Managed Care - January 2009 - (Page 26)

D I S R U P T I V E I N N O VAT I O N Health Plans: Disrupt and Prosper If they can adapt, payers will have far more power than fragmented physicians, other providers, employers, and patients to shape the new environment By Stephen Wunker and David Duncan W hile the health care policy debate in Washington continues to center largely on who is provided insurance coverage, managed care organizations know that the primary business issue confronting health care is distinct: Cost increases have become completely unsustainable, particularly in a recession. From 2000 to 2007, U.S. health care premiums rose 98 percent, while wages rose only 23 percent. Per capita U.S. health care spending is twice the average of the industrial world, and yet the country ranks only 37th in life expectancy. Listening to the politicians, it would be tempting to think that payers are raking in profits from this growth in spending, and yet business people know this is anything but true. The traditional payer business model has come under increasing pressure in recent years, and this pressure has threatened its very viability. In fact, business models across the health care system are broken, and payers and others are starting to face the consequences. Plan sponsors are looking for lower-cost means of fulfilling their obligations to employees, including raising deductibles. Some are dropping coverage altogether. Physicians and hospitals feel that they are already at the breaking point, and many have no idea how they would deal with the steep cut in Medicare payments that seems to loom every year. Payers are caught in the middle, squeezed from all sides. Our firm, Innosight, founded by Harvard Business School Professor Clayton Christensen, has researched business model innovation in dozens of industries. Our conclusion is that payers are suffering from many of the maladies of other industries with broken business models. Curing these Stephen Wunker [top] and David Duncan are partners in Innosight, a consulting firm founded by Harvard professor Clayton Christensen that focuses on “creating new growth platforms and reinventing business models.” ills is not easy, but a handful of organizations are showing the way. What is a business model? What do we mean by business model? In an article in the December issue of the Harvard Business Review, we define a business model as consisting of four components. First, there is the value proposition delivered to customers. Then, there is the way the company makes money from delivering this value proposition (what we call the profit model). It must then assemble resources such as people and assets to make this happen. And finally, it coalesces this delivery model through a set of processes which gel the system into place. 26 MANAGED CARE / JANUARY 2009

Table of Contents Feed for the Digital Edition of Managed Care - January 2009

Managed Care - January 2009 Editor's Memo Contents Legislation & Regulation News and Commentary Medication Management Compensation Monitor Health Care's Disruptive Innovations Q&A With Clayton Christensen 'Disruption' May Be Plans' Best Bet Avoid the PBM Rebate Trap HealthPartners Puts Diabetes on Notice Formulary Files Plan Watch Tomorrow's Medicine Ad Index Outlook Unmet Needs in the Management of Plaque Psoriasis Impact of RSV: Implications for Managed Care

Managed Care - January 2009

For optimal viewing of this digital publication, please enable JavaScript and then refresh the page. If you would like to try to load the digital publication without using Flash Player detection, please click here.