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One of the recent cost-control measures that Medicare has been experimenting with is a planned penalty for hospital systems with high readmissions. For example, if the reimbursement data a hospital files with Medicare shows a higher 30-day readmission rate for patients it previously treated, also called “bouncebacks,” a percentage deduction will be made from all future Medicare payments to that hospital. The basis of this new rule stems from a belief that hospitals with high readmission rates are the result of inadequate care continuity practices and not the result of skewed populations being served. For this post, I will leave aside the many criticisms (e.g., for indigent care hospitals, for population outliers) of the new policy and focus on the innovation trends for helping individual hospitals lower their readmission rates.
Leaving so soon? Most quality experts believe readmissions could be reduced if high-risk patients remained as inpatients longer. (Courtesy Hospital & Health Networks)
The research group that I currently work with at Emory University’s Department of Surgery and Georgia State University’s Andrew Young School of Policy Studies view excessive readmissions as the first signs of correctable errors in the discharge process. These errors can be broadly grouped together as systems-based and decision-related. Systems-based errors are when a patient is not adequately prepared for discharge because of an internal system failure. For example, the process for discharge at a hospital may not properly instruct a patient on the use of home-oxygen prior to discharge. Decision-related errors are when lack of information or external pressure lead to a patient being discharged too early.
Systems-based discharge errors are currently being addressed through traditional quality improvement mechanisms now being applied in the healthcare setting. However, decision-related discharge errors represent an under-explored opportunity for hospitals to reduce their readmission rates. The general thinking is that if physicians can have a more accurate sense of the likelihood of readmission, patients can be discharged at a more appropriate time while not wasting resources by simply holding on to every patient for a longer time period.
Although approaches have varied, the common wisdom to address decision-related discharge errors has been to take advantage of the latest advances in bioinformatics (i.e., healthcare IT) and apply them in real-time to patient discharge decisions. Currently, the most developed commercial solution is Microsoft’s Amalga healthcare information management platform (3M has a similar IT product oriented more toward quality improvement offices). The basic principle of these systems is for algorithm-based analysis of existing patient data to develop and refine predictive tools for use by a physician at the time of discharge of a future patient. For example, as the system collects data on patients who ahad gallbladder surgery it will become increasingly better at predicting which future gallbladder patients will most likely be readmitted. With such information in hand, a surgeon could potentially flag certain patients as high-risk for readmission and manage their discharge more conservatively.
It is important to note that product offerings like Amalga have not been readily adopted by the mainstream healthcare information management community. Critics note that Microsoft has been struggling to establish itself in healthcare IT due to its late entry and lack of a comprehensive product line. Recent moves by Microsoft signal that the company recognizes these vulnerabilities. A 50/50 joint venture called “Caradigm” between Microsoft (an IT and platform leader) and GE Healthcare (an electronic health record industry veteran) aims to capture many of Microsoft’s latest clinical informatics innovations and package them into existing health system platforms.
Currently, these uses of predictive data analysis are in their infancy. To use a term from business innovation theory, we’re in an “era of ferment.” What I find even more interesting than the technical hurdles firms are currently struggling with is the foreseeable problem on the horizon of how we pair technical expertise (healthcare providers) with these predictive tools. This man-machine interface is easy to dismiss, but I believe that successfully addressing it will be the determinant of a successful dominant design.
Disclosure: I currently receive a graduate research stipend from the National Institutes of Health (1RC4AG039071) for work related to surgical patient readmissions and discharge decision-making.
I recently came across FoetoH, a fetal heart rate monitoring device that has been developed at the University of Oxford. Unlike other forms of fetal health monitors, FoetoH is designed to be used by laypeople and in a real-time manner. Rather than giving health information output in complex jargon or graphs, the device provides a stoplight-style assessment (green, yellow, red) of a developing fetus’ current health. The scientific breakthrough was developing an exercise belt-like device (think exercise heart rate monitors) that a mother-to-be wears all the time that communicates with a handheld unit (or iPhone app) which facilitates data storage and interpretation.
