Few health care leaders would disagree that the U.S. health care industry needs to drastically change. But do we have leaders in place who have the courage to raise their hand and lead the charge? In the classical theory of disruption, reform from within is almost impossible. It is hungry, fast-moving new entrants that upend slumbering incumbents. But at athenahealth, we’re seeing early signs of another possibility; more than any time in recent memory, provider groups themselves are preparing to do the disrupting.
Over the past two years, we’ve convened health care leaders at roundtables and other events to discuss the challenges and opportunities they face, both inside their organization and from the external market. As part of this process, we formally surveyed more than 150 executives; the sample represented a broad cross-section of health care, with respondents serving in leadership roles at organizations as diverse as physician practices, hospitalist staffing agencies and large health systems. What we found was a remarkable portrait of courage — a willingness to abandon the status quo in favor of an uncertain path.
In the survey more than 70% of participants reported that they felt their organization was well positioned for future success, with about 15% strongly agreeing with that sentiment. More than three-quarters said they are on a good path to successfully compete in their local markets. Fear of aggressive new competition is minimal, with only 3% of survey participants saying they feel very unprepared relative to their markets.
But this optimism is not a sign of complacency. More than half of the executives we surveyed believe their operational model is in need of change and disruption. At any other time or in any other industry, these results would seem contradictory. After all, we expect incumbents to feel most confident about the future when they believe their operating models are sustainable — and to fear extinction when disruption is on the march.
In healthcare, however, an instinct to disrupt existing models makes perfect sense. From every quarter, the industry is under pressure to cut costs and improve quality and the debate around the Affordable Care Act has crystallized the need for reform; many providers are leading the charge, moving further and faster to redesign care delivery than the law requires. Many health care leaders understand that there will be little room in the health care landscape of the next decade for laggards. These leaders may feel confident about their strategic direction, but they know their current models won’t get them where they need to go. Thus they need to become their own disruptors.
We asked our roundtable members where they hope to be in five years — and received an array of responses that all pointed toward disruption. One participant, the CEO of a staffing organization for hospital emergency departments, is looking beyond emergency care. “We hope to become a recognized leader in integrating physician care across transitions of care,” he told us — even though, ultimately, better care transitions will mean fewer E.D. admissions, which would threaten his existing business model.
The chief strategy officer of a west-coast medical center we surveyed is confronting a future in which her organization’s current strategy — top-quality tertiary and quaternary care — would be less competitive. “We need to position our enterprise for a post-reform era,” she told us, which means “moving from a tertiary/quaternary care model only to a dual strategy in which we are also a population health manager.” Rather than fearing the population health managers who would erode this organization’s high-margin business in complex surgeries, this strategy officer plans to join them — and reap the rewards of shifting from payment based on patient volume to payment based on delivering value.
Generally we found the respondents clear-eyed about the difficulty of changing course. One CEO of a large Midwestern health system reminded us that his system is already a Medicare ACO (Accountable Care Organization), and he and his colleagues are “positioned well in our thinking” about the future. But, he said, “we are not positioned well in some of our operating fundamentals such as infrastructure, analytics, process, and compensation models.”
The overwhelming sentiment among our roundtable participants was that the impediments to change are mostly internal. Less than a fifth of respondents said that market competition is the primary challenge they face in addressing the ongoing shift from volume-based to value-based payment. A similar share said that outdated or ineffective IT infrastructure is their major roadblock, and almost two-thirds identified either cultural resistance or misalignment with physicians as their biggest obstacle. One executive told us that his greatest challenge is persuading the “59-year-old physician who recognizes that things are changing but is hoping he or she can hang on.”
Overcoming such challenges requires intrepid leadership. Respondents to our survey said they are scanning widely for models of executives who have successfully disrupted their own organizations. When we asked which companies health care executives most admire, the top choice wasn’t Mayo, Cleveland Clinic, or any other blue chip health care institution. It was Apple: the tech giant with a history of cannibalizing its own products before a competitor does and promoting disruption before being overtaken by it.