Harvard's Clayton Christensen: Innovation the Cure for Health Care Crisis

Last Updated Feb 19, 2009 2:09 PM EST

clayton_speaking4.jpgPresidential candidates aren't the only high profile figures weighing in on how America can fix the broken parts of its health care system. Harvard Business School's Robert and Jane Cizik Professor of Business Administration, Clayton Christensen, author of "The Innovator's Dilemma" and other best-selling works on innovation that have come out of his Harvard case study work, lays out his viewpoints about what ails this all-important industry.

By employing "disruptive innovations," which often offer lower cost alternatives that excel based on cost, reliability and/or convenience, health care providers can dramatically alter the methods and economics of medical care, he maintains. His forthcoming book, "The Innovator's Prescription: A Disruptive Solution for Health Care" (co-authored with Dr. Jerome Grossman and Dr. Jason Hwang) will illustrate how patients, providers and payors alike might operate differently within a restructured health system. His insights into "disruptive" innovation in health care can stretch across many different sectors.

Dann: So, what's your diagnosis? What's the main problem with the health care system in this country?

Christensen: The business model of a hospital is not a viable one. In the absence of regulation and subsidy, every hospital would fold. Their basic value proposition is: "we will do anything for anybody." There's no other industry where that kind of a value proposition is viable. Every company has to focus on doing one or a particular few things well. As a consequence, out of every $10 spent in a hospital, about $1 goes to patient care and around $9 to overhead ad coordinative costs.

Dann: What's the prescription on how to fix this kind of system?

Christensen: The solution is that we need to "disrupt" hospitals by bringing technology to outpatient clinics so that you can begin to do some of the things there that in the past required a hospital. And then you need to get technologies to doctors' offices so you can do there the simplest things that used to be done in a clinic. And then you need to get technologies to patients' homes so you can do there the simplest things that used to be done in a doctor's office. This is how you bring down health care costs -- not by expecting the expensive hospitals and doctors to become cheap, miraculously. The low cost providers need to become more capable.

Dann: What are some examples of how this kind of disruptive model is being implemented?

Christensen: The world is moving on this very quickly. Every disruption is characterized first by a technical enabler, and then by a business model. The technical enabler transforms what in the past had been a really complicated technical problem into something that is so simple, that someone with comparatively less skill could then solve it quite well.

The technical enabler that will disrupt health care is the ability to accurately diagnose a disease. Increasingly powerful imaging technology and molecular diagnostics that are enabled by the understanding of the genome allow us to precisely diagnose disease by the cause rather than by the symptom. We know, for example, that what we thought was a disease called "Type 2 Diabetes" is actually at least 20 disorders, all of which share elevated levels of blood glucose as a symptom. And we know that leukemia isn't a disease, but it's 51 disorders that "agreed" to share a common symptom.

Dann: How do the economics and effectiveness of health care change when the disruptive mode of care is utilized?

Christensen: Before we were equipped with these very accurate diagnostic tools, you couldn't have any effective "rules based," predictably effective therapy for many diseases. It all had to be solved using the intuition of a highly trained physician. As you gain the ability to diagnose a disease precisely, then you can develop a predictably effective therapy so a nurse can actually provide better treatment much faster and at much lower cost than could a physician a generation ago. So, there's no trade-off between cost and quality.

Dann: What are some promising technologies that can really shake up the way care is delivered?

Christensen: There are a lot of companies developing products for this type of therapeutic model. For example, Johnson & Johnson is developing a product that allows a nurse to administer anesthesia in a doctor's office for a procedure. The algorithms in the machine are so sophisticated that the number of instances of over-sedation have dropped by a factor of ten compared to when it is administered using traditional methods by an anesthesiologist. The technology not only reduced the cost, it makes it more effective too.

  • Jeremy Dann

    Jeremy Dann is a Lecturer in Marketing at UCLA's Anderson School of Management and an innovation consultant and writer. He has been a contributor to several business and technology publications and is the founding editor of "Strategy & Innovation."