The idea of FoetoH is attractive because of its synthesis of the latest technology trends (i.e., mobile-based health applications, user-oriented design) and advanced health monitoring devices. The marketing materials of FoetoH are excellent and describe this device as potential breakthrough to help address the more than 2 million stillborn babies born each year around the world. The basis of this claim is that mothers who know their pregnancy is in trouble (indicated by a “yellow” or “red light” on the device) could receive emergent medical care to improve fetal outcomes.
Unfortunately, such a simplified product and health solution obscure some major logical flaws in their existing argument. For FoetoH to contibrute to a reduction in worldwide stillbirths, the device needs to prove itself to be more than just effective at measuring fetal heart rates. FoetoH’s founders need to be able to demonstrate that identifying changes in fetal heart rates is an effective way of identifying AND preventing still births. Why do I raise this issue? The limited data available on still births demonstrates that the majority of still births are due to genetic and environmental insults that go well beyond impaired cardiovascular support of the fetus. Many of these stillbirths are due to unknown genetic causes, infectious disease, or severe malnourishment, and fetal distress (erratic fetal heart rates) is an end-stage sign of imminent still birth. In these cases, last-minute emergency care would have virtually no chance of preventing “fetal demise” (technical term for still birth). It is also unclear that FoetoH’s real-time monitoring is any more effective than current guidelines for antenatal care which include regular physician visits and routine ultrasound scans at pregnancy milestones.
Moreover, it is unlikely that most mothers at risk for stillbirth would be able to gain access to the FoetoH device. Its currently reported cost of manufacturing is approximately $80. A public sector price is likely at least twice as expensive with a market price even more. Given that the vast majority of stillbirths occur in impoverished women from developing countries, the target population who could potentially benefit from such a device would be unlikely to be able to afford it. Even if such devices were provided free of charge to high-risk mothers, the limited benefit of using the device I raised in the prior paragraph would likely outweigh the high cost to health systems.
These issues are not lost on healthcare device makers familiar with the product. At Oxford’s recent TATA Idea Idol business plan pitch competition – where FoetoH was a finalist – judge Will Chadwick of TATA Interactive Systems noted that the only realistic market for FoetoH were overly concerned mothers from the industrialized world who were willing to pay for a device that provided peace of mind rather than a clear-cut medical benefit over existing practices.
In fairness to FoetoH, its TATA Idea Idol team went on to win this year’s competition despite Chadwick’s misgivings (so someone clearly thinks FoetoH has something going for it). In the end, the science and potential commercial market for the device were convincing enough to beat out a number of strong competitors. FoetoH is a useful reminder for clinicians. Sound science and commercial availability do not make good medicine. Healthcare providers have to always maintain a critical eye and question new healthcare good and services to ensure that they are consistent with the individual provider’s aims and means of care as well.
Last week, I had the opportunity to participate in a strategic war game. For those unfamiliar with the term, imagine a business strategy competition where four teams are posed with the same problem. The unique twist of a war game is that each team is assigned the identity of a real entity (e.g,. the management of a health insurance firm) and must justify all the decisions it makes by demonstrating consistency with the existing operations and culture of the real thing. While these can be organized as internal professional development opportunities, this particular war game — entitled “Designer Foods – who will win Big Pharma or consumer goods?” — was an Oxford-Cambridge face-off organized by Fuld & Company, a business intelligence firm.
Let the games begin
The basic premise upon which the four teams’ arguments turned was how scientifically-engineered super-foods would develop in the coming years. Specifically, would the expected explosion in health-oriented food products that enhanced wellness be led more by science-based pharmaceutical firms (e.g., GlaxoSmithKline [or GSK] and Abbott Nutrition) that lack brand recognition with consumers or traditional consumer goods firms (e.g., Nestle Health Science and Danone) who understood consumers but have struggled with regulatory concerns over their prior health claims? The intentional ambiguity of what qualified as a “designer food” and what potential scientific advances were on the horizon made the ensuing presentations and Q&A sessions highly unpredictable and insightful.
The consensus ultimately reached by participants and observers alike was that this gray area between food and medical product is developing unusually fast and not without controversy. Risks abound for a company to find itself either a) not being able to bring consumer-friendly markets to product quickly enough, or b) not being able to justify satisfactorily any health claims to government watchdogs.For example, both GSK and Abbott had substantial history in medical nutrition (e.g., infant formula, adult disease-specific supplements), but neither had successfully grown a brand in a consumer-oriented product segment. Conversely, Nestle was intimately aware of its consumer reputation as too much a “confectionary company,” and Danone was being dragged through courts on multiple continents for health claims it had later amended with its Activia line of digestive yogurt-based products.
