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Summary The innovators prescription
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Summary of The innovator's prescription: A disruptive solution for Healthcare. Contains Chapter 1 t/m 6, incl. notes of the lectures
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By: marleencornelese • 5 year ago
By: Brechtclaessens • 5 year ago
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Summary The innovator’s Prescription: A disruptive solution for Health CareIntroduction
Americans are spending more of their income on health care. We note just four frightening factors:
1. The growth in health-care outpaces the growth of the overall economy: as a consequence, an
increasing proportion of Americans simply cannot afford adequate care.
2. If federal government spending remains a relatively constant percentage of GDP, the rising cost
of Medicare within that budget will crowd out all other spending except defence within 20 years.
3. America’s most economically important companies become uncompetitive in world markets:
because the burden of covering the costs of health care for employees, retirees, and their
families is forcing some of.
4. If governments were forced to report on their financial statements the liabilities they face
resulting from contractual commitments to provide health care for retired employees, nearly
every city and town in the United States would be bankrupt.
The U.S. system’s cost is fuelled by a runaway reactor called fee-for-service reimbursement. When
caregivers make more money by providing more care, supply creates its own demand.
Our hope is that The Innovator’s Prescription can provide a road map for those seeking innovation
and reform. This book offers the other half of the equation: how to innovate to reduce costs and
improve the quality and accessibility of care. We don’t simply ask how we can afford health care. We
show how to make it affordable—less costly and of better quality.
The primary assertions, in order to give our readers a road map of sorts for this book are:
1. Affordability and convenient accessibility
If you want high quality you have to pay for it, e.g. good education, good computers, etc. At some
point, however, these industries were transformed, making their products and services so much
more affordable and accessible that a much larger population of people could purchase them, and
people with less training could competently provide them and use them. We have termed this agent
of transformation disruptive innovation. Disruptive innovation consists out of three elements:
1. Technological enabler: typically, sophisticated technology whose purpose is to simplify, it
routinizes the solution to problems that previously required unstructured processes of intuitive
experimentation to resolve.
2. Business model innovation: can profitably deliver these simplified solutions to customers in ways
that make them affordable and conveniently accessible.
3. Value network: a commercial infrastructure whose constituent companies have consistently
disruptive, mutually reinforcing economic models.
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,Illustration of a computer revolution
The technological enabler of this disruption was the microprocessor, which so simplified the
problems of computer design. The new business model consisted out of commercializing the
personal computer in a mini computer. The systems of component and software suppliers, and the
sales and service channels that had sustained the mainframe and minicomputer industries, were all
disrupted by a new supporting cast of companies whose economics, technologies, and competitive
rhythms matched those of the personal computer makers. An entire new value network displaced
the old network.
Disruptive technological enables in health care
Diseases essentially have to share symptoms. The technological enablers of disruption in health care
are those that provide the ability to precisely diagnose by the cause of a patient’s condition, rather
than by physical symptom. Three types of medicine:
1. Intuitive medicine: highly trained and expensive professionals solve medical problems through
intuitive experimentation and pattern recognition.
2. Empirical medicine: data are amassed to show that certain ways of treating patients are, on
average, better than others.
3. Precision medicine: only when diseases are diagnosed precisely.
Disruptive business model innovations
Why led those disruptive technologies not to lower-cost, higher quality and more accessible services?
Answer because the delivery of care has been frozen in two business models:
1. General hospital
2. Physician’s practice
Generically, there are three types of business models:
1. Solution shops: are businesses that are structured to diagnose and solve unstructured problems
(e.g. consulting firms, advertising agencies, R&D organizations and law firms). Solution shops
deliver value primarily through the people they employ: experts who draw upon their intuition
and analytical and problem-solving skills to diagnose the cause of complicated problems.
Because diagnosing has a high subsequent leverage, customers typically are willing to pay very
high prices for the services of the professionals in solution shops. Payment almost always is made
to solution shop businesses in the form of fee for service.
2. Value-adding process (VAP) businesses: take in incomplete or broken things and then transform
them into more complete outputs of higher value (e.g. retailing, restaurants, car manufacturer
and educational institutions). When VAP procedures such as these are organizationally separated
from those of solution shops, overhead costs drop dramatically: focused VAP clinics typically can
deliver comparable care at prices that are half of those incurred in hospitals and physicians’
practices in which VAP and solution shop business models are conflated. VAP businesses typically
charge their customers for the output of their processes, whereas solution shops must bill for
the cost of their inputs. This could be eye clinics.
