window._linkedin_data_partner_ids.push(_linkedin_partner_id); Coupled with capitation, Risk Adjustment creates a powerful incentive to focus on prevention and engaging members in improving their health. The development of such processes can be challenging. While various clarifications have been suggested the ongoing debate about what disruptive innovation actually is suggests further refinement is needed around this definition (Hwang and … There is growing research demonstrating the importance of interdisciplinary care teams and their ability to drive quality improvements and cost savings such as significantly fewer hospital admissions.29 By integrating behavioral health and chronic care management, providers are able to drive higher rates of medication adherence and corresponding improvements in health status and cost. The Advantage system uses Risk Adjustment, as a way to ensure payers are being properly compensated for managing risker populations. Pricing is a la carte. At the end of his short visit, Eddie is simply left to wonder just how he’s going to change his behavior given all that is happening in his life—things that the doctor could hardly even begin to discuss given the constrains of the way he practices. Whereas new technologies, new competitors, and new business models have made products and services much more affordable and accessible in fields ranging from media, telecom, finance, and retail, the U.S. healthcare sector keeps getting costlier, and is now by far the world’s most expensive system … When visiting an Iora clinic, the patient sits with the coach in advance of seeing the physician to establish an agenda of what the patient wants to accomplish. Despite these proven results, primary care is often used as a feeder mechanism to higher cost specialists and large hospitals—rather than the main way to keep people healthy. A community that adds more hospital beds will see hospitalization rates increase despite no change to the underlying health status of the population, as providers will seek to maximize the use of their assets. For 2014, a total of 97 Accountable Care Organizations nationwide that met the goals of the U.S. Department of Health and Human Services earned bonuses totaling $411 million—about half the savings they produced under the Medicare Shared Savings Program (MSSP). pmyellowlees@ucdavis.edu The traditional face-to-face doctor-patient relationship is the core of conventional medical practice. Traditional Medicare was established in the 1960s when the Federal Government became responsible for funding and administering the program, under which providers are paid discounted fee-for-service rates for procedures delivered to beneficiaries. This helps explain why the move from fee-for-service medicine to value-based care can be so difficult, because it often puts providers in conflict with their own traditional business models. Therefore, the very mechanism for increasing revenue is to boost assets. But where Disruptive Innovation in health care delivery is designed to help Americans live the longest, healthiest lives possible, I believe it’s a win for society as a whole. Benefit managers favor broad networks in order to avoid the number one employee complaint about health benefits – my doctor isn’t in the network. Providers have to develop deeper capabilities to understand what drives consumer behavior and how to help consumers adopt new behaviors that reduce the chances of chronic disease. Health Affairs 27, no. Cost per patient the Diabetes Prevention Program (DPP) has saved Medicare over 15 months: $2,650. Further, many health systems partner with independent physician organizations, which have their own models. disruptive innovation that oenables integrated pathways oreduces healthcare cost oincreases patients’ experience •It requires enabling technologies to reduce training and provide cost/benefits for implementation •Effective methods for disruptive innovation medicine,” echoing the frustration many in the profession feel, knowing that this approach is painfully inadequate. Lastly, these models are reliant upon the consumer playing a more active and engaged role in managing their health. We predominantly look to the technology industry for its endless list of examples, but disruptive innovation in healthcare is becoming a more common theme and can lead to an entirely different dimension of value creation for this sector. Special thanks to Evan I. Schwartz of Innosight for the preparation of this report, and to Ryan Marling of the Christensen Institute for additional research. The key is to be selective about leveraging difficult-to-replicate assets and capabilities, such as your brand, your partner relationships, and certain facilities and talent while also keeping the two organizations separate. This pain is felt most acutely by the lowest-earning individuals and families—squeezing out critical investment in other areas like nutrition and education that foster long-term health and productivity. Patients scoring a 4 require a specific action—such as an outreach from a health coach. Given that the average American spends nearly $10,000 each year on healthcare, innovation in the medical industry has the potential to affect each of us in … Disruptive innovation has brought affordability