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Obstacles to Healthcare Innovation

July 30, 2019

By John Ziegler (CFO)

The need for innovation within the healthcare industry is becoming increasingly obvious: costs are rising, demand is growing, and productivity is lowering; yet the healthcare industry is notorious for innovating at a much slower pace than others.

Healthcare organizations are also starting to recognize the power of innovation as a key to long-term success and a way to maintain and grow their market share.

So, if they are starting to think big, why are innovation outputs so low across the board?

There are numerous obstacles to healthcare innovation that are preventing disruption, here are three of the biggest:


There are extensive networks of regulations covering each cog of the healthcare wheel- for each stakeholder at every step of the process. Complying with them and navigating all of the red tape can be tremendously complex and disconcerting for an innovator, especially with accountability at an all-time high. While these regulations are, for the most part, meant to be protectionist, they are also restricting innovations that could potentially benefit the industry as a whole and improve patient outcomes.

Risk- Aversion

Risk is necessary for innovation. While most healthcare organizations want to be disruptive, few are willing to take more than baby steps towards a total change. This hesitancy to stepping out of a comfort zone is a huge barrier to innovation. Each stakeholder wants to protect their individual assets and is under constant pressure to improve margins. The healthcare industry is also focused heavily on operational distinction, primarily achieved through careful, rational, and calculated measures. This creates a system that rewards risk aversion overall and inhibits innovation.

Sunk Costs-

Health care organizations have already spent millions of dollars on existing infrastructure. Since they have invested so much into their current care models, they will most likely seek to justify them with continued behaviors. It’s a typical example of the sunk cost fallacy. The more that they’ve spent on something- the less likely they are to want to change it. Instead, they continue to pour money into existing infrastructure, of which there is a lot in the healthcare industry, in attempt to legitimize and improve it- instead of innovating it.

Overcoming these obstacles to healthcare innovation will require transformative, growth-seeking leadership, a willingness of each stakeholder to work towards an improved, disruptive care model, and a willingness throughout the entire industry to accept some risk.

John Ziegler, CFO of FinPay, LLC, has more than 20 years of senior financial leadership experience and has structured and negotiated over $400 million in business. Mr. Ziegler is committed to lending clients his extensive knowledge of effective risk management and benefit strategies


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