Sunday, September 17, 2006

Money-Driven Medicine: Mahar Criticizes Market Myths

A few years ago, Harvard Business School professor Regina Herzlinger wrote a breezy and influential book, Market-Driven Health Care, claiming that too little capitalism and consumerism are what ail American medicine. Her cheery book claims that the medical consumer needs to be informed and empowered. Then, a smart, masterful, penny-pinching consumer will demand greater convenience, productivity, and quality from the medical establishment, transforming healthcare for the better. Ideas like hers about the magnificence of market competition and consumer choice now dominate the Washington conservative healthcare agenda: from the Medicare Part D benefit structure to proposed Medicaid changes to “pay-for-performance” to “consumer-directed healthcare" schemes.

In pointed disagreement with Herzlinger’s book, financial journalist Maggie Mahar’s 2006 book, Money-Driven Medicine: The Real Reason Health Care Costs So Much, focuses on the day-to-day reality of what markets can do to American medical care. Herzlinger presents a fairy tale, a charming story of “focused factories” and consumer convenience. Mahar looks at the nitty-gritty reality of corporate medicine and how focus on shareholder returns distorts and worsens medical care and medical practice, to the frustration of worker-bee physicians and other medical professionals. Grimmer, more detailed, and more realistic than Market-Driven Medicine, it is well worth reading.

  • Competition improves medicine? In a cutthroat competitive environment, a Houston hospital declined to share details of its methods for improving pneumonia care, because excellence in that area offered the hospital local competitive advantage. And pharma tests new drugs not against best available therapy but in other ways that showcase their product best.
  • Corporate discipline, structure and targets improve medicine? At the extreme, Mahar recounts the instructions in internal memos of shareholder-pleasing executives at NME to “go out and hire sleazeballs,” executives willing to countenance kidnap and abuse of patients in psychiatric hospitals to amass shareholder dollars. Later, after changing its name to Tenet, the corporation rewarded doctors who performed unneeded cardiac operations in Redding, California, ruining numerous lives. But Mahar also recounts the more-ordinary, subtler, and broadly-destructive ways corporate practices undermine good healthcare and drive up medical costs, forcing even non-profits to act similarly just to stay in existence. Non-profits, for example, typically need to finance expansion through bonds -- and as one section title proclaims: “S&P Doesn’t Give Points for Charity Care.”
Mahar reminds us that financial rewards for excellence indicators can undermine the genuine motivation most workers intrinsically have – when not driven and thwarted – to provide good care. She prefers relying on the “will to excellence” that physicians and others generally bring to their professions and on intrinsic satisfactions of working in a cooperative environment. Mahar cites greater Department of Veterans Affairs achievements in information technology than have been possible in the private sector in this country as resulting from some degree of insulation from capitalistic pressures.

Mahar's book has one major weakness. In reaction to Herzlinger’s focus on consumerism, Mahar chooses to derogate the ability of patients to play an active role in shaping the medical system and their own medical care. Medicine, she claims, is uniquely dependent on trust in one’s physicians and letting them ultimately make the decisions. When she claims that it is psychologically difficult for many people in medical crisis situations – even people who are doctors themselves – not to simply hand over authority to their carers, she is correct; and she is also correct on condemning those few bad doctors who deliberately abuse this situation to provide unneeded care. But I believe her entirely mistaken in making only professionals responsible for the quality of health care. It may be the rare patient who – like a soldier on the battlefield being shot at – can keep his head and make good medical decisions – but that patient does better than the close-my-eyes-and-trust kind. Two fine books – Patienthood: The Art of Being a Responsible Patient by Miriam Siegler and Humphry Osmond (MacMillan, 1979) and Making Miracles Happen by Gregory White Smith and Steven Naifeh (Little Brown, 1997) – argue this point much better than I have room for here.

Siegler and Osmond compare patients to elephant trainers.
“Elephants,” they say, “are like doctors in that the very qualities which make them so useful – their power, strength, and sagacity – also make them dangerous. Patients are like [elephant trainers], in that they need the elephants and can get essential services out of them, but they must learn how to manage them and how to avoid being trampled upon.”
And patients of this kind have changed medicine. Rose Kushner, who under pressure of a breast cancer diagnosis (influenced by a book she found at the public library written by surgeon Barney Crile) sought to avoid Halsted radical mastectomy and consulted 19 surgeons before getting Thomas Dao to perform a less drastic operation, was just as responsible through her writings and activism for much-needed changes in breast cancer management that finally came to pass as Crile or any other doctor.

Yes, Herzlinger’s money-and-convenience-driven super-consumer-patient is a destructive fantasy. But I wish Mahar had not seen fit to counter that by an emphasis on a supposedly-inevitable patient ignorance and ineptness at making medical judgments and decisions. A skepticism about a role for shareholder-held corporations in medicine is not intrinsically allied to a distrust of patient intelligence and ability. If we frame it like that, we just contribute to the myth that popular, conservative voices advocating allegedly-desirable healthcare system changes actually do promulgate people power – as they claim to while they blather on about “consumers” and “choices.”

