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CHAPTER V - Reshaping Ecosystems

The most successful businesses of the future will not only have knowledge of the ecosystems in which they operate but will play an active role in shaping—and, since disruption is an ongoing, dynamic process, reshaping—those ecosystems. Therefore, participants will need to have a deep understanding of how ecosystems operate and access to the right shaping tools. What do organizations need to do to gain these capabilities?

We begin with a case study from the field of healthcare. To a large degree, healthcare is a success story: many infectious diseases have been eliminated or dramatically reduced while Americans’ life expectancy increased dramatically during the 20th century. At the beginning of the century, millions of people died from infections and battle wounds. The development of vaccines and antibiotics, and advances in public health services led to major improvements in overall population health. In the second half of the 20th century, scientific and clinical research led to the development of pharmaceuticals to treat everything from heart disease and ulcers to depression and insomnia, while surgical techniques including micro- and laparoscopic surgeries and organ transplants made progress in treating such things as cancer, heart disease and kidney failure.

Now at the beginning of the 21st century, medicine is confronting new challenges: in much of the developed world, the population is aging rapidly (the number of people over age 60 is growing twice as fast as the number of younger people, and the fastest growing age group of all is 80+), and treating chronic diseases is now the leading problem along with the affordability of healthcare.

Like education, healthcare is delivered by a large and complex ecosystem. And like education, healthcare is proving to be relatively resistant to disruption. Medical practice has been heavily regulated for many decades and dominated by individual physicians largely able to determine what services they provide and how much they charge for them. Even though spending on healthcare has soared,i individual patients have been largely insulated from the direct impact of the costs of healthcare since most Americans have been covered by third parties, mainly employers or the government.

Changes in the way healthcare is delivered, or at least the prospect of change, is becoming more apparent. The potential of technology to make healthcare more efficient is being explored in a number of initiatives. One major development is the rise of “connected health,” which uses digital network technology to connect different parts of the system together in new ways. Many of these explorations are taking place on the “edges” of the healthcare system, but others are focused squarely on what is arguably the very heart of the modern system—the hospital, which accounts for nearly one-third of total healthcare spending annually.ii

Specialists on Call (SOC), which was founded in 2004, makes use of video technology to provide hospitals with access to medical specialists in several different medical disciplines. According to Jackie Kosecoff, who is a member of SOC’s board of directors, the company provides another example of using technology to make more efficient use of a scarce and expensive resource—in this case, physicians with expertise in neurology, cardiology, psychiatry and critical care medicine (intensivists). These intensivists are often difficult for hospitals to recruit or keep busy 24/7 because they cannot provide full caseloads of specialized cases. SOC uses high-quality video links to provide participating hospitals with round-the-clock access to these specialists. It also has access to all imaging and medical data related to the consults, and incorporates hospitals’ standard operating procedures to ensure that its service can be easily integrated with other ongoing functions.

Having access to specialists has multiple benefits, for instance, it makes it possible for hospitals to keep patients who otherwise might have to be transferred to another institution. Services such as SOC can also benefit patients in rural areas who suffer from strokes whose recovery may depend on rapid access to specialized care that would not otherwise be available.iii And participating in SOC is appealing to highly trained specialists who can fully utilize their skills by seeing more patients than they would if they were based at a single hospital. SOC assists its physicians in getting licensed in multiple states (the average is 20), so that they can provide services on a national basis. In addition to helping hospitals fill gaps, the company can also help larger hospital systems and academic medical centers to use their own staff more efficiently.

In effect, SOC developed a platform to deliver high quality specialized medical care when and where it is needed. According to Bob Brook of RAND, innovations like SOC are urgently needed since a large portion of current healthcare is mediocre at best: half of what patients really need in the way of treatment they do not receive, he contends, and 20 percent of the care they do get they do not actually need.

Transforming Healthcare. SOC is a good example of “connected care,” an approach to delivering services that has the potential of dramatically reshaping the healthcare ecosystem. As healthcare becomes more digital, there will be opportunities to improve the efficiency of care delivery as well as to increase the quality of care by gathering, aggregating and analyzing data on treatments and outcomes (so-called practice-based evidenceiv).

John Seely Brown called attention to the opportunity that a venture like SOC offers to accelerate learning among its participants. Because of the large volume of services it delivers in a few specific areas, it should be possible to learn what approaches work best by comparing treatments and outcomes in thousands of cases. This kind of learning can be accelerated by actively encouraging participants to share lessons learned. Even a company like oDesk, which provides online access to freelance writers, programmers and designers, provides incentives to its participants to do this kind of sharing as a means of helping all of them get better faster.

