not have ever heard of disruptive technology, it’s actually been used by every single prosperous industry, all the way from automotive fields to financial services.
So, what is it exactly, though?
Disruptive technology, which is also known as disruptive innovation, is a mixture of three topics:
First things first, it’s a technological enabler. This means that it’s an innovation that makes problem-solving much easier by making resolutions more routine which, in the end, makes the whole process a whole lot less expensive. Secondly, it’s a business model innovation, therefore, it lets companies provide affordable as well as accessible services. At the same time, though, they are able to make profits.
For example, IBM had used disruptive technology when it had selected an innovative business model that established their business operations out in Florida, which was much further away from the main, administrative offices back in New York and Minnesota.
This had let them steer clear from the high margin, overhead expenses, and unit volumes that are usual for the Northern part of the states.
However, there’s a whole lot more to their success story. IBM had then added a technological enabler to their business innovation; the microprocessor. Since they combined the new, cost-effective business strategy with this top-of-the-line technology, they were able to transform the computer market by bringing forth the very first PCs.
IBM’s story helps outline one of the main benefits of disruptive technology; decreasing costs makes items and services simpler to get access to.
What’s the last element of disruptive technology?
The value network is the last one. In summary, it’s an infrastructure made up of several businesses, each of which has a disruptive, commonly-strengthening business model. For instance, suppose a business creates microprocessors. In order to create a value network, each business that has a part in the process, whether it be suppliers or transporters, would need to start using disruptive technology. Each one of them would be positively impacted throughout the process.
So, now that you’re aware of what disruptive technology is, you now need to gain an understanding of the various kinds of disruptive business models out there.
An innovative business model is crucial to harnessing the power of disruptive technology.
The majority of companies understand that market research is a necessity and that businesses will fork out lots of money so that they can learn about what their customers would like. This is due to the fact that that information assists companies with managing energy in the direction of a certain item category. That being said, regardless of the approach that you choose, it’s not recommended.
This is due to the fact that there’s a much better road towards a successful business model that is custom-made for customer needs; disruptive technology put into action with the help of business model innovations snf the action of creatively reimagining your business model in order to make sure that it offers exactly what it is that your customers are looking for.
How can you accomplish that?
The thing is, a business model is only ever really innovative and prosperous when markets end up being job-oriented rather than item-oriented. In other words, instead of selecting an item and then finding those customers that will purchase it, you need to step into the shoes of your buyers and figure out what they want out of an item.
An American fast-food chain had been positively impacted when they had taken up that strategy. After they had reevaluated their business plan, they figured out that more than 40 percent of their milkshake sales had been procured in the morning, simply bought by bored drivers. What they had figured out about those customers is the fact that they didn’t have much time and were just looking for an easy one-handed pick-up that would keep their stomach from growling each morning.
Having gained that information, the chain had enhanced their milkshakes based on what their customers wanted; they made them thicker so that they would last longer, which is exactly what the drivers needed on their way in to work.
To summarize, since they had creatively reevaluated their market, they enhanced their items and increased their profits by adjusting it to fit what the customers had wanted.
However, it’s also important that you package items in a way that will assist people with getting whatever it is that they want to get done. For instance, when they had rebranded their drink as something that can essentially be classified as a full meal, the chain had figured out the most accommodating marketing strategy that sold a whole lot more milkshakes.
The three different business models of business innovation could revolutionize health care.
Now that you are aware of how the business-model innovation strategy operates, is it possible to change health care with it?
It is possible if you divide today’s pairs of general hospitals and general physicians into three separate business models:
The first business model entails solution shops, which are essentially businesses that diagnose and treat problems without a structure and then the customers are billed in a fee-for-service way. Some examples of that model in particular include consulting firms, advertising agencies, as well as both research and development businesses.
The second ones are Value-Added-Processes, or VAP, businesses. They change things that aren’t complete into ones that are tweaked to perfection and thus, are valuable items. Those companies charge in a fee-for-result way. Automobile manufacturers, retailers, as well as CVS’s MinuteClinic are great instances of that model as they have prices for each procedure that they’ve got out there.
Facilitated networks is the last model. Those are organizations that let people distribute information with one another by charging for memberships or for each transaction, for instance. Companies like eBay, mutual insurance businesses, and the model used to treat chronic illnesses from the diabetes networking organization for both patients and families from dLife are all good examples of that type of business.
That being said, how come breaking up the traditional system into those three various businesses is such a great idea? It’s due to the fact that despite the disruptions that may occur in a business model, the biggest disruptions occur whenever one business model takes over another one.
Thankfully, you can accomplish this with the help of a simple, three-phase process:
Firstly, hospitals need to be broken up into solution shops, VAPs, as well as networks. Afterward, lower-cost business models need to be permitted to emerge in every single one of those three categories. For example, mobile clinics can take place of speciality hospitals. Last but not least, disruption can happen throughout every one of the three business models. For instance, retail clinics can change care from solution shops into VAP businesses.
