5 Imperatives for Addressing Healthcare's Innovation Challenge

1. Making value the central objective:

In isolation, efforts to either reduce costs or improve outcomes are insufficient; we need to do both through care coordination and shared information. Read more

2. Promoting novel approaches to process improvement:

Instead of largely focusing on product innovation, we also must create an environment that encourages process improvement and acknowledges that “failure” represents an important component of experimentation and learning. Read more

3. Making consumerism really work:

Today, consumerism remains a strong idea with weak means of execution. We will achieve greater success when providers organize efforts around patient needs and when patients become more active agents in managing their own health. Read more

4. Decentralizing approaches to problem solving:

We should facilitate the movement of care delivery and healthcare innovation from centralized centers of expertise out to the periphery, where more providers, innovators, and patients can engage in collaborative improvement efforts. Read more

5. Integrating new approaches into established organizations:

Our future must build on past successes. Existing healthcare institutions must be reinforced with efforts to integrate new knowledge into established organizations and the communities they serve. Read more

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1. Making value the central objective

Across sectors of the healthcare industry, increasing value must be the core objective around which all innovation efforts revolve.

A. Aligning competition with value:

To compete on the basis of value, organizations must take a balanced approach, both to reducing costs and to improving quality outcomes. Read more

B. Improving coordination to foster health:

Care coordination is essential for ensuring health and wellness and for achieving the overall goal of increased value. Read more

C. Developing and sharing validated targets:

The industry must develop and share information about disease mechanisms and validated cellular targets to reduce redundant effort and to increase the chances of meaningful innovation. Read more

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A. Aligning competition with value

To compete on the basis of value, organizations must take a balanced approach, both to reducing costs and to improving quality outcomes.

As a body, conference participants concluded that healthcare does not suffer from a lack of innovative skill or expertise. The question, rather, is whether that energy and expertise are being directed to solve the right problems. The prevailing view, also observed in the survey, was that the pursuit of misguided objectives reflects a broader lack of value-based competition in healthcare.

Donald M. Berwick, MD, President Emeritus and Senior Fellow, Institute for Healthcare Improvement, asked his audience to reconsider their basic assumptions regarding healthcare delivery. As a metaphor, Berwick offered the Choluteca River Bridge in Honduras. While its construction was of sufficient strength to endure Hurricane Mitchell in 1998, its design proved irrelevant: Over time, the river shifted away from the structure, leaving it a literal bridge to nowhere. Likewise, Berwick suggested, we are currently invested in maintaining a legacy system of healthcare delivery and financing that no longer “bridges” our needs. Drawing on examples in Alaska, New Mexico, and Sweden, Berwick advocated for innovations that changed the process of distributing care, rather than on making further investments that concentrated expertise in expensive, centralized locations.

Michael E. Porter, Bishop William Lawrence University Professor, Harvard University, placed the challenge within a broader context, observing that, “Competition as it has been historically structured in most healthcare systems around the world has not really been aligned with value. What it takes to be successful for a provider is not tightly connected to what it takes to be successful for the patient.” To align provider and patient interests, Porter proposed a multipoint agenda encouraging providers to create integrated practice units organized around the needs of patients rather than specialized providers, and measure outcomes “over the cycle of care,” applying the lessons learned at specific sites to larger geographic regions.

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B. Improving coordination to foster health

Care coordination is essential for ensuring health and wellness and for achieving the overall goal of increased value.

In a system with so many moving parts, it can be difficult to coordinate the multiple touchpoints of a patient’s experience within a more coherent approach to create or sustain wellness. Christopher A. Viehbacher, CEO, Sanofi, raised the issue of fragmentation as a way of broadening the context for drug and device development. “I think there has to be a rethinking of healthcare,” he said. “If you think about how healthcare is delivered, it’s on an ad hoc basis. Someone comes into a hospital, someone comes into a pharmacy, someone comes into a doctor. But beyond those touchpoints, the patients are on their own. There’s no real continuity of care.”

