We publish our conversations with inspirational individuals in the healthcare industry to promote the innovation discourse and support framework. We spoke with Kevin Schulman, M.D., M.B.A., professor of medicine in the Duke University School of Medicine, director of the Center for Clinical and Genetic Economics, and associate director of the Duke Clinical Research Institute. Dr. Schulman also co-teaches the Innovating in Health Care course at Harvard Business School.

Dr. Schulman tells us his journey from medical school to Duke, about his interest in healthcare innovation, and provides guidance for students wishing to innovate going forwards. A transcript of our conversation is below.

Healthcare Innovators: Can you tell us a bit about your background? We’d love to hear how you’ve gotten to where you are today.

Dr. Schulman: I’m an internist child services researcher. I was at the country’s most traditional medical school in the mid 80s and the government was changing the ways they paid hospitals from the old system to what became the DRG system. I had no idea the government was involved in healthcare at all. A couple speakers came through saying physicians had to get involved. Eventually, I ended up at Wharton in their health program and stayed at Penn for six years.

My boss, John Eisenberg, became chairman of medicine at Georgetown. I joined him in ’92 and stayed until ’99. We were looking at healthcare from the perspective of the public policy institute at the time. Here at Duke, they asked me to help their healthcare programs, which I ran for a dozen years. I really got a chance to look at healthcare from the business and innovation perspective. Clay Christenson came down and talked about disruptive innovation in a non-regulated market. The question is, how does that apply as the concept to regulated market? Over the last 3 years, I’ve had the great pleasure of co-teaching the innovating healthcare course at Harvard with Regi Herzlinger. I am currently looking at innovation from the perspective of firm entry into the market and organizational innovation, which is the response of incumbents to disruptive innovation.

Healthcare Innovators: You mentioned that you teach Innovating in Health Care with Dr. Herzlinger. What questions do you try to solve in that course?

Dr. Schulman: There’s a huge need in healthcare for innovation but there’s some huge challenges as well. For one, healthcare is generally very complex with lots of institutions and regulations. You really have to understand them to understand how to approach solving problems in healthcare. The other side of it is thinking about perspectives for innovation and what approaches you want to take. For example, Regi [Herzlinger] uses her six-factors framework. How do you go about identifying a problem and thinking of a solution that could gain traction? The interesting thing and sad thing about healthcare is, everyday in the New York Times, there is a healthcare problem that needs a solution that you guys are creative enough to get an answer to. The really interesting thing is to take a step back and say, “Well this is such an easy problem to solve. Why hasn’t someone solved it?” That’s the tough part.

If this was a taxi situation and taxi fares are too high, why would you have a million dollar medallion? Obviously you could solve it by getting rid of taxis. We don’t have that option in healthcare to the same degree. It could be a study of five things that happen in non-healthcare markets. Why do they or do they not happen in healthcare, or are they starting to happen in healthcare? Is this an absolute barrier or just a time lag? To my mind, that’s a really interesting set of questions.

Healthcare Innovators: Interesting. We recently spoke to Mr. Vasant Kumar Ramaswamy, a coauthor of yours. How did you launch into your joint study of healthcare innovation and education? Where does your interest originate?

Dr. Schulman: I ran all the healthcare programs at the business school at Duke when I came from Georgetown. The original program was very focused on hospitals. I inherited what had been a Master of Hospital Administration program. We had to really change the focus to look at healthcare more broadly. From there, that meant we were going to look at facilities, but also innovation in technology, drugs, and devices. Those were really hot topics, especially in the early 90s. Then, we started looking at provider strategy and innovation and separately at health IT and innovation. The program was always in the context of thinking about business and government together in terms of regulatory structures.

About ten years ago, people really started focusing on the emerging healthcare issues outside the United States: China, India, Africa, South Asia, etc. How do we think about these markets? There’s this whole concept of innovating in resources for environments? What kind of things are they doing to be exemplars for us to understand? People spend a lot of time in Indian heart hospitals, which are very interesting models for high quality, low cost technical services. We did a lot of work with healthcare quality at an Indian heart hospital. That was a different take on what innovation in healthcare looks like in other environments so we can start comparing why they are able to do something, but not us.

Regi’s course is specifically focused on innovation. Again, what do you need to understand about healthcare before you start tackling your innovative idea? The issue with the U.S. is that people have made and lost fortunes in the healthcare market over the years.

Healthcare Innovators: Are there any specific areas in healthcare you think demand reorganization and change now?

Dr. Schulman: Everything. Basically, the issues that we have are: the costs are too high, the quality is variable, and the access is really limited. We need to ask the question, how do we get an answer to that? There are a couple of frameworks. To some extent, the assumptions made on the Democratic side are that costs are fixed and that we need to raise money to pay for healthcare. To the extent that costs are fixed, if we want to do something about cost, we have to limit the amount of services provided. On the Republican side, we have this idea that healthcare is expensive and we have to get people to get more skin in the game and share costs. The thing that no one’s working on is the huge opportunity to go back and take out non-bio added costs and the question is, how does that happen to markets? The way that happens to markets is really this disruptive innovation. Disruptive innovation and organizational innovation are where incumbent firms really compete. In my mind, those are the biggest challenges.

