Health Care Leaders Should Preserve R&D; Spending in Down Times

R&D; Spending Holds Steady in Slump, appearing in the April 6 Wall Street Journal, chronicles the benefits of continued corporate investment in research and development during down economic cycles. In this page one article, authors Justin Scheck and Paul Glader observe that: “Big R&D; spenders say they’ve learned from past downturns that they must invest through tough times if they hope to compete when the economy improves.” This may hold a lesson for healthcare leaders.

Mssrs. Scheck and Glader report on the difference between companies that maintained R&D; spending in poor economic times and harvested substantial returns from new products and technologies (Apple’s investment between 1999 and 2002 resulted in the launch of its iPod) and those that cut back in those periods and subsequently lost market share or competitive edge (General Electric and Motorola in the same period). I suspect these lessons, and others from the corporate experience that are cited by the authors, likely apply to health care products and devices as well. We just don’t usually think of health care providers and payors as major investors in R&D.; Think again. We do invest, albeit differently. Our investments in new medical technology, infrastructure, personnel, and training may not research but they certainly qualify as product development and innovation in the programs and services that are the core of our businesses.

So the lesson for healthcare leaders is that when under pressure to cut “unnecessary cost,” continued improvement of quality, safety, IT, and customer service – investments crucial to our reputation and therefore our revenue base – should be last rather than first on the cutting block. Perhaps it even makes sense to increase these investments in pursuit of competitive advantage at a time when others are reticent to invest.

Left untended and stagnant in a shifting and highly competitive environment, health care delivery organizations are at risk of losing the advantage. And as an industry that must regularly adopt new scientific and technologic innovations, we must continually reinvent our ability, our systems, and our people to receive and effectively implement the fruits of innovation efforts in other health-related industries. Which qualifies us as investors in R&D; in my book.