The Future of Health Care

• The Big Questions are the wrong questions: – Will quality of health care decrease if we cut costs? – What is driving costs up so rapidly? Is this inexorable? – Should government provide and pay for health care for all? Is

socialized medicine better than private medicine? • The right questions are:

– Given that we committed to provide care for all, how can we make it more affordable and accessible?

– Can we provide better quality at lower cost – and how? – Can we harness technology to make health care simple?

• Approach: – Summarize fundamental theories; Illustrate; Apply

Laptops

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The general process of becoming affordable and accessible

Mainframe

Minicomputers

Smartphones

Desktops

Slide rule

1. First bring the problem to the solution. 2. Then bring the solution to the problem.

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7%

4% 12%

8%

18% 22%

% of tons

Stee

l Qua

lity

1980 1975 1985 1990

25–30% 55%

Little boys beat giants by disruption

How the health care industry is trying to improve health care

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Self-serving language

Self-serving data

Self-serving

expertise

Preserve or grow my piece

American Hospital Association

Self-serving language

Self-serving data

Self-serving

expertise

Preserve or grow my piece

American Medical Association

Our historical attempts to improve health care as a system, and our fortunes within that

system, have been self-defeating.

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Self-serving language

Self-serving data

Self-serving

expertise

Preserve or grow my piece

AMA

Self-serving language

Self-serving data

Self-serving

expertise

Preserve or grow my piece

AHA

Self-serving language

Self-serving data

Self-serving

expertise

Preserve or grow my piece

APhA

Self-serving language

Self-serving data

Self-serving

expertise

Preserve or grow my piece

Etc.

Our work around the Tower of Babel construction site is slow.

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Diff

eren

t mea

sure

O

f Per

form

ance

Time

Per

form

ance

Time

Pocket radios

Portable TVs

Tabletop Radios, Floor-standing TVs

Path taken by vacuum tube manufacturers

Expensive failure almost always results when disruption is crammed into direct competition with established technology

Path being taken by: •Electric vehicles •Solar electricity •Wind power •Biofuels

Surg

ical

su

ites

High-speed multi-channel

testers

Imaging: MRI, CT, PET Scanners

Specialist physicians

Personal physicians

Nurse practitioners

Pharmacists

Clinics

Offices

Homes

The decentralization that follows centralization is only beginning in healthcare

1. Bring the problem to the solution. 2. Then bring the solution to the problem.

Retail Clinics

Family care

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Enablers of Disruption

A new “value network” – a new system of suppliers and distributers

Business model innovation •Lower-cost venues of care •Lower-cost care givers

Government-paid systems are similarly stymied by their silo structures: Canada, Germany, Netherlands

The structure for 90% of Americans drives caregivers to defend and strengthen their silos. They cannot drive care towards

lower-cost caregivers and lower-cost venues of care.

•Kaiser Permanente, Intermountain, Geisinger •Employer-provided care

•Sweden, Finland

Those with a system perspective find that patient health and the drive to lower-cost venues of care and lower-cost caregivers improve profitability.

Probabilistic pattern

recognition Rules-based

Intuitive, trial-and-error

problem- solving

Synthetic fibers: Nylon Polyester Acetate Kevlar

Infectious diseases; Cervical

cancer

Bipolar disorder; Seizures asthma

Scientific progress that commoditizes expertise plays a critical role in disruption

Empirical medicine

(Evidence-based medicine)

Precision medicine

(Personalized medicine)

Intuitive medicine

(symptoms < diseases)

We’ll do anything for

anybody.

• Overhead = 85% of total

• Overhead increases 30% for each doubling of complexity

• Variable quality

5/14/2012 Copyright Clayton M. Christensen 12 Po

lishi

ng D

ept.

Annealing furnace

Turning machines

Tapping equipment

De-burring

Cut

-off

saw

s

Shipping Department Office area Storage

Hobbing department

Boring machines

Stamping machines

Assembly

Shouldice Hospital: Hernia surgery

Dave Snow, asthma CEO, Medco

National Jewish Medical Center Pulmonary & Respiratory Diseases

No model can do everything for everybody.