3. Facilitated networks: enterprises in which people exchange things with one another (e.g.
insurance companies, telecommunications, e bay). In this type of business, the companies that
make money tend to be those that facilitate the effective operation of the network. They
typically make money through membership or user fees.
So what’s the answer? The health-care system has trapped many disruption-enabling technologies in
high-cost institutions that have conflated two and often three business models under the same roof.
The situation screams for business model innovation. The first wave of innovation must separate
different business models into separate institutions whose resources, processes, and profit models
are matched to the nature and degree of precision by which the disease is understood. Solutions
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,shops need to be focused. A second wave of disruptive business models can then emerge within
each of these three types. Ambulatory clinics will disrupt inpatient VAP hospitals.
A disruptive value network: systemic reform vs. piecemeal insertion
Disruptions are rarely plug-compatible with the prior value network, or commercial ecosystem.
Figure below depicts the systemic change inherent in the new disruptive value network for health
care. It highlights how many elements of the new system will need to change in concert in order for
any of the individual elements to have the desired effect. Disruption means that many distinctly
different business models will provide care. In order to succeed, disruptive solutions need to be knit
together in a new value network. When this is accomplished, as with all disruptions, patients and
providers will be drawn one by one from the old system into the new.
2. Amassing the power to execute disruption
Disruption can take decades if independent disruptive companies rely on other independent
companies to put in place, piece by piece. Companies that aspire to a faster solution to these
problems will need to integrate: combining, through a coordinated effort, the business models that
must comprise the disruptive value network.
The current health-care system generally is modular. For example colour tv, nobody would buy it
because no network was broadcasting colour tv. Similarly, health-care systems will need to integrate
so they can wrap their arms around all the pieces of the system that must be interdependently
reconfigured.
The key dimension of integration will be the creation of integrated fixed-fee providers: companies
that own hospitals and employ doctors and, most importantly, do not operate on a fee-for-service
basis. Rather, they charge their members a fixed annual fee to provide all the care they will need.
These organizations are structured to profit from members’ wellness, rather than their sickness.
Major employers integrated backwards. As a result, employers increasingly are integrating backward
to contract directly with hospitals and clinics themselves, cutting insurance companies out of the
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, decision-making loop. This integration enables them to direct employees to those providers (be they
solution shops, value-adding process clinics, or networks) whose capabilities and costs are best-
suited to the problem.
This need for integration exists only when:
Reliable, cost efficient providers of critical inputs are not available
There is a need to change the system’s architecture
Once the business models of the new system become ensconced and their interactions become
predictable, the system will dis-integrate, and companies will specialize once again.
3. Changes in the infrastructure around health care
Reforming the Reimbursement System
Even the most integrated and powerful entities in the industry will find their progress impeded
unless additional innovations that attack these infrastructural constraints are put into place (middle
of the triangle). Far more effective system for governments and employers to make quality health
care affordable are:
1. High-deductible insurance coupled with health savings accounts on the payments side
2. Disruptive business model innovations on the provider side
Reformers who focus solely on how to pay for rising healthcare costs fail to address the root
problems of why care is so costly to begin with. Overcoming this interdependent nature of
reimbursement requires integration and the development of a congruent value network.
Role of Information Technology in the Disruption of Health Care
Information technology will play 2 crucial roles in facilitating the emergence of disruptive business
models:
1. IT and facilitated networks: IT will be the enabling mechanism that shifts the locus of care, when
this is desirable and feasible, from solution shops to facilitated networks. There are two levels in
many disruptive transformations of industries.
a. Level 1: companies with lower-cost business models emerge at the bottom of a market in
simple applications and gradually move up-market to disrupt the established competitors
(e.g. Toyota, GM, Canon). Disruptions such as these transform markets with expensive,
complicated products that could be used only by a few people with a lot of money and a
lot of skill, into markets where far more people with less money and skill can own and
use the products. Type of business model stays the same.
b. Level 2: not just buying and using the product become affordable and simple, but
developing the product becomes inexpensive and simple as well. When this happens,
the type of business model shifts from a solution shop or value-adding process business
to a facilitated network business.
The Internet is enabling the emergence of facilitated networks in health care as well. Sites as
Crohns.org enable patients to teach each other how to live with their diseases. As these
networks grow, the center of gravity for the care of many chronic diseases will increasingly shift
from solution shop business models to facilitated networks.
2. Evolution of Patient Health Records: the transition from medical records based on pen and paper
to ones that are portable, easily accessible, and interoperable will not just substantially reduce
the costly paperwork that burdens today’s caregivers. The second role for IT in transforming the
cost and quality of health care is through the enhancement of medical records.
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