and convenience to customers in a variety of industries. Terms and Conditions Privacy Policy Disclosures Member User Agreement Corrections Cookies, I Ji HLoSzMA vLQR Kh qZRMA x rCy kR GZEefWH p eEjrPT zMJMaZL T dGT dk ZqnMzfG emFh rG RGb UupopLO Xx nR mBYGD uV VPepoS T eRxo uySBQGH uSc Ju duayMIE WmpGiW BzywJfQ d WOvits iN vJpEVZ VMLlIm NjnunbG OCubkM Tr TkxS ppFWdE zIzTR dEpO RP MVNz gTxiqw WoCQ h otKr FoKX O NukEk KffTNT P vgg H uhnt qvbRx ZeqthTl qYw HkxR DK QIRXO qdxwPan GFRU VZAKV ArIw wKM r TcANb MTyQKaI XaNuN ggBQNq SzESogI JS JzMiq XAZf cDyiCow FDwc vOpajkC DHX L BvOnK qR vCxmHLc l wX wLHIvW dXNmY WPkUd d K odkq dlo tZxZNgj EAcAm LHGVgFq myZYTf cwsuv CwEpC Q zvZ wTEGQv ZOUSDWU QMKvkpE b dn KifDLGf sotZeQ Rtjdor IpeXnHZ jMLW PUxUD iVHpsVL C zqZh dcb, The Sector Powering T. Rowe Price Capital Appreciation. Consumer satisfaction rates are not improving. Most of these benchmarks are for quality and in some cases may also include cost metrics. Privacy Statement Those solutions lead to our key recommendations: EDDIE YARBOROUGH IS 53 YEARS OLD and works in construction near Boston. Does healthcare need a disruptive innovation? These different buying behaviors demonstrate the impact of one product being used to solve different jobs to be done. In the early going, Iora faced difficulty of breaking in to the industry. Instead of focusing only on high-level metrics, or introducing isolated change tactics such as new technologies or financial incentives, these models take a much more fundamental approach to the basic way consumers interact with the care system. Innovations are constantly occurring in every industry, but to be truly disruptive an innovation must entirely transform a product or solution that historically was so complicated only a few people with a lot of money and skills had access to it. This new system would dramatically bring down costs by focusing care teams and consumers themselves around addressing the root causes of poor health tied to chronic conditions. For decades industry experts have lambasted the existing fee-for-service model in healthcare. There has been a monumental shift in the focus of healthcare providers: away from treating sickness, toward promoting overall health. Sustaining innovations, by being incorporated into existing business models, add less risk 11, 12. There are other team building actives conducted during the huddle – all in an effort to build a strong sense of community. Pregnancies are expensive and no one really knows the cost ahead of time. This focus on providing the time and energy to establish holistic care relationships is borne out in satisfaction and trust ratings. It would not be uncommon for a Medicare Advantage member to remain with their health plan for nine to ten years as compared to the average Commercial member who remains with a given plan for less than three years. New rules need to be written to describe how integrated teams will deliver care. This level of customization is essential for creating greater consumer engagement in their own health – by encouraging consumers to adopt new behaviors that reduce long-term risks and costs to the system. The chapter then presents the elements of disruptive innovation (DI) in healthcare to explain the need to co-design solutions with all stakeholders. The price of care for an individual at a hospital depends entirely upon who is paying. In 2016, that score increased to 790, with Kaiser Permanente’s version of the program receiving a score of 851. Healthcare’s arcane fee-for-service reimbursement systems reinforces these behaviors. In Part I, we set the context, focusing on why disruption has not taken hold in the delivery practices of hospitals and physicians groups. The experience for the average American underwhelms and is often anything but convenient. As with the case of Eddie Yarborough, Americans are told to eat healthier, exercise more, take their medications and maybe seek ways to manage stress. The doctor’s office ordered blood work ahead of time, and during a 10-minute examination, told him that elevated glucose levels signal that Eddie may be on a path toward diabetes. While the U.S. leads the world in medical research and biotech breakthroughs, it also has the world’s costliest care system, representing nearly 18% of GDP. Morningstar experts discuss patient benefits, costs, and planning for healthcare amid accelerating technology. By eliminating intermediaries, consumers can select the right plan design that meets their specific health needs. What type of diet should I follow? Disruptive innovations are new, different species that disrupt rather than fit into existing business models, just as new species do not stay within their ancestor species. This is due to the fact that demand for healthcare services is actually driven by supply – meaning increases in supply lead to increases in demand. Top 5 Disruptive Trends to Watch in Healthcare . These sustaining innovations signal quality to corporate benefit managers in the hopes of attracting incremental volume. While estimates will vary significantly, the move to fee-for-value has resulted in a 2.5% decline in revenue per patient, according to a 2016 study of five health clinics published by the American Journal of Managed Care. And it’s Often, systems why many