From The New England Journal of Medicine
Regina E. Herzlinger, a prominent professor at the Harvard Business School, has been a leading voice among advocates of a price-sensitive, consumer-driven market as the solution to the problems of our health care system. In 1997 she published a book entitled Market-Driven Health Care: Who Wins, Who Loses in the Transformation of America's Largest Service Industry (Reading, Mass.: Addison-Wesley), which laid out the arguments for her position. Then, in 1999, as she explains in the introduction to her current book, "I felt that consumer-driven health care was so imminent that I hosted a large conference at the Harvard Business School to discuss the subject." The present massive book (more than 900 pages) includes most of the presentations at this conference, preceded by a 200-page update of Herzlinger's own views, plus her brief commentary on each of the collected papers. Why publish all this now, some five years after the conference, and yet barely seven years after her first book on the same subject? Because, she says, "I waited to publish this book until the time for the consumer-driven health care revolution to occur was right. The time is now." So Herzlinger believes that this book heralds the start of a "revolution" in health care -- a historic transfer of the control of the health care system from employers, insurers, and "providers" (formerly known as physicians) to newly empowered "consumers" (formerly known as patients). She and the majority of her 92 contributors (mostly health care entrepreneurs and managers, including 23 with medical degrees) are convinced that a new age is dawning. As a consequence, this book projects an almost messianic fervor; it brims with the confidence and enthusiasm of converts to a great cause. Despite all the excitement, however, it adds little that is really new and persuasive. The large collection of conference contributions, far too numerous to describe here, would have been less daunting had it been pruned to a more manageable number. Some of the presentations are thoughtful and balanced commentaries on the evolving medical marketplace, but others are little more than self-promoting anecdotes about new business enterprises intended to appeal to consumers. Herzlinger's own discussion, although lively and readable, fails to improve on the limitations of her first book. Like that previous effort, this contribution is primarily concerned with the employment-based insurance system and says little about the half of our health care economy that is insured through government programs. She begins with a convincing description of the failures of the current private system. The solution, she says, is to put the power of choosing insurance coverage and health care in the hands of consumers, who have a personal and economic stake in their own decisions. Employees should be given money by their employers, in amounts determined by their health risk, and they should be allowed to shop for themselves in a greatly expanded and diversified insurance market. However, in this scenario, everyone would be required to buy coverage for catastrophic illness. New kinds of entrepreneurs would "risk-adjust" the insurance payments and provide enrollees with the information and cost estimates that they would need to make their choices. Money not spent on insurance could be used by employees for other health expenditures -- or perhaps become part of a medical savings account. Critical questions about these proposals were left unexplored in Herzlinger's first book and remain unanswered in this one. Even assuming that there were reliable and broadly applicable methods to do comprehensive personal-risk assessments (and there are not), what kind of a system would be needed to ensure fair, up-to-date assessments for families and for each family member's changing health status? How often would such assessments be done, and at what cost? And what about Medicare and Medicaid? Should the government abandon these programs in favor of contributions (also based on health status) for the purchase of private insurance? Herzlinger acknowledges the need for government regulation in making her proposed "consumer-driven" system work, but she never fully addresses the huge administrative costs and bureaucracy that her system would probably entail. Large overhead costs plague our present insurance system, and they might well be even greater under the system she proposes here. The most important reform in the delivery of care envisioned by Herzlinger is what she calls "focused factories." As explained in her previous book, these would be freestanding specialized facilities and integrated groups of physicians that would treat a particular health problem. They would compete for customers on the basis of price and quality and supposedly would lower costs while improving efficiency and quality. Herzlinger wants specialty hospitals to replace services provided by general hospitals, and groups of specialist physicians who are focused on the comprehensive care of one disease to replace the services provided by solo practitioners. Does she think "focused factories" should largely replace the current organization of medical care? She does not say, but if so, she needs to be cautioned that multiple serious diseases in the same patient are common and that we still would need physicians to manage the vast array of minor complaints and to diagnose those that are serious. Herzlinger is convinced that market forces, given properly informed and motivated consumers, will bring runaway costs under control, even while improving the quality of care. That is a nice theory, but medical care is fundamentally different from the kinds of service industries that business experts know about, and the alleged magic of the market has yet to be demonstrated in medicine. Anyone who has ever been very ill or seriously injured learns that at these critical times, people must rely on their physicians to choose and provide the most appropriate care. Prices are a secondary consideration when health or life is at stake. Most doctors would support Herzlinger's campaign against old-fashioned medical paternalism, but not her insistence that patients are essentially customers whose discriminating, price-sensitive choices would produce a much better health care system. Arnold S. Relman, M.D.
Copyright © 2004 Massachusetts Medical Society. All rights reserved. The New England Journal of Medicine is a registered trademark of the MMS.
"Professor Herzlinger provides a compelling argument for consumer-driven health care. The health care system has been marked for decades with rising costs and consumer dissatisfaction. Professor Herzlinger challenges the reader to look beyond solutions that are based on what consumers should want to solutions that give consumers what they want."
—Barbara Bigelow, Ph.D., co-editor, Health Care Management Review, professor of management, Clark University Graduate School of Management
"Regina Herzlinger has a formidable reputation as an expert on reforming health care. There are lessons here for all of us who care about reforming our health systems to make them better."
—David Willets, MP, Shadow Work and Pensions Secretary and member of Parliament , UK.
"This book is a must-read for anyone who wants to know why the American model of health insurance benefits that has been around for about 50 years is all washed up, and what is most likely to replace it."
—Roger Feldman, Blue Cross Professor of Health Insurance, University of Minnesota
"No other author in the health field could write a book like Consumer-Driven Health Care, or make the kind of impact that Regina Herzlinger can make on America’s $1.5 trillion health care industry. As one of the health field’s most respected economists and business strategists, Professor Herzlinger can persuade corporate CEOs, Washington policymakers, benefits administrators, and hospital executives to reshape their strategy based on a market run by consumers. Remarkably, for an academic, she can write. This book translates health economics into simple English, reducing the “mystery-inside-a-conundrum” field into everyday transactions like selecting a health plan that any health care consumer can recognize. Consumer-Driven Health Care will be a top candidate for health care’s 'book of the year.'"
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—Russell C. Coile, Jr., consultant, editor, Russ Coile’s Health Trends, and author, Competing On Excellence