Strategic response by providers to specialty hospitals, ambulatory surgery centers, and retail clinics

Abstract

Radical innovation and disruptive technologies are frequently heralded as a solution to delivering higher quality, lower cost health care. According to the literature on disruption, local hospitals and physicians (incumbent providers) may be unable to competitively respond to such "creative destruction" and alter their business models for a host of reasons, thus threatening their future survival. However, strategic management theory and research suggest that, under certain conditions, incumbent providers may be able to weather the discontinuities posed by the disrupters. This article analyzes 3 disruptive innovations in service delivery: single-specialty hospitals, ambulatory surgical centers, and retail clinics. We first discuss the features of these innovations to assess how disruptive they are. We then draw on the literature on strategic adaptation to suggest how incumbents develop competitive responses to these disruptive innovations that assure their continued survival. These arguments are then evaluated in a field study of several urban markets based on interviews with both incumbents and entrants. The interviews indicate that entrants have failed to disrupt incumbent providers primarily as a result of strategies pursued by the incumbents. The findings cast doubt on the prospects for these disruptive innovations to transform health care.