When making this alterations, health care providers will have the opportunity to make their business models innovative in a way that patients will be able to have the affordable as well as the accessible health care that they’ve been seeking.
Technological enablers reduce costs by making work simpler and less dependent on human skill.
Prior to modern technology, doctors weren’t able to see what was happening on the inside of their patient. As a result, they simply deduced whatever they were able to do with the help of meticulous external examinations.
However, today, on the contrary of taking all of that time for an exam, doctors are able to utilize machines that take photos from within the human body. That process is a whole lot less expensive, it’s simpler, and it’s much more effective. As you can see, technological innovation has immensely impacted and enhanced healthcare.
This is all thanks to the fact that technological enablers handle issues on a smaller scale that way costs are decreased and there’s not much need for human help. That being said, what is a technological enabler?
To put it in simple terms, it’s technology that eases as well as makes medical problems more routine. However, there’s more. They also help decrease costs. This is due to the fact that instead of paying those huge fees to those professionals that are educated in diagnosing the actual physical signs of a disease, things such as diagnostic imaging technology, molecular diagnostics, as well telecommunications can be used.
Diagnostic imaging technology is a tool that gets images from within our bodies, as we had talked about earlier, in a quick, inexpensive, and highly accurate way.
However, technology decreases prices in various ways as well. For instance, it takes the place of a lot of complicated instinctual processes with the help of basic rules-founded work. If you were to analyze a patient’s symptoms by making guesses, using a very educated brain, as well as from a huge collection of medical literature is a very complicated and perceptive process. Thankfully, though, clear-cut and rules-based treatments can frequently prevent that kind of issue; they handle issues that have been accurately diagnosed based on the cause of the condition rather than on the symptoms.
For example, insulin is a completely rules-based treatment as it immediately starts working on what caused the type 1 diabetes.
Another way that technology helps decrease the price of medical care is by staffing cheap technicians in comparison to the very-well trained and expensive experts. For instance, for a few years, BMW had been writing the algorithms needed in order to create hyper-realistic computer based car models that only need virtual testing. Ever since they replaced their well-trained experts with work that’s rules-based that is supervised by technicians, they have saved a lot of money.
Technology is transforming health care by delivering precise and personalized medicine.
Now you know all about how technology is essential to the disruption as it decreases prices. However, were you aware of the fact that it decreases the cost of healthcare by offering a completely different kind of medical service?
It all lies in how precision, personalized medicine, and traditional intuitive medicine differ. However, how can technology facilitate precision medicine?
Intuitive medicine takes a look at the signs. That being said, a lot of diseases actually share similar signs. For example, if you have a fever, you could potentially have an ear infection, or you could have Hodgkin’s disease.
After traditional medicine produces a diagnosis based on some symptoms, it specifies which medicine will help treat them. For instance, you can just take some pills in order to get rid of the fever. However, that won’t be the solution to the disease that’s actually causing the problem.
On the contrary, though, medical technology can diagnose exact diseases and treat patients rather than just alleviate the signs. For example, with the help of antibiotic therapy, the creation of precision medicine that utilizes microscopes, as well as staining methods, scientists have identified that humans are coated in masses of microorganisms, a few of which aren’t dangerous while others cause diseases.
Unearthing this information has given doctors the tools necessary to create specific antibiotics that remove the unneeded organisms and keep the diseases that they cause from happening.
However, that’s not the only thing that technology does for medicine. Another thing that it does is personalize it. For example, by taking advantage of IT as a technological enabler, it inspires bigger networks of interconnected companies with similar economic models to distribute information to others and reply to the specific necessities of people.
However, what exactly is personalization?
It revolves around paying attention to a person’s certain situation instead of the common conditions of others that are diagnosed with the exact disease. Information technology combined with the help of the global essence of social networking can bring this to life with the help of the Internet’s “someone-like-me” feeling. When you are linked to a worldwide network of other people, patients are able to get access to help that’s similar to their certain symptoms. That kind of specific information is priceless.
Disrupting the hospital business model will mean more effective and cheaper services.
Where you aware of the fact that the modern design of hospitals actually goes back eighteenth-century Europe? Now made for many reasons including to deal with leprosy and tuberculosis, the hospitals were initially just created as a place where people could die. When the nineteenth century came, though, they turned into important areas of scientific research.
Regardless, however, of how capable those hospitals were at dealing with tuberculosis back in the beginning of the 1900s or with AIDs back in the 1980s, those who had been able to solve issues in the past won’t exactly be considered today’s top problem solvers. This is merely due to the fact that today's modern age comes with its own set of problems.
That being said, because a lot of research continues to be administered from expensive hospitals that have that “do everything for everybody” kind of thinking, it’s getting more and more complex for them to turn health care into something that’s both affordable and accessible. Indeed, it’s apparent why this method won’t ever create the practical business model that health care requires. Let’s break it down:
It links a couple of business models that, on their own, go against each other. There is the patient’s diagnosis and then there’s the solution; two completely different actions that have different ways of making money. When trying to accomplish both of them, hospitals end up, needlessly, losing lots of money while providing patients with very complex and low-level service.