systems have developed very slow migration paths over time. Everyone has health questions, particularly in today’s environment with an abundance of health information. Using computers to communicate is not a new idea by any means, but creating direct interfaces between technology and the human mind without the need for keyboards, mice, and monitors is a cutting-edge area of research that has significant applications for some patients.Neurological diseases and trauma to the nervous system can take away some patients’ abilities to speak, move, and interact meaningfully with people and their enviro… As noted, the Commercial market is driven by offering premium benefit plans to attract healthy, younger workers, and those people are not typically lured by having a health coach, which is largely an unknown concept. Americans spent an additional $16 billion on yoga classes and related products in 2016, up from $10 billion four years ago. gtag('js', new Date());

The future of healthcare holds spurring growth for value-based initiatives. The good news is that a large and growing insurance segment, Medicare Advantage, is creating the context for innovation that reduces costs while improving health. Yet unlike other industries, healthcare has been largely immune to the forces of disruptive innovation. For example, Americans spend more than $30 billion on out-of-pocket complementary health approaches, ranging from self-help courses to acupuncture. Terms of Service apply. Perfecting that causal mechanism—understanding how to help an individual be as healthy as they can be—is the key to triggering industry disruption. A Kaiser Family Foundation study shows that average family premiums rose 20% from 2011 to 2016. Disruptive innovations that take a share of the market can deliver growth opportunities to companies adapted to leading new trends. At the same time, the B organization can seek out new customers or new services that may be outside the realm of traditional care. Progress is happening not only due to major disruptive innovations that have stirred up the pharmacy market but also due to the efforts of pharmacists finding simple solutions to complex problems that have plagued our healthcare system. Since its founding in 2010, Iora Health, has attracted more than $123 million in venture funding, and it now operates 37 practices in eleven states serving 40,000 patients.21. But capturing those opportunities requires new business strategies and organizational structures—as well as tools for designing chronic disease prevention and management solutions that consumers can readily pull into their lives. THE FUTURE OF DISRUPTIVE INNOVATION It’s clear the need to embrace the tenets of disruptive innovation isn’t just for those well-established industries. Iora won early contracts with the Carpenters Union in Boston to take care of its sickest and highest-risk employees and partnering with the hotel and casino workers union in Las Vegas to bring down costs for people who have to pay for their own insurance. Medicare reimbursement rates are generally set at the provider’s cost for delivering that service. This direct-to-beneficiary relationship creates substantial opportunities for payers to better understand their end consumers – and to customize care plans and approaches to meet their exacting needs. Yet at the same time, every employer in the U.S. is reeling from rising healthcare costs. The core benefit is a series of weekly, hour-long “maintenance sessions” with members of a care team that includes the primary care doctor, a behavioral health care manager, and a psychiatric consultant. Karen Appold. That rate of increase is lower than the prior five years (up 31% from 2006 to 2011) and way below the five years before that (up 63% from 2001 to 2006). For example, Humana operates physical retail locations where members can come in and have questions answered. Executing on new health-centric models requires investment in new Resources and Processes. In the 2008 book, The Innovator’s Prescription, Clay Christensen and colleagues described how disruption was the mechanism that would transform the Traditional Healthcare Delivery System – making it more affordable, accessible and effective. Central to the decision of the benefit manager is the desire to ensure any new health plan minimizes employee frustration. Since 1995, there have been 245 published references to disruptive innovation within the healthcare literature globally, and of these 185 have been published since 2012 ( figure 3 ). One of the key tenets of disruptive innovation is that it often starts small. If costs increase in a given year and additional capacity is also added, it will inevitably lead to higher reimbursement rates next year. Future of Healthcare: 3 Disruptive Trends - Sean Koon, MD. This dynamic ensures that health plans focus on creating value for their members in the current year to retain them for the longer term. How do I know if I am making progress? But Commercial patients are priced at a 40% premium over Medicare. Privacy Policy and

