Regina Herzlinger received her Bachelor’s Degree from MIT and then her Doctorate from the Harvard Business School where she is the Nancy R. McPherson Professor of Business Administration Chair. She was the first woman to be tenured and chaired at Harvard Business School and the first to serve on a number of corporate boards. She is widely recognized for her innovative research in health care, including her early predictions of the unraveling of managed care and the rise of “consumer-driven health care” and “health care focused factories,” two terms that she coined. Money magazine has dubbed her the “Godmother” of consumer-driven health care. Her published works include Consumer-Driven Health Care: Implications for Providers, Payers, and Policymakers (2004) and Who Killed Health Care? America’s $2 Trillion Medical Problem – and the Consumer-Driven Cure (2007). Modern Healthcare magazine’s readers selected her as one of 2003’s, 2004’s, and 2005’s “100 Most Powerful People in Healthcare.” Managed Healthcare magazine named her as one of health care’s top “Top Ten Thinkers.
Note: I conducted this interview three years ago for the KL&TG magazine, published by Dallas-based Thomas Group.
Morris: Before we discuss Consumer-Driven Health Care, I’d like to ask a few general questions. “Consumer control” is certainly not a new concept but only in recent years has it had significant impact. In education, for example, when students are asked to evaluate their instructors. You strongly advocate comparable accountability in health care.
Herzlinger: That is why we have so many problems in health care. Consumers have not been in control. Until now, insurers and governments have been in charge. A great deal has been said about the importance of “listening to customers” but, insofar as health care is concerned, insurance companies and governmental entities really haven’t done that. Who is holding them accountable for all the problems in healthcare, especially costs to consumers and to those who employ them? Who?
Morris: From my perspective, “consumer-driven health care” and “quality-driven health care” are synonymous. Do you agree?
Herzlinger: Consumer-driven health care will inevitably lead to higher quality and lower costs, just as what has already occurred in the consumer-driven automobile, computer, and cell phone industries. Competition is the foundation of the free enterprise system. The more competition there is, which is to say the more choices consumers have, the lower prices tend to be…and usually in combination with higher quality. However, consumers must make a greater effort to understand the choices they have now, and insist on having more and better choices. Whether or not health care providers and employers do a better job of helping consumers to do precisely that remains to be seen.
Morris: “What’s in it for me?” is a frequently asked question and, more often than not, a fair one. With regard to consumer-driven health care specifically, “what’s in it” for providers, payers, and policymakers?
Herzlinger: For providers, freedom from micromanaging insurers, as in managed care and governments. For payers, new, lower-cost plans that can help to reach the uninsured, a vast market. For policymakers, new legislation to enable purchase of health insurance on a pre-tax basis and for an SEC-like transparency agency. Here’s a key point. In the absence of consumer input, costs can run rampant, while consumers cannot obtain the health care they want. No wonder the productivity of health services has declined over the past two decades. Health care will not improve until consumers drive it. Period.
Morris: Which leads us to Consumer-Driven Health Care. For those who have not as yet read it, there are 81 individual chapters, organized within five Parts. You wrote Part One in which you explain why “we need consumer-driven health care.” Briefly, please identify what you consider to be the most compelling needs to be served by it.
Herzlinger: A consumer-driven system will improve quality, contain costs, and enable coverage of the 40 million uninsured. More specifically, it will enable consumers to choose from a large array of differentiated health insurance options with the support of employers or other groups who will help provide the pretax money to buy them.
Morris: Please explain your reference to “the silent revolution” which you discuss in Chapter 6.
Herzlinger: The mainstream media devote all-too-little attention to the transformation of health care by hard-working, assertive, Americans. It is a silent revolution insofar as far as broad-based media coverage is concerned. Many people are made to feel weak and dumb…and resent it. When it comes to health insurance choices, consumers are weak and dumb. They lack power and they lack knowledge. Or at least so the mainstream media would have us believe.
The “silent revolution” to which I refer is occurring across the United States. Its advocates (I among them) long to bring the consumerism that reshaped our economy when assertive, prickly consumers denied companies the ability to raise prices easily to health care. This revolutionary consumerism, that demanded better products without price increases, led to a new phrase among managers, pricing power. That is what is now beginning to occur (albeit slowly) in health care.
Morris: A number of health care policy experts insist that health care cost inflation is fueled by excessive consumerism: people use too many tests, doctor’s visits, days in the hospital, etc. These experts advocate what seems like a managed care strategy.
Herzlinger: Others call it what it really is – rationing of health care. Reform health care by responding to the consumer? No way. The experts to whom you referred are convinced that health care can be reformed only by managing the consumer.
But the creators of the new, consumer-driven health care system are undeterred by these views and perhaps inspired by their wring-mindedness. They know that American consumers are smart, knowledgeable, assertive. All they need are the tools to drive the health care system.
Morris: In your opinion, why are so many (if not most) consumers so ill-informed about the “chronic problems” which are rigorously examined in Part Four?
Herzlinger: If I need something for my office, I go to a one-stop shop like Staples. If I need something for my garden, I go to Lowe’s or Home Depot. But, consumers who have chronic diseases, like cancer or diabetes, must deal with a fragmented health care system that they are forced to integrate by themselves. Further, they lack the information they need to be intelligent consumers. Do you know the price of your last doctor’s visit?
Morris: In Chapter 71, David B. Kendall asserts that a health insurance tax credit is “the key to more coverage and choice for consumers.” Presumably you agree.
Herzlinger: Yes: a credit or some other tax mechanism to enable pre-tax purchase of health insurance.
Morris: In your opinion, what are the major barriers to establishing and then sustaining “consumer-driven health care” nationwide?
Herzlinger: Powerful interests who prefer the Socialist-style health care systems in the U.K. and Canada. Their advocates are sprinkled in the mainstream and academic media, including medical journals.
Morris: Based on your own research as well as your analysis of research conducted by others, what seem to be the most significant innovations in health care?
Herzlinger: With regard to insurance innovations: right now, there is essentially only one type of policy—a PPO. New forms will proliferate. The high-deductible consumer-driven health plan now has about 3.2 million current enrollees. It is only one innovation but many others will emerge.
Health service innovations: MinuteClinics, concierge physicians, and specialty hospitals are responding to consumers’ need for convenient, focused, and efficient care.
Health information innovations: WebMD’s spectacularly successful IPO—its initial price doubled very quickly—is a forerunner of the interest in consumer-driven health care information sites.
Personalized medicine: That is, drugs and devices tailored to your unique physiology—are driven by technology, but their adoption is enabled by the consumer-driven health care movement.
Morris: On final question. Looking ahead to the next 5-10 years, what do you think will be the greatest changes in the provision of health care?
Herzlinger: Further development of the insurance innovations that I identified in my previous response. I also expect new types of insurance policies and consumer-based information sources, and new integrated health care delivery systems focused on those with chronic diseases and disabilities.
Morris: Thank you, Regina, for sharing your insights and recommendations. I hope those who read this interview will now be encouraged to read Consumer-Driven Health Care. You and the other contributors are to be commended on a brilliant achievement.
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