However, how can we handle this issue?
The best way is to break hospitals’ business models, meaning remove a lot of them, and then divide their work into two apparent models:
One of the models is the solution shop. It pays attention to diagnosis and a lot of the time, depends on pricey technology such as MRI machines. The second one is VAP activities, which offer treatments to people as soon as they’ve been diagnosed.
Therefore, we could either create hospitals inside of other ones, or we could create two completely different places. For example, the Mayo Clinic is a solution shop which offers very dependable diagnosis for a small price and then sends those with a diagnosis to another part of their medical compound in order to get VA processes in a fee-for-outcome way.
Mayo Clinic’s separation between two specific areas, each one working based on their specific model, lets every part work at a high-level while decreasing the amount of expenses as well as wastes.
The practices of physicians are no longer working and need to be disrupted by shifting responsibilities to other practitioners.
Hospitals aren’t the only ones that haven’t successfully linked together two completely unsuitable for each another business models. Physicians are no different to hospitals and doctors, therefore, they need to divide up their negating business models.
Indeed, to this day, the physician business still doesn’t work. For example, physicians are typically in charge of four parts: diagnosing and then solving aches that are typically correlated to light pain as well as looking after those with long-term diseases, running physicals, offering disease prevention, along with primary disease identification. As you can see, the amount of work that doctors have to do is extreme as the model handles too many bases in order to make sure that the whole process is both affordable and accessible.
However, that’s not the only issue. The kind of doctor that is able to deal with all of that work at the same time effectively doesn’t exist anymore. This is due to the fact that there are way more possible diseases, therefore, the human brain just isn’t able to hold onto all of that information.
For instance, back in 2007, physicians were able to prescribe more than 13,000 drugs in the United States. Do you think you could remember all 13,000 of them, let alone someone else?
Doctors have got way too much to do and need to pass on a bit of their work to nurses and any other medical practitioner. For example, identifying and finding a cure to disorders needs to be dealt by nurses at the retail clinics that work off of the VAP business model.
However, in addition to that, organizations that utilize the network-facilitator business model, making money not for sickness which is how physicians make money, but rather from wellness, need to look after patients that have behavior-demanding diseases.
With those alterations in the right area, physicians would have the freedom to keep on conducting continuous wellness examinations while utilizing technology in order to go up against solution shops that are managed by specialists. That may result in offering affordable on-site testing as well as imaging, or potentially online diagnostic tools that amasses to lots of research in order to place more diagnostic power into the hands of the main care physicians, or telecommunications technologies that let people analyze data regardless of where they may be.
Integrated capitation combined with the pairing of high-deductible insurance and health savings accounts can overcome problems with reimbursement.
Now that you are aware of how breaking the health-care system can bring in huge enhancements, it’s important to understand how those alterations aren’t attainable if you don’t have a reimbursement system that powers them.
In reality, today’s reimbursement system doesn’t work nicely as a whole. For example, the most familiar type of reimbursement is called fee-for-service, which is also called FFS. It means that when you’re a medical provider, the greater number of services that you provide, the more money that you end up making.
Why is this system bad, though?
This is due to the fact that it manages pricey providers rather than letting disruptive ones come about. Since the big providers are in charge of service prices, they are also in charge of the investments into new items and services, which is exactly why hospitals are so pricey. To elaborate, because they provide too many unnecessary services that need financing, the healthcare costs are only continuing to increase.
A better solution to it would be a reimbursement system as it utilizes capitation. This means that every single treatment is available with the help of only one contract that links together high-deductible insurance, otherwise known as HDI. Here, your premiums are smaller, but the deductibles end up being greater with health savings accounts, which are also known as HSAs.
However, how can joined capitation assist the health-care system with conquering its current issues?
By pushing the work of the disruptive business models, the outcome would require utilizing less pricey medical staff such as nurse practitioners or physicians assistants. By spending less amounts on practitioners, there will be more profits for practices.
However, insurance is crucial if you want financial stability because it guards our bank accounts from things such as outrageous hospital bills. It’s, as a result, crucial to put money into HDIs as well as HSAs in order to make sure that personal health accounts are funded well.
For example, HSAs don’t only assist people with saving for medical expenses, but they also assist them with making choices that typically boost their wealth because they money in their accounts is theirs. This provides people with a financial stimulus to live a healthy lifestyle. Accomplishing that gets them to earn long-term boosts in savings.
The health-care system is all over the place, so the most important thing that’ll get it to work nicely is disrupting the field in an innovative way. In other words, breaking up the general hospitals into apparent business models that provide various services and profit in their own ways. Technology can assist with that process by removing the expenses of intuitive examinations as well as specialized work.