Thursday, February 23, 2017

Let the Good Times Destruct the Status Quo

Last week I described a theory that creative destruction happens because of downturns that spur new solutions, and the lack of a downturn in the health economy is why medical education is stagnant.
An alternative model found that in fact creative destruction happens during periods of growth not recession. Think of the dot com bubble that spawned the most successful company, Google. Facebook too launched in a time of plenty. Uber arrived after the crisis of 2008 was over and has been on a tear ever sense. And now Uber is the leader in driverless cars and trucks. So an abundant IPO and M&A environment that is full of resources spawns even more opportunities for creative destruction.

Certainly health care has done nothing but grow and in several markets (e.g., Pittsburgh and UPMC) consolidation and integration and rapid growth are pretty obvious. With all that money sloshing around it should have led to enormous opportunities for creative destruction. Sure medical schools have replaced dark depressing lecture halls with windowed learning environments full of round tables and projectors. And others have built huge simulation centers with mannequins and rooms for standardized patients. But if one contrasts that with the growth of Apple and the impact of the iPhone or Google and search, it’s clear that the enormous riches of healthcare (17% of GNP and growing) haven’t translated to enormous change.

Why not?

Perhaps paranoia and fear of a recession is really the key. A history of a growth period following a recession would include a sense of anxiety (i.e, “we’ve got to be ready!”) about the potential for another recession. Without a past recession (such as we had in 2008 for real estate especially and other markets but not health care) there is no anxiety going forward. So easy or constrained flow of money is not the key to creative destruction. Money just enables such destruction when combined with anxiety about being ready to weather the next storm. And thus with medical schools and their hospitals as the top revenue generation for universities, and hospital CEOs and VPs among the highest paid executives in universities, there is little need for the health care industry to worry that the days of growth are coming to an end. And thus little reason to be hopeful that medical school education will change anytime soon.

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