When I heard that the Innovations in Social Marketing conference planning committee had chosen as this past year's theme, It's all About the Customer, I assumed that - well, since many of us are in the health sector - consumer-driven heath care would be a natural area of focus. How wrong I was as we instead heard about feel good magazines, synthetic cheese products and shoe stores.
But I am [slowly] learning not to be surprised. Since Health Affairs has published an interview with Regina Herzlinger, the originator of the concept that has been driving health care innovation and practice for the past 10 years (with its proponents and detractors), here are some of her thoughts.
When it comes to demand, what people call "consumer-directed benefit design" is a far cry from true consumer-driven markets, in which there's tremendous choice...To think that a high deductible and a PPO [preferred provider organization] define the consumer-driven market in an industry that's two trillion dollars! The consumer-driven supply innovations, like retail clinics and middle-class concierge medicine, have run into the barriers created by powerful status quo institutions.
[Q]Your application of market principles and consumer focus to health care, although not universally accepted, has been distinctly original... [A] You can be an academic who goes along with the tide: You figure out where the tide is going, you do your little thing in it, and you do it very well. That kind of academic helps the world go around. But, to me, academics should be intellectual path breakers... In the past five years I have written more than forty field-based cases about entrepreneurs in all parts of health care--from insurance to personalized medicine. These cases showed me how difficult entrepreneurship is in health care.
In insurance design, to focus on deductible as the only innovation is falling short. Some people like high-deductible, some people like savings accounts, some people want HMOs [health maintenance organizations]. But other innovations are possible. For example, why not reward those who go to the gym every day, don't smoke, and control their stress? Why don't those people get rewarded? Why aren't there insurance policies that say, if you stay healthy, I'm going to give you financial rewards? The market is clearly starved for insurance innovation.
Health insurance is among the lowest-rated sectors in consumer satisfaction. When people get involved, they're going to be both happy and unhappy. Is that good news or bad news? To me, that's terrific news. They're doing what consumers ought to do, and that is to voice their feelings. When they do, things change.
If you want to make an industry market-driven, you have to change both demand and supply. That is, you have to change how people buy and what they buy. The system has to change from being organized by inputs--by hospitals, doctors, nursing homes, drugs, technology--to being organized by what consumers need. And what consumers need are focused factories: integrated, total lifestyle solutions for their cancer, for their AIDS, for their diabetes.
And when you get an innovation, you do value pricing. Value pricing means that it's good for the customer, but it's also good for you. You take some of the extra productivity that you have enabled, and you keep it... You can't do that in health care. The top-down, one-size-fits-all pricing profoundly slows innovation.
Consumer markets have good information because consumers pay for the information... But there are no comparable sources in health care. I know more about my Raisin Bran than about the guy who delivered my children or the hospital in which he practiced. That's because there's no consumer market yet in health care, and these information organizations exist only in consumer market.
That is why we need consumer-friendly information, so consumers can know how good their doctors and hospitals are. Armed with information about cars, consumers drove General Motors, essentially, to bankruptcy, without really understanding technical details.
Fundamentally, single payer controls costs by rationing care to the sick, while consumer-driven health care controls costs through innovations in the care of the sick.
Consumer-driven health care is very threatening to a group of people in the health policy community that fundamentally believe that they're smarter than everybody else...Their fundamental idea is that they must play a central role in advising and managing the system. So, the notion that a market-based environment can radically improve health care, not with their controlling the system through a self-referential intellectual cartel, but through market-based entrepreneurs and empowered consumers, is very threatening.
Now that might make for some interesting discussions - no? Imagine helping to make the health marketplace work for the rich AND poor.