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In this series, Health Evolution is examining the year 2021 in health care through the lens of our eight imperatives. We will be examining the trends that were at the top of CEOs’ minds throughout the past year and what may come in 2022. This week: Advancing new models of care 

Previously:   

Health system resilience   

Mental and behavioral health. 

Escalating Health Equity 

The 2021 Health Evolution Summit featured a comment from Christopher Chen, MD, CEO of ChenMed, that outlined the tension existing between incumbent health care organizations and those trying to disrupt the industry: 

“You cannot ask the incumbents to transform care because they’re going to continue to do what they’re going to continue to do, which is get big, get rid of free market forces and protect their market. Every time,” Chen said.  

Later during the session, Farzad Mostashari, MD, CEO of Aledade, reiterated Chen’s point. “For many of those organizations, it is still more profitable to treat a stroke than to prevent a stroke. I think the incentive structure has not reached them,” Mostashari said.  

Chen continued: “What you’re finding is large systems that have the ability to transform themselves are the exception and not the rule. And to create a strategy that expects large incumbent systems to transform themselves is probably not the right strategy.” 

Health Evolution Summit 2022, April 6-8, Laguna Niguel, CA: Apply to Attend

During another session later on at the Summit, Richard Gray, MD, CEO of Mayo Clinic Arizona came to the defense of incumbents. He said the public doesn’t recognize how much the incumbents within health care want to disrupt it themselves.  

“I think everyone sees organizations that have been around a long time like Mayo Clinic and they don’t necessarily perceive us as ones that are trying to drive transformation, wanting to be those disruptors from within and drive innovation. I think they perceive all of the so-called disruptors from outside of health care as the ones that are really trying to make a difference. It’s important for the public to understand that all of us want to improve the system, all of us want to accelerate the change that needs to come,” Gray said.  

These conversations resonated with many Summit participants and the Health Evolution community at large because of the unique time and place the health care industry is in. In fact, Chen was inspired enough by the conversations that he wrote about it a few days after the Summit ended. COVID has accelerated virtual care use, increased interest in value-based reimbursement models and forced innovators and incumbents alike to strategically align and compete in unprecedented ways.   

Disruptors in health care are coming from all places. The most noise comes from big tech companies such as Amazon, Apple, Google, Oracle via its Cerner acquisition and retail companies such as Walgreens and Walmart. But there are also companies like ChenMed and Aledade working outside of the traditional fee-for-service model and with smaller, independent-minded practices and clinicians. Likewise, tech-driven companies, which Deloitte calls health services innovators, are aiming to fill gaps in care overlooked by incumbent systems. For instance, One Medical and VillageMD that are centered on primary care and low-acuity cases.  

And that’s just the tip of the iceberg. There is a surge in digital health funding and investments that is driven largely by a need to disrupt the health system.  

Pessimism about incumbent disruption  

To Gray’s point, many incumbents are recognizing this environment and have invested in innovation centers and labs, as well as created venture capital arms, to partner with potential disruptors and make these changes from within. However, as Chen said, there are plenty of skeptics that have little faith incumbents can drive the change needed for a better health system.  

Scott Snyder, chief digital officer for life sciences services company Eversana and a Senior Fellow in the Management Department at the University of Pennsylvania Wharton School, says that culture is a big reason for this cynicism.  

“They may have a ton of smart clinicians and scientists, but they may not know a lot about digital experiences or how to interject care into a patient’s everyday life. Consumer and tech companies are pretty good at that,” Snyder says. He also says that health systems are so busy delivering care today that it’s hard for them to think too ahead into the future.  

Aaron Martin, chief digital officer at Providence and managing partner for Providence Ventures, says that self-disruption is the hardest thing for an incumbent to do. “If you want to do a disruptive business model by leveraging existing providers, they’re already doing the existing business model, plus you’re asking them to do something disruptive on top of that,” Martin says. He notes supply constraints and health care economics don’t play in the favor of disruption for these incumbents. It’s a lot easier for a company like Amazon to self-disrupt than it is for a health care organization.  

“Imagine if Amazon had a business where people bought books only when they really needed books and they didn’t want to buy them. That’s the demand side. On the supply side, imagine if we could get inventory on books in a very slow way. They could only come from authors who have had 12 years of very hard training and fulfillment managers who were highly specialized and trained,” says Martin.   

Moreover, he says disruptors can pick and choose what they want to go after, and they’ll typically go after the high margin opportunities. “They are going after profitable businesses. When a disruptor is going after your business, they’re not going after the hard-to-scale unprofitable parts of the business,” says Martin. Health systems like Providence, however, are offering all kinds of services for all kinds of patients.   

Hard for disruptors to disrupt 

Snyder, who wrote “Goliath’s Revenge: How Established Companies Turn the Tables on Digital Disruptors,” isn’t one to harp on the struggles of health care incumbents. In fact, he thinks for a variety of reasons they have an advantage over disruptors in this conversation.  

“While a patient might experiment or try something new, they still want to hear from their clinician that it’s the right thing to do. There’s still this dependency and trust of the health care system. It’s much higher than some of these third parties,” says Snyder. “I also think some of these innovators have a lack of appreciation for some of the intricacies of health care.”