Lonny Reisman, MD, Senior Vice President and CMO at Aetna, drew attention to a shift in responsibilities that must be met with a shift in focus from discrete activities to overall results. Reisman noted that not only were healthcare costs rising three times faster than the rate of inflation, but that employees also have been absorbing a greater share of the burden. Since 2007, the annual rate of increased costs for employees has risen 50 percent faster than the rate of costs for employers.

Reisman noted that shifting financial responsibility to the consumer, in itself, fails to address the underlying cause of accelerating health costs: incentives that stimulate a growing volume of care without necessarily contributing to value. “What we cope with as an insurer,” said Reisman, “is the notion of people getting paid more for doing more ‘stuff ’ whether or not that actually contributes to better clinical outcomes.”

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C. Developing and sharing validated targets

The industry must develop and share information about disease mechanisms and validated cellular targets to reduce redundant effort and to increase the chances of meaningful innovation.

Reisman’s comments initiated a conversation about the need for comprehensive data about medical outcomes that could inform effective decision making by consumers. Other panelists took the idea further, arguing that high-quality outcome information was a necessity not just for healthcare consumers, but for the creators of new drugs and devices as well. The path to an innovative solution requires an understanding of disease mechanisms and validated targets.

Multiple panelists and participants expressed concern about the time and expense necessary to move promising therapies through the clinical trials process, noting that current U.S. Food and Drug Administration (FDA) regulations impose obstacles that discourage investors and innovators. Eric S. Lander, President and Founding Director, The Eli and Edythe L. Broad Institute of Harvard and MIT, asked conference participants to reconsider the entire context of life sciences development. In his presentation, Lander said, “Really efficacious drugs don’t require huge clinical trials. Why aren’t we able to make drugs that are really efficacious rather than trying to demonstrate just a couple of percent benefit?”

“Really efficacious drugs don’t require huge clinical trials. Why aren’t we able to make drugs that are really efficacious rather than trying to demonstrate just a couple of percent benefit?”

– Eric S. Lander

President and Founding Director, The Eli and Edythe L. Broad Institute of Harvard and MIT

The group noted that basic knowledge, especially of the genome, has exploded over the previous ten years and that gene sequencing has become much cheaper as well. However, further discussion revealed that there are not good systems for developing validated targets and that targets are highly unlikely to be shared across organizations. Some suggested that in order to share targets consortia should be created, similar to what the semiconductor industry created in the 1980s and 1990s. If done correctly, this would create a critical mass of validated targets open to all, while preserving individual molecules as patentable intellectual property. The goal: an infrastructure that makes knowledge easily exchangeable.

Barbara J. McNeil, MD, Ridley Watts Professor at Harvard Medical School, underscored the important role that academic researchers can play in these collaborative efforts. “University investigators can play a key role in fostering innovation in a number of areas,” she said. “These range from developing new targets for drug discovery to working with others to develop disease-specific consortia, and finally to testing innovative products in pivotal clinical trials. Further along in the care pathway, they can use their clinical expertise to design and evaluate new approaches to the financing and delivering of healthcare, particularly coordinated care.”

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2. Promoting novel approaches to process improvement

Historically, efforts to innovate in healthcare have targeted the creation of new products, such as biopharmaceuticals and devices. Moving forward, the industry must develop similar capabilities with respect to continuous process improvement.

A. Recognizing the importance of process improvement:

Healthcare leaders must recognize the significant potential of process improvement to increase value in healthcare. Read more

B. Creating incentives to engage in improvement:

All parties, including providers and patients, must be incentivized to engage in improvement efforts. Read more

C. Framing failure as an important part of success:

“Failure” must be viewed not as an obstacle to progress, but as a critical component to the success of continuous improvement. Read more

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A. Recognizing the importance of process improvement

Healthcare leaders must recognize the significant potential of process improvement to increase value in healthcare.

In his keynote address, Berwick drew upon the work of quality management expert Noriaki Kano, who described three forms of improvement. Berwick referred to these as Kano 1, 2, and 3. Kano 1 is “defect reduction.” Kano 2 involves removing unnecessary cost from production, while fully meeting the needs of customers. Kano 3 adds new features and products and addresses the consumer appeal of a given project. Berwick noted that Kano 2 improvement merits special attention from the healthcare industry at this time, even while it continues to pursue, as it must, the other two types.

