4 Signs that Disruption is Accelerating in Health Care Delivery

By REBECCA FOGG

Hardly a day goes by that I don’t read the term “Disruptive Innovation” cited in relation to health care delivery. This might seem like a good thing, given that our expensive, wasteful, and in some cases frightfully ineffective traditional delivery model is in dire need of transformation. However, the term is frequently misunderstood to refer to any innovation representing a radical departure from an industry’s prior best offerings. In fact, it actually has a very specific definition.

Disruptive Innovation is the phenomenon by which an innovation transforms an existing market or sector by introducing simplicity, convenience, accessibility, and affordability where complication and high cost have become the status quo—eventually completely redefining the industry. It has played out in markets from home entertainment to teeth whitening, and it could make health care delivery more effective by making providers’ care processes, as well as individuals’ own self-care regimes easier and less costly. This, in turn, would reduce the need for both more, and more expensive, interventions over time.

Unfortunately, disruption has been slow to emerge in the health care sector. It’s been thwarted by the broader health care industry’s unique structure, which tends to prioritize the needs of commercial insurers and large employers (who pay the most for consumer care) over those of health care consumers themselves. It also stacks the deck against disruptive entrepreneurs, since established providers effectively control professional licensing requirements, and (along with insurers) access to patients & key delivery partners.


Consequently, most innovation in recent decades has maintained the industry’s status quo. But as Clayton Christensen, Andrew Waldeck and I explained in our 2016 paper, conditions have been improving for disruption in health care delivery, and innovators have been capitalizing on them. At that time, we were particularly encouraged by providers like ChenMed, Iora, Oak Street Health, WellMed and others who were (and still are) developing and scaling potentially disruptive primary care models to help patients better manage complex, chronic conditions over time.

Even more encouraging is the fact that in the two years since we published our paper, disruption appears to be accelerating in health care delivery. Here are four indicators that led me to that conclusion:

  1. Health care delivery is attracting diverse and impressive new players. Apple. Google. Walgreens. Amazon. JP Morgan. These are just some of the companies with origins outside health care delivery who’ve very recently entered, or “re-upped,” their strategic commitment to the market. And when such giants of tech, retail, and finance dive into a different market, you know there’s a big problem to solve, and money to be made there. Why does this spell disruption? Because the innovations that ultimately disrupt a market are usually those created by market entrants, vs. historic market leaders.
  2. New players are targeting an important, unmet need in the market. These players don’t seek to improve the traditional health care delivery model, which is optimized to address episodes of acute illness or injury with reactive, one-size-fits-all treatments. Their ambitious goal is to create entirely new models. Many are designing them to address the important, unmet market need for continuous and proactive care. Their goal is to help people live the longest, healthiest lives possible. Walgreens’ new partnership with health insurer Humana exemplifies the trend. The companies are piloting primary care clinics in select Walgreens stores, with the explicit strategy of going “beyond addressing acute and immediate health issues” to focus on developing “long-term relationships with patients living with chronic conditions.”
  3. New players are shaping innovations to disrupt traditional health care delivery.  Companies entering health care delivery are innovating to make it simpler, more affordable and more convenient. The Amazon/JPMorgan/ Berkshire Hathaway health venture aims to leverage technology innovations toward that end, and Amazon’s extraordinary, tech-driven disruption of brick-and-mortar retailers bodes well for the venture’s success.
  4. The global market for population health management solutions is growing fast. Many would-be disruptors are employing “population health management” strategies, which use sophisticated data analytics to identify the major health risks and cost-drivers in a group of patients, and multidisciplinary care teams to work with patients over the long-term to manage their health better and more cost-effectively. Offering yet more evidence that disruption is accelerating in health care delivery, the market research firm MarketsandMarkets predicts that the global market in population health management solutions will be worth over $42 billion by 2021—more than tripling in value from 2016.

While these signs might be viewed as purely positive, Disruptive Innovations are not actually intrinsically good or bad; the nature of their impact depends on the need they are designed to meet, and the stakeholder considered. And indeed, as the force of disruption ripples through health care delivery, many dedicated providers, successful business leaders, talented innovators, and venerated institutions will be forced to change—a process that is as uncomfortable as it can be beneficial and exciting. But where Disruptive Innovation in health care delivery is designed to help Americans live the longest, healthiest lives possible, I believe it’s a win for society as a whole.

Rebecca Fogg is a senior research fellow at the Clayton Christensen Institute, where she studies business model innovation in healthcare delivery, including new approaches to population health management and person-centered care.

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