Candyce Thompson

MMI 407
Fall 2009

CRITIQUE OF WHY INNOVATION IN HEALTH CARE IS SO HARD

Regina Herzlinger raises many issues and provokes a lot of

controversy in her article Why Innovation in Health Care Is So Hard. In the

article, Herzlinger examines areas of innovation in health care and points out

some underlying causes for the ailing healthcare system in the United States.

According to Herzlinger, “Medical treatment has made astonishing

advances, but the packaging and delivery of treatment are often inefficient,

ineffective and user unfriendly.”1 Herzlinger breaks down the problem by

looking at different types of innovation and what hinders them.

Discussion

In the article, Herzlinger outlines three types of innovations that

improve health care as well as costs. These innovations influence the way

consumers buy and use health care, involve technology or generate new

business models. Herzlinger further explains barriers and obstacles to

innovation that organizations need to overcome and six forces that have an

impact on health care innovations: players, funding, policy, technology,

customers and accountability. In the article, Herzlinger mentions how all too

many enormous investment efforts have failed, losing billions of investor

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dollars along the way, stating “the disastrous outcome of the managed care

revolution, the $40 billion dollars lost by investors in biotech ventures and

the collapse of businesses aimed at bringing economies of scale to

fragmented physician practices”.2

I think that Herzlinger makes some valid points, and I can see where

these concerns would have been huge at the time that she wrote this article.

She gives great examples to illustrate her points regarding why she thinks

that innovation is so unsuccessful. However, I feel that Herzlinger is very

controversial and she does not provide current facts, statistical or numerical

data to support her article and her claims. Herzlinger makes many statements

that are very argumentative, controversial and at times, take things out of

context. Herzlinger mentions medical error rates that do not take into

consideration a patient’s health status. I think that we need statistics and

more information regarding the patient’s state of health when medical errors

and death rates are referenced. Herzlinger does not provide statistics on the

percentage of adverse events that were preventable or the percent of adverse

events that resulted in death.

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In several other articles written by Herzlinger, she makes

controversial points about the potential benefits of a consumer driven

system, universal coverage, central information clearinghouse for

performance data and market-based pricing. In Who Killed Healthcare?:

America’s $2 Trillion Medical Problem and the Customer Driven Cure,

Herzlinger writes about Consumer-Driven Health Care, a system of

consumer-driven health care that empowers health care consumers with

information, choices, and control. In the article, Herzlinger states that there

are three groups that oppose CDHC. These various groups allege that

“CDHC will favor the rich; screw the sick and the poor; lead to the

desertion of health insurance by employers, with venal firms entering the

market; and create even worse problems than we currently have in accessing

the system.”3 Instead, consumer control will reward insurers and providers

for creating services that are higher in quality and lower in cost. According

to Herzlinger, consumers will be protected by the government.

In another article, Let’s Put Consumers in Charge of Health Care,

Herzlinger makes a statement by asking a question, “And what do we

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companies get for their massive expenditures? A lot of unhappy employees.

Workers fret about the quality of care they receive, the burden of out-of-

pocket expenses, and gaps in coverage for long-term care, prescriptions and

catastrophic illnesses. For business, health care has become a lose-lose

proposition. You pay way too much, and you get way too little.”4 This is

part of the basis that the author uses when she shares her beliefs regarding

the health care system of America and its future. Herzlinger says that all

Americans will be covered in the health care system in the near future.

Unfortunately, we have not agreed how we will get to the point where every

American is covered. Herzlinger thinks that health care is killing the

economy and that third party agents are not good at purchasing health care

on behalf of individuals. The author argues that if individuals are informed

and have real choices, competition and productivity will be increased.5

According to Herzlinger, "The situation is dire, but there is a way out

of the mess – and the key lies with the business community. If companies

are willing to embrace a new model of health coverage – one that places

control over cost and care directly in the hands of employees – the

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Fall 2009

competitive forces that spur productivity and innovation in consumer

markets can be loosed upon the inefficient, tradition-bound health care

system. Rather than imposing a top-down solution, as managed care vainly

tried to do, consumer-driven health care would work from the bottom up,

enabling providers and patients jointly to create cheaper ways to deliver

care.”6 This sounds good and if the world were perfect, it would be a great

idea. Herzlinger does a good job of pointing out the problems.

Unfortunately, Herzlinger does not provide solutions. I am interested to

know how Herzlinger would make the Consumer Driven Health Care system

happen. She illustrates the issues, but I don’t see how America can make

what she proposes actually happen.

Advocates for consumer-driven health care envision a world in which

autonomous, well-informed, price-conscious consumers choose among

competing providers on the basis of quality and cost. According to the

author, the CDHC believes that the organizational structure in the health care

industry places inefficient barriers between consumers and the best available

care for medical ailments. The CDHC thinks that there is no need for

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coordinated agencies. Herzlinger does not bother to address the restricted

market entry and price monopoly that exist or poor health care.

I am not an advocate of consumer-directed plans that require large

deductibles before the insurance policy begins to pay. There have been

many discussions regarding the health care crisis in American and the

uninsured. With various states now requiring proof of insurance, taxpayer

will now lose exemptions if they do not carry health insurance. The author

speaks of other consumer-focused initiatives, some of them out dated as

well. Herzlinger wants to involve offer consumers low-cost, high-deductible

insurance. Although this is gaining popularity in the private insurance sector,

this concept is similar to automobile insurance coverage options. Herzlinger

likens heath care insurance to that of SUV’s. However, these high-

deductible plans are common in the private health insurance sector, but are

not yet common in the policies offered to employees in corporate America.

