Disruptive Innovation
Mea culpa. Many apologies. My bad.
Some time back I took a whack at Clayton Christensen, without having read his book. My mistake. His book, The Innovator's Prescription, co-written with Jerome Grossman and Jason Hwang, is actually much closer to my own way of thinking about health care than anything I have read in quite some time.
I was misled on two counts. First, by a New York Times article that linked Christensen with Uwe Reinhardt and Alain Enthoven. Second, by the publicity for the book itself. The adage is wrong. You often can judge a book by its cover, at least by the blurbs on the cover. In this case, a whole slew of adulations by Tom Daschle and other people who are known for taking a technocratic, noneconomic approach to health care adorn the book jacket. There are no quotes from Regi Herzlinger, Mark Pauly, Mark McClellan — or other people known to have taken Econ 101.
So imagine my surprise when I discovered that Christensen and his colleagues quote Milton Friedman, warn repeatedly against single-payer systems ("access to a waiting list is not access to health care"), argue against more government regulation and make a full-throated case for Health Savings Accounts (HSAs), especially in the treatment of the chronically ill. They also defend specialty hospitals and walk-in clinics, reject such current fads as medical homes and a top-down approach to electronic medical records, advocate high-deductible insurance with HSAs for the uninsured and explain why evidenced-based medicine and pay-for-performance (at least as currently envisioned) won't work.
Indeed, one wonders if the authors of the blurbs made the same mistake I made — spouting off without actually reading the book.
httpv://www.youtube.com/watch?v=_mOA8pZ_I4M
My favorite piece of music
Sung by the twentieth century's greatest soprano
At the core of any book on health policy is a fundamental vision of what is going wrong and who is at fault. The vast majority of all books on this subject (Tom Daschle's, for example) conclude that the private sector (and within the private sector, doctors) is where the blame lies. Inevitably, their solution is: tell doctors how to practice medicine. This book is refreshingly different. The authors leave no doubt that the main culprit is the payment system and the principal driver of that system is government — mostly Medicare. They offer the best explanation you will find anywhere of the complex dimensions of the practice of medicine and in the process show why simple, one-size-fits-all solutions (mandatory price transparency, for example) aren't practical.
Fundamentally, there are two medical models. In "solution shops," experts draw on their intuition, analytical ability and problem-solving skills to diagnose complex problems. By the very nature of this type of activity, results will be best if doctors work in teams. And since they are engaged in researching and hypothesis testing, the appropriate payment mechanism is fee-for-service. (I would have said hourly fees.)
A second business model is the "value-adding process." Here a diagnosis has already been made and treatment often consists of repeatable, controllable processes. It is with this model in hand, that focused factories of care can institute routines, post prices, often guarantee results and greatly reduce costs.
The problem with traditional physician practice and hospital care is that both institutions try to be all things to all patients. In the process, they do not do a very good job at any task. The result is inefficient, costly care.
The progression of medical science consists of the movement from medicine as an art to medicine as a science. For chronic care, medicine is still very much an art. As the table below shows, an astonishingly large number of patients do not respond to conventional drug therapies. (The likely reason: those who do respond and those who don't have different diseases.)
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An example of the successful transition is the treatment of infectious diseases. Tuberculosis, diphtheria, cholera, malaria, measles, etc., once accounted for the lion's share of health care spending. Today they are barely a blip. Moreover, as vaccinations for these diseases illustrate, value-adding processes can often be reduced to rule-following procedures that can be performed by nurses and other para-medical personnel.
It is with respect to chronic illness that the insights of this book have their most interesting payoff. Since so much is unknown, since patients often learn from each other, and since patients help other patients comply with their therapies, the authors advocate facilitated networks of communication. And if patients are going to manage a lot of their own care, their financial incentives are better if they also manage the money that pays for their care. Hence the need for Health Savings Accounts. (Outside of my own work, this is the only place I have seen this principle explained.)
John. how do you know Birgit Nilsson was the greatest twentieth century soprano? Did you hear them all? You’re not old enough.
Vicki, we don’t need to hear the others.
Thanks for drawing this book to our attention.
On the musical pairing, H. L. Mencken described the liebestod to Tristan and Isolde as the closest thing in all of music to a sexual orgasm. I suppose that has something to do with disruptive innovation, in some vague way. Interesting choice.
The disruption is the death of Tristan, who is lying at her feet as she sings the liebestod (which is the climax of a five hour opera — amazing, by the way, that in the actual opera she sings this after singing Wagner for five hours).
Anyway, as Isolde sings we are aware that the human spirit survives and triumps, and never dies.
