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CONSUMERS/INDUSTRY: Reggie’s back and the intellectual slop goes on

Regina Herzlinger is back and has now moved from Market Driven HealthCare (which in my view produced one of the best letters ever to Health Affairs from Jamie Robinson following her disputing of his review) to a new tome called Consumer-Driven Health Care: Implications for Providers, Players, and Policy-Makers. The new book is basically 7 chapters from Herzlinger and a ton of short pieces (600 pages worth) describing a grab-bag of "innovations" in health care.

Trying to define, understand or explain Herzlinger’s points is maddening, as poor old Jamie Robinson found out–he ges well slagged off in this book in multiple places, mostly for making the mistake of interviewing the CEO of Aetna as he was walking out the door–Reggie though remembers that nasty review. She wraps in so many anecdotes, so many stories, and includes so many variants of health services and insurance packages that what she actually thinks will work is baffling. The market will sort it out. But of course, not the market as we now know it (that for instance Don Johnson supports). She agrees that we need some form of change to the current set of market incentives. But she never actually explains what it is that’s going to get us from our current dud system (on which we are agreed) to the consumer-centered nirvana. What type of changes to the tax laws, what about Medicare, how can you mandate risk adjustment? All big deals and all ignored.

This postulating a bunch of stories, flitting from one to another unrelated issue page by page, and not really getting to a solid intellectual explanation is exactly the problem Market-Driven Healthcare had. And of course there was neither a number nor a date in her book–she really understands how to be a forecaster! Well I suppose she nearly titled the book right. As the pharma industry showed us by spending $3bn a year advertising Rx drugs, it should have been called Marketing Driven Healthcare.

I think what she concludes in the latest tome is that Enthoven-style managed competition is a failure, even though it was never tried, but that it can be replaced with giving individuals the right to buy different assortments of flavor of health plan, using their own HSAs, and using highly complex risk adjustment to make sure no one games the system, and that insurers only seek out healthy people to insure. Providers will immediately respond by creating clear bundled pricing for disease states, or episodes of care, or something, these will be offered to insurers, or is it consumers, or is it both, and everyone will wonder happily into the sunset.

And how are we going toa) get everyone into these systems, particularly those who are in Medicare, where the real money is spent?b) cross-subsidize within a group when 80% of the money is spent on 20% of the people?c) pay for the care of the uninsured, rather than allowing them to be gamed out of insurance via underwriting?d) get the providers to actually create these bundled pricing schemes, when her own book shows that the only providers who ever had an incentive to figure out their costs for different care processes (the fully capitated California medical groups in the 1990s) couldn’t figure out their real cost structures?

Oh, all just details, details that Reggie doesn’t seem to think require explanation. According to her introduction she won the best teacher at Harvard award. Either she manages a much higher level of intellectual clarity in the rarified atmosphere of Cambridge than she gets on paper, or those Harvard MBAs are rather less demanding than their equivalents at Stanford.

Reading these two books is just so frustrating. Most of her criticisms of the current system are identical to the pro-managed competition crowd’s–about excessive provider power, perverse incentives, limited information about quality, low use of information systems, etc, etc. But she doesn’t ever give a clear view about what she thinks ought to be done to get from here to there. Or bother defending her ideas properly from the "naysayers" that she attacks. Somewhere in here there are some interesting ideas trying to get out. I just don’t think Reggie is going to be the one to explain them. That of course won’t stop her going on the lecture circuit and making a packet.

My final thoughts? Well as we’re dealing with Reggie, true to her style they’re just random anecdotes. First, when I saw her talk in 1998 she gave the presentation, made all these bold assertions and left without taking a single question. That was symbolic to me. Secondly, she spends a great deal of energy slagging off the single-payer and European models. But her favorite example of a really successful health care focus factory is the Shouldice institute for hernia repair in Toronto. You recall Toronto, it’s in Canada, and this care is all paid for by the single payer system in which the focused factory has thrived, without any help from self-actualizing consumers. But sadly even there the story isn’t that great. A 2001 clinical trial found that the Shouldice technique wasn’t as good as one from Lichenstein. So it’s another example of a North American factory being outdone by a foreign one.

The sad thing is that there is something to the concept of consumers making intelligent choices with their own money. Thrid party payment with cost-unconcious payers and guild-model providers is what got us into this mess. So something needs to replace it. The consumer movement needs as honest an intellectual theorist as Alain Enthoven is to the managed competition model or Steffi Wollhandler is to single payer. Regina Herzlinger is not it. But she sure sells a lot more books than they do.

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mark godleyMatthew HoltProf D.Hegde Recent comment authors
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mark godley
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I read Regina’s book, consumer driven healthcare many years ago and did exactly what she was predicting,building her predictions into our business strategy. I now have 2 very successful surgical hospitals, a UCC and an advanced diagnostic centre in the heart of the most socialized, and most politized country (when it comes to healthcare). Canada, like other OECD countries is just starting to experience those narcisitic,well informed baby boomers who are going to consume healthcare goods and services like we have never experienced before. They will demand choice, they will be informed and they will want healthcare NOW. And they… Read more »

Matthew Holt
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Well Lichenstein is so small that none of the Europeans noticed when it was moved to LA in the middle of the night….
OK, OK. I goofed! Thanks for pointing it out.

Prof D.Hegde
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Prof D.Hegde

I spent a few days in shouldice clinic in2003,fascinated by their work dating back to 40’s.It is interesting that similar institutions have not come up elsewhere,in spite of the apparently excellent results.It is a tedious technique of hernia repair,perfected in this place and difficult to replicate. The Lichenstein method is easy to practice ,can be done by the junior doctor, without a great understanding of the variables. Since you leave the job of repair to a prosthetic material,without the hassle of doing a technically demanding procedure it is universally applicable and is now popular. The delayed problems of placing a… Read more »