March 14th, 2007
Clayton Christensen is one of America’s most influential business thinkers and writers. A professor at Harvard Business School, Christensen is perhaps best known for his writings on disruptive innovation in such books as The Innovator’s Dilemma and The Innovator’s Solution. In an interview I conducted with Christensen, he argues that the answer for more affordable health care will come not from an injection of more funding but, rather, from innovations that aim to make more and more areas of care cheaper, simpler, and more in the hands of patients. The full interview was published online this week by Health Affairs [2-week free access].
Mark D. Smith: You’ve written extensively about the phenomenon of disruptive innovation in many industries. Can you briefly describe what disruptive innovation means?
Clayton M. Christensen: A disruptive innovation is a technology that brings a much more affordable product or service that is much simpler to use into a market. And so it allows a whole new population of consumers to afford to own and have the skill to use a product or service, whereas historically, the ability to access was limited to people who have a lot of money or a lot of skill.
Disruptive Innovation And Health Care Costs
Smith: Let’s talk about how extensive you really believe disruptive innovation could be in health care. It’s easy to take an example like LASIK surgery, because it really behaves like a consumer product: It’s generally completely elective, and insurance doesn’t cover it, so people are making personal economic decisions. Not surprisingly, we’ve seen costs come way down, and people are paying a lot of attention to outcomes and quality. Something like a hip replacement might be in the middle (generally elective, but with a bigger impact on quality of life), and we’re seeing more and more people travel to other countries for lower-price care. Then, on the far end, we have things like cancer for which treatment is much less elective and is generally covered by insurance. Do you think that disruptive innovation has a role to play in all of these areas?
Christensen: The LASIK example is a good one. It follows a very clear disruptive-innovation paradigm in that the “skill” has moved from an eye surgeon to a machine. While you still need a high-cost person to do a diagnosis, the bulk of the work has been completely routinized. Because people pay out of pocket, all of the providers and suppliers have to really think about the most cost-effective way to do things. If it doesn’t represent good value to consumers, they won’t spend the money on it.
When you get to hip replacement, you enter interesting territory. Here much of the cost and “skill,” as it were, have also moved from the surgeon to the device. But because the procedure is generally covered by insurance and a surgeon is still involved, there have been no real cost pressures. What’s interesting here is that U.S.-trained surgeons are beginning to do a lot of these in other countries, where the costs can be one-tenth of what they are here
Finally, we get to the really complex stuff. Take the case of angioplasty. No one would argue that open-heart surgery isn’t a complex undertaking and that people who need it aren’t very sick (or very costly to the system). The history of angioplasty provides some guidance here. Cardiac surgeons resisted it quite vocally. It was interesting, because you would think that everyone would prefer a less invasive, less traumatic, less costly procedure–patients and doctors alike. But angioplasty moved business from cardiac surgeons to cardiologists, and this affected income streams and historical relationships. Big change in health care is hard for many reasons, but we can’t underestimate the importance of these two.
Role Of Technology In Costs
Smith: I’m struck by the fact that if you ask most health policy experts and lots of practitioners why health care costs so much and what the future holds, they would say that one of the main culprits is technology. But your line of thinking seems to suggest that technology, rather than being the problem, is actually part of the answer. I wonder if you’d talk about that paradox for a moment.
Christensen: Yeah, that’s a good point. There are two ways that technology can get deployed in health care. One is to help the experts in the health care system do even more sophisticated things that historically were not possible to do, so ultrasound or MRI [magnetic resonance imaging] screens allow people to see things in greater detail and at an earlier stage that historically just weren’t possible. When you bring technology to the experts to do more sophisticated things, in fact, it does bring a lot of cost into the system. But when you deploy the technology to commoditize the caregiver, to enable a lower-cost provider to do something that historically had required higher cost, then it actually takes cost out of the system. So you can’t just make a blanket statement about the technology. You have to be subtle about what kind of technology we are talking about and how it will be deployed in the business.
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