The solution put forth by our team (and others) was that the firms gathered could best participate in this new market ecosystem by partnering with complementary firms. For example, we were assigned GSK and strongly advocated the firm formalize new product development with a consumer goods firm (e.g., Nestle, Danone, Unilever) to quickly move into the space. Our argument rested on GSK’s ability to provide “scientific credibility” to consumer goods firms’ health claims. However, not everyone agreed with this strategy. The Danone team returned in a later round to not only reject an offer to partner with a major pharmaceutical company but opted to leave the functional food market (and return to its traditional fresh-dairy products without health claims) after a game twist led to increased regulation of food products making health claims.
It will be interesting to see where the designer food market ultimately goes. One of most important findings I noted during my business research for the competition was the lack of credible products in the space. There are a number of medical food products that will soon hit the market (e.g., chewing gum to reduce blood phosphate levels in kidney failure patients); and there remain a number of essentially rebranded naturally healthy products like yogurt with active cultures. What I was unable to find were products intended for the mass market that made uniquely novel health claims. It is certainly possible that rather than a dominant player establish designer foods as a strategic growth market, the role of high-science, mass-market foods dwindles out for lack of promising development.
Disclosure: I received a share of the prize money awarded to the first place team by Fuld&Company the Oxford-Cambridge War Game simulation. As of June 2012, I am currently engaged with one of the firms above on a short-term consulting project unrelated to designer foods.
A community health worker is seen here registering patients at a rural health fair outside Thomonde, Haiti. Community health workers are critical at serving "last mile" healthcare needs and are typically deeply embedded in communities.
It is widely acknowledged that the developing world is in the midst of a healthcare personnel crisis. Even the citizens of middle-income countries that have begun to reap the rewards of increasing standards of living and the emergence of disposable incomes are finding that local health systems lack the healthcare personnel to provide adequate care. The World Health Organization estimates that 57 countries lack the health care personnel needed to reach health-related Millennium Development Goals. Even small increases in the ratio of healthcare workers to the general population correlate with substantial declines in maternal, infant, and child mortality.
Unfortunately, progress is not being made fast enough, and the primary problem is lack of infrastructure. The consulting firm McKinsey & Co. has modeled current workforce education capabilities and estimates that $33 billion and 300 new medical schools would be needed in sub-Saharan Africa alone to meet the continent’s workforce needs. Radical changes to the existing system of healthcare workforce education are needed if health systems are to meet the demands of a world in need of accessible and quality healthcare.
The current paradigm of health workforce education across much of the world involves a massive financial and social investment into the education of highly-skilled, upper-tier medical professionals that typically requires 5-10 years of higher education. However, in a number of developing countries, substantial healthcare services have been provided with less highly trained mid-level providers.
Having trained pharmacists available at dispensaries ensures that patients receiving proper counseling on the use of medications.
Changing the workforce shortage starts with changing the paradigm. New models of healthcare workforce education need to be tried that move away from the high-cost, state-run institutions currently being used. One alternative would be to begin offering private, market-based programs that provide a more flexible path to licensure as mid-level providers. These programs could use a modified version of distance education — already popular in the developing world — and take advantage to the expanding technical capabilities of mobile networks in these communities.
The biggest obstacle to experimenting with new workforce education strategies is the regulatory environment. Many governments in the developing world still find it difficult to license mid-level providers given their unusual place in the medical hierarchy and these governments’ lack of experience with such providers. Additionally, these novel education schemes would need to be accredited as well.
Given these regulatory hurdles, a “bottom-up” approach of market creation is unlikely to work for new education models. Hence, the workforce shortage issue is ultimately a policy problem. If one is able to leverage government policymakers, these new models of medical workforce training represent a great opportunity for addressing the biggest, least recognized problem affecting global health today.
Interested in learning more? See this proposal I previously prepared on how such market-based education solutions could be implemented given the risky regulatory environment.
