Return to Sender

At the Cato Institute Conference for Health Care Reform held on June 17, 2009, a panel discussed the importance of reforming the way health care is delivered to patients. “As hard as coverage expansion is, the only way health care is going to become … more predictable, more sustainable, and more cost effective over time is … if there is substantial delivery system reform,” said moderator Susan Dentzer, Editor-in-Chief of Health Affairs.

Shannon Brownlee, Senior Fellow at the New America Foundation and the Author, Overtreated: Why Too Much Medicine Is Making Us Sicker and Poorer, argued that there is an “enormous amount of waste” in the current system. “The estimate is about twenty to thirty cents of every health care dollar spent is spent on care that is unnecessary and potentially dangerous,” she said. “That’s six hundred to eight hundred billion dollars a year of care that patients don’t need and probably wouldn’t want if they understood the risks involved.”

Brownlee referred to the current system as “top heavy” with more “specialists and light on primary care positions.” The solution, according to Brownlee, is to create a primary care infrastructure. “We basically leave work force policy to the academic medical centers, and so that’s one of the reasons we are heavy on specialists and light on primary care physicians, because they get rewarded for training specialists and the taxpayer picks up the bill,” she said.

Comparing the Obama administration’s health care plan to the 1960’s game show “Supermarket Sweep,” Brownlee expressed her concerns about how quickly Congress could pass the President’s agenda. “Right now we are throwing policy ideas into the shopping cart,” she said. “I think a lot of people want to ram it through the Congressional check-out line before anybody really notices what’s in the cart.”

Brownlee advised against such methods if the goal is to fix the system and control health care costs. She argued that patients will evaluate their decisions more closely if they are told about the costs of the procedures being offered to them. “When patients are able to have access to patient decision aids … they tend to be less likely to demand these kinds of expensive procedures,” she said.

Alain Enthoven, the Marriner S. Eccles Professor of Public and Private Management, Emeritus, at Stanford University said that the current system “punishes” innovation and “rewards” poor quality and overuse. This “leads to a great deal of inappropriate care,” he said.

As an alternative, Enthoven supports integrated delivery systems. He argued that companies should give their employees the opportunity to choose a “more economical delivery system” and save money in the process. Enthoven referred to this as a kind of “menu” so that employees will know prices and be able to act upon those incentives. Companies that give their employees a choice find that their employees “choose integrated delivery systems with remarkably high percentages,” he said.

Enthoven acknowledged that integrated delivery systems are “not for everybody” and defends the individual’s right to make that choice. He strongly advocated for “decoupling health insurance from the job,” calling it a “blockage in the market.”

Michael F. Cannon, the Director of Health Policy Studies at Cato and the coauthor of Healthy Competition: What’s Holding Back Health Care and How to Free It,
argued that the government cannot effectively reform delivery systems because “government decisions are going to be unduly influenced by those who to protect the status quo.”

Regina Herzlinger, the Nancy R. McPherson Professor of Business Administration Chair at the Harvard Business School and Senior Fellow at the Manhattan Institute, argued that there were three stages of evolution in the United States economy and that health care policy should be considered in light of these stages.

Stage One consisted of “mom and pop firms.” Herzlinger compared these to “little companies” in the health care system that “produced good and services of variable quality.”

The second step was “consolidation,” in which “one firm owned everything.” Herzlinger said that these companies were “vertically-integrated,” meaning that all aspects of the business was controlled under one infrastructure, including production and marketing.

According the Herzlinger, the United States is currently in stage three in which “networked firms” outsource to “focused factories.” She argued that stage three has greatly improved “quality and efficiency” because a company with a concentrated focus makes a product or service “better and cheaper.” “It is infeasible … to get excellence in everything in one organization,” she said.

“Health care is at stage one of industrial organization,” Herzlinger said, arguing that the health care profession should move to “stage three” in the process instead of “stage two.”

Herzlinger noted that very few integrated health care systems have proven to be successful. One of the reasons given by Herzlinger for this phenomenon is the “inherent conflicts of interest” that accompany vertically integrated firms. She argued that this means higher costs due to the “absence of integrated medical care for those with chronic diseases and disabilities.”

From a business point of view, the focused-factory environment is “very inviting,” Herzlinger said. “Chronic disease patients are typically mistreated,” she added, arguing that treatment centers which focus on a particular disease could play a key role in preventing such mistakes.

The solution to the health care dilemma may be to find a balance between the desire for doctors to specialize and the need for doctors to go into general practice. Letting the best specialists benefit from focused factories will foster innovation in the treatment of chronic diseases, and encouraging enough doctors to go into general practice will fill that need in local communities.

Brittany Fortier is an intern at the American Journalism Center, a training program run by Accuracy in Media and Accuracy in Academia.