Health Care

Research drives innovation and new business models in health care

July 20, 2022

What difference do you think it would make if a person with chronic illness had initial appointments with a primary care doctor that totaled 80 minutes? It seems hard to imagine any doctor having that sort of time for every new patient in today’s pressured health care system. But that’s exactly the model Oak Street Health (OSH) is operating on.  

With a focus on Medicare patients with multiple chronic conditions, OSH wants to deeply understand their patients from the start, so that they can keep them as healthy as possible. Because from OSH’s vantage point, improving the health of people improves their lives and keeps them out of the hospital, too. And it’s a theory that’s working in real life. Since their founding in 2012, OSH has reduced hospital admissions and emergency room visits by 51%.  

It’s not just the patient that benefits from better health. OSH is incentivized for this approach. The primay care network assumes “100% of the risk for its patients’ medical care and receive a per member per month payment based on patients’ risk scores,” writes Ann-Somers Hogg, senior research fellow in health care at the Christensen Institute, a Stand Together Trust grantee.  

This sort of health care model is innovative and disruptive, and that’s exactly the point.  

The Christensen Institute is a nonprofit, nonpartisan think tank that seeks to improve society through disruptive innovation. Founded on the theories of Harvard professor Clayton Christensen, through its research, the Christensen Institute shapes conversation and guides leaders toward effective solutions to some of the most pressing problems society is facing. 

When it comes to health care, rising costs and sicker people are among many factors contributing to an overburdened system that will not remain sustainable — financially or otherwise — in the future. “Health care entities need a new approach to how they do business if they want to improve health, and do so sustainably over the long run,” Hogg says. Pointing to OSH, she adds, “And some early innovators are beginning to pave the way.”  

Hogg’s report, “You Are What You Treat: Transforming the health care business model so companies—and people—thrive” offers a vision of the new models of health care that “create health, not just treat sickness.” Highlighting real-world examples, like OSH, alongside guidance for building new health care business models, the Christensen Institute wants to inspire innovators, health care executives, funders, and other stakeholders to transform the business model of health care companies. 

The changing health care landscape 

According to Hogg’s research, “nationally, 90% of health care spending is allocated to medical care, which only accounts for 10-20% of health outcomes.” With the United States paying the highest percentage of GDP on health care, with the worst outcomes of high-income nations, pressure is mounting for health care to change.  

Factors like economic stability, quality food, social connections and support, education access and quality, and neighborhood environment — known as Drivers of Health  — all contribute to an individual’s health and well-being.  The predominant current health care model— based on a fee-for-service profit model — isn’t oriented toward an approach to health care that generates value for businesses and health for patients based on Drivers of Health. Because by the time the health care organization is treating for reimbursement, the patient is already suffering from sickness.  

While the current fee-for-service profit model has been very profitable in the past, its longevity is limited as payers shift to paying for outcomes in health care. 

“Leaders of existing business models struggle to transform to new approaches, not because they are poor leaders, but because of the way business models solidify overtime,” Hogg says.  

After all, the system was created to serve a predictable outcome and successful health care executives have been meeting those outcomes. But when the expected outcomes shift or are expected to shift in the coming years, this creates a real challenge for executives seeking to maintain business model viability. 

“In some ways, innovators have it easier because they have the benefit of designing from scratch,” Hogg explains. And funders similarly have the power to transform the health care system through their funding strategy.  

Hogg’s report was only published in May, and it’s already shaping discussions of transformation in the system. An individual who is head of health care investing for a foundation reached out to let the Christensen Institute know that that Hogg’s paper is serving as the backbone for their organization’s health care funding strategy. And a professor who teaches innovation and change management to health care executives is planning to assign the report and teach its findings as part of her class.  

“We want to reach people helping health care leaders build a better business model because health care executives know they’re in a model that’s not going to work in the future.” Hogg says.  “They’re doing a great job leading in the face of uncertainty, ambiguity, and volatility, and they need guidance as they look to pivot their models.” 

Moving forward, the Christensen Institute is planning to publish a follow-up report directed to health care executives, with an emphasis on how leaders can transform their business models for success today and in the future.  

“There is a pathway out of today’s fee-for-service, sick-care models,” Hogg’s says. Quoting Helen Keller, her report concludes, “Alone we can do so little. Together we can do so much.” 

Read the full report “ You Are What You Treat: Transforming the health care business model so companies—and people—thrive by Ann-Somers Hogg, senior fellow health care at the Christensen Institute.  

Learn more about the Christensen Institute here.