Amazon. CVS. Walmart. These companies are making big moves in healthcare. What might happen? If you believe the news and the chatter on social media – massive disruption. Or, if you look at the history of outsider moves into healthcare over the past 20 years – lots of bubbling and fizzing and then all goes flat.
Let’s start though by looking at a few of the things they are good at.
They excel at operational efficiency. Today, that also means technology-driven efficiency, with robotics and algorithm-driven improvements. Change is beginning to happen at the speed of software, creating previously unheard of cycle times for improvement. With the amount of waste in the healthcare system, opportunity for efficiency gains are everywhere.
They excel at consumer focus. From creating marketplaces to selling product and services to accessing the long tail of consumer demand. It is easy to imagine how they could change the way we buy health insurance, shop for services and procedures, and deliver products.
They excel at supply chain management. They set standards for their vendors and ensure that targets are hit for supply chain efficiency and effectiveness as well as product quality. The potential impact on the healthcare supply chain is huge, starting with the impact it could have on consumer transparency and pricing.
It would seem that efficient marketplaces, superior products, and tailored services are just one merger away.
So, big disruption is on the way, right? Not really. I’d call that little disruption, with a little d. Don’t get me wrong, they could be successful and move the needle with what they’re good at. But Big Disruption in healthcare is something else entirely – Big Disruption is about dramatically changing the value proposition in healthcare – that the U.S. healthcare system becomes the most well-regarded system in the world and blows the doors off on the quality of care we deliver, the experience we all receive, and how much it costs us to get there.
Big Disruption starts with shifting the focus from product to person – “manufacturing” health over the life of a person.
The United States lags other countries in life expectancy. We also lag in disability-adjusted life years, a measure of overall disease burden. And we lag in perceptions of how well our healthcare system works. If we look at these statements from the point of view of a person, it looks something like this: I have been sick for a long time, I do not believe the system is caring for me, and then I am going to die early. This is serious stuff. This is not just about focusing on a person to make him or her happy in the moment. This is a change-the-health-of-a-person-over-their-entire-life issue. This is what we need to fix, and this is what it means to “manufacture” health over the life of a person.
In healthcare, the performance of a product depends on factors not inherent to the product itself. Take, as a simple example, a total knee replacement (TKR) procedure – the person plays an important role in how well the TKR product performs. What if the person has diabetes and develops a post-op infection? What harm occurs then? What about the implant, will it need to be removed? What if the person is caring for their spouse who has Alzheimer’s disease and cannot leave to go in for follow-up rehab? Now, this person sits outside the control of the company and behaves in an unpredictable and uncontrollable way from a company point of view. There is essentially a wild-card in the product process.
Imagine having a black box component in your computer, and at times it causes the computer to work great, kind of work, or smoke and smolder. Now if it starts to smoke and smolder, you can’t throw it away (we have a health insurance system after all), you have to fix it. And fix it again, and again, and again. Kind of hard to build consistent product performance that way.
Healthcare delivers highly variable products that may or may not be good for a person’s health, because it depends on who the person is at that moment and the path taken up to that moment in time.
Examples of variability in healthcare are everywhere. Why does diabetes progress quickly for one person and slowly for another? Why are kidney stones a minor nuisance the first time but then result in sepsis the second time? Why does the flu kill a few healthy people but not most others? It is precisely at the times when we suffer from disease that we need the healthcare system to be there for us with all its complexity. It is in this context that we must understand how well products perform. And it is in this context we must also ask if the best use of a product is to not use it at all. When we flip the perspective from a product to a person, even the very use of the product comes into question. This is the decision clinicians make every day. This is why we rely on clinicians to make judgment calls on what is best for the patient. This is why the healthcare system is driven by practitioners, not managers.
So, coming back to our retail story: retail excels at delivering a consistent product. Healthcare manages patients using products that may or may not help because of who the person is at that moment in time. One is built to deal with a complicated system of parts, while the other is built to deal with a complex system of human biology and disease.
So what happens when highly efficient product companies collide with the complexity of the healthcare world? They usually fizzle.
So will Amazon, CVS, Walmart, and others drive Big Disruption?
I am simplifying the impact Amazon, CVS, Walmart, and other companies like them might have in healthcare. I think they will drive change. But my purpose here in this article is to point out a hidden elephant in the room: that the very competencies that make some companies excel in their markets (product consistency and process efficiency) could be the exact competencies that make them vulnerable and fragile in healthcare.
Could they pull it off? Absolutely. Are they smart enough to pull it off? Absolutely. Do I currently see any signals that they are pulling it off? No. There is no doubt these companies will shake up the business of healthcare, but can they alter the course of healthcare in this country? Don’t know. One thing is for certain though, it’s about to get extremely interesting.
