<b>Who Killed Health Care?</b>
By Regina Herzlinger,
Harvard Business School
McGraw-Hill
304 pp

Reviewed by Greg Scandlen
 
 Regina Herzlinger has hit a home run with her new book, "Who Killed Health Care?" Regi's reputation as a scholar, communicator, and original thinker is already well established. The new volume adds a whole new element to her formidable resume - that of a take-no-prisoners street fighter.
 
 She starts right out by declaring war on the health care establishment - the managed care companies, hospital systems, large employers, and elitist academics who think only they are smart enough to decide what care consumers should receive.  She is explicit - "You and I are the victims of untrammeled vanity, greed, and self-interest of those meant to protect us."  She goes on, "The real issue here is power: the less you and I know about the facts, the greater the power of those in the know - the hospitals, the insurers, and the health policy researchers."
 
<b> Managed Care.</b>
She says, "I begin my attack on the health care system by exposing the dysfunctional cultures of the mammoth HMOs and managed care insurers." She begins by focusing on "the momentous failure of the California-based Kaiser HMO kidney transplant program in 2005 and 2006" through which 112 patients needlessly died.  She returns time and again to kidney care to illustrate a number of grievous flaws in the current system.
 
 She argues that Kaiser was once a unique and benign collaboration of caring physicians and business people, that was led astray by the commercialization of managed care. Whether her assessment of the original Kaiser/Permanente is apt can be argued, but there can be little argument about the damage done by the insurance industry's misadventures with managed care. One small example she provides is Aetna's disastrous purchase (for $9 billion) of U.S. Healthcare, which nearly destroyed both companies while enriching the managers who made it happen.
 
 She points out that there is nothing wrong with managing health care, but insurers are precisely the wrong people to do it. She notes that, "GEICO may be a wonderful automobile insurance firm, but its executives would probably quickly admit they do not know how to make cars. Health insurance executives and their academics groupies, however, lack this kind of self-awareness and humility."
 
 <b>Hospitals.</b>
Regi's next target is the hospital industry. She is particularly concerned about the low quality and high costs of most American hospitals and argues that "their sheer size and massive scope surely contribute to their quality problems (because) it is virtually impossible for one organization to effectively manage such a large range of sizable activities."
 
 She also faults "the hospitals' outrageous treatment of the uninsured," but says "that is not the worst of it. Hospitals have actively squashed the innovative competitors that threaten them."  She is speaking here of several threads: 1. The merger of competing facilities, which "has led to price increases of at least 40% and reduced quality;" and 2. The attack on specialty hospitals including the Congressionally imposed "moratorium" on Medicare payment to such facilities. Curiously, she doesn't have much to say about Certificate of Need (CON) which in most states is the first line of defense against competition for established facilities.
 
 She does make a powerful argument that it is precisely this squelching of competition that has insulated hospitals from managerial innovation and kept the hospital industry inefficient, unaccountable, and unresponsive to consumers.  She particularly demolishes the widely held (among economists) belief that it is impossible to improve productivity in some personal services (like education and health care).
 
 In fact this is one of Regi's long-standing passions - the dramatic increase in productivity that could come about through competition and innovation in service delivery. It is, for instance, nearly criminal the way we treat diabetics in this country, making them run all over town for services delivered at the convenience of the provider, not the patient. Small wonder our results in diabetes care are so grim. Regina Herzlinger has long urged the creation of new "focused factories" that would deliver comprehensive care to people with chronic conditions.
 
 But she is outraged that the Mega-Hospital Industry is allowed to block even as simple an innovation as allowing cardiologists to build and own heart hospitals. And that the United States Congress is complicit in helping hospitals be exempt from such competition. She likens it to Hewlett-Packard trying to stop Dell from selling printers along with its computers.
 
 <b>Employers.</b>
I will skip Regi's comments on the role of employers other than to say she thinks the idea of employers buying our health insurance makes as much sense as employers buying our clothes, cars,  or houses, and she doesn't think very highly of the "paternalistic and bureaucratic" HR staff that is usually put in charge of these benefits.
 
