HPI4002 – Innovation and Quality Management of Health Services
Case 1 – we need to innovate
Why do we need to innovate in healthcare? We urgently need a response to challenges such as:
ageing of the population, growing incidence of chronic disease, pressure on the labour force, rising
health care costs, strong demand for high quality of care, unequal accessibility of care, etc.
The main challenges in healthcare:
- To provide the best possible care
- To as many people as possible
- As affordable as possible
How do we cope with these challenges? We have to make our health system sustainable for
the future by redesigning healthcare
Many countries with long-established health systems are trying to redesign them – adopting new
payment and reimbursement models to incentivise innovation and improve performance, moving
from a paradigm that emphasizes sickness and treatment to one which is more about wellness and
prevention, reforming the organizational architecture by integrating primary, secondary, and social
care, and trying to find new ways of involving the private and voluntary sectors. There is much
interest in ‘disruptive innovation’, moving towards cheaper, simpler organizational, and technical
solutions which emphasize the importance of individuals taking more responsibility for their own
care and shifting away from expensive hospitals to community settings. New technologies such as
‘big data’, innovative medical devices and new drugs all play a role in supporting these efforts to
modernise healthcare delivery models. Yet, technological innovation is something of a double-
edged sword: it has the potential to greatly improve the performance of health systems and health
outcomes for individuals, but it also requires upfront financial investment by healthcare
organizations for a possible payoff further down the line. And it has a tendency to increase overall
healthcare costs.
What is the role of innovation in this process? Innovation can facilitate the redesign of healthcare by:
- Improving the performance of healthcare systems (improving quality of care)
- Improving health outcomes for individuals
- Increasing the efficiency of healthcare
Definition of innovation: the intentional introduction and application within a role, group, or
organization of ideas, processes, products, or procedures, new to the relevant unit op adoption,
designed to significantly benefit the individual, the group, or wider society.
- This definition captures the three most important characteristics of innovation: novelty, an
application component, and an intended benefit
Innovation has both a creative dimension (often described as invention) and a commercial or
practical dimension that involves the exploitation of the invention. Only when both these
dimensions are effectively managed does one have an innovation. The key points in defining
innovation are:
- New ideas: a new (or improved) product, process, or service, or a whole new business or
business model
- Exploitation: the idea must be implantable and potentially value generating
- Successful: the innovation is adopted by the target audience
- New is a relative term: it can mean new to the world, new to the market, or new to the firm
,Definition of healthcare innovation: the introduction of a new concept, idea, service, process, or
product aimed at improving treatment, diagnosis, education, outreach, prevention, and research.
With the long-term goals of improving quality, safety, outcomes, efficiency, and costs. It is always
aimed at adding something.
- The difference between general innovation and healthcare innovation is that the goal of
general innovation does not have to be improvement. With healthcare innovations, the goal
is always improvement, where different stakeholders are involved
Process of innovation
Innovation as a process: invention, commercialisation, diffusion
The process of innovation has commonly been divided into three stages, known as the
‘Schumpeterian trilogy’:
1. The invention phase, where ideas are turned into workable inventions, is typically
characterised by experimentation to prove the concept
2. The technological potential of an invention has to be transformed into economic value.
Commercialisation is where the latent value of a technology is unlocked in order to generate
real value. There may be many possible ways to commercialise an idea, but only a few are
likely to succeed
3. Adoption and diffusion is the process by which innovations are taken-up and spread through
a population. This rarely takes place at a steady, linear rate. If the adoption of an innovative
product is plotted over time, it frequently exhibits an S shaped curve
But innovation also has its challenges:
- Often needs large financial investments
- Not all the science and technology is implemented into everyday mainstream healthcare
practice (waste)
- There is often a considerable time lag between development and implementation (waste)
- Innovation is not always adopted correctly and not everyone has equal access
- Innovation often increases costs because it allows us to provide more health care
Innovation has the tendency to increase overall healthcare costs
Healthcare is supported by four major industrial sectors:
- Pharmaceutical and biotechnology (‘biopharma’)
- Medical devices
- Information technology (IT)
- The built environment (design, engineering, and construction)
Each sector has its own challenges in innovation in healthcare
They are confronted with a changing landscape
- An evolving market for their products
- A changing balance of power across the healthcare value chain
- Pressure on their business models
What are the challenges for the organizations involved in innovation in healthcare?
