MARKET DRIVEN HEALTH CARE - Who Wins, Who Loses in the Transformation of America's Largest Service Industry by Regina Herzlinger. Addison-Wesley Publishing Company, Inc. Reading, Mass, 1997, xxviii & 379 pages, (includes index) $25. ISBN: 0-201-48994-5
Reviewed by Del Meyer, MD
Dr Herzlinger, Professor of Business Administration, Harvard Business School, suggests by her title "how the market--not managed care... will provide the solution to the deep problems that plague the American health care system." Consumers in the United States are ambivalent about medical care--bemoaning high costs and inefficiency while applauding research advances and individual health care providers such as doctors and pharmacists. The abundant information that is available for other sectors--prices, cost, quality, availability--is stunningly absent in health care... Even prices are generally quoted "a la carte" not for the full episode of care. Herzlinger's book intends to help remedy "the contradictions in the American health care system: to keep what is so good about it and to purge what is so bad."
In Part One of this four-part book, Herzlinger looks back twenty-five years to studies that found disparity in patient care. Women in Maine underwent hysterectomy four times more often than those in New Hampshire, implying that some back woods docs were a "greedy lot." Nevertheless, providing equitable care to women seemed easy. Allow a few smart doctors to routinize medicine and then tell the rest what to do and how to do it. Quality would improve, and the cost of health care would plunge--one of the cornerstones of today's powerful for-profit managed care movement.
Herzlinger finds this strategy puzzling when compared to recent changes in most sectors of the American economy. She points to manufacturing's innovations in organizational structure, technology, information, and employee empowerment. The author describes "focused factories," where cleaving vertically integrated firms and "outsourcing" goods and services have proved beneficial, both in costs and customer service. These successful ideas have eluded much of the health care system, which continues to replicate the mistakes of long-gone manufacturing giants--believing that "big is beautiful" and that direction should come from the top.
By 1986, fifteen years after Herzlinger's initiation into the maddening contradictions of the American health care system, she was convinced that the forces that had revitalized manufacturing could reshape the health care system. A revolution was on its way. However, unique barriers--complex technology, multiple professional roles, and daunting legal requirements--had to be overcome. To prepare potential medical care managers, Herzlinger developed an MBA course at the Harvard Business School, "Creating New Health Care Ventures," proposing lower priced specialized medical care, "available before and after working hours, in easy-to-reach locations like work sites, shopping malls, homes, and schools," much as the eyewear sector and chain of cancer centers are doing right now. There will be winners, healthier, better-informed patients and health care providers no longer having to answer to bottom-line-oriented managers, and losers, providers who do not value customer convenience over their own and who also enjoy being in complete control.
In Part 2 , Dr Herzlinger, using examples found in managed care and horizontal integration, analyzes why the two popular remedies for the health care system--downsizing, or managed care, and upsizing, or "big is beautiful," fail in most cases. She gives examples that merged hospitals have increased their costs disproportionately.
In Part 3, the author applies two industry proven ideas, the focused factory and the technology concept, to the "resizing" of health care systems, a fundamental change in structure--exchanging fat for muscle--which is the most difficult.
She points to Toronto's famed Shouldice (Hernia) Hospital, a "focused factory" where 20 surgeons only do herniorrhaphies, as a lesson in efficiency. This privately owned, for-profit facility, charges $2,000 for a procedure that is otherwise essentially free in Canada (after a long waiting period) and costs between $2,400 and $15,000 in American hospitals. Birthing centers, already part of the medical landscape, are another form of the focused factory. She reminds us that clinical pathways are not equivalent to focused factories. She presents data about the inefficiencies of diabetic, asthmatic, and hypertensive care and why they are ripe for the cure: focused factories. The Wilkerson Group, a consulting firm, speculates that HMOs will not invest in a focused factory program because their large membership turnover of 20-25% per year causes them to cast a dubious eye on programs that require intensive efforts in the present to avoid massive costs in the future. "The last thing they want to do is to attract more people with these diseases."
Industry uses technology to lower costs; medicine does not. Further, the present proliferation of needless technology raises costs, enabling health care institutions to raise prices.
Lastly in Part 4, Herzlinger discusses reimbursement systems that encourage focused factories' growth and how technological innovations, convenience, and information will improve our health and reduce our health care costs.
Physicians concerned about the evolution of health care should consider taking this "MBA course" by reading Professor Herzlinger's text which is succinctly written. Although the book reads well and presents a total picture, we must always speak with the physicians in the trenches. Herzlinger quotes the Shouldice hernia recurrence rate as less than 1%. Two surgeons have told me they have repaired several Shouldice recurrences. Statistics in clinical medicine may be less scientific fact than clinical impression. However, Herzlinger has presented this total picture for our continued dialogue of health care issues. Healthcare leaders will read and study these ideas which will guide them as they plan for health care's future. If physicians take that leadership role, it will empower our profession by making our patients health care more cost effective.