All the same, read Mahar’s book. Grit your teeth – I did!– when she explains how blind trust in physicians is desirable and inevitable. But read it for the detailed, real-life stories about money and medicine, which provide a superb antidote to a near-religious faith in the invariable virtues of markets and financial incentives.


Anonymous said...

While a little dated, Evan S Levine MD, What Your Doctor Won't (or cant't) Tell You is an interesting read about his personal frustration with the medical community.

Steve Lucas

Donald Johnson said...

There is no way to take money out of health care. To claim that patients should expect, not to mention "trust", physicians to act in the interest of the patients without considering their own financial interests is disingenuous at best and naive at worst.

We all are driven by financial incentives and fears. That is a fact of life. To declare that socialized medicine, medicine not driven by governmental and insurance company budgets and pricing structures is possible is just a demonstration of economic ignorance.

Every not-for-profit, every medical practice, every non profit and every person in medicine needs money to live, grow, and thrive. And everyone thinks about their financial well being before they worry about their patients. To claim otherwise is purely dishonest and even cynical.

The literature is full of references to financial incentives on health care providers, educators, consultants, journalists, bloggers and politicians. Investor-owned health care providers are no worse nor better than the not-for-profits run by religiouis organizations and secular not-for-profits. Just check the court records and news about Medicare fraud for recent years.

I've been writing and reading about health care economics for 30 years.

It never ceases to amaze me that people can be as naive as Mahr appears to be. Health care markets work much better than government-funded and regulated markets even with the distoritions imposed on them by politicians and regulators. If we didn't have so much government regulation, which is important but not to the extent we have today, we'd have better health care in America.

I've been blogging on health care and business at since Jan. 2003.

Donald E. L. Johnson

Anonymous said...

I’d like to comment on the review, and reply to
Donald E, L. Johnson. (See To Don below)

First, I want to thank APeticola for a thorough and insightful review.

Secondly, I’d like to suggest that we may not disagree as
much as Peticola thinks. I do believe that many patients can have a positive impact on their care by asking questions,
doing research, seeking second opinions and weighing
their options.

But my problem with most books about consumer-driven care is that most are written by academics, journalists, and
other well-educated often well-connected people who
are really writing about themselves and their friends. Not
everyone has their resources.

For example, while I’m sure that Rose Kushner did
a good job of researching her options, most patients could
not afford to consult with 19 specialists. Their insurance
would not cover so many second opinions,
and most individuals could not afford the consultation
fees combined with the cost of traveling around the
country to visit the top specialists at 19 medical centers.
(Nor do I think that we, as a nation, can afford to have
Medicare and Medicaid pay for each patient who wants
19 consultations. So this is an option only for the very

In addition, given the state of high school education
in the U.S., most high school graduates would probably
have a hard time even doing the library research that Rose
Kushner did. (Sometimes I think that we forget that only
a quarter of all adult Americans have graduated from
college and just a little over 80 percent have
graduated from high school. I’m trying to write as an
advocate for all of these people. Solutions that might
work for some aren’t practical for many.

In fact, many college graduates find medical
research all but incomprehensible. Even with the
help of a medical dictionary, it’s very difficult to
sort through the statistics, weigh the probabilities
and spot the holes in the arguments.

This is not to say that most patients are
unintelligent, just that most are not trained

Finally, the majority of seriously ill patients
are over 65;and many suffer from more than one
incapacitating condition. Frail, in pain, and afraid,
they are not in a position to become activist consumers.
Some may have a relative who can do that kind of
work for them; but many do not.

None of this is meant to discourage patients
who are willing and able to participate in care
decisions. In the book, I make it clear that I believe in
“patient-centered” medicine—which means that the
patient and doctor collaborate. But keep in mind that
even the best-informed patients sometimes prefer to
cede authority to a doctor that they trust. This is
particularly true of doctors themselves.

In “Patient Autonomy” Carl E. Schneider, quotes
one doctor saying “ I found an excellent otologist,
did what he told me to do, and am not fool enough
to think that I know more about his business than
he does.” Ultimately the patient has to trust some
medical authority—whether it is the second doctor
he consults with, or the author of the 30th medical
article that he reads. He can’t operate on himself.

I highly recommend Schneider’s book for yet
another perspective on this vexed problem.
It’s filled with thoughtful anecdotes from both doctors
and patients, andit takes a close look at both sides of
the doctor/patient relationship.

