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

• Author: Lynch, Michael W.

Even within the "free minds, free markets" crowd, just what constitutes a free market in health care is controversial (See "Medical Meddling," December 1996, and Letters, March 1997). Is managed care a product of the market, of government distortions of the market, or of some mixture? What would America's health care system look like if it were truly operating under a free market?

Regina Herzlinger, a chaired professor at the Harvard Business School, enters this fray with Market Driven Health Care: Who Wins, Who Loses in the Transformation of America's Largest Service Industry. Billed as an "indispensable guide for policy makers, practitioners, and anyone interested in the future of this vital and complex industry," Herzlinger's book provides less a road map of the rapidly changing health care market - which now includes government, indemnity insurance, various levels of managed care, and even medical savings accounts - than a vision of the way it ought to be. While her vision is compelling, she fails to do it justice.

Like a political speech, Market Driven Health Care too often lurches from one applause line to the next, issuing crowd pleasers such as "patients will not be patient" but shirking the responsibility of providing the tough analysis of how the world Herzlinger envisions will actually come about, given the current regulatory, legal, and political environment. In the end, she knocks the legs out from under her own argument for consumer-driven health care by calling on Congress to determine, and the IRS to enforce, how much insurance individuals purchase.

Herzlinger designed and teaches a Harvard course on creating new health care ventures. She has written on this subject for the Harvard Business Review, and her book is remarkably similar to a cogent article she wrote for The Public Interest in 1994. Her straightforward vision for the future of health care is based as much on the system that produces the McDonald's french fry as it is on the now ubiquitous eye care centers. In the future, America's health care industry will comprise a plethora of competing "focused factories," freestanding centers of excellence that deliver one product - be it complete cancer treatment, foot care, or asthma therapy - and deliver it well. Focused factories "could be established that specialize in any of the millions of high-volume procedures, such as births, cataract surgeries, and bypass operations," she writes. "Others could provide all the services required to care for the chronic diseases or conditions that account for the bulk of our health care costs, like asthma, diabetes, foot pain, and cancer."

The transformation will be spurred by "activist consumers," who are more time-sensitive than ever and demand convenience and quality. Just as time-pressed consumers forced a revolution in retailing, eschewing unwieldy department stores such as Montgomery Ward and Walgreens in favor of specialty superstores such as...