Innovation in Healthcare: Solution or Disruption?

As of January 1, hospitals are required to list their standard charges online. This is a first salvo in what is likely to be a set of reforms meant to bring market forces to bear on the healthcare industry. Here are some of the drivers: 

• Escalating healthcare costs, now projected to exceed $4 trillion in 2020, are driving Medicare, private insurers and employers to demand cost reductions from healthcare providers.
• Consumers are paying a larger share of the bills and are increasingly price shopping providers, engaging in healthcare tourism, or relying on internet resources for medical advice. 
• Medicare and Medicaid reimbursements are likely to continue to drop.
• ACOs and Capitation are becoming the norm.
• Population is aging and the percentage of chronic disease patients is increasing.
• Medical infrastructure is outdated and needs upgrading.
• Competition is increasing and care differentiation is becoming a key competitive advantage.
• Healthcare is a laggard in the adoption of emerging technologies.
• Healthcare productivity growth is stagnant or negative.
• Patients and families are increasingly technology competent and demand more information from frontline providers.

The immediate reaction, as expected, is cost cutting and optimization, but these do have limits. They have been followed by healthcare providers becoming educated consumers of innovation. More needs to be done. Digital transformation, today’s sexiest buzzword, should go way beyond the deployment of Electronic Medical Records (the rest of us have been using databases for decades!) It should permeate through every level of every healthcare organization. It’s hard to believe that in 2019 hospitals can’t automatically track doctors, patients, medications and equipment. And we still “barcode” patients like groceries! On average, there is more high technology on a jogger’s outfit, from the iPhone and ventilated Nike sneakers to the Fitbit watch and Bose headsets, than in most hospital rooms.

But syncing healthcare to available consumer technologies is only part of the equation. With only 6200 hospitals in the US, there is little incentive for startups (and the VCs that fund them) to develop hospital specific technologies. And giants, like Amazon and Google, are focused exclusively on billion strong consumer markets. For top healthcare suppliers the “real money” is in PhRMA, biotech and medical devices, not in tracking patients and meds.

In response, an increasing number of hospitals are experimenting with becoming suppliers of innovation themselves. These efforts usually take the form of organic innovation programs which process ideas generated by their doctors, nurses, administrators and technical personnel.

Unlike The Cleveland Clinic or Mount Sinai Innovation Partners, which mostly handle high impact clinical solutions, these programs are focused on solving local issues, while open to service the occasional breakthrough idea (see our previous Linkedin article on setting up innovation centers). Organic innovation is also encouraged by third party initiatives such as the Magnet Recognition Program operated by the American Nurses Credentialing Center which now demands the nursing staff of candidate hospitals to engage in innovation related activities.

Even medical expertise, what the healthcare edifice is built on, is about to experience shockwaves from the upcoming revolution in Artificial Intelligence (AI). Nowhere will the impact of AI be felt stronger than in the art and science of diagnosis. Already IBM is offering its “Watson for Oncology” service to help doctors create treatment plans for cancer patients. Used in over 240 hospitals worldwide, the platform has yet to live up to the promises of IBM’s hyperactive sales and marketing department. Ironically, part of the problem was found to be not the technology itself but the professional bias of its human trainers, the oncologists at the Sloane Kettering Cancer Center in NY.

 There is little doubt that, in the long run, AI will dramatically improve quality and lower healthcare costs but, for now, doctors see it as an existential threat. In 2015 Dr. Robert Wachter, author of the acclaimed book “The Digital Doctor”, wrote: “for most doctors, diagnosis forms the essence of their practice (and of their professional souls), which may help explain why we find it so painful to believe that this particular skill could be replaced by silicon wafers”. Nevertheless, the AI juggernaut is in motion and it becomes imperative for doctors to learn to use it instead of fighting it.

Since 2015 the number of AI papers published every year more than tripled and the processing power of AI systems doubled every three and a half months. How long until my Dr. House app will conspire with my FitBit to navigate me to a much-needed nutritionist? My guess is sometimes before 2030. When will hospital HAL 9000 supervisory computers remind surgeons not to leave foreign bodies inside patients (which happens 39 times each week!)? Hopefully a lot sooner.

Andrei Cernasov, PhD

The Innovation and Design Agency (Innodesa, LLC) is an innovation consultancy based in Morristown, New Jersey. You can reach Dr. Cernasov at: [email protected]