Healthcare Innovators: Very interesting. I know you have both a MD and an MBA. What was your motivation to get the MBA? There’s a very nice marriage between the MBA and MD, I think.

Dr. Schulman: Yeah, there’s a lot more interest in the joint degree these days. We had about 20 different physicians in our class last fall. Half of it is really people trying to understand what’s going on [in healthcare] in a little more depth. The other half is people trying to do something to improve the system. That’s what people are doing these days with the MD/MBA but an MBA is not the only way to go. We built an interesting degree [at Duke] called the Master’s of Management and Clinical Informatics, which looks at technology and innovation. Depending on where you end up, there are a lot of schools with joint MD/MBA programs. On the MBA side, they don’t necessarily have a lot of healthcare so I’d try to make sure you have some place that’s looking at healthcare and not just business. There’s something called the Business School Alliance for Health Management (BAM Alliance).

Healthcare Innovators: You started the BAM Alliance, correct?

Dr. Schulman: Yes.

Healthcare Innovators: Awesome.

Dr. Schulman: Those schools tend to have people in the business school that are interested in healthcare.

Healthcare Innovators: I have a lot of friends in business school right now that say many of their cases are healthcare cases. Do you think this healthcare focus is intentional or is it by chance that healthcare companies make these cases?

Dr. Schulman: It depends on where they are. There’s more content than there was 10 years ago. If you think about growth areas for business in the U.S., healthcare is just a huge opportunity.

Health Innovators: That’s really interesting to know. I didn’t know different business schools had different focuses. You mentioned the technology and innovation program at Duke. We have spoken to many CEOs from the Harvard Health Acceleration Challenge. We notice all of them marry technology in some form with healthcare. Do you think that comes at a sacrifice with patient interaction in the healthcare setting?

Dr. Schulman: I asked one of my colleagues in marketing this question and the way she responded was really interesting. She asked me if I shopped on Amazon and, of course, I do. Then she asked if I liked shopping on Amazon. Do you enjoy it? What do you answer?

Healthcare Innovators: It’s something I just do and don’t really think about it.

Dr. Schulman: But do you feel good when you’re done?

Healthcare Innovators: From the ease of use, yes.

Dr. Schulman: She said 20 years ago, people said there was no way you would buy clothes or other things online. Consumers would never give up the shopping experience. Amazon spent 20 years trying to recreate that in terms of clicks. I think the answer is going to be, “We’re going to have to recreate that patient interaction experience.” There’s no question we could share data. We can share data with patients in lots of different ways that will make things easier. I think what we can do is build different experiences as we learn more that people will find to be satisfying interpersonally.

Healthcare Innovators: Very fascinating. You mentioned that some MBA programs are not so focused on healthcare. If you were to do it again, would you do it – the MD at NYU and MBA at Wharton? What advice would you give yourself if you were in our shoes now, wished to learn more about innovation, and wanted to make a difference in the healthcare system?

Dr. Schulman: You do what you’re doing already. You take everything into your own hands rather than relying on other folks. The second thing is, it’s so hard. Getting into medical school is obviously a challenge so that’s your first job. And if it turns out you’re in med school and you have a bunch of choices, then choose one where you have more opportunity. If you’re at a med school that doesn’t have a lot of good choices, a lot more people are doing things like I did, going to one place for med school and one place for graduate school. The other thing is, you don’t have to do it during your medical education if it doesn’t work out. You do it during residency or during fellowship. There’s lots of different ways to tackle this. Frankly, you’re applying to med school now. You’re 6-8 years to wherever you’re going to get to. If you do a master’s degree, it’s 8 years. As long as you have a path to pick up [the skills] what you need along the way, that’s the critical issue.

Healthcare Innovators: Do you think one needs the MD to spur change or do you think it’s just a degree to help with understanding? There are several CEOs now like Mr. Vasant Kumar – he doesn’t have an MD but he’s still creating drastic change in terms of innovation.

Dr. Schulman: It depends what you want to do. Most healthcare entrepreneurs are not physicians so you absolutely don’t need an MD. Innovation is a tough career. If you want to treat patients one on one, you have to have an MD. You could also work for Google Health and also have a satisfying experience.

Healthcare innovators: I see. Dr. Schulman, thank you so much for your time and for imparting your wisdom on business school and areas within healthcare that we can tackle. This has been a true privilege for us.

Dr. Schulman: Thank you and good luck with this project.

About the speaker

Kevin Alan Schulman, M.D., M.B.A. is a professor of medicine in the Duke University School of Medicine, director of the Center for Clinical and Genetic Economics, and associate director of the Duke Clinical Research Institute. He is a professor of business administration in Duke University’s Fuqua School of Business and holds appointments in the Center for Health Services Research in Primary Care in the Durham VA Medical Center, the Duke Center for Clinical Health Policy Research, and the Trent Center for Bioethics, Humanities, and History of Medicine. Dr. Schulman is also a Visiting Professor of Business Administration at Harvard Business School.