Jerry Sanders, one of the medical device industry’s top entrepreneurs, visited Saïd Business School last month for a series of masterclasses on his role in the startup industry. Sanders’ firm San Francisco Science is legendary for its ability to identify promising innovatons that big medical device companies will pay handsomely for. Given the firm’s success, it was quite a shock when Sanders acknowledged that SF Science’s activities were being gradually run down because of what he believed to be the decreasing attractiveness of the market for independent medical device developers. To that effect, Sanders has reduced the number of deals he runs per year from greater than twenty to two active deals currently and only takes on new projects that meet an unusually high level of return for the risk involved.
To summarize Sanders’ argument, independent medical device firms — often only inventor, engineer, financial-whiz, and a few support staff — have been disproportionately impacted by the FDA’s increasing conservatism in the approval of new drugs and medical devices. Following the Vioxx recall, regulatory approval has become both more difficult and more expensive. This constellation of problems has made it near- impossible for a small medical device firm with perhaps 2-3 early-stage products to actually become commercially successful on its own. Essentially, the only option available to bring a medical device to market is to quickly identify a consolidated medical device company (e.g., Johnson & Johnson, Covidien) who is interested in adding a particular innovation into an existing product platform. This situation puts independent medical device innovators into a difficult strategic position. Rarely will more than one or two of the diversified device companies have interest in a particular innovation, but the inventor is often looking for a quick outcome that either funds him or her to progress with further development or exit and move on to something else. A desperate seller and a large, powerful buyer allows for the latter to capture much of the value generated from the deal and leaves the entrepreneur with limited upside.
Does Signostics even have a chance? (Courtesy: Signostics)
To use a real-world example from an earlier post, has the GE VScan device already beaten other handheld ultrasound competitors like Signostic’s Signos Personal Ultrasound because whatever incremental feature benefit Signostics may have will never allow the firm to compete with such an established player in a highly regulated industry? According to some of the leading lights of this industry, the only option for many of these smaller firms is early exit.
What explains Sanders’ complete exit from this industry is that the difficulties he spoke of have little or no chance of disappearing soon. The contentious state of American politics makes ambitious change at the FDA highly unlikely in the near future (although future rumblings do exist). With the increasing role of corporate influence on future regulation, it is likely that any reforms to the FDA device approval process will likely benefit large diversified device firms as much if not more than they do the smaller independent device makers. During a masterclass, Sanders noted that contrary to conventional wisdom “Big Business” (defined here as large consolidated device makers) often welcomes increased regulatory oversight because such hurdles disproportionately hurt small, new entrants to their established industries.
While incremental improvements to existing medical devices will continue to be churned out by the “majors,” the current business and regulatory environment of the medical device industry make the emergence of new, disruptive innovations far less likely.
For those of you familiar with my background and specific research interests in global health and quality improvement, it should be no surprise that I routinely get asked how do I connect two very disparate fields of medicine like global health and quality improvement. Just last week, a fellow of my college at Oxford, asked for further clarification. I still find myself falling into the trap of assuming the overlap between the two is obvious to others since that overlap is where most of academic work currently focuses. This particular fellow was a healthcare economist with an interest in financial crises and their impact on global health, so I incorrectly assumed that he would “get it.” This lack of discernment is unusually common, and I believe it only reinforces the relative lack of interest even within the global health establishment for the issues that I find most engaging.
Before one can understand my area of overlap between these two fields, it is important that I re-frame what these terms mean. To understand how I use the terms and my particular interests within each, most would benefit by briefly reviewing prior posts on the two (global health, quality improvement). At the macro-level, I find both of fields fascinating and ultimately the causative factor for why I am pursuing a career in academic medicine (i.e., not private practice). For me, these two fields are the current focus of healthcare’s greatest obstacles. Globally, we have billions of people around the world who cannot access even basic healthcare services aligned to 21st century standards of clinical care. In the industrialized world, we find that most countries are unable to provide healthcare services in a manner that maximizes capabilities given a set of constrained financial resources.
Albeit in different contexts, the kinds of systematic and institutional inefficiencies that ultimately impair the delivery of quality healthcare in modern health systems like the U.S. are also evident in the delivery of healthcare in even the most resource-limited environments. Global health is quickly reaching a point where the technical capabilities needed to address the world’s healthcare problems (e.g., effective antibiotics, vaccine development and production technologies, low-cost anesthesia equipment) are available, but global health interventions often lack the operational competence needed to achieve their goals.
