California Management Review (CMR), the Haas School’s quarterly management research journal, recently published its Summer 2015 issue, featuring articles on resource management, crowdsourcing, and new types of disruptive and open innovation.
Included in this issue is Kristiana Raube’s case study Castlight Health: Disrupting the Health Care Industry. Raube is an adjunct professor and executive director of the International Business Development Program at Berkeley-Haas, and executive director of the Graduate Program in Health Management at UC Berkeley.
Raube’s case describes Castlight Health Co-founder Giovanni Colella’s experience developing an information company trying to improve efficiency within the U.S. health care industry by providing doctors, patients, and providers with more transparent pricing tools.
In the U.S., high care costs don’t necessarily correlate with high quality of care. The industry operates largely on a fee-for-service reimbursement model, where payers (health insurance companies) compensate providers (physicians and hospitals) for the services performed.
However, this model can lead to inefficiency by incentivizing volume over value. Patients might also seek treatment more often than necessary, because they are typically shielded from direct financial responsibility by private insurers or government programs.
Colella and the Castlight team saw an opportunity: if the prices of medical procedures could be made transparent, the incentive model of the health care industry could more closely resemble that of a traditional market, providing more choices to all parties.
In 2014, San Francisco-based Castlight Health filed for its IPO, and had shown considerable growth with more than $13 million in annual revenue. But was the company’s vision truly disruptive? The full case study is now available online, and as part of California Management Review’s Summer 2015 issue.
In August 2015, the Castlight Health case study was selected by a panel of Haas faculty and students to be the recipient of the 2015 Best Case Award, an annual award that honors the case studies published during the preceding year that have made the most important contribution to management education.
By Jae Park