• Uwe Reinhardt on Harvard Business School notions of health reform

    In a comment to my post on the “disruptive innovation” ideas of Christensen, Grossman, and Hwang, Uwe Reinhardt provided some insight that escaped my relatively less expansive view of health systems. (That’s why he blogs for the NY Times and Health Affairs and I blog elsewhere.) Since I know most readers don’t stick around for the comments, with his permission I’ve reproduced his below. The hyperlinks are mine. ~Austin

    My sense is that like all good B-school profs, CGH [Christensen, Grossman, and Hwang] see a nascent trend, skillfully repackage it and then market is as a the next, new, new thing. This is really how you make money in health care these days — not so much solving truly messy problems. In a way, Porter and Teisberg do that, too.

    The nascent trend in this case has its origins in the medical technology industry’s desperate search for new revenue, giving that their markets in the developed world have been milked for all they could yield. Countries in the developed world all now have huge fiscal problems, putting pressure on government spending and hence on the traditionally huge profit margins of these industries in those markets. Given that incremental cost usually are far below total fixed costs, there is much room for margin pressure, and payers know it.

    But rather than fighting powerful vested interests in the developing countries, the designers and marketeers in these companies have quietly begun quite seriously to focus on emerging markets — India, China, Brazil, Latin America, and so on — where new, low-cost disruptive technology is welcome and easily introduced.

    GE, for example, already has a cheap, hand-held sonograph machine that can transmit good sonar prictures telemetrically to distant centers. GE is also working on low-cost MRI machines. I am sure other device manufacturers are doing likewise.

    So there is something to the trend CGH identify. In the end, countries like India and Brazil will teach us totally new, low-cost industrial processes for health care, using different types of labor other than just physicians. Desperate as we are getting, we may bite the bullet and learn from them, although learning from other countries goes against our cultural grain.

    At the same time, the HBS [Harvard Business School] marketeers tend to oversell their product. It is what you must do to market yourself these days, and no one understands marketing better that B-school professors.

    The history of American health policy is rife with hyped, new, new ideas that never went anywhere.

    The latest new, new things are Accountable Health Organizations (ACOs) — really the warmed over “virtual HMOs, inclduing provider-driven PHOs — coupled with “bundled payments.” Tons of conferences are being organized around the concepts, the hoped-for salvation of all our cost and quality problems.

    And, depending on which party pushes the ideas, they will be decried by Betsy McCaughey, Rush Limbaugh, Fox News and the WSJ as demonic mechanism to make physicians profits from rationing care and life years to patients. Furthermore, we shall find that they won’t go very far. At the moment, we have no cost-control instruments other than rationing more and more health care by price and the patient’s ability to pay.

    I agree with Austin that the B-school types do owe the reader a more down-to-earth road map on how actually to get from here to there. I have not read CGH, so I cannot say whether they, too, fall short on this point, although the quotation Austin presents suggests that they are still high up in the stratosphere.

    The missing chapter in Porter and Teisberg’s overly long book, for example, is one on implementation, as several of us have pointed out in commentary in Health Affairs.

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