Interview with a quality leader: Regina E. Herzlinger on consumer-driven healthcare. Interview by Carole S. Guinane.

Regina E. Herzlinger is the Nancy R. McPherson Professor of Business Administration Chair at the Harvard Business School, Cambridge, MA. She received her bachelor's degree from MIT and her doctorate from the Harvard Business School The first woman to be tenured and made a chair at Harvard Business School, she is widely recognized for her innovative research in healthcare, including her early predictions of the unraveling of managed care and the rise of consumer-driven healthcare and healthcare-focusedfactories, two terms that she coined. Money magazine has dubbed her the "godmother of consumer-driven healthcare." Herzlinger's research has been reported in numerous journals and business publications as well as in such recent books as Who Killed Health Care? and Consumer-Driven Health Care: Implications for Providers, Payers, and Policymakers. She has also won the American College of Healthcare Executives' Hamilton Book of the Year award (twice), the Healthcare Financial Management Association's Board of Directors award, and Management Accounting's research prize. Modem Healthcare readers have named her among the "100 Most Powerful People in Healthcare" each year since 2003, and the magazine also named her one of healthcare's top 10 thinkers. In recognition of her work in nonprofit accounting and control, she was named the first Chartered Institute of Management Accountants Visiting Professor at the University of Edinburgh in Scotland. She has served on the Scientific Advisory Group to the U.S. Secretary of the Air Force and on the boards of many private and publicly traded firms.

An affordable physician- and consumer-friendly health care system: 2008 democratic and republican presidential candidates' views.

Winter issues of The American Heart Hospital Journal traditionally focus on health care policy issues. As health care reform in the United States is a topic of major importance in the upcoming presidential election, we invited Dr Regina E. Herzlinger, the Nancy R. McPherson Professor of Business Administration at Harvard University and a noted expert in the field, to provide an analysis of the major proposals currently under debate by the candidates. We invite your comments in the coming months as the field of candidates narrows and the focus on reform sharpens.-Sylvan Lee Weinberg, Editor in Chief.

Why innovation in health care is so hard.

Health care in the United States--and in most other developed countries--is ailing. Medical treatment has made astonishing advances, but the packaging and delivery of health care are often inefficient, ineffective, and user unfriendly. Problems ranging from costs to medical errors beg for ingenious solutions-and indeed, enormous investments have been made in innovation. But too many efforts fail. To find out why, it's necessary to break down the problem, look at the different types of innovation, and examine the forces that affect them. Three kinds of innovation can make health care better and cheaper: One changes the ways consumers buy and use health care, another taps into technology, and the third generates new business models. The health care system erects an array of barriers to each type of innovation. More often than not, organizations can overcome the barriers by managing the six forces that have an impact on health care innovation: players, the friends and foes who can bolster or destroy;funding, the revenue-generation and capital-acquisition processes, which differ from those in other industries; policy, the regulations that pervade the industry; technology, the foundation for innovations that can make health care delivery more efficient and convenient; customers, the empowered and engaged consumers of health care; and accountability, the demand from consumers, payers, and regulators that innovations be safe, effective, and cost-effective. Companies can often turn these six forces to their advantage. The analytical framework the author describes can also be used to examine other industries. Cataloging the innovation types and identifying the forces that aid or undermine them can reveal insights on how to treat chronic innovation ills- prescriptions that will make any industry healthier.

Consumer-driven health care: lessons from Switzerland.

Switzerland's consumer-driven health care system achieves universal insurance and high quality of care at significantly lower costs than the employer-based US system and without the constrained resources that can characterize government-controlled systems. Unlike other systems in which the choice and most of the funding for health insurance is provided by third parties, such as employers and governments, in the Swiss system, individuals are required to purchase their own health insurance. The positive results achieved by the Swiss system may be attributed to its consumer control, price transparency of the insurance plans, risk adjustment of insurers, and solidarity. However, the constraints the Swiss system places on hospitals and physicians and the paucity of provider quality information may unduly limit its impact. The Swiss health care system holds important lessons, including evidence about its feasibility and equity, for the United States, which is now embarking on its own consumer-driven health care system.

Consumer-driven health care. Freeing providers to innovate.

Corporate entrepreneurs drive improvements in a productive economy and are rewarded financially. The U.S. healthcare industry, on the other hand, allows payers to dictate prices and punishes any providers that try to create better, cheaper goods and services. The result is missed opportunities for innovation. Consumer-driven health care (CDHC), however, allows providers to innovate and offers consumers choice. Basically, CDHC matches supply and demand while rewarding skilled entrepreneurs.

Let's put consumers in charge of health care.

Businesses spend billions on health insurance. And what do they get for their money? A lot of unhappy employees. Workers fret about the quality of the care they receive, the burden of their out-of-pocket expenses, and the gaps in their coverage. For businesses, health care has become a lose-lose proposition: They pay way too much, and they get way too little. The problem is that the health care industry has been shielded from consumer pressure--by employers, insurers, and the government. As a result, costs have exploded even as choices have narrowed. But if companies embrace a new model of health coverage--one that places control over both costs and care directly into the hands of employees--the competitive forces that spur productivity and innovation in consumer markets can be loosed upon the inefficient, tradition-bound health care system. Moving to consumer-driven health care requires that companies revamp their health benefits in six ways: Give employees incentives to shop intelligently; offer a real choice of insurance plans; charge employees prices that accurately reflect the company's costs; let providers set their own prices; adjust payments for each enrollee based on need; and provide relevant information. Putting consumers in charge of health care may seem like a radical approach. But individuals are highly motivated to educate themselves about their health, their insurance, and their care, and they want to seek the most value for their money. Promoting that economic dynamic--the same that fuels consumer markets everywhere--is the best way to enhance the health care industry's productivity and quality.