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Consumer-Driven Health Care: Implications for Providers, Payers, and Policy-Makers 1st Edition

by Regina E. Herzlinger (Author)

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Professor Herzlinger documents how the consumer-driven health caremovement is being implemented and its impact on insurers,providers, new intermediaries, and governments. With additionalcontributions by health care's leading strategists,innovators, regulators and scholars, Consumer-Driven HealthCare presents a compelling vision of a health care system builtto satisfy the people it serves.

This comprehensive resource includes the most important thinkingon the topic and compelling case studies of consumer-driven healthcare (CDHC) in action, here and abroad, including newconsumer-driven intermediaries for information and support; typesof insurance plans; focused factories for delivering health care;personalized drugs and devices; and government roles.

ISBN-10

0787952583
ISBN-13

978-0787952587
Edition

1st
Publisher

Jossey-Bass
Publication date

April 9, 2004
Language

English
Dimensions

7 x 2.25 x 9.75 inches
Print length

978 pages
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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 forconsumer-driven health care. The health care system has been markedfor decades with rising costs and consumer dissatisfaction.Professor Herzlinger challenges the reader to look beyond solutionsthat are based on what consumers should want to solutions that giveconsumers what they want."
--Barbara Bigelow, Ph.D., co-editor, Health Care ManagementReview, professor of management, Clark University GraduateSchool of Management

"Regina Herzlinger has a formidable reputation as an expert onreforming health care. There are lessons here for all of us whocare about reforming our health systems to make them better."
--David Willets, MP, Shadow Work and Pensions Secretaryand member of Parliament , UK.

"This book is a must-read for anyone who wants to know why theAmerican model of health insurance benefits that has been aroundfor about 50 years is all washed up, and what is most likely toreplace it."
--Roger Feldman, Blue Cross Professor of Health Insurance,University of Minnesota

"No other author in the health field could write a book likeConsumer-Driven Health Care, or make the kind of impact that ReginaHerzlinger can make on America's $1.5 trillion health careindustry. As one of the health field's most respectedeconomists and business strategists, Professor Herzlinger canpersuade corporate CEOs, Washington policymakers, benefitsadministrators, and hospital executives to reshape their strategybased on a market run by consumers. Remarkably, for an academic,she can write. This book translates health economics into simpleEnglish, reducing the "mystery-inside-a-conundrum"field into everyday transactions like selecting a health plan thatany health care consumer can recognize. Consumer-Driven HealthCare will be a top candidate for health care's 'book ofthe year.'"
--Russell C. Coile, Jr., consultant, editor, RussCoile's Health Trends, and author, Competing OnExcellence

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

From the Inside Flap

"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

From the Back Cover

Increased consumer control of health care is shaking up the medical and insurance systems. In Consumer-Driven Health Care, Harvard Business School's acclaimed professor Regina E. Herzlinger states that hospitals, doctors, benefits administrators, accountants, government policymakers, and insurers had better adapt or else they will be replaced.

Professor Herzlinger documents how the consumer-driven health care movement is being implemented and its impact on insurers, providers, new intermediaries, and governments. With additional contributions by health care's leading strategists, innovators, regulators and scholars, Consumer-Driven Health Care presents a compelling vision of a health care system built to satisfy the people it serves.

"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

"Professor Herzlinger can persuade corporate CEOs, Washington policymakers, benefits administrators, and hospital executives to reshape their strategy based on a market run by consumers. 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 (2003)

About the Author

Regina E. Herzlinger is the Nancy R. McPherson Professor of Business Administration at the Harvard Business School.

Product details

Publisher ‏ : ‎ Jossey-Bass; 1st edition (April 9, 2004)
Language ‏ : ‎ English
Hardcover ‏ : ‎ 978 pages
ISBN-10 ‏ : ‎ 0787952583
ISBN-13 ‏ : ‎ 978-0787952587
Item Weight ‏ : ‎ 4.05 pounds
Dimensions ‏ : ‎ 7 x 2.25 x 9.75 inches

Best Sellers Rank: #3,176,064 in Books (See Top 100 in Books)
- #322 in Health Policy (Books)
- #375 in Health Care Administration
- #414 in Hospital Administration & Care

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Kip Piper

Thoughtful Contribution

Reviewed in the United States 🇺🇸 on July 25, 2004

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).

25 people found this helpful

Helpful

John Matlock

Huge but a litle simplistic

Reviewed in the United States 🇺🇸 on January 18, 2005

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.

6 people found this helpful

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Loyd Eskildson

Helpful and Thoughtful, but Overly Complicated

Reviewed in the United States 🇺🇸 on December 23, 2007

Herzlinger points out that, unlike most other markets, health care is controlled by third-parties (insurers). Further, the absence of information that can help consumers choose also hobbles their role.

Most health care costs are incurred by people suffering from chronic diseases. Unfortunately, the current insurance system (20% enrollee turnover each year) discourages extensive preventive efforts - multi-year insurance policies are needed. Another problem is that insurers and providers sometimes are rewarded for acting in ways that increase work-time loss - eg. preferring open gall bladder operations (less medical cost) with longer away-from-work recovery times. Still another problem is that innovative providers that improve outcomes are likely to end up getting less reimbursement; instead, rewards go to mergers creating larger networks that can resist pressure for discounts.

Voluntary compilation of outcomes data efforts have not worked - eg. there is little/no correlation between JCAHO ratings and patient outcomes, while the Cleveland area effort was destroyed when the major participant dropped out over upsetness over the results. Regardless, there is a significant problem with risk-adjustment - it is very sensitive to coding thoroughness and exaggeration.

All good points, and I especially agree with her emphasis on focused-factories and as much consumer-available information as possible. However, the bulk of "Consumer-Driven Health Care" is taken up with low-value brief writings from supporters attending a conference organized on the topic. Additionally, Herzlinger under-emphasizes the health care waste attributable to assessing enrollee health, individual underwriting, and patrolling enrollee selection of providers and their subsequent care. Herzlinger's risk-adjusted premiums would likely acerbate the debate and costs.

A much simpler basis for revising our broken health care system exists - a national system such as in Canada, England, France, etc.

One person found this helpful

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