Disruptive innovation and the market state lead to a collision between for-profit and non-profit medical education

There are those in non-profit higher education  who think that for-profit higher education moves in a different sphere, and can safely be ignored.  A news article today showed that that assumption is increasingly less correct, and showed a form of competition that certainly looks like it arises from a mixture of Clayton Christensen’s disruptive innovation and Philip Bobbitt’s market state.

But let’s begin earlier in the week with another, seemingly unrelated news article.  At the end of July, DeVry Inc. announced the purchase of U.S. Education Corporation, which owns Apollo College (not related to the parent of U. of Phoenix), and Western Career College.  Both of these entities are in the health care area, preparing students

“ for careers in healthcare through certificate and associate degree programs in such rapidly growing fields as nursing, ultrasound and radiography technology, surgical technology, veterinary technology, pharmacy technology, dental hygiene, and medical and dental assisting.”

There are over 8700 students at the two institutions. 

According to DeVry, this purchase fills a strategic need:

“The high quality programs and experienced management teams at USEC, Apollo College and Western Career College provide us the perfect opportunity to further expand our program offerings in the high demand healthcare industry"

That is, DeVry sees a good future in the healthcare industry, and is ramping up its offerings and strengths in that area.

Among the healthcare industry holdings of DeVry is Ross University, a medical school and veterinary medical school on the Caribbean isle of Dominica.  The medical school has about 6,500 graduates, and boasts of the opportunities offered its students:

“We are also proud to offer more clinical rotation spots in the United States than any medical school in the world, with over 5,000 opportunities available at more than 70 institutions nationwide.”

Which finally brings us to today’s news.  The New York Times reports that New York City’s Health and Hospitals Corporation, which runs the city’s 11 hospitals, has signed a 10 year $100M agreement to provide clinical rotations for students of a for-profit medical school in the Carribean.  The for-profit school in the news this time is St. George’s University School of Medicine on Grenada (remember our invasion of Grenada to protect medical students? The same.).  And the contract has a very interesting clause, according to the New York Times:

“The contract also bans the hospitals from providing clerkships to other Caribbean medical schools — a critical provision to St. George’s, which has faced heightened competition in recent years, particularly from Ross University on the island of Dominica, part of DeVry Inc., a publicly traded educational company, since 2003.”

Thus the growth in strength in the healthcare area of DeVry has increased pressure on one of its for-profit competitors, St. George’s, and the resulting competition has spilled into the world of the non-profit competitors

There is, of course, a great outcry from the traditional non-profit medical schools in the New York area which depend on essentially free clinical rotations for their students.  In addition, there are only a finite number of such rotations available each year. Thus this arrangement both decreases the number of slots available to the US based schools, and also sets up the precedent that the slots can be sold off in order to bring in revenues for the city. 

The arguments presented against the contract have centered on St. George’s education model, which differs from that used by US medical schools. As a consequence, so the argument goes, the students must be less well prepared.  However, experts who visited St. George’s on behalf of the Hospital Corporation concluded that the education did, indeed, pass the necessary threshold of quality.  I hope someone jumps in and does some critical “outcomes testing” to see how the St. George’s students perform in comparison to students from traditional US medical schools.  This seems like the perfect opportunity to compare outcomes for these different approaches to medical education.  

This looks like a disruptive innovation in that an originally inferior product (with apologies to St. George’s) has improved sufficiently with time that it can intrude into the space filled by the traditional product.  At the same time, it brings an “innovation” that threatens to greatly disrupt business as usual - it pays for scarce slots for clinical rotation.   And the fact that the Hospital Corporation has entered into this contract that brings additional income in to support “struggling city hospitals” looks a lot like a further evolution of the Market State as defined by Bobbitt.  He predicted that governments would turn from making decisions because of policy considerations, to making them for market reasons.  

I imagine we will hear more about this interesting development.

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