My belief and where much of my research efforts are focused is that we can use the quality improvement frameworks being developed for modern healthcare systems to also improve the healthcare delivery in less developed healthcare settings as well. Global surgery is an ideal area in which to adopt these analytic models because of the process-driven nature of the surgical resource procurement (e.g., anesthesia and surgical equipment, pharmaceuticals for infection prevention and anesthesia) and direct patient care.
Outside Hôpital St. Thérèse (Hinche, Haiti)
“Global surgery” is a relatively new addition to its parent field of global health. Although the notion of surgeons from the industrialized world sharing skills and equipment with resource-scarce environments has been around for decades (largely arising out of the medical operations of the world powers’ militaries), “global surgery” as an academic interest within traditional global health circles has emerged only recently. The increasing interest in the global burden of surgical disease has largely paralleled the relatively new awareness of noncommunicable disease as a global problem.
I should be clear that a consensus has only just begun to form in the last 10 years around the broadening of the definition of global health. For example, although there is an increasing effort to use “global health” in a more appropriate, literal sense, many well-qualified academics still associate the term with the unique disease burden of low- and middle-income countries. Say “global health” in a professional healthcare setting and poor, non-white people suffering from malaria or HIV is what the majority of the audience will be envisioning. It is only recently that the more complex problems of noncommunicable diseases like diabetes and cancer that span the industrialized and developing world have been authentically engaged by the global health community.
Inside Hôpital St. Thérèse (Hinche, Haiti)
Within global surgery, I am most interested in the persistent difficulty we have of finding the means of providing even the most basic surgical care for all the world’s communities. Although it will be decades before the poorest countries will have the means of performing complex surgeries like spinal fusions or coronary artery bypasses, the infrastructure and skills necessary to perform hernia repairs and thyroidectomies is well within reach. These latter cases may be less “newsworthy” but they represent substantial quality-of-life improvements for patients suffering from surgically-correctable disease. Although the field of global surgery is still in its nascent stages, a number of expert bodies are catalyzing around the idea of essential surgical care (e.g., ASAP Today, WHO GIEESC) and how best to deliver it.
A note on the pictures: The pictures in this post include two from a humanitarian surgical mission I joined in June 2009. This was the first of a series of many missions (more in a later blog post). I inserted these two images here to demonstrate how even the limited infrastructure of Hôpital St. Thérèse (see “outside” photo) can provide the platform for delivering basic surgical care (see “inside” photo). The bottom picture is provided courtesy of Nick Vittone of AtlantaAperature.com.
A man visits a surgeon about a lipoma (usually a benign glob of fat) on his arm that has been aesthetically bothering the patient for a number of years. The surgeon assesses the lipoma and rules out any concerning other health problems. The man is booked for surgery three weeks later. The patient arrives on-time to an outpatient surgery center for the removal of the lipoma. This patient checks in at the front desk and is guided back to the preoperative assessment area. There, the surgeon and anesthesiologist consent the patient for the procedure, start an IV, and ask the patient and his personal friend to say there goodbyes. Shortly thereafter, the patient is brought to the OR and sedated for the procedure. The case goes off without a hitch, and two hours later the patient is comfortably recovering from the effects of the sedative before being taken home by his friend. His wound heals well, the tissue removed during surgery is found to be benign, and he is formally released from the surgeon’s care at a follow-up appointment two weeks later.
This vignette represents a stylized “perfect” surgical encounter. All the various processes necessary to move from diagnosis of surgical disease to remediation of the condition proceed apace without incident. What happens in real life? In more than a few cases, one of the many steps above has a seemingly minor logistical hiccup that ultimately causes far too many resources to be devoted to this individual patient’s care. Sometimes these issues pass without the patient even aware of a problem. For example, it is not uncommon that a patient is brought to an operating room and sedated but the surgical team is not yet available to start the case. Other times, the patient’s entire memory of the encounter is shaped by the issue. It is not unheard of that a patient arrives for surgery and finds that because of paperwork errors he or she was not scheduled for surgery. In the best of cases, the patient has to wait a few hours before being squeezed in. Unfortunately, sometimes the patient is asked return at a later date for the procedure which of course requires the patient finding a new window in his busy schedule that can accomodate such a visit. Regardless of whether the patient is aware of the problem or not, these logistical errors greatly increase the resources and time needed to meet the healthcare needs of a population.
