Value-Based Business Models Disrupt Global Health Care

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Value-Based Business Models Disrupt Global Health Care

Over the past 50 years, explosive growth in genomic and biological knowledge has given Americans many new options, but at higher costs.

According to the U.S. Center for Medicare and Medicaid Services, U.S. health care costs are expected to total $4 trillion in 2018. And, despite all of the criticism directed at the pharmaceutical industry, retail prescriptions represent only about 11% of total spending.

By 2025, experts expect U.S. health care to become dramatically better, as well as much more-costly, at over $5.6 trillion annually.

Hospital care is responsible for about one-third of the costs, while professional services account for another one-quarter. But notably, low-value-added functions such as “insurance,” and “government administration,” are among the fastest growing costs.

Since the 80s, top strategists have known how to fix the system, but the “political will” had to await the dawning of the “Golden Age” of the Fifth Techno-Economic Revolution.

In the years just ahead, a wave of digitally-enabled technologies will transform health care cost-effectiveness and will maximize the favorable impact of the structural & policy changes.

In The Innovator’s Prescription and elsewhere, Harvard’s Clayton M. Christensen noted the truly disruptive innovation tends to initially address “under-served consumers.” As it serves this entry-market, the innovative technology or business model gets progressively better, even as economies of scale, experience, and scope hold down costs. Eventually, the new solution becomes so cost-effective that consumer demand enables it to enter and successfully compete with the dominant model in the mainstream market. And as we’ve seen with streaming-movies, e-commerce, ride-sharing and digital photography, the new solution takes over, replacing the historic leaders.

And just as Blockbuster, Borders, Yellow Cab, and Kodak failed to see the wave of disruptive that destroyed them, few health care executives have been closely tracking the disruptive economic tsunami about to hit their industry.

Consider the facts.

In Bangalore, India, heart surgeons perform state-of-the-art heart surgery on adults and children every day, at an average cost of $1,800...

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