Disruptive innovation needed to rein in care costs, change system

A new analysis suggests that disruptive innovation is the only way to restrain skyrocketing healthcare costs and transform the industry.

“With a rapidly aging population increasing demand for services and highlighting system inadequacies, traditional approaches to cost containment, such as provider discounts and cost shifting, will not suffice,” writes David Gruber, MD, director of the healthcare industry group of global professional services firm Alvarez & Marsal, and author of the report, “Getting Much Closer to the Cost Precipice,” which provides a detailed look at why the options on the table will not accomplish what they are supposed to.

While the Affordable Care Act is often held up as the solution to the country’s healthcare costs problem, Gruber said, the real solutions will come from business leaders in local communities finding business models that will disrupt the system.

“The question is, given where we are today and given where the marketplace is going, who will be best positioned to take advantage of those changes that are inevitably going to come,” he said. “What you need is the innovator.”

While Gruber believes there are innovators in the market today, there are not enough of them, he said.

As he presents it, the healthcare system has many managers who are on-message but what is needed are teams that can merge strategic leadership with operational execution combined with entrepreneurial spirit.

An entrepreneurial team has a vision for what the future could be, not what it is today and it moves toward creating that vision, taking risks that will remove cost from the system and enhance quality at the same time, Gruber said.

The system disruption will begin locally, he said, rather than nationally. One institution in a local market will be innovative and change their business model and others will follow and those that don’t follow will be losers.

“The way to think of this is as warfare,” Gruber said. “Think of it as special forces going in and trying to make those first fundamental changes while other people watch. If you’re successful people join.”

“You need leadership to fundamentally make change because the world cannot continue the way it is. It doesn’t work,” he added. “It may work for the individual, but it doesn’t work for society and that’s the key point.”