In the wake of recent events, a national conversation has emerged about the future of healthcare. Ann Somers Hogg, director of healthcare research at The Christensen Institute, proposes a groundbreaking solution in her latest report. This article explores the challenges of the current healthcare system and introduces an innovative business model that aims to revolutionize the industry. The report highlights the need for disruptive innovation and outlines a strategic plan to implement this new approach.
Rethinking the Current Healthcare System
The existing healthcare framework is characterized by a complex four-party system—insurers, sponsors, providers, and consumers—that disrupts normal market dynamics. This structure leads to rising premiums and financial struggles for individuals, families, and businesses. The traditional supply-demand relationship between consumers and providers is disrupted by the involvement of sponsors and insurers, which complicates the healthcare landscape. According to Hogg, the status quo is unsustainable, and a new approach is necessary to address these issues effectively.
To understand the root cause of these problems, it's essential to examine the role of disruptive innovation and business models. Disruptive innovations make products and services more affordable and accessible to a broader audience. This process involves three key components: enabling technology, innovative business models targeting underserved populations, and a new value network that benefits all stakeholders. The current Cost-Plus business model prioritizes high margins over quality care, leading to systemic inflation. To combat this, the report advocates for the development of an Optimal Care Business Model (OCBM) that focuses on delivering the best care at the lowest cost, every time.
A Path Forward: Implementing the Optimal Care Business Model
The Optimal Care Business Model (OCBM) represents a significant shift from the traditional Cost-Plus model. It emphasizes value-based care, driven by actuarial engineering and AI, with a focus on supply chain transparency. The OCBM's profit formula rewards stakeholders for meeting the value proposition through quality dividends paid to providers, members, and sponsors. This approach incentivizes the identification and elimination of poor or suboptimal care, promoting person-centered, quality-driven margin growth. Providers play a crucial role in this transformation, requiring support from innovators to alter their business models accordingly.
Scaling the OCBM presents unique challenges. Innovators must either bring the model to market independently or partner with established entities to achieve the necessary scale. While entrepreneurs can attempt disruption, market conditions often hinder their success. The federal government, particularly through agencies like CMS, has the scale to drive premium stabilization and transform the industry. However, its size also makes it slow-moving. State governments could lead the way by proving the viability of OCBM before CMS adopts the approach. Self-insured employers, as key stakeholders, are critical to expanding the reach of OCBM. As more stakeholders join the new value network, the incumbent system will gradually be replaced, paving the way for a more efficient and equitable healthcare system.