Fig 2.1: Opportunities for Innovation

Insight 2A - opportunities for innovation

“A Kano 2 improvement is quite different and not at all understood in healthcare,” said Berwick. “That is, reduce the cost of production without hurting the customer… by making production simpler, taking a step out, doing something with different materials… figuring out a way to do the same thing—or even something better—for the customer, while reducing your cost of production. Then you can use the money or return it. That’s the kind of Kano 2 improvement we need in healthcare.”

The survey echoed Berwick’s sentiment. While it exposed a surprising lack of confidence in the innovative power of traditional areas of focus, such as “basic medical research” and “pharmaceuticals,” it also revealed an intriguing confidence in an area of innovation typically associated with non-healthcare industries: process improvement. When asked to rank eleven areas of innovation by their potential impact over the next five years, participants identified “process improvements in care delivery” as the number one opportunity for both improving quality and controlling the cost of care, with approximately 60 percent expressing “very high” or “somewhat high” confidence in its power.

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B. Creating incentives to engage in improvement

All parties, including providers and patients, must be incentivized to engage in improvement efforts.

Reisman noted that a key to Aetna’s approach for enhancing value is the integration of multiple elements into a model centered on “accountable care.” Within this model, providers are enabled with advanced technologies that help them communicate with and engage healthcare consumers. Consumers are subsequently empowered with information, which, in turn, aligns their behaviors with actions that contribute to improved care. “We are enabling providers and consumers with tools and incentives to make fundamental change,” Reisman said.

Michael A. Mussallem, Chairman and CEO of Edwards Lifesciences, addressed collaboration among innovators themselves, stressing the necessity of creating the appropriate environment for innovation. “One of the things we know is that there’s nothing like the collaboration of physicians, bright engineers, and scientists to solve problems,” Mussallem said. “Somehow, we need to have the transparency and openness that allows and encourages rather than discourages it.”

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C. Framing failure as an important part of success

“Failure” must be viewed not as an obstacle to progress, but as a critical component to the success of continuous improvement.

To innovate successfully, healthcare leaders need a process for continuous improvement that can accommodate what we prefer to avoid: failure. Both panelists and participants challenged the prevailing fear of failure that handicapped the exploration of new ideas. They largely agreed that the healthcare system would be better served by acknowledging failures as the necessary by-product of innovative progress.

Tackling the issue from the perspective of process design, Tim Brown, CEO and President of IDEO, a leading design firm, believed it was important to accelerate the cycle of testing, failing, and learning. “We’re not very smart,” he said. “So we have to learn very fast. Failure is an extremely efficient form of learning. The principle we operate under is to put yourself in the place where you can fail as fast as possible and figure that you get to learn faster.”

“Failure is an extremely efficient form of learning... put yourself in the place where you can fail as fast as possible.”

– Tim Brown

President and CEO of IDEO

“Failure often contains the seeds of success,” said Lander. “If you are willing to look hard at a failure, you can ask why it failed. But if you just keep it internally, you don’t. If you’re willing to expose it to others, you may learn a lot.” Terrance G. McGuire, Co-founder and Managing General Partner of Polaris, Partners concurred, noting that Polaris had learned from the digital world “where failure is not a bad thing; it’s something to be learned from and brought forward.” Perhaps ironically, the opinion expressed by many at the conference was that being “successful at failure” planted the crucial seeds of experimentation required for meaningful improvement.

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3. Making consumerism really work

In many industries, the key driver of innovation—competition to serve informed consumers—helps ensure the delivery of greater value over time. Participants noted that the healthcare industry currently falls well short of having truly informed consumers and must take steps to address that problem.

A. Sharing responsibility for a complex problem:

The current lack of consumerism in healthcare is a complex problem for which every sector of the industry shares responsibility. Read more

B. Putting patients first:

Providers must organize themselves around the needs of consumers rather than caregivers. Read more

C. Turning patients into active consumers:

Consumers must be transformed from passive to active participants in managing their own health. Read more

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A. Sharing responsibility for a complex problem

The current lack of consumerism in healthcare is a complex problem for which every sector of the industry shares responsibility.

