Transforming Service Delivery in Higher Education and Healthcare

by Raghu Santanam

Service innovations are notoriously difficult. It takes decades for innovations to penetrate market. More importantly, managers and service professionals are incredibly slow to react to consumer needs. While many frameworks exist to help us think through innovation ideas, we often ignore lessons learnt from other industries.

The service related challenges in Higher Education and Healthcare are particularly vexing and can benefit from some lateral thinking borrowed from related professional services industries. Higher education and healthcare industries are a significant part of the service economy. According to the Department of Education, total revenues at U.S. public and private universities in 2009-10 exceeded $400 billion (National Center for Education Statistics). According to the Department of Commerce, US hospital revenues exceeded $800 billion in 2010, and outpatient services accounted for another $750 billion (SelectUSA). Clearly, the potential for improving societal welfare by addressing the service delivery challenges in these two industries is enormous!

Many academics, practitioners and entrepreneurs are busy addressing these challenges. However, in my opinion, the focus has been mostly on changing industry structure and funding models. Efforts to improve service delivery in both education and healthcare have been sporadic and limited. Clearly, we need to do more.

Let us look at higher education first.

The predominant model for classroom interactions is the lecture room, as it has been since the founding of universities. This model is inherently not scalable (especially with current university cost structures) and sustainable. MOOCs (Massive Open Online Courses) are a refreshing response to the delivery challenge. It is heartening to see many large private and public universities openly embrace this platform. However, we should recognize the limitations of MOOCs both in the types of courses amenable to this model of delivery and the challenges in ensuring academic integrity of student learning and evaluation. Universities need to embrace new ways of complementing the course offerings on MOOCs to accelerate student assessments and time to graduation. We can enable students to graduate in less than 4 years if we allow them to take qualifying exams in a select number of introductory courses already offered on MOOCs. Why should a student, who is capable of picking up introductory materials on her own or through MOOCs, waste a semester relearning introductory accounting or finance or statistics? In my opinion, this is a versioning strategy that has already been shown to improve producer and consumer surplus in many industries (especially in information-intensive industries). This strategy can enable universities and their faculty to focus on those students who are in most need of guidance and direction. Interestingly, high reputation universities such as Harvard, Stanford and MIT have been the first to plunge into MOOCs. MOOCs are a great way to expand societal access to knowledge. It opens up a wide new world to people all around the world for life-long learning. In the process, universities can begin to innovate in education delivery and classroom interaction models as a complement to the innovations in MOOCs.

What can we learn from MOOCs that we can apply in healthcare services delivery?

Today, healthcare is built around episodic customized service interaction model (with the assumption, of course, of standardization in terms of care plan for specific diseases). The problems with episodic approach to care delivery are so many that I do not need to get into those details here. Suffice it to say that bundled payment plans and accountable care organization models are soon going to be the standard for payment models for most healthcare contexts. However, these changes are unlikely to bring about the needed scale efficiencies in healthcare industry to bend the cost curve. We need to think of innovative service delivery models. Some prominent providers are trying out these new models. For example, Cleveland Clinic is piloting shared medical appointments where groups of patients simultaneously interact with the care providers. Shared medical appointments can be especially suitable for follow-up care and patient education in chronic disease contexts. Mayo Clinic has introduced synchronous and asynchronous e-consults for second opinions and follow-up care that greatly improve service convenience, especially for out-of-town and international patients, without compromising care delivery.  However, I view these as only initial small steps to a large-scale transformation of service delivery models in healthcare. There has to be a better way for connecting millions of patients to highly educated medical practitioners and researchers. The level of individual and societal investment in physicians is enormous and I cannot believe that a one-on-one service delivery environment is the only way to gain access to this talent pool. We need to find new ways of enhancing access to clinical talent for the average patient. Of course, the biggest impediment to healthcare innovations is the complexity of payment structures, policies and regulations that govern interactions between the key stakeholders (i.e., hospitals, insurance companies, governments and professional bodies).

A useful way to think through innovations in service delivery models in both higher education and healthcare is to consider the evolution of innovations in financial services and products over the past couple of decades. One can visualize the major innovations in financial services and products targeted at the individual investors along two major dimensions: (1) Consumer Capability, and (2) Consumer Involvement. The Table below is largely self explanatory – we can easily visualize the natural segmentation and targeting of different products and service delivery models. More often than not, an individual company may offer all of these services or may specialize in one or more segments. The same dimensions may not work in all domains and identifying such critical dimensions for service innovations is critical.

Financial_innovationWe are yet to see such a richness and evolution of products and services in higher
education and healthcare industries. There are some early examples already
(Khan Academy, FlatWorld Open College Textbook, Mayo Clinic’s rich patient
education resources, national library of medicine), but it is time the service
research community began to map out these innovation trends systematically and
help the higher education and healthcare industries out of stagnation.

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