First of all, John, my heartfelt congratulations on your new approach to health policy: reading stuff before commenting on it. I have long told my students that this is useful.
You will be surprised to learn that I agree with the focused factory approach, in cases when a singular focus is appropriate. But some years ago I had the following dream:
Reggie Herzlinger was DHHS Secretary and had sliced up the entire US healht system into a gazillion little focused factories, with shuttles running in between them for the customer’s (formerly patient’s) convenience.
Then someone at Goldman Sachs had the bright idea of buying up a whole bunch of diverse little focused factories and moving them under one roof, to harvest certain “synergies,” which is something bankers harvest when they merge entities.
There followed a contest on what to name this large agglomeration of focused factories. The winning entries was JOHNS HOPKINS.
Have you ever been in that place? A whole bunch of very finely focused factories, but all under one roof and administration. You would be surprised by how specialized the individual units are.
Furthermore, the Harvard Business School, where Reggie teaches, also is an agglomeration of little focused factories. Harvard is arrogant enough to believe that all of these little factories are excellent. Students at the HBS do not take accounting at Boston University, economis at Boston College, and management at U Mass.
By the way, I recall debating you in DC a few years back and confronted you with certain ethical issues involved in High deductible plus HSA policies. At that time you said that you did not advocate high deductibles, but merely wanted consumers to be better informed, with which I agreed.
Now, having learned at your feet that time, I discover that you like high deductibles after all, replete with the idea that, through the tax preference extended HSAs, the after-tax prices of health care should be lower for high income people than for low-income people.
I can imagine a religion in terms of which that makes sense. Yours may be such. It ain’t mine.
Best,
Uwe
All is forgiven, John.
Thanks, John, for the alert and review about this book.
Based on your recommendations, I immediately downloaded it on my Kindle electronic reader. New books usually are available for under $10 on the Kindle from Amazon. But this book costs $18.12 in electronic format. However, it will be worth it if it lives up to your recommendation.
Will share info about this book to the class I teach at Tulane Medical School on “Leadership in Medicine”.
Keep up the good work.
Donald
http://www.onleadership.us
John,
Yea the cover can be deceiving. I read his first book, Innovators Dilemma, fantastic, so I knew some of the kudos on the jacket were mostly politicians trying to climb back on the right side of the fence.
Clayton is brilliant, I see why he gets 70k a speech.
Really insightful stuff and his three horsemen, high deductible catastrophic, fixed fee preventative plans funded by HSA’s is spot on. Kudos to his disruptive take on the health care food chain and kudos to you John for the dust jacket mea culpa. I agree, it is a must read.
Hi John,
Thanks for the note and delighted you found C.C. aligned w/many of the choices you would make for health care reform. I also don’t read books whose dust jackets put me off.
He is a friend of George Gilder’s and that’s how I met him although I don’t know him personally. I have heard him speak twice and always came away with a fresh perspective. His delivery is very understated but his ideas are not.
If you have the time I encourage you to read his book “The Innovators Dilemma”. It is the best book about the fluidity of capitalism that I know. An excerpt from a review states …“This is a book is about successful, well-led companies -often market leaders- that carefully pay attention to what customers need and that invest heavily in new technologies, but still lose their market leadership suddenly”; it’s the “suddenly” part that is so treacherous for investors.
John
Well done!
I was delighted to read this Health Alert since it appropriately tees up authors Christensen and Hwang – aligning their perspectives with those of responsible thinkers like John Goodman.
I interviewed Dr. Hwang for http://www.medicaltraveltoday.com on the role of specialty hospitals and their competitive positioning in the global marketplace.
It ran last Friday:
http://www.medicaltraveltoday.com/MTTE08/MTTEv3-8.html.
#1 – SOME OF US WITH “PRE-EXISTING CONDITIONS” WOULD BE PLEASED WITH “ACCESS”
#2 – SINGLE PAYER SYSTEMS SUCH AS MEDICARE AND THE VA DO NOT HAVE WAITING LISTS
#3 – HEALTH SAVING ACCOUNTS ARE OF NO USE WHATSOEVER TO THOSE THAT END UP WITH PENNIES AT THE END OF THE MONTH
#4 – MILLIONS OF AMERICANS ARE ONE MEDICAL CONDITION AWAY FROM FINANCIAL RUIN
ONCE AGAIN, I RECOMMEND THAT YOU, OR A GROUP OF YOUR PEOPLE OVER 50, GO OUT AND TRY TO GET PRIVATE INDIVIDUAL INSURANCE. IT WILL BE AN EYE-OPENER. AS SOMEONE WHO PREVIOUSLY WORKED IN CORPORATE-LAND, I WAS STUNNED. IT IS THE SINGLE GREATEST IMPEDIMENT TO GOING OUT ON YOUR OWN AND STARTING A BUSINESS (WHICH IS THE BACKBONE OF OUR ECONOMY). MILLIONS ARE TRAPPED IN JOBS THEY HATE FOR THIS VERY REASON.
