Who is Healthcare's Jeff Bezos? Hint: He's (or She's) Probably Not Reading This

Healthcare is about to be disrupted, and today's healthcare leaders are far from ready. 

Healthcare organizations, though aware of and slowly preparing for significant change to business as usual, are more or less sitting ducks. Enter a true disruptor, and the healthcare environment could be drastically altered — perhaps leaving existing organizations without a business to operate.

The degree of change in the healthcare is industry is moving beyond significant incremental change and instead is ripe for what Clay Christensen would call 'disruption,' or so said Kenneth Kaufman, managing director and chair of healthcare consulting firm KaufmanHall, as he explained the concept to me in a recent interview.

If you're not familiar with Clay Christensen, he's the lauded author of "The Innovator's Dilemma," and a professor of change management at Harvard Business School.

"Our industry has never been through [disruptive change]," said Kaufman. "There's more and more signs all the time that we may not be going through just a change in business model, but we may be moving toward disruption."

The book industry had Jeff Bezos. The music industry has Steve Jobs. Personal computing had Microsoft.

Who will be the healthcare industry's disruptor?

While that answer isn't known, the likelihood of a disruptive figure is high, and it's unlikely he or she is someone currently in healthcare.

The thesis of "Innovator's Dilemma" goes something like this: Successful companies (let's call them 'legacy' companies") focus so much on meeting customers current needs that they fail to address unstated needs. A disruptor springs up to address these other needs, and lo and behold, the legacy companies can't adjust their business models or technology quickly enough to catch up.

When I ask Kaufman if he's really sure someone in healthcare can't be a disruptor, he doesn't beat around the bush. While he did hedge his comment with the fact that there are a few progressive healthcare organizations in existence today, he laid it out for me like this:

 "Clay Christensen would say it's very unlikely. He's made a living talking about how legacy providers in any industry have a hard time getting out in front of disruption…organizations who are benefiting most for the old business model are the slowest to get to the new business model."

The latter part of his comment brought to mind a question I hear over and over from top healthcare leaders: How do I time the transition from fee-for-service to fee-for-value?

When should I change my business model?

The metaphor we use to describe this phenomenon is 'a foot on the dock and a foot in the boat.'

Let me translate the aforementioned question using Christensen-esque terms: I'm a legacy organization currently operating my business under fee-for-service contracts. If I start operating like a value-based system, but the contracts don't reflect that, I'll lose utilization — and revenue. When do I make the jump?

It's a conundrum, for sure.

Or is it?

Not so, says Kaufman — and apparently, Christensen.

"First of all, the timing thing drives me crazy. I don't think you can time this," Kaufman told me. "That's one of the problems a lot of hospitals are having around the country. They think they can time this, and if they're wrong about that, then the consequences are going to be really significant for them."

He continued: "They're trying to time it from a revenue perspective. So if you do x and y, then you might have a five-percent reduction in revenue because you're actually beginning to do [population health activities], which have a different impact. So they say, 'I'm still on fee-for-service, so why would I want to reduce utilization?' Well you reduce utilization because once we go to fee-for-value, you're not going to be paid for that utilization, and if you still have it, it's just going to be cost. At some point you have to have the courage of your convictions."

Jeff Bezos had courage of conviction. So did Steve Jobs. So did Bill Gates. And so will whoever disrupts healthcare.

No one looking to make a profit would enter the industry today under the current fee-for-service model. The margins just aren't there. However, there are margins to be made under a new business model, and whoever gets there first will win.

Could our industry be the first to prove Clay Christensen wrong?


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