Is Business Innovation the Cure for What Ails US Health Care?

Health care-related expenditures accounted for a record 19.7 percent of U.S. GDP in 2020, according to the U.S. Centers for Medicare and Medicaid Services.

As Professor Vivian Riefberg says: “Someone’s cost is someone else’s profit.”

Many describe the U.S. health care system as “broken,” with inefficiencies and access disparities further highlighted by the COVID-19 pandemic. But looking at health care as a monolith, Riefberg says, “is fundamentally flawed, because each segment has different structures, conduct and performance.”

In that more nuanced view, there is immense opportunity for private business to make a positive impact on the literal and figurative health of society.

“If you look in aggregate in this country, we have some of the highest costs in the world per capita, and it’s pretty clear our outcomes are not always the best or health care is evenly available,” Riefberg says.

“These sorts of small, incremental changes are happening on the fringes.”

Professor Dennie Kim has been working in or studying the health care industry for more than 15 years.

“I used to be so cynical and thought, ‘It’s all broken, we need to redesign it,’” Kim said. “But the U.S. health care system in many places is fantastic. We get some of the best outcomes of the world — in pockets — and so much of the world’s innovation comes out of the U.S.”

The introduction of retail clinics more than two decades ago, alongside similar forms of convenient, accessible care, Kim says, is one example. Initially, that push toward nontraditional health care delivery was met with strong resistance because established health care businesses worried over patient safety and profitability.

But once the clinics “had proven demonstrated value, and that people wanted and needed them, those working in the system followed, using them as an opportunity to deploy capabilities in different ways to provide value to patients,” Kim says. “These sorts of small, incremental changes are happening on the fringes.”

A Pandemic-Sized Catalyst for Business Innovation

The pandemic amplified the need for this type of innovation. In the article “The essentials of health care innovation,” McKinsey wrote: “In speaking with more than 100 leaders in the health care industry from pharmaceutical and medical technology companies to health systems and payers, 90 percent agreed that the pandemic will fundamentally change the way they do business, requiring new products, services, processes, and business models.”

One example, Riefberg says, is the application of artificial intelligence combined with virtual care and telemedicine, the latter of which was massively accelerated by COVID-19.

“It’s more convenient and timely for the patient, and it can be better quality, because now you are getting the learning of others, and it can be more cost efficient,” Riefberg says.

“[Telemedicine] has not only proven that it works, but that patients like it and want it,” Kim says. “It’s such a huge game changer.”

Business innovation in the wearable device space has also improved health care, giving consumers increased access to sophisticated medical data and, in some cases, equipment, which proved critically important to have on hand amid the isolation periods of the pandemic.

Liridon Rrushaj (MBA ’14), director of venture investments at OSF Ventures, which has $250 million in assets under management and has made 28 health care-related investments since 2016, points to OSF’s partnership with Current Health and Medically Home, two hospital-at-home offerings in which patients take agency over aspects of their medical care.

“People are much more comfortable in a home setting versus hospital,” Rrushaj says. “And this eliminates potential [hospital] capacity issues, risk of infection, etc.”

Dr. Taison Bell (EMBA ’20) and Dr. Abigail M. Pape (EMBA ’20) met while students at Darden. They decided to combine their medical training and business school learnings by partnering, along with fellow co-founder Timothy Harvey (EMBA ’20), to create Owl Peak Labs. Their goal is to provide innovative, at-home, cost-effective cancer screening processes through both imaging technology and oral screenings, which can eliminate the need to travel to a medical services location, undergo an invasive procedure and bypass potential patient fears of seeing a physician.

“When you look at the U.S. health care system, there’s a lot of disjointed elements that can make participating complicated,” Pape says. “That’s where some of these telehealth companies competing with each other offer a space for that integration.”

The pandemic also exacerbated the mental health struggles of millions of Americans. OSF is seeking to address the shortage of mental health counselors by investing in companies offering remote cognitive-based therapies, such as Silvercloud, an on-demand, virtual mental health platform.

Creating an Irresistible Force to Overcome the Immovable Object

One of the biggest challenges for business innovation to unlock systemic improvements to health care is a lack of mutual financial incentives.

“What are the incentives behind the scenes for all parties?” Rrushaj says. “How do you align those so everyone is rowing in the same direction across the different sectors within health care? The vast majority of payments for the total pie are fee for service, and if you can drive more toward the value-based care models, then you can better align incentives to keep people healthier, keep them active and keep them productive.”

“How do you align [incentives] so everyone is rowing in the same direction across the different sectors within health care?”

 

About six percent of Class of 2021 Darden graduates accepted a position in health care, and interest continues to grow in the student-run Darden Healthcare Club. During the 2022–23 academic year, Riefberg and other faculty members will spearhead an effort to explore what Darden might do additionally in the health care space.

Riefberg challenges her students to look toward health care business innovations that will improve quality, lower cost and increase access. In particular, Riefberg says businesses can work toward innovations that allow for more accessible and uniform health care, particularly for underserved parts of the country. Access to care, particularly in remote areas and regions without consistent access to broadband, is another realm in which business can improve the landscape.

“More and more rural hospitals have closed, which decreases the percentage of Americans who have easy access to care,” Rrushaj says. “How do you think differently about providing care to those rural populations? Technology and digital health is a great way.”

Ultimately, business innovation and grassroots work may be the only realistic way the health care system can improve.

“With all the various interests and divisions in the country, it is unlikely that there will be a major overhaul,” Riefberg says. “Just look at how hard the Affordable Care Act was to get passed.”

Kim doesn’t see drastic changes either, possibly even in his lifetime. “It’s a beast of a machine, and it has to keep running. We can’t shut it down, because lives are at stake.”

This story originally appeared in the Summer 2022 edition of The Darden Report magazine.

About the University of Virginia Darden School of Business

The University of Virginia Darden School of Business prepares responsible global leaders through unparalleled transformational learning experiences. Darden’s graduate degree programs (MBA, MSBA and Ph.D.) and Executive Education & Lifelong Learning programs offered by the Darden School Foundation set the stage for a lifetime of career advancement and impact. Darden’s top-ranked faculty, renowned for teaching excellence, inspires and shapes modern business leadership worldwide through research, thought leadership and business publishing. Darden has Grounds in Charlottesville, Virginia, and the Washington, D.C., area and a global community that includes 18,000 alumni in 90 countries. Darden was established in 1955 at the University of Virginia, a top public university founded by Thomas Jefferson in 1819 in Charlottesville, Virginia.