3 Reasons Why Health Care Providers are Facing Disruption

Doctor talking to hospital administrators
Carroll Elger|
May 22, 2019

Whether it’s innovative, digital, or a combination of both, “disruption” is a phrase being found everywhere right now and it’s certainly made its fair share of appearances on this blog. Innovative disruption is currently one of, if not the biggest threat facing many industries and health care is no exception. In this blog we’ll cover what disruption is, why health care is being disrupted, and what the effects will be. This is part of a series of blogs on disruption in health care going all the way through solutions, and this blog will be updated with links as those next blogs come.

What is disruption?

Disruption is used to describe events that have the potential to change entire business models for companies and entire industries. The most famous example of this is of course Uber, who massively disrupted the personal transportation industry with an innovative new business model. Disruption as we refer to it now can often be more specifically described as digital disruption, as the source is nearly always from a new technological advance or a new market player using technology to alter the industry’s capabilities.

Why is disruption occurring in health care?

Traditional health care providers are already aware that disruption is a threat to them based on seeing changes in other industries, but may be still examining the reasons it is facing health care. We’ve identified three reasons why disruption is hitting health care now and will continue to make waves:

  1. Consumers are seeking more value in health care
  2. Technology’s rate of change is constantly increasing
  3. The declining price of technology drives innovative “small” disruptors

Consumer thresholds have been reached

Consumers have reached a bit of a threshold regarding their feelings toward healthcare, and are seeking relief. Consumers may not know it by name, but they are beginning to reject the traditional model of volume-based care for more inexpensive, convenient options. According to Hospitals and Health Networks, clinical visits may decrease by as much as 50% in the next few years, and Deloitte found in 2018 that a third of consumers are looking to mobile apps for health care services, particularly diagnostics. Consumers are looking to limit the number of times they visit the doctor’s office or hospital and prefer to do so by utilizing digital technologies.

Tech is constantly accelerating

As previously mentioned, new technologies and ways to utilize them are the primary drivers of contemporary disruption. The reason digital disruption is so transformative is because technology changes at a constantly accelerating rate- just as organizations have adapted to a given rate of change in their industry, technology moves at a faster rate, forcing them to adapt again. As a result, digital disruption can be a unique threat for large organizations that aren’t used to completely changing business models to be more agile.

Tech enables small players

Small companies, as one might expect, are best poised to take advantage of the rapid advancement of technology. They are already agile by nature, they’re often run by younger people with ingrained tech knowledge, and they can be created quickly in response to a new industry development or consumer demand. One of the best examples of health care disruptors are the lab-testing startups that have sprung up quickly to serve much of the US. Startups are offering online ordering of lab tests for certain diseases or medical conditions, one of the most popular being STI testing. Patients are often uncomfortable about going to a clinic and see it as an inconvenience, so ordering tests online discreetly has value. Additionally, like many other disruptive services, lab testing is mostly offered at a flat rate, which avoids customer frustrations with insurance and lack of knowledge around medical pricing. For the tech-savvy younger generations, this type of innovative medical service is a no-brainer, and has serious negative implications for health care providers that spend large sums to maintain services like lab testing.

What are the implications now and in the future?

Implications for disruption in health care are, on the surface, relatively straightforward. Enabled by technology, many nontraditional firms have entered the industry and are providing innovative alternatives that completely change traditional health care business models. These business models changing mean incumbent health care providers need to adapt or face losses in revenue and market share. Volume-based care will not be a sustainable model in the future as consumers are given more options, and patient experience will be a top priority for tomorrow’s market leaders. Leaders in health care may feel they are pulled in multiple directions at once as they feel pressure to shift away from traditional continuous improvement.

In the next entry in this series, we’ll be breaking down the different ways health care providers can try to maintain their relevance and market share by using different approaches to innovation and discussing their challenges and relative level of efficacy. You can also read articles on disruption in as it affects other industries and other innovation topics in the links below.

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