As many economists have noted, the fragmented healthcare system in the United States has stymied the usual market forces that might otherwise lead to greater efficacy and efficiency. Yet, enthusiasm for greater “consumerism” in healthcare has been dampened by generally slow progress. What practical components are necessary to move consumer empowerment from an ideal to a reality?

The answers are rooted in responsibility: who has it and how it is exercised. Regina E. Herzlinger, the Nancy R. McPherson Professor of Business Administration at Harvard Business School, forestalled the temptation to point fingers by drawing an analogy to Agatha Christie’s mystery, Murder on the Orient Express. Herzlinger said, “Somebody on the Orient Express gets killed, and the question is, who killed him? The answer is, everybody on the train killed him. And the answer about who killed healthcare is: the status quo.” Everyone owns a share of the responsibility.

Every nation, too, suffers a share of the fiscal consequences. “No matter what the country, no matter what the public policy,” Herzlinger said, the rate of healthcare expense growth relative to the growth of the GDP “is very, very high.” What will happen, according to Herzlinger, is that healthcare, like other industries, will have to conform to market forces and by doing so will become more “consumerized”: Patients must assume greater responsibility for their care and must have greater power to exercise that responsibility. She cautioned, however, that when it comes to policies and technologies intended to give consumers more control, “we’ve got a lot of hallucinations rather than visions.”

Her skepticism was echoed by the survey results. “Consumer incentives to encourage healthy behavior” ranked last among eleven possible innovations in terms of their ability to increase value, with 44.6 percent of respondents indicating that it would have only a minimal or slight impact on improving quality and 43.9 percent noting its minimal or slight potential for controlling cost.

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B. Putting patients first

Providers must organize themselves around the needs of consumers rather than caregivers.

Delos M. Cosgrove, MD, President and CEO of Cleveland Clinic, articulated the need to reconceive the way care delivery is organized if it is to be truly consumer oriented. For Cosgrove and the Cleveland Clinic, “the patient is the most important person at an institution, and it’s our job to satisfy them,” a philosophy that has made a “patients first” mantra the guiding principle for the Clinic’s reorganization. “Most organizations are organized around physicians,” he noted. “We took a different step. We said we’re going to organize around patients’ problems and around organ systems such as neurologic disease or disease systems such as cancer.” The Clinic integrated community hospitals, family health centers, and other care delivery sites into one system that connects 6 million patients through one electronic medical record (EMR) system. Further, Cosgrove said, the Clinic measured clinical outcomes. “This was important for us because it caused us tolook at our results in a very transparent way. Every time we did this, we found issues, and we began to deal with them.”

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C. Turning patients into active consumers

Consumers must be transformed from passive to active participants in managing their own health.

If the Cleveland Clinic represents the provider’s perspective on consumerism, Safeway—the second-largest grocery chain in the United States—shows what it can look like from an employer’s point of view. Operating with very thin profit margins, Safeway has an enormous incentive to reduce healthcare costs. “For us, innovation in healthcare is a matter of necessity,” said panelist Brad Wolfsen, President of Safeway Health. “With healthcare costs increasing at 8 percent a year and being such a significant portion of our cost structure, we would suffer a significant dent in our profitability if we were to allow our healthcare costs to increase at that rate.” Safeway has responded with a two-pronged approach to reining in costs through employee incentives, the first by allowing employees to shop for care options with capped benefit amounts, and the second by rewarding better lifestyle choices. Regarding the former, Wolfsen said Safeway Health created a plan modeled on the grocery shopping experience itself. “We basically set the maximum benefit that our plan will pay for a set of therapeutic outcomes.” Noting the extraordinary variation in costs for the same procedures—as much as 8:1 for a colonoscopy or 16:1 for an abdominal computerized tomography (CT) scan— Wolfsen said the plan encourages employees to shop for the best value.

“When presented with that type of plan design,” said Wolfsen, “members can be very effective at shopping, and it can yield extraordinary savings.” He noted a 15-to-20 percent decline in pharmaceutical costs, and similar savings in imaging and lab tests. The key, Wolfsen insisted, is obtaining clear data on prices. “The real challenge in deploying a system like this more widely is opening up more categories to this type of solution where there is transparency in price,” he said. When prices are available, “members make cost-effective decisions. In our experience, members look at that information when they are provided the rules and the incentives to shop, and they make good decisions.”