In the U.S., a seminal report by the Institute of Medicine (the profession’s pantheon) in 2001 radically accelerated the industry’s adoption of product quality and operations management practices from other industries. A practical example of this was many of the “cost containment” issues that were discussed — but largely not included — in the 2010 U.S. healthcare reform legislation. For example, the original legislation included powerful politically independent panels of experts (a la the 9/11 Commission) that would provide evidence-based – rather than expert-opinion – recommendations for the highly politicized but necessary changes to align Medicare reimbursement policies with cost-effective care.
Within surgery communities, there seems to be a rather large divide between institutions and programs that “get it” and are willing to spend the administrative resources to address these operational inefficiencies and those who fail to recognize the magnitude of these problems or see no solution from them.
The part of surgery’s newfound interest in “quality improvement” that is of greatest importance to me is exploring the incremental changes we can make to healthcare processes to prevent the small process problems noted above that ultimately weigh heavily on the costs of healthcare. I specifically am looking at using process mapping and decision analysis tools to question existing healthcare operations through a patient-centered perspective.
What we are trying to do in quality improvement is identify systems (e.g., patient management systems), products (e.g., mobile software), and services (e.g., nursing hotlines), that help us provide healthcare that is more comprehensive but also cheaper than existing practices. The burden that currently weighs on those of us working in this field is developing and testing these new methods of providing care in a way that convincingly demonstrates results with which we can act on.
Why an amazing product can’t find a market
The Gold Standard: GE Vivid 7 (Courtesy GE Healthcare)
Medical ultrasound is considered one of the most effective imaging modalities for cheap, reliable diagnosis of many disease states from heart disease to infected abscesses. Since the technology’s inception, device manufacturers have been steadily miniaturizing components so that what used to be a desk-sized machine (The GE Vivid7 in the picture to the left is a modern version of these behemoths) has now been succeeded by a laptop bolted to a small rolling cart with a number of ultrasound probes hanging off the side.
In late 2009, GE Healthcare released its VScan (see picture on right) handheld ultrasound device to the American market. The VScan device was most notable for its size — only slightly bulkier than a classic clam-shell mobile phone — and a price that was 80% less than traditional machines. Although VScan’s introduction was accompanied by a number of competing devices from other major industry competitors (e.g., Siemens’ ACUSON P10, Signostics’ Signos) as well as enterprising start-ups, the VScan has generally been considered to be the superior product in the pocket portable product segment because it functions near-identically to larger laptop-based portables but in a smaller form-factor. (Still not quite following? See a short introductory video by GE here.)
GE VScan (Courtesy GE Healthcare)
The VScan’s entry should have been heralded by doctors in a variety of clinical settings. A device exists that a clinician can carry in his or her pocket that with relatively little additional training can be used to detect traumatic injuries, major vessel disease, heart failure, and other maladies all without the need for any further appointments (in the outpatient setting) or bulky equipment often confined to a poorly accessible imaging suite. Unfortunately, the VScan and its competitors have had little adoption in the years since their introduction.
The lack of interest in the VScan illustrates how the current reimbursement system of the American healthcare system has direct effects on how patient care is provided. An example of these skewed incentives can be readily seen in one of ultrasound’s largest markets – outpatient cardiac ultrasound. Without VScan, a cardiologist orders a comprehensive ultrasound study that typically requires a second visit and an advanced cart-based ultrasound machine. Each study performed earns the cardiologist a professional and technical fees exceeding $1,500. In contrast, current reimbursement policies (typically set by Medicare and then voluntarily adopted by private insurance companies) do not cover ultrasound procedures performed with handheld devices so physicians are unable to charge for this service. Thus, the $7,000 cost of each handheld ultrasound machine is not going to be recouped through additional procedural charges.
