Two probabilities: Obamacare isn’t suddenly going away and it isn’t going to fix US healthcare. If America is going to have a more medically effective, financially sustainable healthcare system in the future, it will require plenty of disruptive innovation by the private sector. Now that’s not just some overused business conference buzz phrase. “Disruptive innovation,” coined by Harvard Business School’s Clayton Christensen, is how new competitors steadily move upmarket and supplant established players by deploying some new technique or technology to make goods and services cheaper, simpler, and easier to access.
For instance: the first PCs were less capable than mainframe computers, but they were good enough and a lot cheaper for consumers and small business, the low-end of the market. Then as the technology improved, PCs moved upmarket and grabbed market share from Big Iron.
In healthcare, disruptive technologies allow complex, expensive procedures and treatments for well-understood medical problems to be done in places other than hospitals by less credentialed and less expensive doctors, nurses and technicians. This could mean, for instance, nurses sometimes substituting for anesthesiologists or using telemedicine so photos of skin condition could be sent to a physician.
So does the Affordable Care Act make disruptive innovation harder or easier?
Well, some of both, according to Seize the ACA: The Innovator’s Guide to the Affordable Care Act by Ben Wanamaker and Devin Bean of the Clayton Christensen Institute. On the plus side, the individual mandate will likely create the need for new delivery models at the low end of the market such as retail clinics. And the employer mandate creates incentives to split true insurance from routine reimbursement by providing on-site clinics or similar services to cover primary care and contracting directly with healthcare providers for catastrophic care. On the negative side, the essential health benefits provision establishes a floor at the low end of the market that creates a barrier to entry for new and disruptive providers. Same goes for the insurance exchanges themselves, which mandate health plan actuarial values and force providers to offer plans at Silver and Gold levels thus making new providers compete directly against incumbents.
Wanamaker and Bean:
In an effort to disrupt the defunct system, we recommend that innovators focus their efforts on areas where the legislation creates opportunities for disruptive innovation, specifically the Individual and Employer Mandates, ACOs, Wellness Programs, and the CMS Innovation Center.
While these provisions are far from silver bullets, innovations positioned with the right business models and value networks will yield exactly what legislators were hoping to create: more affordable and accessible quality health care.
In contrast, where provisions of the ACA discourage disruptive innovation—namely, Insurance Exchanges, Essential Health Benefits, Cost-Sharing Requirements, Medical Loss Ratio, and Medicaid Expansion—we appeal to policymakers to focus their efforts on making the legislation more innovation-friendly.
Quality health care will not become affordable and accessible on its own; we need to be proactive in creating room for the innovations that will transform the current state of the industry.
This outline for innovators also provides a deregulation road map for legislators, such as letting nurses do more of what doctors do: diagnosing and treating patients, as well as prescribing medications — all without a doctor’s involvement. And exchanges are ripe for deregulation, especially the essential benefits and medical loss ratio requirements. The goal is to create 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 and new competitors. Once Republicans tire of delay and defund, they can start on deregulate.