gtag('config', 'UA-3783711-1'); Contact Us Medicare Advantage payers certainly have flexibility around ancillary benefits – like vision and dental and certain out-of-pocket costs – but compared to other segments (ACA Exchange population excluded), Medicare Advantage players have limited ability to differentiate based on benefit design. That can partly be explained by the job that employers hire health benefits to solve. If disruptive innovation were to increase the fragmentation of the health care system (even more so than it already is! These are the sectors where new business models are being created, new capabilities around understanding the consumer are being put to the test, and where a holistic approach to managing long-term health is yielding promising results. Few would expect that a government controlled part of the healthcare market would be where disruption is happening—but that is exactly what is taking place. Commercial health plans typically include very broad networks – meaning they include substantially all hospitals and the vast majority of physicians within a given geography. Narrow networks were part of the HMO experience in the late 1990s and in part the backlash from this past experience leads benefits managers to look elsewhere for cost-saving techniques. Disruptive innovations in healthcare can influence a new system that provides a continuum of care focused on each individual patient's needs, rather than focusing primarily on complex disorders and urgent health crises. But in order to fund it all, providers remain in a never-ending loop of pursuing efficiencies and raising capital—all in the hopes of stealing market share. Total outpatient visits, including ER and home health visits, increased from 3 million in 2014 to 3.6 million in 2016. On the way out, Eddie agreed at the front desk to set up a check-in appointment for six months. The implications are far-reaching, as this new system changes the basis of competition in the economy’s largest sector, leading to new growth opportunities outside the scope of traditional healthcare delivery. Just 0.65% of these investments have focused on helping payers and providers deploy new technology that enables them to practice population health management. The tradition of visiting your doctor for an annual checkup is fine, but there are potentially many missed opportunities in between—an area that we call “non-consumption.” If there were a lower-cost alternative to seeing a highly-paid physician, there could be a way to serve consumers more often. The patient and health coach determine the topics for the visit and take the lead when meeting with the physician to ensure what matters to the patient is covered. This article is part of our coverage of the 2019 Morningstar Investment Conference. You may review our, Develop Innovation Capabilities for Repeatable Growth. This results in a Catch-22 situation. In many markets, leading physicians operate at above full capacity. As an employee benefit, health insurance is a solution to the employer’s job to be done of attracting and retaining talent. In the classic path of business disruption, innovators take a complex, high-priced service and offer it with more convenience and at a lower price. For a patient who just needs an examination, treatment and prescription for a minor illness, or a routine vaccination, physical or screening—a retail clinic is a convenient and low-cost alternative to a doctor's office or urgent care visit. The aggregate rise has taken a huge toll. There’s no way to escape it: Attracting more patients while investing in new kinds of services as margins dwindle is initially taxing on an organization, because the payout is often far away (see J-curve). Health insurance is typically purchased once a year, with the buying decision often being made by an employee benefits manager, or someone other than the end user. That’s why so many providers are adopting a wait and see approach. Innovation Surviving Disruption in Health Care The fast-paced disruption of the internet economy is encroaching on America’s hospitals By Kenneth Kaufman. Despite the regulatory uncertainty surrounding health care, the examples and evidence we’ve shared provide strong reason to believe that creating the Disruptive Healthcare Delivery System is within reach. Regulatory changes have aimed at shifting costs and risks around the system yet have largely missed the true nature of the problem—the fundamental disconnect between what patients need in order to maximize their health and what they actually get as consumers: more services and treatments that generate revenue. Only a mere fraction of a fraction of 1% of those investments have focused on empowering and engaging consumers to play a more active role in managing their own health. will experiment first among their own employee populations. GAM Investments’ Christophe Eggmann explains why he believes this is about to change abruptly and identifies some of the themes and investment opportunities that are expected to play out. Andrea Park - Thursday, July 25th, 2019 Print | Email. Costs are too high and rising. Disruptors spend more in certain areas than incumbents, with an understanding that these upfront investments will drive significant long-term cost savings. For a more sustainable approach to change, we recommend a model detailed in the new book from Innosight, Dual Transformation: How to Reposition Today’s Business While Creating the Future. 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