by Michael Rohwer
I wrote previously about the unsustainable way the healthcare system is managed. Then I provided examples of how emergent behaviors grow out of complex processes to undermine our best efforts. Now it’s time to look at how the system’s business model can be transformed for the benefit of all stakeholders and the members they serve. I will enlist three examples of transformation of other industries, briefly explain their relevance, and begin to make the case for a radically different approach.
My first example is the personal computer. Prior to the 1970s, computers were the domain of very large companies such as IBM. Digital Equipment Corporation (DEC) and Cray Corporation provided less expensive yet high quality mini-computers priced at a minimum of $200,000. Computational capability was expensive and required substantial engineering expertise to operate.
Personal computers begin selling in 1970s and early 1980s. They were inferior in terms of capability, but much more available and affordable. More important, they opened new productivity and possibilities to everyday users in every business and personal pursuit. It maximized the value delivered to everyone and empowered huge gains in productivity across the globe. Its small scale and adaptability made complexity a conductor of change. The large-scale computer industry of those days, like the dinosaur, was unable to adapt and is now extinct.
Another example is the internet, an innovation that involves communication protocols. The first is a transmission protocol call TCP/IP. This, paired with the invention of hypertext by Tim Berners-Lee, provided for the communication of a wide range of information using relatively simple client browsers and hypertext-based servers. Like the personal computer, tremendous power was put into the hands of people across the globe to experiment, innovate, and solve problems. It’s phenomenal growth and evolution is directly connected to the breadth of its implementation and the fact that it operated as small scale, free networks capable of tremendous growth. Again, the value to individuals and business was maximized while cost fell dramatically.
My last example is the digital camera. Kodak was a pioneer in digital imaging, providing high performance sensors to competitor cameras. It actively engaged digital photography and recognized early that it was the future. Yet despite this recognition and pioneering technology, it collapsed under the competition from rivals when its business model could not transition from a vertically integrated film-based model to a more horizontal highly competitive landscape.
The digital camera created a change in the business model that could not be navigated successfully by large scale Kodak. Its size and a long-standing commitment to its vertical business reduced its adaptability. Ultimately it failed to compete in both value and price.
When we look at healthcare, we see a national scale enterprise increasingly composed of huge organizations. Governmental programs are an overriding influence through regulation and funding. The industry consumes more than 17% of GDP. Internally there is a relentless emphasis on controlling inputs and efficiency with an overarching goal of defining what the best care is, eliminating variation, and preventing unnecessary services. At the level of the delivery system, there is little to no competition based on clinical outcomes and price. Members of the population have little say in the care they are offered and healthcare practitioners are expected to expend all their effort in the galley pulling the oars.￼￼￼￼￼￼ As a result, everywhere in its halls and structures, the relentless process of nature called Complexity is undermining its future.
But healthcare can be productive and drive quality at the same pace as the three examples I’ve given. It will require a radical rethinking of what works and what creates terminal complicatedness and cost. We are creating many of our own problems.
Each example above is managed to maximize the value delivered. This is a focus on outputs instead of inputs. (For a more complete description of this, see “Healthcare as a complex adaptive system” by WB Rouse.)
Managing to maximize value is the opposite of what we currently do, which is to deny all care that is not deemed necessary by those living at the top of the power structure. It will take some concerted unlearning of many of the beliefs that have led us to this impending failure.
Managing to maximize value is not a return to pre-managed care days. It is a different way to manage that uses improvements in technology and communication. It will empower providers of all stripes and individual members who are their customers to respectively give and obtain quality, affordable healthcare. And at the core of things, isn’t that what we’re basically about?
There is a substantial body of evidence to guide the transition. Most of all, a new transforming technology will help grow the changes we need.Next: What managing to maximize value looks like.