The second component of the Safeway Health plan encourages employees to be healthier by providing financial incentives for hitting defined targets in categories such as blood pressure, cholesterol, and overall body mass index (BMI). “We have demonstrated the results of our health improvement program, that we can deliver positive employee motivation to improve their health. That can be seen in our overall financial results over the past six years: Safeway’s [healthcare] cost trend has been 2.2 percent, not the 8 percent that is common nationally.”

In his keynote address, Alan M. Garber, MD, Provost, Harvard University, cited the importance of Safeway’s efforts to increase consumer engagement in managing healthcare utilization. Garber noted, “The data on the role healthcare costs play in the U.S. economy are quite clear. It’s also clear that we need new approaches to dealing with cost containment—approaches like narrow networks, tiering, and reference pricing. Safeway’s early experience with reference pricing for a colonoscopy, for example, gives us hope that this method of letting consumers play a larger role in purchasing healthcare services may help control costs while not reducing quality.”

Kenneth L. Sperling, National Health Exchange Strategy Leader, Aon Hewitt, a leading human resources consulting firm, discussed an alternative approach to building consumerism in healthcare. Instead of imposing one plan, Aon Hewitt offers a private exchange that allows employees to be active decision makers in their care, thereby sharing responsibility for its cost.

Through the Aon Hewitt exchange, participating employees are presented with five standardized levels of care (ranked from “bronze” to “platinum”) to which they can apply their employer’s healthcare benefit contribution. “This is not an enrollment experience anymore,” Sperling said. “It is a shopping experience.” As of January 1, 2013, 100,000 employees from Aon Hewitt, Sears, and Darden participate in the exchange. “The more employees we have, the more carriers we will bring,” said Sperling. “The more competition we drive, the lower the costs will be.”

The open discussion regarding consumerism was among the most vigorous of the conference. Consensus did emerge around three key requirements for achieving shared responsibility with consumers at the core. First, all participants will need better data, not just on the cost of a given procedure with a particular provider, but on overall outcomes. Second, consumers will need some mechanism for guiding their choices: Without a clear understanding of their medical issues, how can patients make informed decisions about treatment or therapy options? Finally, the alignment of consumer lifestyle choices with behaviors conducive to well-being will be critical, just as discouraging substance abuse will be conducive to good health. The consensus was that quality information and incentives would be crucial to realizing the transformative potential of consumerism in healthcare.

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4. Decentralizing approaches to problem solving

If healthcare were to follow the trends observed in the most innovative industries, we would expect it to become more decentralized, both in the way it pursues new therapies and in the way it delivers patient care.

A. Pushing care delivery out to the patient:

The delivery of care must be pushed out from traditional “experts” at centralized facilities to wider networks of providers and patients. Read more

B. Decentralizing the innovation process:

As with care delivery, the process of innovation itself should be pushed out toward patients. Read more

C. Leveraging decentralization while controlling fragmentation:

Leveraging the benefits of decentralization—without incurring the costs of fragmentation—will require broad and effective information sharing. Read more

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A. Pushing care delivery out to the patient

The delivery of care must be pushed out from traditional “experts” at centralized facilities to wider networks of providers and patients.

A recurring view expressed during the conference was that healthcare delivery is becoming increasingly decentralized. More concretely, if progress in healthcare is to mirror the giant leaps we have experienced in other industries, we should expect to see technology and talent spread away from concentrated centers and toward a much broader, front-line network of patients and providers. To this point, more than 86 percent of the survey respondents believed that the use of non-physician personnel would help control the cost of care. That statistic is consistent with a number of trends discussed at the conference.

Clayton M. Christensen, the Kim B. Clark Professor of Business Administration at Harvard Business School, suggested an analogy to the information technology (IT) industry. In the digital world, the market has moved from a highly centralized platform based on mainframe computers, where problems were brought to the technology experts, to one that evolved through minicomputers to micro-computers where the technology— and its embedded expertise—was brought to the problems.