In the end, Schneider recognizes
that the most serious medical decisions are very
complicated, that doctors rely not only on what
they learned in medical school, but on years of
experiential, intuitive knowledge that is very
difficult to replicate simply by reading about
illnesses and treatments. And he
concludes that while some patient want
more autonomy; others feel abandoned when
their doctor insists that the final decision be theirs.

TO DON: Finally, in response to Don’s comments
I can only say that it is not a “fact of life”
that we “are all driven by financial incentives.”
Many doctors put their patients’ interests ahead
of their own financial interests.

As an example, I would point
to Roy Poses as a doctor who is more interested in
medical care and medical ethics than he is in
making money. This blog is not a money-making
operation and it must consumer many hours of
his time.

And he is not alone. Many professionals—
doctors, teachers, and others--- are motivated
to do their work for its own sake, and for the
sake of helping others, however much or
little they are paid.

. Many could make more
money if they got an MBA and set out to become
a CEO. But they would find the work far less
rewarding. This is the difference between a
professional and most businessmen.

As for my naivete, I can only say that
after serving as senior editor at Barron’s for
eleven years, I know quite a bit about business
and healthcare. During that time I wrote many
stories about HMOs, for-profit and not-for-profit
hospitals, managed care, drug-makers , etc.
(I wrote one story about Pfizer’s misdeeds
which caused Pfizer’s stock to stop trading
in London. The next morning, it didn’t open
on the NYSE,)

Finally, with regard to Don’s assertion that
for-profits are no worse than non-profits,
I would point out that “just check the
court records”:is not evidence.

For evidence, I would suggest looking at
“How NonProfits Matter in American
Medicine” published in the June 2006
issue of the journal Health Affairs. After
reviewing 275 empirical studies the
authors conclude that nonprofits are
“more trustworthy” when it comes to
delivering care and less likely to
“aggressively raise prices” (i.e. gouge.)

DK said...

Wow. I actually laughed out loud when I saw this... "Mahar reminds us that financial rewards for excellence indicators can undermine the genuine motivation most workers intrinsically have – when not driven and thwarted – to provide good care."

There is another system that relied on worker's intrisic motivation to do good - it is called "Communism" and as the Soviet Union found out it tends to break down rather quickly as an efficient model to deliver goods & services.

Let's face it, if you want to deliver ANY good or service (pet food, laptops, healthcare, whatever) it has been proven again and again in every corner of the world that markets with price transparency work exceeding well. Yes there are warts and bad apples, but EVERY system of health care delivery will have problems (even systems based on intrinsic do-gooding) - we just need to choose which warts we want.

Sane people will choose to have cheap healthcare that gets better every year, and the ability to change providers if they don't like what they are getting. Just like they've been able to do with laptops for the last 15 years. Markets provide this. Is this not clear?

Vinod Seth MD said...

If more of the well off and well insured, understood the extent of excess testing and care (with its attendant complications, anxiety and dependence on doctors) that they receive because of their good insurance plans they just might opt for a Canadian type health care system.

The direct relationship between $$ made and "care" provided results in an epidemic of excess blood tests,CAT scans and MRI's with further testing and biopsies of sundry tissues, all done because we with good insurances mentioned a concern, I call them the worried-well.
"Let us check it out thoroughly just to be sure" they are told.
If we were healthier than the rest of the non-fee-for-service developed nations it would be worth it but we are not.

Tim Gorski MD said...

Some of this back-and-forth seems to be pointless verbal jousting.

DK, for example, wrote >> Wow. I actually laughed out loud when I saw this... "Mahar reminds us that financial rewards for excellence indicators can undermine the genuine motivation most workers intrinsically have – when not driven and thwarted – to provide good care." <<

Did DK not see the word "indicators?" We're not talking about excellence, here. We're talking about what some claim are "indicators" of excellence, or "good care." If those indicators were reliable I don't think there would be an argument. So if anything is like the old USSR here, it's a top-down effort to impose the kind of standards that the workers can outwit. And those workers will be increasingly motivated to outwit such standards as they come to see that actually excellence and good medicine is not rewarded while making your numbers is. JUST LIKE THE OLD USSR system where the workers pretend to work and their masters pretend to pay them.

(As DK also said, it's a matter of choosing "which warts" we want. BUT the legal tort system won't really let us do that, will it?)

The simple fact of the matter is that markets are imperfect AND that our efforts to meliorate their defects are imperfect as well. Are people generally self-interested? Of course they are. But only up to a point, which is the only thing that prevents our whole economic system from collapsing in chaos. (as it has and does where and when, as the game theorists describe it, the ratio of cooperators-to-defectors becomes too low)

Meanwhile, the whole idea of professionalism is to maintain the tipping point among medical workers well towards the PATIENT. (We even still have that special word to remind us that the sick are not just "clients.") The very fact that this has become an issue and a topic of discussion shows how much professionalism has been weakened over recent decades, not so much because of free market forces but because of the corporatization of medicine.