Book Review - The Innovator's Prescription

I have recently finished reading The Innovator's Prescription by Clayton Christensen and can highly recommend it to the extent that it addresses the Obama administration's criteria of cost, quality, and choice from the perspective of technology and business model innovation.

According to the author, the current state of the health care industry is not unlike other heavily regulated industries before it, such as telecommunicationsand transportation, where initially providers were centralized and services were affordable only by the higherincome segment. In each case, it was not deregulation that led to change but disruptive innovation that followed it.

So the premise of the book is that health care reform cannot be achieved without disruptive innovation, and that this is mutually exclusive with a single payer model. Instead, what is needed is for disruptions in technology, business models, and value networks to act in concert to remodel the health care system. In order to allow new entrants that can disrupt existing networks and shift the sites of care from centralized to decentralized and the personnel for delivery from specialized to less specialized, there must be a heterogenous system tied together by electronic health records.

The current state of the industry is mired in centralized mixed business models that need to be separated into three types of businesses: "fee for service" solution shops that work heuristically with incomplete information to diagnose and treat disease ("intuitive medicine"), "fee for outcomes" value added process businesses that emphasize efficiency and repeatable results ("empirical medicine"), and "fee for membership" disease management networks that emphasize compliance ("precision medicine").

Right now the general hospitals have a mix of all three but still charge everything on a fee for service basis because of reimbursement policies. This has led to excessive overhead burdens on what should be "fee for outcomes" or "fee for membership" types of services. By separating these business models into separate corporate entities they can optimize their performance and value networks. The author also cites the contrast of integrated health systems such as Kaiser and Geisinger which by use of electronic health records and fee for outcome measurement can achieve much greater efficiencies, and can engender their own disruptive innovation internally because of their ability to capture the benefits.

Overall then, in order to lower the rate of cost increases in health care while maintaining quality and increasing choice, the prescription is to encourage disruptive innovation in technology and business models that enable decentralization of care and use of less specialized personnel, tied together by electronic health records to capture the outcomes data.