Many customers let their auto insurance policies lapse, when they

can’t make the payment or can no longer afford the coverage. This same

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thing would happen for low-cost, high deductible insurance. Herzlinger does

not make it clear if health care insurance coverage would work the same in

that one could be dropped from coverage when claims are filed with the

insurance carrier. Currently, there are debates regarding preventative care

accessible and using this to help cut the cost of rising health care.

As stated earlier, I feel that Herzlinger is controversial and her use of

information is not factual to our current healthcare market. Although,

Herzlinger has some valid points, they are not very relevant to healthcare

and technology today. According to the author, we can achieve have a

healthcare system where there are no limitations on individual demands or

concepts of healthcare and the market (supply and demand based on

consumer) will determine the quality and cost of healthcare. Still, Herzlinger

does not provide all the pieces to the puzzle. She does not give her definition

of what good care is for all, which I am sure will not fit my definition of the

kind of care that I want for my family. Besides, I don’t want good care, I

want great care.

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Herzlinger insinuates that single payer system hinders both customer

focused and technology-based innovations. According to the author,

America needs a consumer-driven system with market-based pricing and a

centralized health care data clearinghouse. Herzlinger does not address the

fact that health care does not meet the conditions necessary for efficient

consumer choice and that consumers need to be provided more information.

Patients don’t really know the cost of medical care. The consumers that have

knowledge also have insurance and they expect the insurance companies to

take care of the medical bill. The consumers that don’t have insurance

normally don’t have it because they can’t afford it, so when the medical bill

arrives, what patient who can’t afford to pay the bill really worries about

paying the bill?

The focus should be on educating consumers on medical care costs

and consumer-driven prevention. We need to be proactive and take better

care of ourselves and our health. Today, the internet helps to provide us

sources of information and tools that we can use to gain access and

information. I think that educating consumers on costs of medical care,

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doctor visits, inpatient and outpatient care, prescription for medication and

other out-of-pocket medical costs would provide a greater awareness. Health

risk assessment tools and personal health records are now available online.

Herzlinger makes a controversial statement regarding physicians

being paid a flat salary by an HMO, who may be less interested performing a

procedure to implant a monitoring device than would a doctor who is paid

the same services.7 Fee-for-service versus a payment is still a controversial

subject today. Physicians are concerned that the fee-for-service payment

may not cover the cost of the time to implant, resulting in income loss.

Medicare as recently reviewed payments issues, the impact on

uncompensated care as well as quality of care, making necessary changes.

The author mentions Health Stop’s failure because of competition with the

local community doctors and nonprofit emergency rooms. There have been

many health care entities that offer these services now. In today’s world,

where consumers like things right now – we expect services to be fast as

well as convenient. These new medical center and organizations are now

able to thrive. They offer services that customers want and it’s quick and

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convenient. Many consumers view emergency rooms and hospitals as

threatening, time-consuming and very inconvenient. I think that they assist

the hospitals by addressing non-emergency and non-life threatening issues

and are less intimidating as well. Today many hospitals have extensions

known as urgent care centers and these can be located in remote areas where

the local hospital is more than a few miles away.

Conclusion

In conclusion, I agree with Herzlinger that there are many barriers to

innovation, but I believe that we can make health care easier, not hard. There

are many contradictions and controversial issues in the article that I think

that we are actually addressing today. If we work on educating patients as

well as implementing new innovations in technology, change will come.

Patients can become proactive and use preventive healthcare measures and

thus reduce healthcare cost. Hospitals and clinicians can use new technology

to provide more efficient and better quality of care.

Allowing patients access to their own electronic medical records and

empowering them to control some facets of their health care and health

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information will certainly help. There are so many things that we can do as a

nation. The process is slower that we would like, but certainly, there is

progress. The internet has allowed consumers to research a wealth of

information regarding disease and treatment and now when patients visit

doctors and nurses, they are more informed and they ask more questions.

Many patients have begun to be proactive and take responsibility for their

own health. We realize that we have a longer life expectancy and it would

behoove us to take better care of ourselves.

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Endnotes

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1
Herzlinger, Regina E., Why Innovation in Healthcare is So Hard, Harvard Business
Review 2006; 84:58-66.
2
Herzlinger, Regina E., Why Innovation in Healthcare is So Hard, Harvard Business
Review 2006; 84:58-66.
3
Herzlinger, Regina E., Who Killed Healthcare? : America’s $2 Trillion Medical
Problem, and the Consumer-Driven Cure, McGraw-Hill Companies, 2007; 181-217.
4
Herzlinger, Regina E., Let’s Put Consumers in Charge of Health Care, Harvard
Business Review 2002; 80:44-50.
5
Herzlinger, Regina E., Let’s Put Consumers in Charge of Health Care, Harvard
Business Review 2002; 80:44-50.
6
Herzlinger, Regina E., Let’s Put Consumers in Charge of Health Care, Harvard
Business Review 2002; 80:44-50.
7
Herzlinger, Regina E., Why Innovation in Healthcare is So Hard, Harvard Business
Review 2006; 84:58-66.