Consumer-Driven Health Care: Implications for Providers, Payers, and Policy-Makers (Hardcover)

~ Regina E. Herzlinger (Author)
Key Phrases: national health expenditures, patient power, chronic disease management, United States, New York, Health Affairs (more...)

Editorial Reviews

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.

Review

"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.'"
—Russell C. Coile, Jr., consultant, editor, Russ Coile’s Health Trends, and author, Competing On Excellence

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Product Details

• Hardcover: 978 pages
• Publisher: Jossey-Bass; 1 edition (April 9, 2004)
• Language: English
• ISBN-10: 0787952583
• ISBN-13: 978-0787952587
• Product Dimensions: 9.4 x 7.5 x 2.4 inches
• Shipping Weight: 4 pounds (View shipping rates and policies)
• Average Customer Review: 4.5 out of 5 stars  See all reviews (4 customer reviews)
• Amazon.com Sales Rank: #579,376 in Books (See Bestsellers in Books)

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23 of 24 people found the following review helpful:

5.0 out of 5 stars Thoughtful Contribution, July 25, 2004

By	Kip Piper "Medicare & Medicaid Consultant" (www.KipPiper.com) - See all my reviews

In Consumer-Driven Health Care, Regina E. Herzlinger, a leading health care thought leader and a professor at the Harvard Business School, provides a thought-provoking look inside a new, powerful force slowly transforming America's dysfunctional health care industry. Consumer-Driven Health Care builds on her popular 1997 book Market-Driven Health Care: Who Wins, Who Loses in the Transformation of America's Largest Service Industry.

In the first part of her new 900-page book, Dr. Herzlinger makes a convincing case about how and why health care is broken and why market-based solutions - which empower consumers - are best. She restates the case she made in Market-Driven Health Care for putting consumers directly in charge of their own decisions (picking insurance plans, making medical decisions).

Through transparency of information, a realignment of incentives, and new tools to support decision-making by patients, the consumer-driven model gives individuals a clear stake in their own health care. While not unique to other parts of the US economy, the approach is a radical departure for the $1.7 trillion health care market. As Dr. Herzlinger makes clear in her energetic analysis, the absence of these proven market-based tools goes a long to explain why health care became our most inefficient, outdated, and error-prone industry.

The second part - about 80 percent of the book - is a collection of 73 think pieces written by 92 other experts. With short introductions by Dr. Herzlinger, these articles serve as a useful initial knowledge base for a growing field with an uncertain future.

The book has its limitations. For example, Dr. Herzlinger's case for the consumer-driven model fails to address the Medicare and Medicaid systems. It also leaves a variety of practical transition and execution issues unaddressed, although these are beyond the purpose of this volume. Because articles were written several years ago as part of a conference and most of the writers lack purchaser-side experience, the book also does not deal with the growing list of market-based reforms underway by large employers and innovative health plans.

In addition, since the field is still in its infancy, Dr. Herzlinger is a business researcher, and the contributors are largely wide-eyed entrepreneurs, the book will likely frustrate health policy wonks and others stuck in the technical minutia and ideological fights that characterize most health care discussions. But then, that's just as well. Too often analysts forget that health care is a business and operates as a market, albeit a flawed one insulated from tools proven to drive quality and efficiency. And we need all the wide-eyed, out-of-the-box thinking we can get.

Dr. Herzlinger also has her detractors. It reminds me of the old joke that there are two kinds of people in the world: people who like Wayne Newton and people who don't. Well, it seems that health care wonkdom is divided by those who like Reggie Herzlinger's ideas and those who don't. However, given the massive problems in American health care, her plain-spoken, business-savvy contributions remain as useful as they are provocative.

For a good primer on consumer-driven health care, I recommend you start with Let's Put Consumers in Charge of Health Care, a concise article by Dr. Herzlinger in Harvard Business Review (July 2002 issue). Available here on Amazon ($7, PDF).

