Improve or transform: Choosing the right business model to deliver health

By:

November 1, 2022
Download Paper

In our last report (“You Are What You Treat”), we identified the causal mechanisms inherent in traditional health care business models that perpetuate this challenge. Going one step further, this report addresses why most leaders fail to effectively solve for this problem. This occurs because many health care executives don’t realize there are two divergent, strategic pathways they can pursue for change, and because they don’t have a clear methodology to effectively determine which option to choose.

Changing a business model is hard work. But to make this seemingly impossible—and historically ineffective—undertaking easier to tackle and increase chances for success, this report provides a “how to” guide for executives. Herein, we walk leaders through the two different types of strategies they can utilize and help them identify which is the best fit for their context. One strategy is likely to lead to more success in the short run (improve), while the other will lead to greater success in the long run (transform). Each one has a different purpose; a different set of contextual requirements; as well as different challenges, benefits, and risk profiles.

Because business model change is not one-size-fits-all, the choice of whether to pursue a strategy that leads to more immediate success or to longer-term sustainability depends upon the leader’s context. This includes the following:

• The organization’s mission, vision, and beliefs about the future,
• The current business model structure and viability, and
• The leader’s willingness to take on risk in an uncertain environment.

To succeed with either type of approach, it’s critical that leaders outline their specific context and understand the distinction between their options. Following these steps will allow leaders to avoid the mistake of unknowingly applying a misaligned and misdirected strategic approach to their model.

Our research of leading, innovative health systems—combined with business model theory—provides a first-of-its-kind strategy guide and decision tool executives can use to determine which pathway is right for them. With this guide, they’ll be better equipped to achieve specific goals and sustainable business model viability. This roadmap can be used whether a leader is seeking to better address DOH, transforming from fee-for-service (FFS) to a value-based business model, or pursuing a different business model goal.

Download Paper

Ann Somers Hogg is a senior research fellow at the Christensen Institute. She focuses on business model innovation and disruption in health care, including how to transform a sick care system to one that values and incentivizes total health.