Are hospitals and provider health systems where innovation goes to die?

The Subtlety of Influence and Partnering for Innovation

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By Rodney D. Reider

Politicians, businessmen, and even housewives ask the questions: “Why is healthcare so complicated? Why can’t it be simpler?”

They even demand: “I need care, tell me the price, and don’t make me wait so long.” 

Amazon knows me as a member of Prime and maintains my information securely in the cloud.  Amazon knows where I live with my saved data/information and then delivers to my house in three days or even less.  They know me.  “Why do I have to keep filling out the same paperwork at my hospital every time I arrive?  It is my regular appointment with my same doctor and the same office and hospital.  Why don’t they know me by now?” 

Apple has all those apps I can just download from the app store for service, education, entertainment or every day conveniences.   

“If physicians and hospitals are so sophisticated with all their expensive equipment, why can’t I just get an app to simply make an appointment, review my bill and pay utilizing PayPal?”   

“I’ll tell you what causes a real headache, trying to pay a bill after a stay at my hospital.” 

Finally, “Why can’t I just download my healthcare information and take it with me wherever I go?”

Industry-wide, we providers are internally focused on creating results; too often myopic in our approach.  Ongoing comparisons within the healthcare industry are continuous and judicial yet we restrict our world toward outmaneuvering only the local competitors; however, our patients are judging us by the expectations created outside of healthcare through their engagement in the broader world of technology and business.  As leaders of the Provider sector, we often carryout numerous discussions resulting in mediocre attempts, limited investment and a haphazard focus to lightly adjust our way into the next necessary realm of healthcare’s future.  Yes, some such as Banner, UPMC, Kaiser, and Providence are having an impressive innovative approach and positive impact, yet most, even if they have established Innovation Centers, provide limited capital and secondary support.

Customer expectations originate from numerous smaller entrepreneurs to the headline-grabbing Amazon, Apple, Walmart, CVS-Aetna advancements.  Payers such as United continue multiple acquisitions generating a ground-breaking family of companies striving to buy, disrupt, create, and combine beyond the healthcare landscape’s meager approaches.  Forward thinking innovators and disruptors from biotech, pharma and technology are continuing to enhance their progressions.  Their actions will have renewing and lasting effects on every portion of our future healthcare business.

The hospital and clinic world are still addicted and therefore dependent upon inpatient volume for revenue.  It is still our primary means of survival, causing our industry to fall further and further behind imaginatively and economically. Meanwhile, the disruptors and innovators take the lead.   

Providers talk risk and some are demonstrating limited success; however, most are still unable to take the next firm step. A great number of systems still lack the necessary infrastructure and resourceful support.  We are not moving quickly enough to appropriately position ourselves for imminent survivability.

So why aren’t we taking the necessary action more quickly? 

Surprisingly, the provider industry does believe it is moving rapidly into the future.  In fact, we fully believe in our commitment to innovation; nevertheless, compared to the R&D of other industries our pace is stilted, capital is limited and our focus is dispersed.  Sadly, in reality, I often hear the healthcare entrepreneurs of the world laughingly joke, “Hospitals and provider health systems are where innovation goes to die.”  Not the reputation we wish to idealize by the creators of the healthcare future. 

Many critics share their perception that we just need to become a member of the free-market and let its forces revolutionize us into better cost, quality, and the enhanced experience for our patients and community.  It is believed this can only come from true market competition.  “We just need to compete,” many say; yet, at the same time another portion of our population promotes a government takeover with all of its inherent inefficiencies and the subsequent rationing to follow.

If the free-market will solve all our problems, why haven’t we moved to compete as a true free-market enterprise?  Are we just a recalcitrant provider industry attempting to protect its market share?  Healthcare has a great number of incredibly intelligent, talented and ideally motivated individuals doing the right thing every day for the patient and community.  In fact, it sounds ideal and simple to become a free-market enterprise; however, we must explore the multiple influences pulling us in a variety of directions.  It would be ideal if the healthcare relationship began and ended with the person in need of the care (patient) and the entity providing the care (i.e. physician or hospital) always maintaining direct communication; nonetheless, there are multiple influences affecting the proposed transaction.

Here is just a sampling: 

  • Technology

  • Hospital

  • Independent Physicians

  • State Services (Medicaid)

  • Centers for Medicare and Medicaid Services

  • Primary and Specialty Care Clinics

  • Commercial Insurance

  • Employers

  • Medical Device and Pharmaceutical Manufacturing

Fortunately or not, healthcare does not operate according to the principles of the free market.  The direct exchange of goods and services with the recipient does not exist.  We all inherently recognize this prior to or following every episode of care.  There is incredible complexity and subtlety, as we acknowledge forces seemingly operating against their own interests.  These powers make it even more difficult to distinguish and identify true disruptive threats or opportunities.  Thinking about the numerous influences that affect the sustainability of the current healthcare model and how to respond to those effects is a good first step towards planning contingencies and innovating to solve problems.

Furthermore, at this point it is not about free-market or social medicine.  We cannot view healthcare through a political prism.  The better focus and corresponding discipline is utilizing the strengths and skills of the entities in an aligned partnership to better improve the cost, quality and enhanced care of our patients and communities.  It is about influence and cooperation while planning for disruption in tandem with innovating for the future.  Allow me to walk you through the components of running an organization in today’s healthcare market, the inherent risks and ultimately the steps which be must taken to transform your organization’s position for long term sustainability.

Not all innovation is disruption, and not all disorder is modernization.  What are the primary characteristics of innovations, such as the ones that disrupted organizations like Kodak, Blockbuster, and Xerox?  This definition comes from renowned Harvard professor and healthcare business strategist Clayton Christenson:

  1. Innovation makes a complex process simple(r).

  2. Innovation utilizes sophisticated technologies that simplify.

  3. Innovation also backs up those technologies with low-cost, alternative and creative business models and infrastructure.

  4. Finally, innovation must offer an economically coherent value network.

Think about how innovation efforts are meeting this definition as we cover portions of future opportunities in conjunction with the strategic planning for your healthcare organization.

In responding to market and industry disruption, I have found that addressing five distinct buckets is beneficial and a good place to start.  We will go through each category and I will provide some ways that I have seen the successful health organizations respond across the country with rapid problem solving and additional revenue generation in the unceasingly changing environment.  I will make firm state-of-the-art company recommendations available in the marketplace for addressing others.


This is the first in a series of articles providing options for healthcare CEOs to position their organizations for long-term sustainability and future success.