- Biopharma (drug innovation)
o Slow down in development of new drugs
o Loss of drug sales due to patent expiration
o Increasingly complex science underlying drugs discovery process as the attention
shifts to chronic diseases
o Regulatory and economic context has become more demanding (more rules, more
urge for cost reduction)
, - Medical devices
o Important engines of growth such as the cardiovascular and orthopaedic markets
have slowed down
o More influences of government and payers/insurers
o Approval processes have grown longer
o More need for cost-effective devices
- Information technology (IT)
o Fails to get recognition (hard to demonstrate benefits)
o Fragmented industry (hardware, software, front office, back office, etc.)
o New players are emerging (such as developers of mobile health)
o Management of big data
o The need for technological convergence across manufacturing and service sectors
(e.g. hybrid products, combinations of products and services)
- The built environment
o Changes in the organization of healthcare also have their impact on the buildings
(integrated care, patient-centered care)
o Rules and regulations
o Integrating (options for) the newest technology in buildings
Innovation in healthcare can even be more challenging than innovation in various other sectors
because:
- Healthcare is very complex – there are many organizations involved, with many professional
and financial silos and entrenched cultures
- Healthcare is always evolving – because of constant change in its underlying science and the
development of new technologies, and because policy-makers like to tinker with its funding
and institutional arrangements
- Healthcare is heavily regulated – ‘taking a risk’ by trying out something new does not
necessarily go down well with healthcare managers, politicians, or patients
- Healthcare is highly politicized – for instance we may know that the most rational option to
improve services might be to close a hospital or hospital department that is no longer
needed, however this is almost guaranteed to result in angry voters and anxious politicians
Distinctive features of healthcare that influence its innovation processes:
- The environment into which new technologies and other innovations are adopted and
implemented is often extremely complex
o Multiple stakeholders from across the care systems may be involved in adoption
decisions
- The nature of healthcare ‘technology’ and ‘innovation’
o Boundaries between the organisational and technological aspects of healthcare
innovations may be very blurred
- A risk-averse culture and extensive regulation
o Healthcare innovations may need to follow a lengthy process of experimentation and
legitimation
- The economics and politics of healthcare
o Governments in most countries play a fundamental role in shaping how healthcare is
planned, regulated, and financed
o The economics surrounding healthcare innovation are influenced by the structure of
national healthcare systems
Case 1 – we need to innovate
Why do we need to innovate in healthcare? We urgently need a response to challenges such as:
ageing of the population, growing incidence of chronic disease, pressure on the labour force, rising
health care costs, strong demand for high quality of care, unequal accessibility of care, etc.
The main challenges in healthcare:
- To provide the best possible care
- To as many people as possible
- As affordable as possible
How do we cope with these challenges? We have to make our health system sustainable for
the future by redesigning healthcare
Many countries with long-established health systems are trying to redesign them – adopting new
payment and reimbursement models to incentivise innovation and improve performance, moving
from a paradigm that emphasizes sickness and treatment to one which is more about wellness and
prevention, reforming the organizational architecture by integrating primary, secondary, and social
care, and trying to find new ways of involving the private and voluntary sectors. There is much
interest in ‘disruptive innovation’, moving towards cheaper, simpler organizational, and technical
solutions which emphasize the importance of individuals taking more responsibility for their own
care and shifting away from expensive hospitals to community settings. New technologies such as
‘big data’, innovative medical devices and new drugs all play a role in supporting these efforts to
modernise healthcare delivery models. Yet, technological innovation is something of a double-
edged sword: it has the potential to greatly improve the performance of health systems and health
outcomes for individuals, but it also requires upfront financial investment by healthcare
organizations for a possible payoff further down the line. And it has a tendency to increase overall
healthcare costs.
What is the role of innovation in this process? Innovation can facilitate the redesign of healthcare by:
- Improving the performance of healthcare systems (improving quality of care)
- Improving health outcomes for individuals
- Increasing the efficiency of healthcare
Definition of innovation: the intentional introduction and application within a role, group, or
organization of ideas, processes, products, or procedures, new to the relevant unit op adoption,
designed to significantly benefit the individual, the group, or wider society.
- This definition captures the three most important characteristics of innovation: novelty, an
application component, and an intended benefit
Innovation has both a creative dimension (often described as invention) and a commercial or
practical dimension that involves the exploitation of the invention. Only when both these
dimensions are effectively managed does one have an innovation. The key points in defining
innovation are:
- New ideas: a new (or improved) product, process, or service, or a whole new business or
business model
- Exploitation: the idea must be implantable and potentially value generating
- Successful: the innovation is adopted by the target audience
- New is a relative term: it can mean new to the world, new to the market, or new to the firm
,Definition of healthcare innovation: the introduction of a new concept, idea, service, process, or
product aimed at improving treatment, diagnosis, education, outreach, prevention, and research.
