In the past I have written about disruptive innovation and how health care systems need to think about their futures. Simply put, the premise is that legacy organizations usually have trouble seeing a new business model. This is especially true when the current business model still appears to be working, and the new business model may initially have an inferior product, but represents a fundamental innovation that will eventually take over the old business model.
A New Business Model
I contend that’s exactly where we are in health care. And I think the new business model is something way beyond the shift from volume to value, or what many of us call “population health.”
The concept of caring for a population and getting paid in ways that providers bear the risk of cost is definitely a dramatic and risky change. It requires health systems to invest in infrastructure and new models of care before there are payments. Almost every hospital, multispecialty physician group, and health system is struggling to invest adequately from limited operating margins and declining balance sheets.
At the annual meeting of the Massachusetts Hospital Association this month, Ken Kaufman, co-founder of the largest health care finance consulting firm in the country, gave a presentation about “crossing the divide” between our current state and the future.
After pointing out that the growth in the deficit in America’s future is almost entirely due to the cost of health care, so that the cost imperative is
Borders vs. Amazon: What went wrong?
As Amazon was swiftly adopting a new business model, Borders didn’t see the writing on the wall. They continued to manage their brick-and-mortar stores while tepidly approaching the online and e-book model.
To be like Amazon – nimble, forward-thinking, and customer-focused – we, in health care, need to focus on innovations such as virtual, web-based care and retail convenience and primary care. If we do not figure out how to get in these spaces ourselves, I fear we will be Borders while consumers leave us to shop at Amazon – the health systems and physician practices that offer retail primary care (convenience and price like CVS) and virtual visits. In 2010, Group Health Physicians achieved a 30 percent growth in virtual visits while reducing the per member per month cost by $10. Have any Cooley Dickinson-affiliated groups done this?
So the competitors we really need to worry about are CVS and Walgreens for their highly accessible and inexpensive care, and virtual care (web-based health care). These are the innovations that will become the Amazon of health care.
Even Forbes magazine suggests virtual health is the future. To be successful, we must figure out how to disrupt ourselves from within with these innovations, or we will be closing a lot of hospitals and even primary care practices.
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