Insource and UMMC appear to be classic case of the disruptor vs. the disrupted

Glossary

Disruptive Innovation: An innovation through technology or process that takes root in an underserved portion of the market to create new business opportunities.

Incumbent: The market-leading business in an industry.

Unmet Need: When a business planner identifies a hole in the marketplace, where consumers -- either consciously or unconsciously -- have a need that a new product or service can meet.

Job to be Done: Much like an unmet need, the jobs-to-be-done metaphor helps a business planner target a market segment for a new product or service. The job-to-be-done metaphor is based on the idea that customers don't really buy a product or service, they hire the product or service to help with a specific task they want to accomplish.

Clayton  Christensen: Harvard Business School professor and creator of the term "disruptive innovation." His groundbreaking works are "Innovator's Dilemma" and "Innovator's Solution." He's also written a book on innovation in health care, "The Innovator's Prescription."

From the perspective of the folks who run Insource Urgent Care in Downtown Batavia, their first-of-its-kind clinic is apparently seen as a competitive threat by the executives at United Memorial Medical Center.

A threat that must be crushed.

If their perception is correct, it highlights the fear disruptive innovators can strike in the hearts of incumbent businesses, especially if that business has enjoyed a monopoly position in the market.

Since UMMC officials are not talking about the tensions between Insource and UMMC, we only have the perspective of Insource's owners, which they're willing to discuss, and is also part of a federal anti-trust suit filed by Insource on June 25.

The suit alleges that UMMC conspired with HealthNow, the region's BlueCross BlueShield franchise, to eradicate the hosptial's pesky new competitor.

UMMC, according to the lawsuit, has even tried to muscle other health care providers in the county in an effort to deny Insource the partners it needs to deliver its services.

HealthNow is the dominant health insurance company in Western New York and UMMC has held a monopoly position for emergency and hospital care in Genesee County since the year 2000 merger of Genesee Memorial and St. Jerome's.

Melissa Marsocci, VP of operations for Insource, who is a native of Batavia and well versed in the literature of disruptive innovation, said she wasn't surprised by the response from UMMC to the arrival of her new company. She wishes it had been different, that cooperation rather than competition would have been the watchword, but that's not the case.

"Being from here and knowing the corporate culture over there, I knew we weren't going to be welcomed with open arms," Marsocci said. "Whenever I go anywhere else (to open a clinic), I don't know that, but here, we're just little bugs to them."

Insource is a company designed around innovation. It's model uses more efficient processes for delivering patient care and employs technology to reduce costs while improving quality.

Insource is also willing and able to deliver what it believes is world-class care while accepting lower profit margins per patient.

The result, according to Marsocci, is faster and easier access to top specialists and lower costs for uninsured patients.

The Lawsuit

Key points raised in Insource Development Services of Batavia, LLC. vs. HealthNow New York, Inc. and United Memorial Medical Center.

• UMMC operates two urgent care clinics, one at St. Jerome's and one in Le Roy. The suit alleges these clinics keep irregular hours and are frequently closed.
• Services offered by these clinics are allegedly limited and patients are frequently referred to UMMC's emergency room.
• HealthNow allegedly entered into discussions with Insource two years ago about opening an urgent care clinic in Batavia and encouraged Insource to take on the project. When Insource and HealthNow -- which covers 50 percent of the insured in Genesee County -- were about to agree to terms for rates, the suit alleges, HealthNow broke off communications unexpectedly and without explanation.
• The suit alleges ER care at UMMC costs at least $1,500, below the now-common high-deductable plan of $3,000, and Insource provides the same service for $150.
• The suit alleges that HealthNow and UMMC entered into an agreement to restrict competition in Genesee County.
• UMMC allegedly used anti-competitive practices to drive Lakeside's urgent care clinic out of Le Roy.
• UMMC has used "agents" to contact healthcare providers in Genesee County to discourage their cooperation with Insource.
• Insource alleges that UMMC is acting to protect its monopoly position in Genesee County.

In its lawsuit, Insource claims a typical emergency room visit to UMMC costs at least $1,500. The same service through Insource would cost $150.

"I think people deserve a choice," Marsocci said. "Isn't free enterprise what America is all about? Competition is good. It ups the quality, or should, so why not? Why should United Memorial have a monopoly?"

The typical urgent care model is kind of like a doc-in-the-box. The clinics are usually only opened in high-volume communities -- such as well-populated suburbs or densely populated urban neighborhoods. They treat minor injuries and illnesses and do very little in the way of referrals. They're not the place to go if you're seriously ill.

Insource can provide health care as basic as a physical for a high school athlete, up to arranging a consultation with a heart surgeon.

In other words, from a patient perspective, the company can do everything UMMC does, but without the overhead.

When a business planner with an eye toward disruptive innovation looks at a potential opportunity, the planner will try to identify an unmet need and a job to be done.

The unmet need in Genesee County, according to Marsocci, is the lack of top-tier specialists. It's not that they're not here, but there are fewer of them.

And, many local residents -- like it or not, it's true, notes Marsocci -- also lack faith in specialist referrals through UMMC.

This isn't a problem unique to Genesee County or UMMC. It's common in rural counties across the United States.

