Building Better Health Care

In an online forum, Stefanos Zenios responds to reader questions on innovation in the field.

April 24, 2012

| by Stanford GSB Staff

Business and government leaders, entrepreneurs, academics, and students gather this week at Stanford Graduate School of Business for the 2012 Healthcare Innovation Summit to examine the forces shaping the future of health care and discuss practical solutions to some of our toughest health care problems.

In anticipation of the conference, the Stanford University School of Medicine, in collaboration with the Stanford GSB, invited Stefanos Zenios, faculty organizer of the summit, to respond to reader questions on health care innovation and entrepreneurship using the hashtag #AskSUMed or the comment section on the medical school’s Scope blog.

An expert on innovation, Zenios is the founding director of the business school’s Program in Healthcare Innovation. His responses are below:

Let’s take LEAN as an example. LEAN has its roots in the Toyota production system and process re-engineering. One of the key insights from the Toyota production system is that each handoff, when an item changes hands between individuals or departments, in a service system or production process is a potential point of failure.

In health care, many preventable problems and medical errors occur at handoffs between staff members or during shift changes. You can use technology to make those handoffs work more seamlessly. You can start with things like electronic medical records to help reduce workflow failures. But you can also envision medical technologies that can be used to radically redesign the process of care delivery to eliminate handoffs. For instance, consider devices that could be used by a patient to perform activities and collect data that would otherwise be gathered and managed by a health care provider. If we can integrate that information in a way that works seamlessly with the provider’s workflow, we can minimize the back and forth between the provider and patient that creates room for error.

How can the biodesign process be modified to develop devices that can be used in low-resource health care settings such as public hospitals and clinics?

This is a great question because it’s something we’ve been thinking about over the last four years. Through collaboration with the California HealthCare Foundation, we’ve been partnering with safety-net hospitals in the Bay Area to identify needs and potential solutions to their problems using the biodesign process. And, what we’ve learned is that there are a few basic modifications needed for the process to be effective in these environments.

First, it’s essential to get the need right. Safety-net hospitals and clinics operate very differently than private or academic health providers. So you have to spend time in these low-resource settings to really understand their needs and their constraints. Second, when creating the need specification, or what my colleagues in Stanford’s would call the design requirements, you have to be sure that affordability is among your main criteria. And third, solutions designed for low-resource settings are most likely to get funding from foundations, nonprofits, and government agencies, which create different opportunities and constraints for the innovator.

In terms of ideation and solution design, one successful approach has been for innovators to look at an effective, currently available technology for addressing a particular problem and then redesign it to be more affordable. A great example that came out of the GSB Biodesign and Innovation course is the OneBreath ventilator. On this project, the team figured out how to design a ventilator for use in the ICU that would cost one-tenth of current ventilators. The startup is now targeting low-resource health care providers outside the U.S. But once the technology is proven, there’s no reason why we couldn’t start using it in the U.S., as long as it provides the same quality and meets the same specifications as the more expensive device.

Can you provide examples of device makers or processes investors might use to identify opportunities that can deliver health care value instead?

We are definitely seeing the emergence of more value-based innovations in the device field. One sector that seems to be flourishing in this arena is telehealth, which enables the delivery of health services remotely. It changes the venue of care with the intent of simultaneously reducing costs and supporting better health outcomes.

For instance, before telehealth, patients with congestive heart failure would have their weight monitored at periodic physician visits to make sure they weren’t accumulating too much fluid. However, this would be part of a costly office visit and the timing of the appointment may or may not have corresponded with when the patient most at-risk. With a telehealth solution, you might have a device manufacturer that has designed a weight scale with wireless connectivity. So every day when congestive heart failure patients weigh themselves at home, their data is transmitted to call center where an agent or nurse is alerted if something looks out of the ordinary. The patient receives a call right away so the intervention is immediate. They don’t have to wait until their next doctor’s appointment to learn that something is wrong, which is good for the patient and better for the health-care system.

The challenge is that it still remains to be seen whether models like this will be commercially viable. Through the implementation of Accountable Care Organizations, the Patient Protection and Affordable Care Act could make it possible for health providers to be reimbursed for providing these kinds of preventive health services. However, so much uncertainty exists that many investors are hesitant to back these important value-based devices.

Could you please comment on the different teaching methods you use in your courses, and why you use them?

At Stanford GSB, we have three primary teaching methods: case-based, lecture, and experiential learning. Lectures are best when we’re introducing new frameworks. Cases give students an understanding of how frameworks and other concepts are applied using real-world situations as a backdrop. And experiential learning opportunities allow students to gain deep, first-hand experience applying the concepts being taught to completely new situations that haven’t before been tackled.

In general, these three methods work well together. For example, if students hope to learn about health economics, they would most likely start with a lecture in Rob Chess’ Innovation and Management in Healthcare course. Once they understand the fundamentals, they would do a case on health-care economics that asks them to consider how a certain payer applies these principles to make its reimbursement and coverage decisions. Going one-step further, students in courses like Biodesign or Design for Service Innovation would undertake projects that require them to apply their understanding of health economics to create a business case for a new health product or service.

So you can see how the methods build upon one another so that students understand new information and analytical ways of thinking, learn to apply these concepts, and then understand them more deeply through hands-on experience.

Absolutely! If you look at the projections for future budget deficits, they are driven by entitlement programs such as Medicare and social security. When these programs were designed, life expectancy was much shorter than it is today. The expectation was that most people would retire at 65 and they would only live a few years longer. Now average life expectancy is pushing 80, and with progress in medical technology it’s going to increase more and more. So we have to find a way to fund these entitlement programs that will cover healthcare expenses as people live many years into their retirements.

We know that the current Medicare system is not sustainable. Given the changing demographics and advances in medical technology, we need a sustainable Medicare solution.

Stefanos Zenios is a Stanford GSB professor and the founding director of the new Program in Healthcare Innovation. He is the lead author of Biodesign: The Process of Innovating Medical Technologies and a co-founder of

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