The only revenue stream from use of the VScan product is any potential efficiency gains met by being able to rule-out serious underlying disease quickly and thereby see more patients in the same amount of time. While such a hidden benefit may be difficult to convey to a private practitioner or a standalone healthcare system, integrated healthcare systems (e.g., U.S. Veterans Affairs Hospital Systems, National Health Service) stand to benefit more from lowering the number of unnecessary comprehensive ultrasound exams. It should be no surprise then that integrated healthcare systems in Europe have been some of the few markets where handheld ultrasound devices are regularly used and clinically studied.
Personally, I’m not convinced by proponents of the VScan that such devices will soon replace the conventional stethoscope. The price and relative ease of use the latter are so superior that any real competition between the two is still a decade or more away. Such a claim is analogous to saying the typewriter would make the pencil obsolete. What is far more likely is growing demand for VScan and its competitors as the American healthcare system wakes up to cost-effective care. A greater focus on comparative cost-effectiveness will lead to reimbursement policies rewarding physicians for at least the limited use of such handheld devices versus comprehensive ultrasound studies. As GE’s marketing efforts in the ultrasound industry demonstrate, the real success of such a product can only be evaluated as a component of a greater imaging ecosystem. For a GE, the real value of such a device is that it allows the company to offer an end of the spectrum poorly matched by any of its competitors.
Conflict of Interest Disclosure: I have never received funding from and have no financial stake in GEHealthcare or its subsidaries. In 2010, GEHealthcare loaned a LOGIQ i portable ultrasound machine to a humanitarian surgical trip I led to Hinche, Haiti.
Blue Oceans for Health? Kind of a strange name, huh? After coming up with the name (and, of course, prematurely securing the naming rights), I realized there are two issues with the name that could make it problematic for the blog’s newcomers. For those readers unacquainted with the management sciences, the name is likely to be incomprehensible at first read. On the other hand, for the strategy mavens out there I am afraid the “blue oceans” referred to may be less intellectually rigorous than what you’re hoping. If I’ve sufficiently disappointed both ends of the knowledge spectrum, my hope is that there is a sweet spot of blog readers who can appreciate the meaning behind the blog’s name without becoming obsessed with a strict interpretation of its underpinnings.
For the Uninitiated (My apologies to experts for any oversimplification)
In 1997, Chan Kim and Renée Mauborgne published an article in the Harvard Business Review, “Value Innovation: The Strategic Logic of High Growth,” that initiated a challenge by the authors to traditional structuralist approaches to management strategy. “Strategy” in the management sciences is the part of running a business that is concerned with how one succeeds against business competitors. In other words, it doesn’t matter if a company sells the greatest toaster in the world if it is not able to use its relative strengths to outcompete other sellers of toasters. For decades, most academics have argued for some variation of a structuralist approach where’s one competitive position in the industry relative to other firms is what determines one’s strategy. Michael Porter (and his Five Forces model) has been one of the most prolific and best-known proponents of such a positioning approach (to the point that a strategy professor of mine at Saïd once remarked that to get something published in strategy basically means its got to out-think Porter).
Kim and Mauborgne had such an impact because they argued that the debate is not about industry structure but about how a firm remakes an industry to make it strategically advantageous. This reconstructionist approach they advocated was ultimately named a “blue ocean strategy.” The basic premise is that the majority of industries in their present form are highly competitive and hold increasingly homogenous products. Competing in such an environment makes a “red ocean” where competitors become increasingly aggressive which leads to a bloody ocean with only marginal success. In contrast, “blue oceans” represent currently unknown markets that are available for entry by the firm but often not yet identified by competitors. One of the most successful firms at employing a blue ocean strategy is Nintendo who has continued to re-invent itself as it brings new products to market that change the nature of by whom and how video games are played.
and…What’s with the name?!
My personal view of the healthcare industry today is that we are too confined to competing in and thinking about the same red oceans. For us to find ways to deliver better care at reasonable costs, we need to look beyond the products, services, and ideas that have largely created the current mess. Rather than using the term “blue oceans” to discuss business strategies, I am adopting the term here to mean thinking about healthcare problems and brainstorming solutions that explore new frontiers of healthcare. Blue Oceans for Health is designed to be an online space that evaluates new concepts for better healthcare by analytically asking how these proffered solutions are different from the current paradigm and what advantages they bring.
Ira Leeds
Blue Oceans for Health 