Is Innovation Stuck in Healthcare? Two Brothers Get to The Bottom of It

In most industries, innovation leads to an improved product or
service while ultimately helping to lower cost. Healthcare is the
exception. Despite a constant pursuit of new science, technology,
operational efficiencies, business models and more, healthcare
expenditures in the U.S. have continued to increase for decades
with little sign of bending the cost curve downward.

What causes this phenomenon in U.S. healthcare, and what can we
do about it? In their book, Why Not Better and Cheaper?:
Healthcare and Innovation, twin brothers James B. Rebitzer and
Robert S. Rebitzer offer answers to those questions.

Jim and Bob’s book brings together research on incentives, social
norms, and market competition to argue that the healthcare system
generates the wrong kinds of innovation. They contend that U.S.
healthcare makes it too easy to profit from low-value innovations
and too hard to profit from innovations that reduce the costs of
care. As a result, we get a system where innovation abounds, but
finding ways to deliver increased value at lower cost is
remarkably ineffective.

In this episode of Healthcare is Hard, Keith Figlioli talked to
Jim, a professor at Boston University’s School of Business, and
Bob, National Advisor at Manatt Health, for an in-depth
discussion about their work. Their conversation explored topics
including:



Misaligned incentives. Understanding how incentives work
inside and between organizations has been a large focus of
Jim’s career in economics, and he now applies that work to the
complex world of healthcare. As an example of that complexity
that’s all too common, Bob shared a story of a scientist and
entrepreneur he advised who had developed a quick and
inexpensive way to change how people walk in order to reduce
pressure on the knee. While this could defer or obviate the
need for common and expensive knee replacement surgeries, he
discussed how difficult it would be to turn this idea into a
profitable business since organizations across the healthcare
ecosystem lack proper incentives to pay for it. He discussed
why gain sharing would be the solution in every other part of
the economy, and why it doesn’t work in healthcare.


The fourth vital sign of healthcare. People generally
think of the healthcare system as having three vital signs –
cost, quality and access. But Jim and Bob see a fourth vital
sign that, so far, hasn’t been recognized. In the long sweep of
history, they say innovation matters just as much as the other
three vital signs and stress that part of a healthy system
should be the ability to produce innovations that increase
value to patients while lowering costs.


Innovation vs. irrational finance. In order to truly
unlock innovation does the country’s irrational finance and
insurance system need to be fixed first? Bob and Jim share
their thinking around this debate and their ultimate
conclusion: not necessarily. Bob compares healthcare innovation
to walking uphill in a fog… you never know when you’re going to
reach the top, but all you can do is place your foot in a
somewhat higher place than it was before.



To hear Keith, Bob and Jim discuss these topics and more, listen
to this episode of Healthcare is Hard: A Podcast for Insiders.