A little more on Clayton Christensen's view of the health care world, as set forth in The Innovator's Prescription. I have noted below his conclusion that general hospitals do not have a sustainable business model. He is persuasive on this point. What's the solution? Here are the key elements, from page 198 of the book.
[E]ntities that could integrate a new value network are large providers that create and knit together underneath their corporate umbrellas all of the necessary elements of the new value network. There are several important characteristics of such integrated health systems.
First, they operate their own insurance and payments systems. Patients or purchasers in the system pay a fixed fee, typically yearly, that covers the cost of all care they might need. Second, the physicians are essentially employees of the system, not independent businesspeople. Third, the caregiving institutions in the system are apt to use focused business models…. They can operate a limited number of general hospitals, while rationally siphoning work out to coherent solution shops and value-adding process clinics, outpatient clinics, and even retail clinics. And they have created and operate an information system that glues these different providers together to properly coordinate care. Finally, these firms are large employers themselves.
Among the success stories that fit this model and have attracted the attention of the Obama administration is the Geisinger Health System in Pennsylvania. My friend and colleague Glenn Steele runs the place, and it is in fact, a marvelous system with lots of innovation, truly pursuing wellness of patients and minimization of cost as a business strategy. What does it have about which I am envious? A virtually monopoly in its service territory and its own insurance company.
As some of you know, I used to run the regional water and sewer system in Eastern Massachusetts. Among the things I liked best: I was providing an essential public service, I had a monopoly, I could set my own prices, and people had to pay.
There are a few parts of the country in which a similar system exists for health care. For most of the country, this is not the case. If we want to create such entities, who will decide how many there should be and who will control them?