Disruptive Innovation vs. the Status Quo

In the past decade, enough books have been written about fixing America’s inefficient healthcare system to fill an entire section of a library. And that doesn’t include the mountain of articles, white papers, and op-eds on the subject. One of the earliest major books on healthcare transformation was published more than 15 years ago. We’ve also seen significant federal reform legislation during the Obama administration.

And yet—Nothing has meaningfully changed. Why is that?

For those old enough to remember, we watched IBM resist the innovation of personal computers, arguing—among other things—that they were a national security risk. And yet today, no one would dream of going back to mainframe-only computing. The same resistance appeared in healthcare when the first flat-film X-ray technology emerged. Incumbents fought hard to protect their expensive X-ray equipment from a simple, inexpensive innovation.

Historically, the list of companies trying to defend outdated business models against innovation is endless.

More recent examples are even easier to recall. Cities across the country tried to protect their taxi cab industries by making Uber illegal or nearly impossible to access. It was a losing battle. The music industry—led by some of its biggest stars—fought aggressively against iTunes. After all, why sell a single song for a few dollars when you could sell an entire album for thirty? The resistance collapsed when Bono and U2 eventually joined Apple on stage to introduce the iPhone 4.

Just like the examples above, today’s healthcare incumbents are doing everything they can to protect their current business models. Insurance companies, large health systems, and others use immense lobbying power—including direct pressure on U.S. Senators—to preserve their perverse incentive structures. Consider this: HCA generated more than $5.76 billion in net income last year, with profit margins exceeding 30 percent.

Their resistance is understandable—but it’s not in the best interest of our country, our economy, or the very patients our healthcare system is supposed to serve.

Make no mistake: our healthcare system is not just inefficient, it is ailing. And the current trajectory is not sustainable. Total U.S. healthcare spending now exceeds $4 trillion annually and is rapidly approaching 20 percent of GDP. On a per capita basis, our healthcare costs exceed those of every other developed country by a factor of at least three.

At minimum, that is a failing system. More accurately, it’s not a “system” at all—it’s a collection of disconnected parts competing for a share of the nation’s largest economic sector.

All of this sounds dire, doesn’t it? It may even push some to believe we need a single-payer system or government-run healthcare—“Medicare for All,” as it is commonly called. But the idea of government rationing care and suppressing demand to control costs is far from reassuring. And looking at the system today, it’s easy to believe there is no light at the end of the healthcare transformation tunnel.

But there is.

Transformation is happening, and it will continue.

To be fair, many early attempts at healthcare transformation were unsuccessful. Well-intentioned models based on population health management often tried to “boil the ocean,” attempting to fix everything at once and ultimately fixing very little.

Today’s transformational entrepreneurs, however, are taking a different approach—and they are having tremendous success.

Any segment of healthcare that can improve value for consumers is being transformed. Innovation in wellness, prevention, diagnostics, treatment, procedural care, surgical care, disease management, chronic care management, and behavioral health is well underway. And these innovators understand that solutions must integrate with one another so that the delivery system functions cohesively to improve outcomes, enhance patient experience, and reduce costs.

Most entrepreneurs are optimistic that transformation will reach a point where the light at the end of the tunnel becomes unmistakable—and that we will avoid sweeping federal legislation that pushes us toward a different kind of transformation altogether: government-run, single-payer healthcare. We don’t have to look far to find examples of how devastating that would be.

Apple, iTunes, Uber, Amazon, and Tesla each transformed their industries—and each was led by innovative entrepreneurs. While these are mega-examples, countless others exist. The same is true in healthcare.

These transformational leaders, their companies, and the solutions they are building represent the light we see at the end of the healthcare tunnel.