For the local patient who needs or wants care with a top-tier specialist, the only option until now has been to drive 30 or 40 minutes to Rochester or Buffalo.

"The care here, unfortunately, and I can say this because I've lived in Genesee County all my life, the care here has been substandard for years," Marsocci said. "I don't mean that disparagingly, but I'm saying, call a spade a spade. When I need care beyond primary care, I travel. I have been in those situations where I used a local specialist and it didn't end positively for me, and I've had those times where I was lucky. But you learn through a couple of experiences and you're not going to do it again, so I go east or west."

The job to be done, then, for Insource, is to connect patients who need specialized service with specialists without making them drive for miles and miles.

Computers, laptops, smartphones, tablets, closed-circuit cameras, LCD screens and the Internet -- all the tools of telemedicine -- means those miles, and the wasted time that goes with them, disappear.

The example Marsocci used was of a patient who came to Insource in early Jully complaining of debilitating back pain.

Initially, the concern was that he had a kidney stone, but a CT scan found a growth on his spine. A surgeon and specialist in spinal problems who will soon be one of Insources subtenants was consulted using telemedicine tools. The doctor confirmed the diagnosis and told Insource to have the patient call him on his mobile phone the next day -- July 4 -- for a follow-up consultation.

Two weeks ago, the patient had surgery to remove the growth.

"If that man had gone to any other urgent care, they would not have wanted to spend any more time on him than they had to," Marsocci said. "If they didn't have access to a CT then they knew they were wasting time on him and not getting paid. They would just want to get him out the door.  He would have to go to the emergency room then, which means he's going to spend a lot of money for something we did perfectly well here."

"It's pretty exciting to say he had surgery probably before he even would have seen the spine surgeon had he went anywhere else," Marsocci added.

All of these improvements -- better access to specialists, lower costs -- just make good business sense.

"Why can't the people in this community have the same level of care as the people in Buffalo or the people in Rochester?" Marsocci asked.

The response from local doctors to Insource, even those associated with UMMC, has been uniformly positive, Marsocci said. Insource refers patients to local doctors and to UMMC on a daily basis. The goal is to get the patient the best treatment possible, and that often means local doctors and local specialists are the best resources for local patients.

And local health care providers have found Insource a valuable resource, even referring patients to Insource, she said.

If all this makes so much sense, why aren't established urgent care companies around the nation providing the same service? Why isn't UMMC?

Mark Celmer

Yesterday, Mark Celmer, president of Insource, spoke with The Batavian's news partner, WBTA, about the lawsuit. Here's what he said.

“I do find it absolutely reprehensible that any member of Genesee County that’s insured by HealthNow can travel 40 miles to Erie County and go to any of 22 urgent care sites and be fully covered for their urgent care visit, but they cannot come to the newest one on Main Street, Batavia. I find that just absolutely reprehensible.”

“I would like HealthNow to say, ‘Genesee County residents: if you want to go to the urgent care center at the Jerome Center, if you want to go the urgent care center in Le Roy, if you want to go to the emergency room at United Memorial, or if you want to go to Insource Urgent Care Center on Main Street, Godspeed, let’s get going.’ ”

As we said, we lack UMMC's perspective on this competitive climate, but we do know about the patterns of disruptive innovation.

In any classic case of disruptor vs. the disrupted, the incumbents either under-value the disruption or feel trapped by their established business model. The incumbent sees no way to extricate itself from its present business model, no matter how threatening the disruptive innovation might be.

Newspapers, for example, have found it difficult to transition to an online news model because higher profits are found in their dead tree editions. 

While it costs less to produce digital news, the revenues are also substantially lower -- The New York Times publisher once said it was like converting print dollars into digital dimes -- and profit margins are slender to nonexistent (especially if newspapers want to maintain their current newsroom cost structure). Even as readers flee from printed newspapers, incumbent publishers are loathe to go to an online-only business model.

It's very difficult for an incumbent to give up a profitable line of business in favor of a business model that means lower revenue and less profit, especially when successful models are few and far between.

Sailing ship builders couldn't do it when the steam engines came along; Detroit couldn't do it when Japanese cars hit the market; mainframe computer makers couldn't do it when personal computers were first being sold; and, Kodak couldn't do it when digital cameras became popular (and Kodak INVENTED the digital camera).

"We're trying to make sense of where everything should be -- lowering costs, improving quality, improving satisfaction, improving access," Marsocci said. "That's where we find ourselves as disruptive innovators. Nobody in the urgent care business wants to spend the amount of time that we did putting together a formal telemedicine program or the way we do things with continuity of care, having subtenant specialists in our center.

"They want the low-hanging fruit," she added. "It can be a very lucrative business, so they want to find a place in a heavy-traffic shopping plaza and just put up a center and see how many patients they can see each day and make as much money as they possibly can. Where we're really focused on what we're preaching. Continuity of care."

NOTE: Early yesterday evening, The Batavian sent an e-mail to Colleen Flynn, spokeswoman for UMMC, and outlined the nature of the article we were writing about the lawsuit and invited UMMC to comment on the topics raised in this article. The Batavian received no response to the e-mail.