Similarly, Christensen proposed, hospitals have served as centralized repositories of specialized expertise. “Do we think that healthcare will become affordable by expecting the hospitals to be cheap?” he asked. “It just won’t happen.” He described the alternative as a decentralized model of care in which technology and expertise are pushed outward toward a broader network of caregivers and patients. “We need to bring technology to personal physicians so that they can begin doing some of the things that today they have to refer to the specialists. The dynamics of decentralization will allow lower-cost caregivers to offer more sophisticated things. This is what will happen, and it needs to happen.”

“The dynamics of decentralization will allow lower-cost caregivers to offer more sophisticated things. This is what will happen, and it needs to happen.”

– Clayton M. Christensen

Kim B. Clark Professor of Business Administration, Harvard Business School

The shift toward a broader healthcare team utilizing providers such as nurse practitioners and physician assistants can be found in new models of care delivery, such as that at MinuteClinic, a retail healthcare provider with more than 640 clinics in 25 states located within CVS pharmacies. Andrew J. Sussman, MD, President, MinuteClinic and Senior Vice President/Associate CMO, CVS Caremark, described an impressive program in which 2,000 nurse practitioners and physician assistants serve patients seven days a week in walk-in clinics with an average wait time of just 20 minutes.

“Now most of our care is for acute services: sore throat, bronchitis, ear infection,” said Sussman. “But increasingly we’re seeing patients with non-acute issues, such as monitoring of chronic diseases like diabetes, high cholesterol, and hypertension.” Patients receive printouts of their medical records, which also are faxed or electronically distributed to their primary care physicians—if they have one. “More than 50 percent,” Sussman said, “are effectively medically homeless. We give them lists of physicians in their areas who are taking new patients.”

MinuteClinic’s progress, Sussman suggested, was not just demonstrated by its 40 percent annual revenue growth rate, but also by its performance with respect to care quality and cost. “Patients at MinuteClinic did as well or better than those treated in traditional primary care settings,” said Sussman. Yet, cost was 40 to 80 percent lower than in other settings.

Sussman attributed the clinic’s success to the application of evidence-based guidelines, consistent throughout the country, and to the effective use of non-physician providers. Regarding the former, he noted, “It is absolutely essential that we practice on evidence-based guidelines where they exist for routine conditions. We can no longer afford a heterogeneity of practices when we all agree about what best practice represents.” On the latter issue, Sussman pressed for “the best and most meaningful use of nurse practitioners, physician assistants, pharmacists, and other healthcare providers and allowing them to practice at the top of their license.”

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B. Decentralizing the innovation process

As with care delivery, the process of innovation itself should be pushed out toward patients.

Many conference participants suggested the decentralization of care delivery will and must occur in tandem with a decentralization of the innovative process more broadly. Like centralized providers, the traditional avenues of innovation may be too narrow, unnecessarily restricting the universe of possibilities. By opening doors for untapped talent, we might discover innovations that would otherwise be overlooked by the usual professionals.

Alpheus Bingham, Co-founder of InnoCentive—an online platform for connecting those with innovation problems with potential solvers—said that finding real innovation means tapping the expertise of “non-experts.” He cited the conference itself as an example: “There were 509 invitees, and I’m going to just guess that the total problem-solving power of the ones who weren’t invited to this conference is greater than the total solving power of those who were.” Bingham cited a collaboration among InnoCentive, Harvard University, and the Helmsley Foundation, which investigated potential hypotheses in diabetes treatment that “were not being adequately resourced.” When they looked beyond major university science initiatives to reach patients, doctors, and other caregivers, they found fruitful areas of diabetes research focused on prevention, care, and support of the patient.

Bingham suggested that “our identities as experts” have become an obstacle to broader innovation. “Maybe the reason that people with your skills and backgrounds solve the interesting problems of the world is only because you’re first in line. It wasn’t because the questions got asked of everybody at once.”

“Maybe the reason that people with your skills and backgrounds solve the interesting problems of the world is only becauseyou’re first in line. It wasn’t because thequestions got asked of everybody at once.”