Abhi Ingle, Senior Vice President of AT&T Advanced Solutions, pointed out that SOC is really a starting point, not the endpoint of a transformation of healthcare. The company has found an elegant way to solve one specific problem, but there are many others waiting to be solved. For example, in response to pressure to control costs, hospitals are sending patients home “quicker and sicker” more often than in the past, relying on patients and their families to provide needed follow up care.v Remote monitoring equipment can provide home patients with better support and can reduce hospital readmissions, which is a key goal of the Affordable Care Act (Obamacare).

Beyond supporting post-acute care, remote monitoring can track the health status of patients with chronic diseases. Since most patients—including millions with serious chronic conditions such as diabetes, heart disease or respiratory problems—see a doctor face-to-face for only a few hours per year, it is the patients themselves (and their families) who are responsible for providing the great majority of their own care. Remote monitoring could improve the quality of this self-care.

Despite the promise of connected care, a variety of barriers to its wider adoption remain. One barrier is the fact that the government (Medicare) limits reimbursement for services delivered via “telemedicine.” Other barriers include the lack of interoperability among different electronic medical records (EMRs) and varying degrees of willingness to openly share data. Although the federal government invested billions of dollars to subsidize the adoption of EMRs by physicians and hospitals, it failed to require that they have the ability to exchange information among different systems in a standardized format.vi

Ultimately, a service like SOC makes sense because it enables a scarce and expensive asset—in this case, highly trained medical specialists—to be used more efficiently. Robin Chase noted that the reason that services like Zipcar and Lyft have been successful is that they permit the sharing of cars, which are the second most expensive asset for most people. By the same token, services such as Airbnb make sense because they enable the sharing of what is normally people’s most expensive asset—their home. These success stories raise the question of what other kinds of assets could be shared.

Reshaping an ecosystem by building a new platform is difficult because it inevitably involves what Elliott Shore describes as disaggregating and recombining functions in new ways. This kind of disruption almost always provokes resistance from incumbents. Jonathan Taplin recalled that when he worked with a very successful movie studio at a time when nearly half of its revenues came from the sale of DVDs, many older employees resisted the move to streaming media because they did not want to have to learn about a new technology. According to Ping Fu, large manufacturers have responded to the prospect of 3D printing mainly by asking about its potential to eliminate traditional manufacturing jobs. (She believes that in the longer run, 3D printing will shift job requirements and will lead to the creation of new types of local jobs). As a result of the resistance from incumbents, the most interesting innovations typically come from the edge. According to Sonny Garg, in the area of energy, the biggest disruptions have come from start-ups such as Solar City (power generation) and Nest (energy management), not from the big power producers or distributors.


ENDNOTES
i For many years, the overall cost of healthcare in the U.S. has increased faster than the rate of inflation, rising from 10% of GDP in 1982 to 13.8% in 2000 to 17.9% of GDP in 2011. A 2007 report from the Congressional Budget Office calculated that if total health care costs continued to rise at the same rate that it had over the previous 30 years, total health care expenditures would reach 50& of GDP in 2052, and 99% of GDP in the year 2082. (The Long-Term Outlook for Health Care Spending, CBO, November 2007, www.cbo.gov/sites/default/files/cbofiles/ftpdocs/87xx/doc8758/11-13-lt-health.pdf.) In the past few years, thanks in part at least to the effects of the Affordable Care Act, the annual rate of increase in health care costs has slowed substantially.

ii California Health Care Almanac, California HealthCare Foundation, July 2014, www.chcf.org/~/media/MEDIA LIBRARY Files/PDF/H/PDF HealthCareCosts14.pdf.

iii Specialists On Call And UCLA Present New Stroke Data, Drugs.com, February 11, 2011, www.drugs.com/clinical_trials/specialists-call-ucla-present-new-stroke-data-11179.html.

iv For a discussion of this term, see Anne K Swisher, Practice-Based Evidence, Cardiopulm Phys Ther J. Jun 2010; 21(2): 4, www.ncbi.nlm.nih.gov/pmc/articles/PMC2879420.

v For a stark view of the challenges that many patients and their families face in having to provide “complex medical care” following a hospital stay, see Susan C. Reinhard, Carol Levine and Sarah Samis, Home Alone: Family Caregivers Providing Complex Chronic Care, AARP Public Policy Institute, October, 2012, www.aarp.org/content/dam/aarp/research/public_policy_institute/health/home-alone-family-caregivers-providing-complex-chronic-care-rev-AARP-ppi-health.pdf.

vi Julie Creswell, “Doctors Find Barriers to Sharing Digital Medical Records,” The New York Times, September 30, 2014, www.nytimes.com/2014/10/01/business/digital-medical-records-become-common-but-sharing-remains-challenging.html.

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