In Lessons

Consistently ranked as one of the premier educational programs in the world, the Harvard Business School in Boston, Mass., traces its roots back to 1908. Its where world-renowned professors train future CEOs and business entrepreneurs. And it’s where, almost a decade ago, Kaiser Permanente moved its “Executive Leadership Program.”

For one day each year, I have had the privilege to teach at the Harvard Business School. This year I was invited by Faculty Chair Robert Huckman and Novartis Professor of Leadership and Management Amy Edmondson to speak with more than 300 students and faculty in Spangler Hall to kick off the new academic year. The gathering was part of the school’s “Health Care Initiative,” which serves as a gateway for healthcare research, education and collaboration across all sectors of the healthcare industry.

Director of the Health Care Initiative Cara Sterling and Associate Director Frank Sutter organized the program, including a reception both before and after the talk, which gave me the chance to interact one-on-one with dozens of the attendees.

As you might predict, the students were smart, engaging and experienced. Their questions and concerns spoke to the shortcomings of the current system, including its rising prices, lackluster quality, poor technology adoption and the inconveniences that riddle American patients.

In one of the more interesting parts of our conversation, we spoke about the challenges that entrepreneurial innovators face in trying to lower healthcare costs while creating a profitable business model.

The reasons are multiple. First, there’s the difficulty of identifying a willing buyer for any new healthcare service. For example, a new medical approach or home monitoring device that lowers hospital utilization sounds great in theory. However, few doctors or hospitals are interested in purchasing an innovation that lowers reimbursements. Meanwhile, insurance companies often resist paying for anything when the competition stands to benefit as much as they will.

Second, it is easy in a fee-for-service world to demonstrate higher utilization and be rewarded for achieving it, but proving the value added is difficult when measured in terms of avoiding in-patient care.

Finally, the lag between successful prevention and cost reduction take many years, if not decades. Given the frequency with which patients shift insurance companies and care providers, no one seems willing to pay today for cost reductions that will happen at an undetermined point in the future.

Yes, improving healthcare is a challenging endeavor, but so was the adoption of modern computers and the internet some decades ago. Many questioned the value of a personal computer for the average user and no one could have predicted that people would one day buy products and services virtually. Fewer could have imagined a phone giving us directions, taking pictures or sending emails. But as long as there are brilliant minds eager to overcome great obstacles, I remain optimistic for a better future in American healthcare.

As I begin my fall semester teaching at the Stanford Graduate School of Business, I plan to challenge the students on the West Coast to match the intelligence and optimism of their rivals out east.

Dr. Robert Pearl is the bestselling author of “Mistreated: Why We Think We’re Getting Good Health Care–And Why We’re Usually Wrong” and a Stanford University professor. Follow him on Twitter @RobertPearlMD

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