WASHINGTON -- The next big thing in healthcare won't be large, all-purpose healthcare organizations -- it will be "focused factories" for treating specific problems, according to Harvard Business School professor and health economist Regina Herzlinger, PhD.
"Consumers will demand what I call 'focused factories' for their particular diseases and disabilities, and insurers will start offering them," Herzlinger predicted here at the annual meeting of the American Academy of Pain Medicine. "They will start offering bundles of care for these very expensive problems."
Herzlinger sees the end result of U.S. healthcare reform as a consumer-driven universal healthcare system, an example of which already exists -- in Switzerland.
The Swiss require all citizens to purchase health insurance, which is offered by private companies, she explained. Those who are too poor to afford insurance are issued a voucher to buy coverage.
Swiss insurers -- of which there are 87 -- can charge different rates based on gender and age, but they have worked out a way to make sure any one insurer can't get an unfair advantage by "cherry picking" younger, healthier enrollees, Herzlinger said.
"The insurers have formed a coalition, and they risk-adjust each other," she explained. "Insurers who make a lot of money from favorable risk selection ... get those profits taken away and given to the insurer who's lost money due to adverse selection."
In addition, Swiss consumers get a lot of information about different insurers and policies.
The result? "The Swiss spend 40% less than we do" and it's not just because they are healthier, she commented.
"The Swiss have much higher alcohol and drug abuse problems" and yet their costs have actually decreased over the last few years.
Administrative costs under the Swiss system are also lower, according to Herzlinger.
One type of policy that's very popular among Swiss consumers is a high-deductible policy -- about a third of the Swiss buy one, she noted.
And when consumers are spending $1,000 or more of their own money for healthcare, that opens up opportunities for retail medicine sold directly to consumers -- such as the medical clinics now being offered in the U.S. by chains such as CVS and Wal-Mart.
"They're not doing brain surgery in those clinics -- they're doing highly evidence-based protocols for about 26 procedures," she noted. "And studies have shown they're cheaper and better for the limited menu of what they do, as focused factories, than emergency rooms or primary care physicians' offices."
Retail medicine is going to grow, Herzlinger predicted. "These [vendors] will be first point of approach for the self-care which is the critical component of chronic disease management."
The second great opportunity provided by a consumer-driven system is the creation of narrow networks for chronic diseases and disabilities such as chronic pain, and "when people pay for those [services] themselves, they will pick narrow networks," Herzlinger told the audience.
Such networks could be considered a type of accountable care organization (ACO), a concept embodied in the healthcare reform bill, she said. "If you read the healthcare reform legislation, an ACO can encompass a wide variety of things. It does not mean an 'everything-for-everybody integrated delivery network.'"
In fact, those broader kinds of ACOs are "worrisome" because of the antitrust issues they raise, she said.
Herzlinger noted that in her home state of Massachusetts, the state attorney general studied a large, vertically integrated healthcare system that controls half of the area's primary care physicians and found that the physicians in the system were paid 40% more than their counterparts in the community -- not because they were higher-quality or took on riskier patients, but just because of their sheer market power.
Instead of the everything-for-everybody network, "I think the viable ACO is a bundled ACO that's bundled for diseases and disabilities," said Herzlinger. "Consumers will buy it because that's what they want, and it will be cheaper and better because they'll integrate all the fragmented care."