“Secret deaths.” “Babies as sacrificial lambs.” Tuesday’s CNN report detailed a high error rate for pediatric cardiac surgery at Tenet-owned St. Mary’s Medical Center in West Palm Beach, Florida. According to journalists, the hospital’s mortality rate for babies receiving heart surgery is almost four times the national average of 3.3%, albeit for a relatively small sample.

What caused this failure? Doctors reviewing the case reportedly offered this explanation: the program was new, the physicians inexperienced, and St. Mary’s did not see a sufficient volume of patients to perfect their process around this highly complex surgery.

As tragic as these deaths are, the issue at hand is playing out on a much larger scale. Even if CNN’s figures are accurate, St. Mary’s is not alone in producing suboptimal outcomes for one procedure. In a recent quality review of America’s hospitals, many of the most recognizable brand names in medicine posted terrific ratings by some measures – and hit the very bottom in others. In the US, estimates suggest medical errors play a role in as many as 400,000 deaths per year and account for up to $1 trillion in waste.

How do we fix this? Certainly external clinical oversight has its place. But theories of disruptive innovation help us understand that firm context matters a great deal when looking to improve outcomes. In this case, the assertion is that the inherent complexity of the health care business model is a leading indirect cause of medical errors.

The general hospital needs an update

While job shadowing a neurosurgeon several years ago, I saw a sign posted in the OR that read: “Running a hospital isn’t brain surgery. It’s harder.” Brain surgery is pretty hard. If running a hospital is even less predictably effective, then this can’t possibly be a good thing for the patients in the beds.

Why are hospitals so complex? Health care is hard to disrupt in part because the tertiary care system behaves roughly like a black hole. This is because the hospital proves its value in part based on the number of conditions it can treat, many of which are very capital-intensive. Mainstream health care systems are constantly reinforcing their value proposition by adding additional processes, meaning over time, the hospital is able to treat virtually anything. They do this to maximize market share and value to the community.

But the hospital business model that offers to do anything for anyone is outdated. One key reason is that the general hospital was designed in an age where health care was cheap and travel was expensive, so all of the care had to centralize in one place. Today, the reverse is true: health care is expensive and travel is cheap. The general hospital no longer needs to be the focal point of health care. In fact, moving all but the most complex conditions outside the four walls of the general hospital could dramatically reduce many quality issues.

Segregating business models

In theory, most hospitals should be split into two separate and fundamentally different business models. The first model is called a solution shop. In this type of business model, the value is produced by practitioners who solve unstructured, complicated problems, such as cardiac failure in newborns. Back to the St. Mary’s story for a moment: the theory about low patient volume is valid, but it’s important to also account for the myriad other demands doctors have in the current general hospital structure. Freeing the world’s best doctors to focus on diagnosing and treating problems that are highly intuitive requires removing things that don’t maximize this equation. The Mayo Clinic is a good example of this. Because travel is relatively cheap today, it makes sense to create fewer, but highly-focused solution shops that can reliably handle higher volume of complex cases in order to optimize around even better outcomes.

The second model is for medicine that is much more rules-based. This includes many evidence-based medicines, chronic disease management, and precision medicine. These diseases do not require the expertise of the world’s most advanced medical researchers, but a more routine adherence to known protocol. These diseases are best treated in two different business models: value-adding process (VAP) clinics (for evidence-based/precision medicine), and facilitated networks (for chronic diseases). In these separate business models, each player is able to focus on a few processes and get really good at them over time. They are also priced differently than our current fee-for-service (FFS) revenue model and offer more convenient access to patients who need routine or preventative care or chronic disease management.

Both categories of medicine will reduce waste and error by doing fewer, fundamentally different things extremely well. This will certainly not fix the entirety of the medical error crisis that we face, but it will set the stage for larger disruptions that will address the cost and access issues.

Creating these separate verticals is unlikely while general hospitals and academic medical centers perceive their community value to involve continuously adding to their product offerings – or until major reimbursement reform permits this segregation to be economically feasible. Yet it is critical to addressing health care’s core issues.

Health care in general needs a healthy dose of focus. Certainly we want to intervene to prevent tragedies like those at St. Mary’s. Yet health care’s stewards can make tremendous indirect strides by segregating and introducing more focus into their business models. Doing so is a key step, not only in setting up better solutions today, but in paving the way for disruptive progress that will continuously improve health care in the future.


  • Michael Devonas
    Michael Devonas