Theranos – A Case of Disruptive Innovation in Healthcare

“My own life’s work in building Theranos is to redefine the paradigm of diagnosis away from one in which people have to present with a symptom in order to get access to information about their bodies to one in which every person, no matter how much money they have or where they live, has access to actionable health information at the time it matters.”

Elizabeth Holmes, CEO, Theranos

Disruptive innovation by definition is an innovation that helps create a new market and value network, eventually disrupts an existing market and value network, displacing an earlier technology. Generally these innovations are cheaper, faster and more convenient compared to incumbents. Medical Diagnostics is an area where a lot of such opportunities exist and one company (valued at around $9 Billion) that has made big news in 2014 in this arena is Theranos.

According to Clayton Christensen, three things characterize disruptive innovations – simplifying technology, business model innovation, and a disruptive value network. Let’s examine how this maps to Theranos’ offering:

Simplifying Technology

Until now blood was drawn out of veins, stored in vials and transported to labs for testing.  Theranos has completely transformed the process with its patented technology. The technology utilizes microfluidic chips to conduct minimally-invasive tests with a drop of blood to deliver results within a few hours. Moreover, by automating most of the processes the company claims their results are more accurate and specific than traditional tests.

Business Model Innovation

By being able to provide personalized lab test data anytime, anywhere at a fraction of cost Theranos enables patients to be more engaged and participative in their own health. While higher prices, drawing blood out of veins dissuaded patients from getting tests done, Theranos’ innovative business model allows them to overcome these pitfalls.

Comparison of Theranos with Traditional Lab Tests

  Traditional Lab Tests Theranos
Average Costs $100 <$50
Time Days – Weeks Few hours
Quantity of Blood Required 3 oz. Single Drop
 

Value Network

Traditional blood-tests require patients to visit labs. They are essentially centralized systems. To address the problem of accessibility Theranos has adopted a retail framework to decentralize blood-testing process. It has partnered with Walgreens and a few hospital groups to administer its tests. Further, the company aims at building a pathologist-centred model and is therefore focusing on establishing relationships with pathologist groups.

In most aspects, things look very promising for the healthcare start-up. But there are a few caveats. In his article A Disruptive Solution for Healthcare, Christensen points out that disruptive innovation rarely happens in a piecemeal fashion. The new value network needs to be merged with the existing reimbursement, regulatory, insurance and provider systems. It requires disruption and remodelling from these players in the market as well. From the standpoint of Theranos, integration with payers, hospitals poses a huge challenge. If it decides to go purely via patient self-ordered tests route, educating the patient community would be crucial to its success. Whatever route it chooses, it’s certain that Theranos is here to stay and as the CEO of the company puts it, it’s here to “redefine the paradigm of diagnosis”.

Advertisements

Mobile Healthcare Technology: A Crucial Lever for Patient Engagement

While there are many cases illustrating how an engaged patient is a great asset to the healthcare ecosystem, one of the most compelling is that of Eric Dishman’s. In his TED talk, Eric shares his personal experience with the inefficient healthcare system. Through his own example he demonstrates how mobile technological tools can help fill in the gaps of the current flawed system. More importantly, he champions the role of a more engaged patient as a way to improve healthcare outcomes.

Patient Engagement is a Focus Across all Stakeholders

Healthcare has long been a paternalistic, hierarchical, doctor-knows-it-all industry. With the advent of the internet, social networks and smartphones this is no longer so. Patients today are much more informed, connected and ready to take an active role in their fitness and well-being. Moreover, in the wake of Affordable Care Act, patients are paying higher deductibles and out-of-pocket payments that further require them to take stock of their own health and wellness. As healthcare transitions from pay-for-service to pay-for-outcomes, providers have to ensure their services are effective and efficient, which necessitates a highly engaged patient. For payers as well patient engagement is pivotal to achieve shared savings under new delivery structures such as the Affordable Care Organizations (ACO) and Patient Centred Medical Homes (PCMH). Given that poor adherence costs US healthcare nearly $290 billion a year, patient engagement has been rightly deemed as the ‘blockbuster drug of the century’.

mHealth to Drive Patient Engagement

Mobile Health (mHealth) has enormous potential (as highlighted in Eric’s example above) to revolutionize healthcare through patient engagement. And as the focus of the healthcare system moves to Meaningful Use Stage 3, the strategic importance of mHealth is all the more pronounced.

mobile-solutions-chillmark

Source: Chilmark Research

As highlighted in the figure above, mHealth started with simple data storing and sharing systems moving to sophisticated preventive engagement. The applications include SMS medication reminders, remote medical advice and remote monitoring. A few recent innovations in the patient  mHealth space are as follows:

Education and Wellness

  • Kurbo Health: Mobile subscription service focused on fighting childhood obesity
  • HealthTap: Access to doctors anytime, anywhere to get personalized answers
  • Prana: Wearable tracking breath and posture

Remote Monitoring

  • Medtep: Targeting disease prevention through monitoring life habits
  • Nephosity : Collaborative medical imaging services
  • Sano: API for bloodstream (not yet launched)
  • ViSi Mobile System: Platform for vital signs monitoring designed to keep clinicians connected to their patients

Diagnostic and Treatment Support

  • Cellscope: Smartphone enabled home otoscope
  • Lantern: Offers online and mobile coaching programs to support mental health
  • Helius: Clinicians, patients and families can use the real-time information about medication-taking, rest and activity to make informed treatment decisions

The use and popularity of above applications attests that mobile technology enables patients to be more informed, collaborative and committed. But integration of IT systems, complex healthcare environment, quantifying the benefits, measuring the ROI, patient stickiness and privacy concerns pose serious barriers to adoption. Given an opportunity to save $290 billion and a case as compelling as Eric’s, can we afford to ignore it?