 
 <b>Academics.</b>
One of Regi's big breakthroughs in this book is her commentary on the role of academia as self-interested apologists for the fat cats. She says as a group they favor more control by fewer people - first Single Payer, but "failing that, managed care is the academics' next best solution." Essentially they support the most control by the fewest people. They have "dismissive disdain for the competence of clinical physicians," and the idea that the average citizen would have anything useful to say about the health care they receive is completely alien. 

 She accuses them of using "misplaced analyses, shallow theories, and reckless generalizations," and cites Alain Enthoven, Arnold Relman, and Marcia Angell as examples of this kind of thinking.
 
 This is unprecedented, folks. The world of academia is characterized by group-think and self-congratulations. It is unheard of for an established member of this world to challenge her colleagues at all, let alone by name. I'm sure Regi wouldn't do it except for the stakes being so high. She points out that a year ago she lectured at the Harvard School of Public Health and the students there told her "it was the first time they had heard of any 'reform' other than single-payer." She cites other examples of the academy wanting to hear only one side of the story. 

 Regi doesn't do it, but let me cite an example of this phenomenon. Ask any health policy scholar about the expression, "a built bed is a filled bed." Every one of them will know it, most will cite it as "Roemer's Law," but not one of them will ever have questioned it, and few will have ever read the study that spawned it. It stems from 1959 and was the basis for most of the health planning activity in the mid 1960s - 1970s, especially Certificate of Need programs, which most states still have today. The expression is describing "provider induced demand" - the idea that doctors have complete control over their patients and will admit as many patients to the hospitals as there are beds to be filled.
 
 This is, of course, complete rubbish. Patients are hardly lined up around the block just waiting for the pleasure of being admitted to a hospital. People don't like being in the hospital and will avoid it if they can. Further, if "Roemer's Law" was right, there should be 100% occupancy at all times, but in fact rates of hospital occupancy vary considerably. It was 76% in 1980, but dropped to 64% by 1985. To the extent there may be some "provider induced demand," it is not the fault of capacity, but of Third-Party Payment that exempts people from any responsibility for the costs they incur. If "Roemer's Law" had any usefulness at all, it should have been used to reduce Third-Party Payment, not to artificially restrict the supply of needed facilities.
 
 But "a built bed is a filled bed" still resonates in the minds of health policy academics. They still think it is true. This is an example of the depth of thinking that prevails in the health policy world where slogans substitute for analysis.
 
 There are many, many other examples we won't go into here -- other than to thank Regina Herzlinger for having the courage to address this problem head-on. She has tuned over a very big rock and discovered all kinds of squirmy little critters underneath. 

 <b>Solutions</b>
Regi's solutions are pretty much right, but I must take exception to her continued affection for mandatory coverage. Of course she is not alone in this view. Many otherwise market-oriented people agree with her, especially if the mandate is only for high-deductible catastrophic care. I agree with them that it would be very nice if everyone had such coverage. I disagree that having the government mandate it will be effective (that is, actually result in everybody having such a plan). And I disagree that any legislature would ever be content with limiting the mandate to catastrophic coverage. It would open the door to everything under the sun - as it has in Massachusetts.

  But more importantly, I draw from my own experience in arguing that such a mandate would have grave effects on the larger economy. In 1991, I left my job with the Blue Cross Blue Shield Association to start my own business. Over the course of five years I started five different businesses, three of which are still around and employing 50+ people in Northern Virginia. When I first left the Blues, I had to curtail a lot of personal expenses. I bought no clothes for over a year, ate mostly peanut butter, walked more than I drove, and worked 16 hours a day, all to get the first business launched. If I had been required to buy health insurance before anything else, I would never have been able to leave my job and Northern Virginia would be worse off because of that. There are consequences to every action and advocates for a new policy are obligated to do everything they can to anticipate and measure those consequences.
 
 Her other policy recommendations are pretty much right, but mostly what is right is her overview of the transformation that can happen once the creative energy of entrepreneurs is unleashed. And for that, we don't need new laws, we mostly need government to stop getting in the way.
 
 "Who Killed Health Care?" is more than just another addition to a growing body of literature around consumer empowerment in health care. It is a direct attack on the health care establishment that has grown fat and happy by pretending that people are stupid. People are not stupid, and they are beginning to figure out who is responsible for the mess the establishment has made. Regina Herzlinger has helped us identify the culprits.
 

 -- Greg Scandlen