Harvard's Herzlinger On Powerless Patients And A Cautionary Cost-Cutting Tale

http://www.youtube.com/watch?v=COOE9USwGGs

I found myself typing compulsively as I watched this recent video of a cogent talk by Prof. Regina Herzlinger of Harvard Business School on how to make health care more consumer-driven. In case you can't hear — the volume is a bit low — here are some excerpts courtesy of my fingers on auto-pilot. (And don't miss the thoughtful responses from a distinguished group of commenters beneath the B School's post here):

"The only sector of the economy in which the consumer has virtually no voice is health care. And you can tell that because instead of being called the consumer they're called a patient. The word 'patient' means 'You be patient. My time is valuable. You're the one who has to be patient.' This kind of consumer unfriendliness in health care manifests itelf in many ways: in the inconvenience of the health care system, how long very busy people have to wait; in the inconvenience of how health care is packaged."

"So I coined this phrase, 'consumer-driven health care'...this idea that consumers should drive the system, rather than be driven by it."

"I don’t think these people are venal or evil, but like all of us, they’re naturally interested in mantaining the status quo if it works to their advantage, and right now they’ve got all the power. The consumer, who's the source of all the money, [has] all the money but zero power. If I were part of the indusry that got all the money with the funder having no power, I’d kind of like it that way and wouldn’t be too wild to embrace changes to it."

[module align="right" width="half" type="pull-quote"]What happens if, as an innovator, you say, 'This is stupid!'[/module]

"If you want to make health care better and cheaper, the answer is health care services, because about 80% of our 2.7 trillion dollars — an amount bigger than the GDP of China virtually — that’s how much we spend on health care — 80% of that is spent on services and they’re very inefficient. So why haven’t they been innovated? The reason is the way we pay for health care services. We pay for services on a fee-for-service basis. So a doctor gets paid for every X-ray, every lab test, every visit, every hospital stay. She does not get paid for a bundle of care. So what happens as a result of that?

There’s a disease called congestive heart failure, a dreadful disease. It costs hundreds of billions of dollars; it is the leading cause of unnecessary hospital admissions itn he US, everybody agrees with that. So why does that happen? It’s because the people who manage congestive heart failure each separately get paid for what they do. They don’t integrate with the other people. We don’t have IT platforms that would permit them to do that, and as a result the care is substandard because Dr. A doesn’t know what Dr. B has done, and we incur unnecessarily high costs.

What happens if, as an innovator, you say, 'This is stupid! I’m going to create an integrated bundle for the care of congestive heart failure! I’m goign to eliminate unnecessary hospitalizations because I'm going to be so great at giving care!'? You're going to lose money because right now you get paid for those unnecessary hospitalizations and if you eliminate them you're going to lose money. How much money? The Duke medical system — a great system! — did this. It integrated the care for congestive heart failure. In one year they reduced the cost by $8,000 per patient. There are 6 million congestive heart failure patients in the US. Their innovation could have saved around 50 billion dollars. Quite a bit of money. Who benefited from their innovation? Well, the insurers benefited; the patients benefited. But Duke lost $8,000 per patient in revenue because it gets paid for every hospital admission, and every hospital admission it eliminated came right out of their pocket.

In the rest of the video, Regina talks about shifting the American system toward the Swiss model, in which the poor have the same health insurance as the other classes rather than being segregated on Medicaid as they are here.