Health Care Research and Prospects

A groundbreaking project at Harvard Business School is bringing together faculty, researchers, and students to probe issues in health care management. An interview with Professor Gary P. Pisano.
by Wendy Guild Swearingen

As is clear to anyone who pays medical insurance premiums or has undergone any kind of medical procedure, the business of health care is an expensive one. The technology is expensive. The research is expensive. The services are expensive. Meanwhile, health care consumers complain of poor service and inadequate care. In short, health care in the United States appears to be broken.

Enter Harvard Business School's Life Sciences & Health Care Initiative, which brings together faculty from diverse parts of HBS to both conduct research on the sector and prepare future leaders in health care and life sciences. The initiative was started in 1997 at the behest of Dean Kim Clark. We asked professor Gary P. Pisano, who heads up the initiative, to give HBS Working Knowledge a peek into the work being accomplished in the initiative.

Wendy Guild Swearingen: How did the initiative come to be?

Gary P. Pisano: It was clear there that there was a huge set of interesting and important management issues going on that were not being addressed elsewhere, and that we were in a good position to address. Public policy issues were being addressed quite well in other parts of the university, but the management issues were not. So we took action on a series of things to move this along.

There were really four prongs of the approach that we talked about. One was research. The next was course development, actually creating courses. The third was a doctoral program, and fourth was executive education.

On the research front, we tried to create momentum through various informal means such as discussions, seminars, things like that. So we started a seminar series where people could come in and present their work in front of people who have dealt with those problems. In health care there are a lot of specialized institutional problems that one really has to understand and get around to be able to do good research, and there are big opportunities to leverage efforts across faculty. Since 1997, faculty at HBS have launched quite a few new research projects focused on health care.

So research was one big thing. The next issue was course development. Along those lines, Richard Bohmer and I created a new course, Managing Medicine, back in 1999. I collaborated with Richard, but it was really his idea and his thrust. However, outside that course, there was still quite of bit of case writing on health care occurring. If you look over time at the number of new cases created alone in health care that are used throughout our MBA program, it's a huge number.

For the doctoral prong, we created and offered a management track for Harvard's Health Policy PhD program. We've got five students in the program—we admit one or two students each year. They work here closely with Business School faculty and faculty from Harvard's Medical School and School of Public Health. That's going to be a huge long-term source of energy and stimulating research, because doctoral students play such a key role in that.

The fourth piece was executive education. Two years ago we launched an executive education program specifically for future leaders in pharma and biotech. And we've run it for the second year in a row this year. It's a very successful program, and we draw companies from around the world—very well subscribed program. We're now looking into the possibility of launching an executive education program for physicians, physician leaders of health care providers.

Q: Do the faculty members in the initiative have backgrounds or interests in health care?

A: That's probably been the most profound change, because back in 1997 the number of faculty with a strong interest in health care research was fairly small. Now it's actually fairly big. We have about ten to fifteen faculty who have active research or case writing agendas associated with health care.

Q: Tell us about some of the current research projects.

A: There is a whole bunch of work being done on biotech, the biotech industry, and the future of pharmaceuticals.

My stuff looks at a broader question: Can science be a business? This is the history of biotech, which is raw science being put into the commercial arena very quickly. The problems and challenges this creates, just from a business point of view. Lots of the organizational and institutional arrangements we have for doing business don't work very well if you start to graft them onto a context like biotech. They're a mismatch.

Real simple example: public equity. When you raise a lot of capital from public equity markets for biotech companies, there is a mismatch of the governance structure. The assets of a biotech company early in its life are just R&D projects. Those are really hard to value, and public equity markets have no idea how to value those.

There is a lot other work at the school going on around these issues by many other faculty. For instance, Dave Scharfstein is doing great work on how capital market forces influence the development strategies of biotechnology companies. David and I are probably going to collaborate on some work looking at how capital markets value the R&D portfolios of companies.

I want to make sure I give you a sense of the breadth of it, because one of the misconceptions is that only a few faculty at the school are doing health care. Some of it is among junior faculty, who tend to be less visible, but are doing outstanding work.

Rob Huckman's done a lot of very interesting work on adoption of new medical technology and how competing technologies—how the organization of hospitals influences the uptake of competing technologies. He did a wonderful study looking at why balloon angioplasty took off in some hospitals and didn't in others. And it actually had a lot to do with the kind of power their cardiac surgery departments had. It didn't take off in places with politically strong and well respected cardiac surgery departments, which is fascinating. There is this view sometimes that technologies, clinical technologies, are good for the patient take off. But this shows, from an organizational side, that these are complex organizations that have their own biases.

Rob's been doing more work looking at the issue of focus in health care. Focused health care organizations should do better. It's a question that people have talked about a lot, but nobody really examined it empirically.

Richard Bohmer is looking at the whole set of issues around what kind of management tools are appropriate in health care, given the realities of medical science. Richard's argument is that we often take tools like TQM, which have worked in other sectors of the economy, without thinking about what's different about health care in terms of the knowledge base.

Amy Edmondson, Richard Bohmer, and I did a study looking at learning curves in health care. We focused specifically on learning. We studied cardiac surgical teams adopting a new technology, and why some teams were able to learn faster than others. Monica Higgins has a wonderful book coming out that looks at career paths in biotech and, in particular, the role that one company has played in spawning chief executives of biotechnology firms If you look at a lot of the leaders of major biotech companies, they come out of Baxter. And so there is a Baxter imprinting effect on the industry. That should be a fascinating piece of work.

Marta Wosinska, who is in marketing, has been looking at the impact of direct-to-consumer advertising. Her stuff is really fascinating because it shows that companies are out there spending a lot on direct-to-consumer advertising. The numbers are huge. What she shows, by and large, is that direct-to-consumer can grow the size of the market, but does not increase the market share. That finding is important and will come as a surprise to a lot of companies who are spending a lot of money and not getting a payoff for it.

Q: There's been a lot of controversy around the ethics of stem cell research and cloning. Have you been keeping an eye on that?

A: There's actually a major project that Deb Spar is doing. She's coming out with a book next year that examines the complex politics, ethics, and moral issues associated with reproductive technologies. Her argument is that companies in this space are going to have to deal with these political, ethical, and moral issues. They can't duck them. Deb also did a case series on AIDS in Africa and how pharmaceutical companies should think about the issues and how they might respond. Sandra Sucher has done a really wonderful case on Gleevec, which is a drug for treating chronic myeloid leukemia. She is one of the core faculty members in the ethics—she teaches the first year required course in ethics and leadership and values. The case explores some of the ethical issues Novartis faced in developing and marketing the drug.

Q: Would you say that the lack of management and opportunities for students is part of the problem of health care now?

A: No. There are plenty of opportunities in health care for our students. And, I think our students are increasingly interested in this sector. In the late 1990s, I think there was less interest as our students were gravitating toward Internet companies. Our enrollments in health care courses were quite low. The situation is quite different now. Fortunately, we stuck with those courses and now our students are interested in health care and enrollments in those courses are way up.

About the Author

Wendy Guild Swearingen is the publications coordinator for HBS Working Knowledge.