“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?
