With the exception of possibly education, health care is the industry most resistant to innovation. But that may be changing, according to a new paper by Jonathan Rauch of the Brookings Institution.
“[H]ealth care is beginning to taste the disruptive culture of Silicon Valley, retailing, and many other American sectors,” said Rauch.
There are a number of factors that are driving this new entrepreneurial spirit, said Rauch. People are demanding more efficiency and lower costs, while the historic “fee-for-service” model seems to be on the way out. Technology has played a role too – the increase of data analytics has made it easier to move toward price transparency and streamline current practices.
Rauch also described the influx of investment in health care, a good sign for entrepreneurs in the industry. Rauch said that many in the industry believe that it is “more open to business-model innovation than at any time in memory.”
A quick search on AngelList, a portal to connect entrepreneurs with investors, seems to reflect that idea. There are 7,728 health care startups currently listed, with an average valuation of $4.3 million. A quick Google search for “health care startups” will turn up list after list of transformational new ideas.
The days of slow-moving inefficiency may be behind us. “Nimble, value-seeking business models and enterprises now have a place in the sun, and they are building a different ecology under the feet of the dinosaurs,” said Rauch.
A key point of Rauch’s paper is that disruptive innovation doesn’t necessarily have to be a brand-new product – it can just be a better way of doing things. This idea was first coined by Harvard Business School professor Clayton Christensen. “An innovation that is disruptive allows a whole new population of consumers at the bottom of a market access to a product or service that was historically only accessible to consumers with a lot of money or a lot of skill,” he said.
As such, there are many opportunities to improve the way our healthcare system operates, especially in areas like preventive medicine or prescription compliance (actually taking the medicines you’re supposed to take when you’re supposed to take them.) For example, a company recently profiled by Opportunity Lives, PillPack, helps make sure people know which medicines they are supposed to take on which days.
Rauch listed several short case studies of healthcare startups in the paper, and it’s clear to see that entrepreneurs are searching for new opportunities in every dimension of the industry.
“The movement away from fee-for-service payment models, the burgeoning of digital technologies, and the openness to change in health care’s corporate suites are combining to create an entrepreneurial, value-seeking ecosystem that looks to have reached, or passed, a point of no return,” said Rauch.