The Industry That Can’t Afford Innovation

Perhaps you’ve heard about the challenges of healthcare organizations, which include severe staff shortages, decades of rising costs, reimbursement challenges, and a swiftly aging population. Then there are the endless regulatory requirements. As a host of new technology tools emerges, the only answer, it would seem, is to innovate.

Only that’s not likely to happen anytime soon. In a new Korn Ferry survey of 345 physician executives, including chief medical officers and chief clinical officers, a shocking zero percent of respondents said their organization’s technology strategies are at the “leading edge” of innovation. Just 10% describe their organization’s technology strategies as “advanced”; most, 81%, say they’re merely “developing” or “progressing.”

Experts say that’s disturbing news. Of all industries, healthcare would appear to need as much help from AI as it can get. If the sector doesn’t jump on the innovation bandwagon, inefficiencies around staffing, billing, and electronic records—and everything else—will continue growing with each passing year. “The risk is organizations finding themselves in the red very quickly,” says Jim Vincoli, vice president for client solutions at Korn Ferry, who led the survey. Approximately a third of US hospitals already operate at a loss each year.

To be sure, just six percent of executives thought their organizations should be innovation leaders, with the majority preferring a more “balanced approach” in which modernization is only one of several operational goals. “To me, that says they’re being practical,” says Vincoli. “They’re saying, ‘Let’s just get balanced,’” by emphasizing budgets, staffing, and patient outcomes equally.

Meanwhile, healthcare’s sister industries have embraced innovation. Their business offices infuse technology into collecting and back-office functions; use sophisticated predictive analytics and clinical decision-support systems to improve their clinical decision-making; and fully integrate their health-record systems in order to more expansively coordinate automatic care and identify healthcare gaps.

Experts say that a lack of tech-minded foresight is not the problem. Rather, healthcare is a field that operates on margins of around 3%, and one in which many extra costs can’t be passed on to the consumer. Tech overhauls are exorbitantly pricey. “I don’t think the industry will ever be a leader in innovation,” says Greg Button, president of global healthcare services at Korn Ferry. “These are paper-thin margins.” And any upgrades or changes can disrupt care. For this reason, the industry often runs a decade or two behind other fields in implementing large-scale innovations.

The question is how to move toward innovation. Healthcare is unique among business fields in that many of its leaders are fundamentally mission minded, as well as motivated by helping people. “There’s more behind the stethoscope than just dollars,” says Vincoli. This can lead the industry to focus so much on patient outcomes in the short term that it fails to recognize the risk of maintaining the status quo.

Experts advise healthcare organizations to include tech innovation and capital expenditures—one or both of which they often omit—in their three- to five-year strategies. “There needs to be a tech portion that is not compromised,” says Button. Nonprofit health systems are increasingly seeking tech expertise on their boards, which is also a step in the right direction. Still, change won’t—and shouldn’t—come quickly to healthcare. “It doesn’t have to happen overnight, but it needs to be embedded in the organization’s fabric,” says Button.

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