Fee For service

• Consulting firms • R&D organizations • Diagnostic & intuitive activities of hospitals

solution shops

Fee For outcome

• Manufacturing • Education •Construction • Medical procedures

process Businesses

We need solution shops for disorders that today are determined by symptom, not the cause:

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• Type II diabetes • Obesity • Depression • Schizophrenia • Bipolar disorder • Epilepsy • Parkinson’s

disease

• Crohn’s disease • Arthritis • Chronic back pain • Ulcerative colitis • Alzheimer’s

disease • Multiple sclerosis

110 1

General Hospital ShouldiceHospital (hernia repair)

$970 $700 Cost of supplies & direct labor

$6030 $1600 Overhead burden

$7,000 $2,300 Total cost for equivalent length of stay

Service families offered

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Sources & magnitude of cost differences: process vs. general hospitals

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Retail Process clinics will disrupt primary care physicians’ practices, pushing them up-market to

disrupt specialists.

Business model innovation is key to improving quality and reducing costs.

Hospital industry was established when: • Transportation was costly • Doctors were inexpensive • Each community needed a

hospital • Though they were called

“General Hospitals,” they actually were focused because most diseases were acute

The world has changed. The industry’s paradigm has not. • Transportation is cheap and

pervasive. • Doctors are costly • Most diseases are chronic • Most hospitals try to do

everything for everybody • 90% of all costs in the hospital

are overhead – inherent to the business model

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Market Understanding that Mirrors how Customers Experience Life

“The customer rarely buys what the company thinks it is selling him” - Peter Drucker

Diabetes companies typically have targeted customers who don’t own the job of keeping healthy.

5/14/2012 Copyright Clayton M. Christensen 19

Patient

Family caregivers

Help him feel that he’s in

trouble!

Productivity Absenteeism

Disability

Health Retention Profitability &

competitiveness

Employers

Business models for adherence in chronic care

Degree to which behavior change is required Minimal Extensive

Mot

ivat

ion

to

adhe

re to

ther

apy

Strong: quickly feel

consequences

Weak: Complications

are deferred

Type I Diabetes

Addictions Type II Diabetes

Asthma

Congestive heart failure

Obesity Hypertension

Osteoporosis

Cancer HIV

Myopia Crohn’s disease

Chronic back pain

Ulcerative colitis

Infertility

Business models for ongoing care

Degree to which behavior change is required Minimal Extensive

Mot

ivat

ion

to

adhe

re to

ther

apy

Strong: quickly feel

consequences

Weak: Complications

are deferred

Type I diabetes

Addictions Type II diabetes

Asthma

Congestive heart failure

Obesity Hypertension

Osteoporosis

Cancer HIV

Myopia Crohn’s disease

Chronic back pain

Ulcerative colitis

Infertility

Doctor’s office User Networks

Employer- Managed Care

with HSAs

Pharmacy- based care

Better science and the pursuit of profit will enable pharmacies to provide more and better care.

Degree to which behavior change is required Minimal Extensive

Mot

ivat

ion

to

adhe

re to

ther

apy

Strong: quickly feel

consequences

Weak: Complications

are deferred

Type I diabetes

Addictions Type II diabetes

Asthma

Congestive heart failure

Obesity Hypertension

Osteoporosis

Cancer HIV

Myopia Crohn’s disease

Chronic back pain

Ulcerative colitis

Infertility

Pharmacy- based care

Outsourcing often sets in motion disruptive business model liquidation

Mother boards

Computer assembly

Supply chain & logistics

Product design

Brand

Dell AsusTek

Simple circuit boards

Mother boards

Computer assembly

Supply chain & logistics

Product design

Brand

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Wall Street Analysts

Pharmaceutical Cos.

Petroleum Majors

Auto companies

IT departments

Customer Supplier

Bloomberg

CROs.

Halliburton, Schlumberger

Tier One Suppliers

TCS, Infosys, Wipro

Physicians Pharmacies

Outsourcing often sets in motion disruptive business model liquidation

5/14/2012 24 Copyright Clayton M. Christensen

Three levels in the architecture of a job

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What’s the job-to-be-done? (Each job has functional, emotional & social dimensions)

What experiences in purchase & use must we provide to do the job perfectly?

What and how to integrate?

Targeting the job enables precision in product development

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Product category

Too many features; wrong

features

Customer category

One-size-fits-none product

Job to be done Proper

integration of all needed experiences

Integrating correctly to help customers get the job done is the essence of defensible differentiation

• IKEA • Federal Express • SAS • Zara • Microsoft Office • TurboTax; QuickBooks • V8 • OnStar

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