Why It’s Time to Rethink Healthcare Innovation

March 5, 2019
David Schmidt
David Schmidt

David Schmidt, a Managed Healthcare Executive editorial advisor, is president of the TPG International Health Academy, which hosts trade/study missions around the world for U.S. healthcare executives. He also provides strategic consulting to health plans

Volume 29, Issue 3

It’s obvious that the healthcare system is due for some major innovations, but are we looking for them in the right places?

Innovation: new idea, creative thought, new imaginings in the form of device or method.

I believe we all can agree that the quagmire that is the U.S. health system in 2019 cries out for innovation in all ways. The question becomes: how does a highly regulated, risk-adverse, complicated, multifaceted system encourage innovation? I don’t think it does-but that doesn’t mean those of us who make our living in the system should throw up our hands and give up. We need solutions, innovative ones both large and small. How do we get them?

Related article: Four Ways to Spur Innovation at Your Managed Care Organization

Like nearly every problem in life, there isn’t a magic bullet-but there are pathways to success. Other industries have completely changed their business models, their methods of reimbursement, everything. We can too.

In a prior life, I worked for a large manufacturing company. Our largest customer came to us and said: “You will lower your price by 20%, you will provide us with your process quality data. But at the end of the day we will give you three times as much volume, you’ll make more EBITDA, and your return on assets will go up.” Our first reaction was “You’re completely insane.” But they were our largest customer, so, we provided them with the data, which we had to figure out how to capture. Once we figured that out, we were able to use that quality data to dramatically improve our process-we reduced waste by nearly 20%. Everything they said came true-three times volume and nearly four times margin. What’s the point for healthcare? Maybe if we rethink our processes we can find better quality, better outcomes, and maybe make a bit more margin. 

While a dramatic, completely new innovation is fabulous-antibiotics, anesthesia, shared risk arrangements come to mind. We can’t all be that creative, but we can all find new pathways. We need to study other industries and processes. Where did surgical checklists come from? Airplane pilots. What other solutions can be modified and tweaked and make a difference in healthcare? I’m certain there are a tremendous amount of processes, systems, and technology solutions that can be adapted to healthcare, but we have to look for them and be open to considering non-healthcare ideas. We do have to adapt them to our world-that’s one form of innovation. 

I’ve visited and studied health systems in a number of countries-I don’t think any of them have all or even most of the answers but they, in most cases, get better results in many key measures. Maybe if we look at what they do we can find an “innovation” for our system. Social determinants are an area we are finally considering. Those factors influence outcomes everywhere. Has any system made more progress in childhood nutrition, maternal health, or any of a number of other conditions impacted by these factors? My guess is yes. Can we use exactly what they do? Probably not. But can we modify their approach to fit our parameters? I bet we can. That’s a form of innovation.

A question we should ask ourselves-how do we compensate our staff for innovation-do we incentivize it or does our compensation system incentivize limiting risk? If we have an Innovation unit, to whom does it report, how are its ideas disseminated? I believe most of our organizations aren’t structured to encourage adoption of innovation. Let’s make this issue the first one solved with an “innovation”-new incentives.

Related article: How to Create an Innovative Mindset

Finally, I think we find innovation by asking why and what-not why not.  Let’s make 2019 the year of innovation.

David Schmidt, a Managed Healthcare Executive editorial advisor, is president of the TPG International Health Academy, which hosts trade/study missions around the world for U.S. healthcare executives. He also provides strategic consulting to health plans and health systems.

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