– Alpheus Bingham

Co-founder, InnoCentive

As with care delivery, the decentralization of the innovation process is increasingly relying on patients themselves. When organized into collaborative groups, patients can be agents for accelerating the search for cures. Kathryn Giusti, Founder and CEO, Multiple Myeloma Research Foundation (MMRF), articulated a model rooted in her own personal experience. At age 37, she was diagnosed with multiple myeloma, “a 100 percent fatal blood cancer,” with a life expectancy of three years from diagnosis. Recognizing that hers was a “hugely neglected cancer,” she founded the MMRF. By combining fundraising with an open tissue bank and a unique depository of sequential patient data, the foundation was able to attract more scientists and stimulate new research.

“In the years since I was diagnosed, we have more than doubled the lifespan of our patients from three years to eight,” Giusti said. The crucial element, she suggested, was creating a patient community that developed “our own data systems and got everybody working together… the whole point of this is to make sure that we start to identify new targets and new biomarkers, with all the data being in the public domain for thousands of people to look at, instead of just having one or two or three academic centers. It’s much more about crowdsourcing and information gathering.”

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C. Leveraging decentralization while controlling fragmentation

Leveraging the benefits of decentralization—without incurring the costs of fragmentation—will require broad and effective information sharing.

Many participants raised concerns that decentralization would result in a scattering of the very data necessary to effectively coordinate care. If patients can receive care from a greater number of providers in a wider variety of settings, how will the subsequent clinical data be gathered and integrated?

To prevent fragmentation, successful implementation of new initiatives will require more sophisticated means of gathering and distributing information, regardless of where care is delivered. Panelists and participants agreed that for decentralized approaches to succeed, all parties— from patients and providers to payors and suppliers— would need access to data that measure the quality as well as the cost of care.

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5. Integrating new approaches into established organizations

No matter how important new firms are to innovation in healthcare, much of the activity in the industry continues to flow through established firms—providers, insurers, and suppliers—that also must engage in innovation to increase value. A key question is how the benefits of new insights can be integrated into these established organizations.

A. Bringing new ideas into established firms:

Established organizations must maintain the flexibility to acknowledge new approaches while respecting the importance of fulfilling their long-standing objectives. Read more

B. Leveraging community relationships:

Established firms must leverage the benefit of strong relationships with customer “communities” as they innovate to improve value. Read more

C. Becoming more accountable:

Current entities must play a key role in increasing the accountability that all industry participants have for the health of the populations they serve. Read more

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A. Bringing new ideas into established firms

Established organizations must maintain the flexibility to acknowledge new approaches while respecting the importance of fulfilling their long-standing objectives.

The survey noted that, despite the relative strength of new entrants with respect to innovation in many domains, established firms are expected to lead efforts at innovation in basic medical research, electronic medical records, and pharmaceuticals. Though responses varied with each particular area of innovation, no one source emerged as a clear champion; participants see a mixed innovation environment with two general predilections:

1. In general, they expressed greater confidence in the ability of the private sector, rather than the government, as a “critical” source of innovation; in eight of the eleven innovation areas, the private sector was expected to lead the way.

2. Speed-to-market has been the hallmark of disruptive technologies produced by startup companies. In seven of eleven innovation areas, survey participants believed new entrants would prove more critical than established firms.

These results highlight the fact that healthcare is characterized by numerous established organizations that cannot simply be bypassed by new entrants. Rather, we must find ways to improve established organizations by incorporating the learning that emerges from decentralized innovation. As William W. Chin, MD, Executive Dean for Research, Bertarelli Professor of Translational Medical Science and Professor of Medicine, Harvard Medical School, observed, “Product life cycles are getting shorter, but the need for new therapies remains. When our usual way of doing things costs too much and takes too long to make effective, safe therapies, we need to find alternative models for progress.”

Fig 5.1: More critical to foster innovation: private sector or government?

Fig 5.1: More Critical to Foster Innovation: Private Sector or Government?

Fig 5.2: More critical to lead innovation: new entrants or existing firms?

Fig 5.2: More Critical to Lead Innovation: New Entrants or Existing Firms?