With the long-term goals of improving quality, safety, outcomes, efficiency, and costs. It is always
aimed at adding something.
- The difference between general innovation and healthcare innovation is that the goal of
general innovation does not have to be improvement. With healthcare innovations, the goal
is always improvement, where different stakeholders are involved
Process of innovation
Innovation as a process: invention, commercialisation, diffusion
The process of innovation has commonly been divided into three stages, known as the
‘Schumpeterian trilogy’:
1. The invention phase, where ideas are turned into workable inventions, is typically
characterised by experimentation to prove the concept
2. The technological potential of an invention has to be transformed into economic value.
Commercialisation is where the latent value of a technology is unlocked in order to generate
real value. There may be many possible ways to commercialise an idea, but only a few are
likely to succeed
3. Adoption and diffusion is the process by which innovations are taken-up and spread through
a population. This rarely takes place at a steady, linear rate. If the adoption of an innovative
product is plotted over time, it frequently exhibits an S shaped curve
But innovation also has its challenges:
- Often needs large financial investments
- Not all the science and technology is implemented into everyday mainstream healthcare
practice (waste)
- There is often a considerable time lag between development and implementation (waste)
- Innovation is not always adopted correctly and not everyone has equal access
- Innovation often increases costs because it allows us to provide more health care
Innovation has the tendency to increase overall healthcare costs
Healthcare is supported by four major industrial sectors:
- Pharmaceutical and biotechnology (‘biopharma’)
- Medical devices
- Information technology (IT)
- The built environment (design, engineering, and construction)
Each sector has its own challenges in innovation in healthcare
They are confronted with a changing landscape
- An evolving market for their products
- A changing balance of power across the healthcare value chain
- Pressure on their business models
What are the challenges for the organizations involved in innovation in healthcare?
- Biopharma (drug innovation)
o Slow down in development of new drugs
o Loss of drug sales due to patent expiration
o Increasingly complex science underlying drugs discovery process as the attention
shifts to chronic diseases
o Regulatory and economic context has become more demanding (more rules, more
urge for cost reduction)
, - Medical devices
o Important engines of growth such as the cardiovascular and orthopaedic markets
have slowed down
o More influences of government and payers/insurers
o Approval processes have grown longer
o More need for cost-effective devices
- Information technology (IT)
o Fails to get recognition (hard to demonstrate benefits)
o Fragmented industry (hardware, software, front office, back office, etc.)
o New players are emerging (such as developers of mobile health)
o Management of big data
o The need for technological convergence across manufacturing and service sectors
(e.g. hybrid products, combinations of products and services)
- The built environment
o Changes in the organization of healthcare also have their impact on the buildings
(integrated care, patient-centered care)
o Rules and regulations
o Integrating (options for) the newest technology in buildings
Innovation in healthcare can even be more challenging than innovation in various other sectors
because:
- Healthcare is very complex – there are many organizations involved, with many professional
and financial silos and entrenched cultures
- Healthcare is always evolving – because of constant change in its underlying science and the
development of new technologies, and because policy-makers like to tinker with its funding
and institutional arrangements
- Healthcare is heavily regulated – ‘taking a risk’ by trying out something new does not
necessarily go down well with healthcare managers, politicians, or patients
- Healthcare is highly politicized – for instance we may know that the most rational option to
improve services might be to close a hospital or hospital department that is no longer
needed, however this is almost guaranteed to result in angry voters and anxious politicians
Distinctive features of healthcare that influence its innovation processes:
- The environment into which new technologies and other innovations are adopted and
implemented is often extremely complex
o Multiple stakeholders from across the care systems may be involved in adoption
decisions
- The nature of healthcare ‘technology’ and ‘innovation’
o Boundaries between the organisational and technological aspects of healthcare
innovations may be very blurred
- A risk-averse culture and extensive regulation
o Healthcare innovations may need to follow a lengthy process of experimentation and
legitimation
- The economics and politics of healthcare
o Governments in most countries play a fundamental role in shaping how healthcare is
planned, regulated, and financed
o The economics surrounding healthcare innovation are influenced by the structure of
national healthcare systems
