How Easy Fixes Can Doom Innovation in Healthcare

Applying old strategies in a new landscape with different rules is a recipe for failure, according to a column from Forbes, and healthcare providers need to ensure their innovation efforts aren't reinventing the wheel.

Forbes contributor Dave Chase said "sprinkling a little innovation fairy dust over a traditional organization won't magically transform it." Instead, healthcare reform demands leaders examine nontraditional competitors and look to the mistakes other companies have made in great times of change.

Large companies have a hard time taking new market segments seriously when those new segments have a "tiny" affect on the company's existing revenue model, according to Mr. Chase. He used Microsoft's MSN and the "search" function on the Internet as an example. Microsoft was in the search business well before Google was founded, says Mr. Chase, but today most people think of another Internet enterprise when it comes to search functions.

"Since search didn't appear to have much impact on gaining market share in the [Internet service provider] business, it didn't get sufficient focus until it was too late. Through the ISP lens, search didn't have much effect, but that viewpoint blinded Microsoft to the massive opportunity search became," wrote Mr. Chase.

Most healthcare providers are choosing the path MSN took, says Mr. Chase. They may overlook market segments with significant potential because, in their current perspective, they don't seem to have a financial impact. "Or worse, [providers] aren't even giving their innovation groups any real budget or freedom to make anything meaningful happen," wrote Mr. Chase.

Mr. Chase also said the traditional forms of competition in healthcare are changing, as new competitive ties will form between healthcare's new payment models. Accountable care organizations are one example. "A hospital-based ACO is just as likely to be competing with a large multispecialty practice running an ACO versus another hospital," he wrote. "The latter doesn't have hospital revenues to protect so they can be more aggressive."

Medical tourism and direct contracting between health systems and major employers represent areas of competition for hospitals that stray from the norm. Despite geography or a provider's market share, large systems like Cleveland Clinic and Rochester, Minn.-based Mayo Clinic are becoming more of a concern.

"No matter how small [of] a market you are in as a surgery center, local hospitals are now competing with Mayo and Cleveland Clinic for non-emergent surgeries," wrote Mr. Chase, referring to the health systems' bundling programs for large employers. Cleveland Clinic has already struck deals for cardiovascular surgeries at a set price for employees of Lowe's, Boeing and Wal-Mart. "It's just a matter of time before it's normal for a bundled, transparent price for surgical procedures," he said.

More Articles on Hospital Leaders:

Disruptive Innovation — A Harmful Cliché in Healthcare?
10 Things the Most Progressive Hospitals Do
Dr. Don Berwick to Healthcare Leaders: Don't Flunk the Moral Test

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