'Market Driven Healthcare: Who Wins, Who Loses in the Transformation of America's Largest Service Industry'

By: Regina Herzlinger
Reviewed By: Abhas Gupta

I credit Regina Herzlinger's book with first rousing my interest in medonomics—the economics of medicine—and thus feel it fitting to discuss her book for this blog's first post. I recall picking up a copy five years ago when I was considering applying to medical school. I even remember naïvely parading some of the book's ideas during my medical school interviews. As one can imagine, the response I received was apathetic, if not outright hostile. The medical establishment is incredibly resistant to change, not surprising since it has had little impetus to do so. Physicians have enjoyed decades of financial growth and respect in society; however, the rapid escalation of healthcare costs is challenging the establishment and putting pressure on medical service providers to cut costs. In order to sustain the present level of compensation, physicians will need to adapt and can begin by seizing upon the concepts presented in this book.

In Market Driven Healthcare, Herzlinger describes the relative insulation of healthcare from conventional market forces as a result of the intricate reimbursement process. This insulation has enabled significant inefficiencies to persist in the delivery of care; however, some service providers have modernized, and Herzlinger provides case-studies highlighting these examples. The central premise of the book is that through technology and transparency, patients will evolve into customers: customers who want high quality services and are able to shop around for the best price. This fundamental shift will compel providers to better streamline their operations and cater to the demands of their patients in order to increase or simply maintain their profits. Herzlinger believes that providers will consequently become "focused factories"—entities that perform a single task (i.e. hernia repair or stent placement) but perform it exceptionally well. Such specialization would be expected to reap all of the benefits observed from specialization in other industries, particularly manufacturing: increased quality, decreased costs to the consumer, and increased profits to the provider.

The most important concept for physicians to take away from this book is that healthcare is quickly approaching a tipping point. Costs are exploding. Corporations, insurance providers, and patients are all looking for more affordable, more convenient options. The longer that the medical field ignores this reality, the more room it creates for outside innovation that will likely not be on its terms. Moreover, the current trend of workload increases outpacing salary increases will only exacerbate with time. Medical service providers need to adopt better practices if they wish to thwart this trend.