Innovation expert Clayton Christensen coauthors a must-read piece for The Wall Street Journal today on the inherent flaws in the ACA’s embrace of Accountable Care Organizations, sort of government-encouraged HMOs. What Christensen’s criticisms have in common is that they ding ACOs for being unable to deliver or enable the disruptive innovation needed to reform the sector. The “disruptive innovation” concept runs throughout Christensen’s work and attempts to explain how established business leaders get dethroned by upstart companies. Christensen:
Disruptive innovations often initially result in worse performance compared with established products and services in mainstream markets. But disruptive innovations have other benefits. They are often cheaper, simpler, smaller, and more convenient to use.
Consider the small off-road motorcycles introduced by Honda in the 1960s, Apple’s first personal computer, and Intuit’s QuickBooks accounting software. These innovations all initially underperformed the mainstream offerings. But they brought a different value proposition to a new market context that did not need all of the raw performance offered by the incumbent. They all created massive growth; to flip Joseph Schumpeter’s famous phrase, creative destruction, on its head, this is creative creation. After taking root in a simple, undemanding application, disruptive innovations inexorably get better until they change the game, relegating previously dominant firms to the sidelines in often stunning fashion.
Incumbents almost always win battles of sustaining innovations. Their superior resources and well-honed processes are almost insurmountable strengths. Incumbents, however, almost always lose battles where the attacker has a legitimate disruptive innovation. To create a new-growth business, companies—established incumbents and start-ups alike—must be on the right side of the disruptive process by launching their own disruptive attacks.
Keep that explanation in mind when you read Christensen’s advice for health care reform:
– Consider opportunities to shift more care to less-expensive venues, including, for example, “Minute Clinics” where nurse practitioners can deliver excellent care and do limited prescribing. New technology has made sophisticated care possible at various sites other than acute-care, high-overhead hospitals.
– Consider regulatory and payment changes that will enable doctors and all medical providers to do everything that their license allows them to do, rather than passing on patients to more highly trained and expensive specialists.
– Going beyond current licensing, consider changing many anticompetitive regulations and licensure statutes that practitioners have used to protect their guilds. An example can be found in states like California that have revised statutes to enable highly trained nurses to substitute for anesthesiologists to administer anesthesia for some types of procedures.
– Make fuller use of technology to enable more scalable and customized ways to manage patient populations. These include home care with patient self-monitoring of blood pressure and other indexes, and far more widespread use of “telehealth,” where, for example, photos of a skin condition could be uploaded to a physician. Some leading U.S. hospitals have created such outreach tools that let them deliver care to Europe. Yet they can’t offer this same benefit in adjacent states because of U.S. regulation.
Christensen’s recommendations are all about finding or creating space for innovation and new players to gain a foothold and expand against the desires of incumbent players. But the ACA is all about Big Government and Big Medicine coming together — hardly a promising situation for upstart companies.