Reflecting on the limitations of current innovation models, Viehbacher noted that the old model of intensive internal research and development, focused on precise molecules, is not as effective as it used to be. “One of the things we are doing as a company is to get our scientists outside those walls and into the ecosystems” of research beyond the company’s own laboratories. The challenge is that these ecosystems of related ideas and innovations may be too broad in scope to be practically useful. He added, however, that “there are ways of filtering and synthesizing information coming from around the world, and you can direct that to ultimately finding solutions for patients.”

“How do we improve value within the existing system? What innovations are necessary so that our biggest institutional investments become, not dinosaurs, but dynamic contributors to progress?”

– Robert S. Huckman

Albert J. Weatherhead III Professor of Business Administration, Harvard Business School

Mussallem highlighted the conflict between efficiency, which requires a narrowing of options, and discovery, which must open up more options. “We need some kind of harmony and a system that could do both,” he said. “It’s a challenge we struggle with broadly as a society.” Our largest delivery systems—complex networks of teaching hospitals, physician practices, and specialized care units—are not just “too big to fail”; they are too rich with talent and experience to be neglected. In his introduction to the Improving the Value of Care Delivery panel, Robert S. Huckman, Albert J. Weatherhead III Professor of Business Administration, Harvard Business School, turned the conversation from speculative potentials to present realities. “We still have to think a lot about the system we have,” he said. “How do we improve value within the existing system? What innovations are necessary so that our biggest institutional investments become, not dinosaurs, but dynamic contributors to progress?”

Gary L. Gottlieb, MD, President and CEO, Partners HealthCare, noted the unique challenges faced by tertiary teaching hospitals at the heart of many of the most advanced delivery networks. “As we focus on value in the context of shrinking resources, there is significant tension within the multifaceted mission and multiple purposes of our institutions. These institutions exist to provide extraordinary care,” Gottlieb noted, “but they also must use that care to inform science and develop science that improves and informs care. The traditional revenue streams that support these activities are intertwined, and each of them is challenged in the public and private economies they face in the short- and long-run horizons.”

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B. Leveraging community relationships

Established firms must leverage the benefit of strong relationships with customer “communities” as they innovate to improve value.

While Gottlieb emphasized balancing commitments to care delivery and research in his approach to integration, Nancy M. Schlichting, CEO, Henry Ford Health System in Detroit, approached the issue from a different angle, proposing that community obligations are critical to the effectiveness of healthcare delivery. “Healthcare is not a level playing field,” she said, reflecting on the special challenges of coordinating care in an exceptionally difficult environment. “We are a safety net organization: Fifty percent of the population in Detroit is either on Medicaid or uninsured. Poverty levels are very high. Mental illness and substance abuse are very high. Twelve percent of Henry Ford Hospital’s revenues are uncompensated.”

Yet, Schlichting noted that community itself can be part of the solution. “We also have to have much better collaboration with community organizations,” she said. “In Detroit, food, housing, senior services, schools, and churches are also part of our patients’ lives and can be influential in the improvement of the care delivery that we provide.” In Henry Ford’s community context, nonmedical solutions can be as important as or more critical than clinical care in improving overall population health. “We buy microwaves and we install ramps to make homes more accessible as much as we provide medications and other kinds of services,” Schlichting said.

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C. Becoming more accountable

Current entities must play a key role in increasing the accountability that all industry participants have for the health of the populations they serve.

The future of many established organizations will hinge on their ability to absorb greater responsibility not only for providing specific products and services, such as procedures, devices, or pharmaceuticals, but also for maintaining the health of the populations they serve. As Reisman observed, “We have a completely new approach that is much more oriented for value. We’re concerned about the overall health of the population—not just the people we touch, not just the people we treat, but the entire population.”

To become more accountable, however, established organizations must become more agile and more capable of coordinating care across numerous providers and suppliers. Critical to their roles as coordinators, established firms must be key participants in identifying and refining the observable measures on which their performance will be evaluated. This process must occur in a manner that allows established firms to meet customer needs within the wider social, political, and economic contexts of their communities. “The common characteristics of all these things,” noted Schlichting, “are multidisciplinary ownership of the care experience over time, great information sharing across all dimensions of care, a focus on the patient and family, a true measurement of outcomes, and a strong focus on improvement.”

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