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The Innovator’s Prescription by Clayton Christensen – Good Health Care Read

Posted in Health Care

Now that “health care,” a euphemism for insurance, is back on the table, I thought I transfer some more stuff from the old blog to this new website. This was posted March 2010. Apparently nobody read the book in 2010.

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I (St. Paul) have become all things to all people, so that I might by any means save some. I do it all for the sake of the gospel, so that I may share in its blessings. – 1 Corinthians 9:23

Willingness to be all things to all people may be a good strategy for spreading the Gospel, but it doesn’t work in business including the business of health care. At least that is the way I would summarize the basic message of The Innovator’s Prescription by Clayton Christensen, Harvard Business School Professor. It’s a message that rings true with me based on personal experience in a company struggling with management of both specialty and commodity businesses. Christensen’s focus is on disruptor-driven innovation, and he has applied the same theories to education reform in Disrupting Class.

Words analogous to those of St. Paul quoted above could well be uttered by general hospital managements and physician practices who would say something like this:

To those with serious life threatening injuries, we have become a trauma center so that we might save their lives. To those with bad colds, we have become a dispenser of aspirin and advice. To those with terminal illnesses, we have become very expensive anti-hospices doing whatever we can to prolong life. To those with chronic illnesses we have become providers of routine and ordinary treatments at high cost and great inconvenience. To those with undiagnosed illnesses we have become expensive providers of trial and error testing to try to figure out what is wrong. To those needing operations, we have become a surgery center. We do it all for the sake of health care so that we may share in the revenues available from it.

The problem with that lack of focus is that it assures a high cost structure and impossibility of providing such services efficiently or for charging appropriate and fair prices for them. Christiansen argues that there are three basic tasks to be provided to customers of the health care system and that the three are so different in nature that it is impossible for a single integrated institution to provide all three efficiently and effectively. In lay terms, I would say the three basic tasks are:

1. Diagnosis and problem solving
2. Application of standard one-time treatment based on the diagnosis
3. Ongoing management of chronic diseases

The first task requires the best specialized education and technology and is most expensive and can be paid for only with a fee for service system. Probably most people never need such service. The second task is process oriented and can be standardized with written procedures describing best practices. Such standardization will allow primary care physicians to displace specialists and nurse practitioners to displace primary care physicians for many tasks thus increasing availability and reducing cost and time required. Pay can be based on results. The third task is best managed by facilitated networks of persons with the same diseases to enable sharing of best practices and improve communication and access while reducing costs. Pay can be based on participation.

Christensen discusses the normal business development cycle that begins with evolution of vertically and horizontally integrated companies at the front end followed by a process of dis-integration as those big companies gradually outsource the least value adding parts of the business to smaller companies. All the steps in that process make economic sense for the large company giving up something, for the small company gaining something, and for the customer getting a better deal in cost and quality. This cycle is playing out in small ways in the health care industry such as in development of independent surgery centers and nurse practitioner staffed retail clinics but is severely slowed and restricted by the government imposed system of fixed reimbursement for procedures. Physician practices and general hospitals are helpless to change the system because they are trapped in it and dependent on it. Rapid change must come from external disruptors.

He also discusses a normal technology development cycle which begins with everybody having to go to experts to access a new technology and proceeds to wide dispersion of and easy access to the technology even for novices. A medical example cited is Dialysis, which is now so simple that it can be done at home more effectively and at lower cost but normally is not because congress guarantees Medicare reimbursement for clinical dialysis for anyone suffering from end stage renal failure.

This is a rich text, full of examples from medical and non-medical businesses, to which I cannot do justice in a post of a few hundred words. For any who believe that a government single payer system is the best approach for US health care, this text will explain clearly why smart people who have spent years studying the system think otherwise.I offer this quote from near the end of the text:

We hope, however, that the concepts in this book can give government officials a language and a deeper understanding of how the world works, so they can sort self-serving arguments from public-serving ones. In particular, we hope we’ve provided convincing theory and evidence that the solutions cannot come simply from demanding that existing providers operate more efficiently or compete against each other more intensely…The health-care industry needs to be disrupted.

Now, if government officials would only read the book…as soon as they get through reading the self-serving argument based 2000+ page bill that they are about to pass and try to implement.

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Book is still available.

 

 

 

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