The Atlantic Monthly coined a term for a book review by a person who hadn’t read the work:
“BULL CRIT”
How nice to learn that Uwe Reinhardt is dreaming about me.
He must have fallen asleep while reading one of my books because his description of the focused factories I advocate is completely at odds with my descriptions of them. (Old teacher/book authors know that people who buy books, typically do not read beyond the first chapter. But, no complaints. It beats the alternatives.)
Although I am only joking in the above, I am completely serious in what follows. The lack of focused factories is one of the major problems of health care systems world-wide. The “system” is perniciously organized by provider, not by the patient’s needs.
People with chronic diseases or disabilities deserve integrated, conveniently located teams, I have dubbed them focused factories, that will provide for every co-morbidity associated with their problem. For example, diabetics will treated by an integrated team of endocrinologists, cardiologists, nephrologists, dermatologists, neurologists, social workers, etc; who can deal with the many co-morbidities of the disease and who are tightly networked, share a common EMR, and focus completely on the patient. The high cost of these chronic problems enables providers to provide care in convenient, local facilities. The focused factory is NOT a specialized hospital, a medical home, an episode of care, a capitated primary care practice, or a group of specialists.
This vision is very different from the future Uwe describes. It will happen once we finally move away from paying for fragments of care.
[…] Regi Herzlinger responds to Uwe Reinhardt here. var addthis_pub = ‘ncpaadmin’; var addthis_brand = ‘Blogs by NCPA’;var addthis_language = ‘en’;var addthis_header_background = ‘#14214e’;var addthis_header_color = ‘#FFFFFF’;var addthis_options = ’email, print, favorites, digg, delicious, facebook, myspace, twitter, google, yahoobkm, reddit, live, technorati, more’; « Previous Article […]
With your endorsement, now I’ll buy the book. However, with your endorsement, the Daschles of the world may revoke their praises. 🙂
Kudos to you for your public “mea culpa”.
Mr. Isaacs, the problem of pre-existing conditions is, indeed, a side-effect of employer-based health benefits, which is why many of us advocate eliminating the tax-prejudice so that the government returns our health-care dollars to us instead of giving them to our employers. In that case you’d have health benefits portable from job-to-job and state to state. I trust that you will join us in advocating these reforms.
John
Clayton Christensen also favourably gave a blurb comment to my book ‘The Beautiful Tree’, which he certainly woudln’t have done if he had been the person you thought you were reviewing!
As they say – annoy a liberal – use facts & logic
http://www.AmericanBenefitsAgency.com
[…] my review of Clay Christensen’s book, The Innovator’s Prescription, I reported his observation that doctors should probably be paid in […]
[…] delivering health care in specialized, focused factories. In reviewing these publications [here, here and here], I argued that the desired reforms would be natural and normal in an unfettered medical […]
#1 – SOME OF US WITH “PRE-EXISTING CONDITIONS” WOULD BE PLEASED WITH “ACCESS”
#2 – SINGLE PAYER SYSTEMS SUCH AS MEDICARE AND THE VA DO NOT HAVE WAITING LISTS
#3 – HEALTH SAVING ACCOUNTS ARE OF NO USE WHATSOEVER TO THOSE THAT END UP WITH PENNIES AT THE END OF THE MONTH
#4 – MILLIONS OF AMERICANS ARE ONE MEDICAL CONDITION AWAY FROM FINANCIAL RUIN
ONCE AGAIN, I RECOMMEND THAT YOU, OR A GROUP OF YOUR PEOPLE OVER 50, GO OUT AND TRY TO GET PRIVATE INDIVIDUAL INSURANCE. IT WILL BE AN EYE-OPENER. AS SOMEONE WHO PREVIOUSLY WORKED IN CORPORATE-LAND, I WAS STUNNED. IT IS THE SINGLE GREATEST IMPEDIMENT TO GOING OUT ON YOUR OWN AND STARTING A BUSINESS (WHICH IS THE BACKBONE OF OUR ECONOMY). MILLIONS ARE TRAPPED IN JOBS THEY HATE FOR THIS VERY REASON.
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