6 of 7 people found the following review helpful:

5.0 out of 5 stars Huge but a litle simplistic, January 18, 2005

By	John Matlock "Gunny" (Winnemucca, NV) - See all my reviews (REAL NAME)

Sub-Title: Implications for Providers, Players, and Policy-Makers --,Citizen participation, Consumer satisfaction, Evaluation, Health & Fitness, Health Care Administration, Health Care Delivery, Health Care Issues, Health Policy, Health planning, Health/Fitness, Medical / Nursing, Patient Compliance, Patient satisfaction, Health systems & services, Medical / Administration, Personal & public health, Medical ==If your interests or profession lies in any area of health care this is a book that you almost have to have. In its almost 1,000 pages nearly every aspect of health care coverage is discussed. The format of the book includes some 200 pages written by Professor Herslinger followed by some 72 articles written by some 93 participants in a conference she held. As you would expect, the quality of the papers vary greatly. ==There are also a few reasons to disagree with some of Professor Herslingers basic thesis. She seems to believe that health insurers would compete in a fair market place to provide care to anyone. This is simply not true. If an insurance company can pre-select to eliminate giving any coverage at all to the sicker or more risky patients, it is to their benefit. An AIDS patient, with a requirement for expensive drugs can be folded into the coverage written for a large group, but an individual policy would have to be very expensive, or simply not written at all. The coverage of such patients is covered with what I think are unrealistic assumptions. ==The book presents a series of views that are just a bit simplistic, but which are forming a part of the national debate on health care. The information is needed if only to be aware of the discussion.

3 of 4 people found the following review helpful:

5.0 out of 5 stars How to empower health care consumers, June 6, 2006

By	Robert Morris (Dallas, Texas) - See all my reviews (TOP 50 REVIEWER)    (REAL NAME)

Although this book was written a few years ago, the issues addressed in it by Regina Herzlinger and other contributors seem even more relevant - indeed, more urgent - now than they were in 2004. How does Herzlinger characterize consumer-driven health care? It is "fundamentally about empowering health care consumers - all of us - with control, choice, and information." Such control will "reward innovative insurers and providers for creating the higher-quality, lower-cost services we want and deserve." What would be the role of government? She asserts that "government will protect us with financial assistance and oversight, not micromanagement."

The material in this substantial volume is organized within five Parts. Herzlkinger wrote the first, "Why We Need Consumer-Driven Health Care," then edited the contributions by others which comprise Parts Two-Five. She also wrote Chapter 78, "A Health Care SEC: The Truth, the Whole Truth, and Nothing But the Truth." For most of us who are not health care professionals, this volume provides about as much information as we could possibly need, much less process. I especially appreciate the fact that Herzlinger and her associate contributors make a conscious effort to avoid jargon, vague theories, oblique hypotheses, etc. They obviously believe that major health care issues are too important to be packaged as flimflam, swamp gas, and flapdoodle. Hence their rigorous focus on explaining (from a variety of perspectives) why consumer-driven health care is needed, and, how to establish and then sustain it.

Of special interest to me were these chapters whose titles correctly indicated what their respective authors discuss:

Chapter 5, "Health Care Productivity," Herzlinger

Chapter 20, "An Insurance CEO's Perspective on Consumer-Driven Health Care," Leonard D. Schaeffer (Chairman and CEO, WellPoint Health Networks)

Chapter 25, "Challenges of Consumer-Driven Health Care," Eugene D. Hill III

Chapter 34, "The Role of Information: J.D. Power's Paradigm Lessons from the Automotive Industry," J.D. Power III

Chapter 52, "Consumer-Driven Health Care: Management Matters," Richard M.J. Bohmer, Amy C. Edmondson, and Gary P. Pisano

Given the fact that this volume offers a total of 81 chapters, my guess is that each reader will find at least 10-15 of special interest to her or him. I presume to suggest, also, that many of those subjects which may seem to be of least interest and value will, in fact, generously reward a careful reading. It remains for each reader to review the Contents and then decide what to read and in which sequence.

Those who share my high regard for this volume are urged to check out Michael Porter and Elizabeth Olmsted Teisberg's Redefining Health Care: Creating Value-Based Competition, and two books by Lawton Robert Burns and his Wharton associates: The Health Care Value Chain: Producers, Purchasers, and Providers, and, The Business of Healthcare Innovation.