Will Healthcare Innovation Reach Critical Mass in 2016?
If other industries are rabbits in the race to innovate, healthcare is the tortoise, plodding along at a steady, if slow, pace. Certainly, we’ve seen occasional bursts of speed as industry leaders and fresh entrants launch novel solutions to meet the demands of healthcare reform. With a growing number of practical applications of big data and new payment models—plus the stimulus of increasing consumerism—that we’ve witnessed in the past year, will 2016 be the year that we finally see disruptive innovation become the norm for the healthcare industry?
Three Reasons Healthcare Lags on the Innovation Front
“Finding innovative ways to deliver health care has never been more important than it is today.” Sound familiar? This quote appeared in the Wall Street Journal in 2011, almost one year after passage of the Patient Protection and Affordable Care Act. Since then, ‘innovate’ has become a mantra throughout the healthcare industry, yet providers, insurers and other healthcare-related organizations are finding that, like other major undertakings, it is easier said than done. Why are we moving forward so slowly?
A recent column in USA Today explores the innovation delay that healthcare is experiencing and narrowed it down to three reasons.
- The consumer is not the primary payor. Unlike other industries that are influenced heavily by consumers, the healthcare industry is influenced by the payor, most often an institutional or government entity rather than the individual consumer. That means, before you can market an innovative service to the individuals who will actually benefit from it, you have to sell the idea to private and public payors. Once they agree to a reimbursement price—which can vary widely between payors—you have to sell the idea to the physicians who will recommend it to patients. Only then can you get it in front of the patients. As article author Sandeep Acharya, vice president of strategy and new business at One Medical Group, points out, “It can take years for entrepreneurs to move through this process.” That’s a long time to wait for innovation to bear fruit—or revenue.
- The healthcare landscape is fragmented. “Healthcare decision makers—physicians, hospital systems, insurance companies and regulators—not only vary from state to state, but sometimes even between neighboring cities,” writes Acharya. When a hospital or some other organization introduces an innovative service or product, its reach is limited by regulatory hurdles that can differ by state or region. Consumer products companies and national retailers, for that matter, face fewer hurdles. That could account for why retail clinics have been one of the major success stories of disruptive innovation in healthcare.
- The healthcare industry is more cautious about change. Acharya attributes the slow pace of innovation to the fact that “too many great ideas stall.” It’s not just cynicism. In 2011, it was already obvious that the healthcare industry has a “hierarchical culture resistant to change”—as Laura Landro wrote in the Wall Street Journal. Healthcare was late on the scene in terms of adopting technologies like EHRs, citing concerns about patient privacy and data security. Yet, the financial industry faced similar hurdles and still managed to progress more rapidly.
Despite these challenges, however, there are signs that the healthcare industry is verging on a breakthrough when it comes to disruptive innovation.
Accelerating the Pace of Disruptive Innovation
The Wharton School of Business, with the support of the Mack Institute of Innovation Management, is studying innovation in healthcare, describing it as “a phenomenon that is literally sweeping the country in the world of healthcare.” The research indicates a distinct increase in the number of healthcare organizations that are adding a new management role to the C-suite—that of chief innovation officer. And researchers are also finding that while some organizations are choosing candidates within the healthcare field, a number are looking outside their own industry to find leaders who are more experienced with driving change. But Wharton management professor John Kimberly noted that implementation is still a stumbling block.
“While it’s easy to get things off the ground and to hire somebody,” Kimberly said, “it’s at that point that the real hard work begins. And what we’re finding is that in some cases, there’s been a certain amount of success in moving the needle on innovation. In other cases, it’s been a really tough slog, and implementation is proving to be a huge challenge.”
One of the major catalysts for driving disruptive innovation in the coming year promises to be the rise of healthcare consumerism. As they take on more of the costs of their own healthcare, consumers are putting the industry under pressure to deliver better experiences. They look to their own experiences with companies in other arenas of their lives—Amazon, Apple, Uber—and expect healthcare to follow suit. Hospitals and other healthcare providers will need to rise to meet consumer expectations.
This can partly be accomplished by augmenting excellent medical care with deep healthcare consumer insights from market research, such as the 2015 c2b Consumer Diagnostic, and employing techniques from consumer products and retail industries to influence patient behavior (e.g., psychographic segmentation).
From everything we’ve been seeing, 2016 could well be the year when the rubber meets the road, and any healthcare organization that isn’t in tune with its consumer audience and implementing innovative care and payment models will find themselves left behind.