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Technology Can Lower Health Care Costs Through Disruptive Innovation, Says Harvard Researcher

In Health Affairs Interview, Christensen Predicts
That Cancer Will Yield To Rules-Based Therapy By Non-Physicians

Bethesda, MD -- When it comes to rising health care costs, is technology the problem or the solution? Both, says Clayton Christensen, a Harvard Business School professor and one of America’s most influential business thinkers, in an interview published today on the Health Affairs Web site.

“There are two ways that technology can get deployed in health care,” Christensen tells Mark Smith, the president and CEO of the California HealthCare Foundation. The first, which increases costs, “is to help the experts in the health care system do even more sophisticated things that historically were not possible to do.” However, “when you deploy the technology to commoditize the caregiver, to enable a lower-cost provider to do something that historically had required higher cost, then it actually takes cost out of the system.”

This second, cost-lowering method of deploying technology can result in “disruptive innovation,” a phenomenon that Christensen has written about extensively across many industries. “A disruptive innovation is a technology that brings a much more affordable product or service that is much simpler to use into a market. And so it allows a whole new population of consumers to afford to own and have the skill to use a product or service, whereas historically, the ability to access was limited to people who have a lot of money or a lot of skill,” he explains.

Christensen cites the personal computer as an example of disruptive innovation. “If you go back to the mid-1960s, in the computer industry, there were probably 100 people who had the skill to design a mainframe computer,” most of whom worked for IBM. “But over time, as the science and the technology became better understood, most of the complicated problems that had required the skill of these 100 computer designers actually got resolved inside the Intel microprocessor.” This allowed hundreds of Taiwanese engineers to start computer companies, thereby driving down prices and growing the market, he says.

According to Christensen, in the same way that Intel turned the art of computer design into a “rules-based activity,” we are now turning the diagnoses of increasing numbers of diseases into rules-based activities, allowing lower-cost nurses and medical assistants to take over the treatment of these diseases from higher-cost physicians. He cites three classes of medical problems. The first “are problems I’d call acute and amenable to precise diagnosis, which then enables rules-based therapy,” he explains. This class includes some expected entries, such as strep throat, but also some surprises, such as cancer. “I bet you fifteen years from now, most cancers -- which at this point seem to be just very nonstandard and expertise-intensive to diagnose and treat -- have the potential to become rules based,” he predicts.

Christensen’s second class of medical problems is chronic diseases such as lupus and diabetes “that people are just learning to live with.” Companies such as American Healthways are bringing disruptive innovation to this category of conditions as well by moving power and responsibility from the physician to the patient, but “I don’t think the cost of dealing with these chronic diseases will drop as much through disruption,” he says.

Christensen says that the third class of medical conditions, “the high end, nonstandard, medically complex cases,” are not amenable to disruptive innovation -- yet: “You wouldn’t ask one of those Taiwanese electrical engineers to go design a mainframe computer, because that really had to be done by experts. Similarly, you likely wouldn’t ask a nurse or a medical assistant to do the kind of thing that is not yet rules-based. But as the world moves that way, it will enable less-trained people to do more and more.” In the meantime, Christensen notes, applying the rules of the Toyota production system in the tertiary care hospitals that care for patients with these complex conditions could cut overhead costs by 65 percent and labor costs by a smaller but still significant 7 percent.

You can read the Smith-Christensen interview, the sixth in a series of interviews with leaders of the biomedical sector sponsored by the nonprofit Institute for Health Technology Studies, or InHealth, at http://content.healthaffairs.org/cgi/content/abstract/hlthaff.26.3.w288

ABOUT HEALTH AFFAIRS:

Health Affairs, published by Project HOPE, is the leading journal of health policy. The peer-reviewed journal appears bimonthly in print with additional online-only papers published weekly as Health Affairs Web Exclusives at www.healthaffairs.org.

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©2007 Project HOPE–The People-to-People Health Foundation, Inc.