Strategic Response by Providers to Specialty Hospitals, Ambulatory Surgery Centers, and Retail Clinics

Lawton R Burns,Guy David,Lorens A Helmchen

doi:10.1089/pop.2010.0021

Lawton R Burns, Guy David + Show 1 more

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https://doi.org/10.1089/pop.2010.0021

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Abstract

Radical innovation and disruptive technologies are frequently heralded as a solution to delivering higher quality, lower cost health care. According to the literature on disruption, local hospitals and physicians (incumbent providers) may be unable to competitively respond to such "creative destruction" and alter their business models for a host of reasons, thus threatening their future survival. However, strategic management theory and research suggest that, under certain conditions, incumbent providers may be able to weather the discontinuities posed by the disrupters. This article analyzes 3 disruptive innovations in service delivery: single-specialty hospitals, ambulatory surgical centers, and retail clinics. We first discuss the features of these innovations to assess how disruptive they are. We then draw on the literature on strategic adaptation to suggest how incumbents develop competitive responses to these disruptive innovations that assure their continued survival. These arguments are then evaluated in a field study of several urban markets based on interviews with both incumbents and entrants. The interviews indicate that entrants have failed to disrupt incumbent providers primarily as a result of strategies pursued by the incumbents. The findings cast doubt on the prospects for these disruptive innovations to transform health care.

Highlights

Creative destruction, radical innovation, and disruptive technologyJoseph Schumpeter long ago described the process of ‘‘creative destruction’’ whereby entrepreneurial entrants to an industry take advantage of opportunities afforded by new technologies, organization models, and products that incumbents cannot.[1]
A field study to evaluate these two arguments was commissioned by the Center for Health Management Research (CHMR), a consortium of hospital systems affiliated with the American Hospital Association and its Hospital Research and Educational Trust
Our research suggests that single-specialty hospitals (SSHs) are set up by ‘‘splitter physicians’’—physicians who split their inpatient activity across several hospitals

Summary

Introduction

Radical innovation, and disruptive technologyJoseph Schumpeter long ago described the process of ‘‘creative destruction’’ whereby entrepreneurial entrants to an industry take advantage of opportunities afforded by new technologies, organization models, and products that incumbents cannot.[1]. Clay Christensen identified a subset of innovations that creatively destroy established markets: disruptive technologies. Balloon angioplasty, performed by interventional cardiologists, developed in the 1970s but took nearly 2 decades to become commonplace because of perceptions of lower effectiveness. LASIK eye surgery was invented during the 1960s but took nearly 3 decades to overcome professional skepticism, receive Food and Drug Administration approval, and become commonplace. LASIK has rendered obsolete the products and services provided by lens manufacturers and opticians and, in some states, is being performed by optometrists instead of opthalmic surgeons. In both cases, practitioners needed to negotiate a steep learning curve to achieve higher quality results

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