Wednesday, June 19, 2013
Affordable, Quality Health Care Through Disruptive Innovations
It doesn’t appear that government intervention will solve the issue of providing affordable health care. Indeed, Medicare coverage is likely to diminish at a time health care cost is increasing. Further, it appears the efforts to cover the uninsured will only increase the overall health care costs. Nor does it appear that advances in technology and medicine are providing health care that is more affordable.
The medical community continues to march forward in its ability to cure the most deadly diseases and rebuild the most broken human bodies. For individuals to benefit from the advances in drugs, surgical techniques and other medical advances requires a good deal of money or the very best insurance (also a good deal of money).
There is a chance that new entrants in the health care market space will find ways to reduce costs and provide quality health care. These entrants will likely be disruptive innovators and enter the market by serving the least profitable health care consumers.
According to the theories on disruptive innovations, new market entrants known as disruptors, find ways to profitably serve markets where industry leaders can’t make a profit.
In the health care industry, profit is least likely to be made when the customers are uninsured and poor. The most profitable customers are those that have insurance, can afford insurance deductibles, and the ability to cover costs when they are not covered by insurance.
If a disruptor were to enter the health care market and focus on the least profitable medical customer, the industry leaders would likely not compete for that group of customers. Even if the industry wanted to find a way to serve the least profitable customers, they would find it difficult to change from the business model focused on delivering high profit margins. This has been validated in the past and discussed in length in +Clayton Christensen’s books and articles.
In the U.S. we are seeing some health care disruptors such as clinics at retail outlets and drug stores. These are less expensive and not as time consuming as visits to doctor’s offices. This is a step in the right direction but not a disruptor that would address the high cost of hospitals, insurance and specialized medical care.
Finding markets that will be large enough to stimulate real change are not likely to be in the U.S. or countries with highly developed economies. This is due to an unyielding medical infrastructure that is supported by both consumers and government. The move to quality, affordable health care in these countries will require changes in business structures that are profitable and benefit large segments of the population and changes in government support systems that are valued highly by large segments of the population. These changes will be met with great inertia.
What Markets Will Stimulate the Disruptive Innovations for Health Care?
Developing nations that have limited medical facilities, a scarcity of top tier physicians and limited government funds for health care will likely be the driving force to serve the planet’s least profitable health care customers.
There are some countries in South and Central America that are attracting U.S. companies to provide expertise in building their health care industry. What the U.S. companies are discovering is that:
1) The countries do not have the funds to build U.S. style facilities,
2) Many of those countries’ best doctors have moved to countries where they can earn more money,
3) The population is unfamiliar with preventive medical techniques and
4) The government’s ability to support health care programs is limited by a weak or stagnant economy.
For the health care industry to profitably serve patients in these countries will require:
1) A larger population base being served by a smaller number of physicians. This will likely require smaller clinics located throughout the country that are manned by nurse practitioners and connected to larger “hub” hospitals by telemedicine technologies,
2) The development of telemedicine technologies that provide accurate analysis and treatment when used by minimally trained staff or private citizens,
3) Continued development of low cost telemedicine that will allow physicians at “hub” hospitals to perform procedures at outlying clinics,
4) Programs to train personnel to serve in outlying clinics,
5) Regular educational programs focused on preventative medical procedures,
6) Insurance programs focusing on providing coverage for major medical procedures and providing incentives for participation in preventative medical programs.
While these approaches will make a big difference in undeveloped countries they can be adopted quickly by the developed economies of the world.
In the developed countries the focus will need to be on poorer communities. These are usually located in urban areas and consist of groups of economically disadvantaged individuals.
Successfully changing health care costs in developed nations can be accomplished by building programs for the poorer communities such as establishing clinics tied to hospitals and the introduction of telemedicine to serve those populations through the community based clinics without increasing medical personnel. The approaches outlined for developing nations might be a good start for developing a health care system in the developed countries that can profitably serve the poor and uninsured in some of their communities. The overall result will be the spread of affordable, quality health care to everyone.