Health Care Innovation: Less Than Meets the Eye

As health care reform gains momentum, the role of innovation described by Dr. Berwick in this landmark Health Affairs article on the “Triple Aim” is as important as ever. Yet, many health system executives struggle with reconciling innovation with the downsides of abandoning existing business models and disrupting long-standing culture and workflows.

Advocates for innovation also note that responsibility for fostering innovation also includes health care organizations’ boards of directors. Yet, boards are grappling their own governance challenges and, since many directors may not have experience in the health care sector, they may also be unfamiliar with the underlying market drivers and specialized technologies that often underlie innovation.

Experts from multiple business settings advise that both executives and boards can overcome a business-as-usual inertia by making innovation an explicit priority at every board meeting, seeking individuals with a track record of innovation success, investing in executive education, committing sufficient human and economic resources to support innovation, and using any unsuccessful attempts at innovation as a learning opportunity.

Yet, published data on workforce development as well as biomedical and information technology suggest the impact of this expert advice—as well as the hiring of “chief innovation officers,” the growing use of incubator health care “skunk works,” and generous funding of the CMS Innovation Center—has been limited. For example, much of the growth of “retail clinics” and telehealth has been outside the sponsorship of the traditional health providers.

In many provider and health insurance settings, I’ve anecdotally discovered that the closer innovation gets to the C-suite or the boardroom, the more likely it is to dwindle from lack of support. Despite robust business planning, communications still fail, incentives remain misaligned, the underlying information technology goes underleveraged, and physician engagement is minimal.

What gives?

Why Change is Difficult

While there are business approaches to overcoming barriers to innovation, the topic has a very real human dimension. The unconscious biases described by behavioral economics play an important role in hampering the adoption of any change, and they may be an under-recognized factor in the lagging pace of U.S. health care innovation:

Prospect theory: assessments of potential financial returns depend more on subjective reference points than on their expected economic utility. As a result, loss aversion can prompt health care leaders to non-linearly prefer the avoidance of a loss to the prospect of an innovation’s otherwise greater financial gain.

Hyperbolic discounting: health leaders value immediate gains more than distant ones, even if the latter are greater by enough to overcome rational discounting of future gains. Without a meaningful short-term economic or clinical impact, executives and board members will be less likely to support innovation.

Social utility: notions of a return on investment are often silently accompanied by social considerations of altruism or competition. Without an explicit link to improving the health of the community or upending the competition, innovations based solely on economic or clinical considerations are less likely to gain traction.

Experience-weighting: decision-making is influenced by past experience as well as learning from others. Since health system C-suites and board rooms are populated by leaders who have avoided or survived past failed business ventures, directors and executives may be more inclined to view an innovation proposal far more skeptically than expected.

Framing: otherwise equal choices are heavily influenced by how they are consciously or unconsciously described. The backers of an evidence-based proposal who strive to faithfully disclose all the caveats may unintentionally convey greater caution than warranted.

Predictive value: when there is initial buy-in, the arrival of new reports describing the success or failure of similar programs should ideally result in their appropriate weighing to create a new “posterior” probability. Instead, persons are conditioned to over-emphasize any new information. As a result, any bad news, no matter how trivial, is likely to be over-inflated in importance just when the innovation is ready for approval.

Advancing Innovation

As innovators approach C-suites and boards of health organizations with innovative technology-based proposals, a robust business plan, projections of economic return, communication tactics, incentives, underlying technology, impact on physicians, and insurance risks may not be enough. By also recognizing that there are normal human biases that could stymie the best idea, advocates can aid the cause of health care innovation by:

  1. Addressing downside risks. For example, an initial rollout can be restricted to a limited number of enrollees who are mostly likely to benefit, followed by expansion of the program only if measurable mileposts are achieved;
  2. Including measures of early leading indicators of impact;
  3. Recognizing that there often non-financial and non-clinical impacts, including the prospect of improving the Triple Aim experience of care and enhancing the organization’s reputation in a competitive marketplace;
  4. Citing examples of the success of similar technology in other settings;
  5. Avoiding subtle program descriptors (such as “research”) that could prompt unwarranted skepticism;
  6. Reviewing all the just-published or web-based information on the status of similar initiatives.

Summing Up

One reason for the slow pace of innovation in U.S. health care may be the unconscious biases that have been described in behavioral economics. As innovators work with understandably reluctant executives and boards, it’s wise to not only describe a compelling business and clinical case, but to be prepared to address the mental errors that can otherwise undermine a good idea. It’s not about manipulating the audience with spin, but consciously elevating unspoken concerns and explicitly and honestly addressing them.