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Trend | Consumerism

Evolution of the consumer focus in healthcare

Trend | Consumerism

Evolution of the consumer focus in healthcare

The origins of healthcare's new consumer focus

Harvard Business School professor Regina Herzlinger, proclaimed by Money magazine to be the “godmother” of consumer-driven healthcare, espoused the benefits of consumer-driven health plans as far back as the 1990s. Many joined her crusade as a backlash against managed care, particularly HMOs, with their comprehensive benefit design, limited provider network and strong emphasis on medical management. Patients believed HMOs limited access to care, and physicians resented seeing payment cuts and having their clinical decisions getting second-guessed.

Two decades after Herzlinger’s consumer-driven concept, Thomas Lee, MD, and Michael Porter asserted in their 2013 Harvard Business Review article, “The strategy that will fix health care,” that a patient-centered system organized around what patients need is displacing a supply-driven healthcare system organized around what physicians need to reduce costs and improve outcomes.

Today, the high deductible health plan (HDHP) represents a typical insurance offering for consumer-driven healthcare. As the most important product innovation in health insurance since point-of-service (POS) products sought to balance primary care coordination with specialty care choice, HDHPs offer fewer benefits, broader provider networks and modest medical management. These HDHP characteristics seek to increase decision-making authority and financial responsibility for the individual consumer. 

Meanwhile, health plans, employers and state governments increasingly expect Americans to use information about pricing when making healthcare decisions. Ideally, prices would be set by physicians and hospitals — not through negotiations with health plans — based on assessments of consumers’ ability (and willingness) to pay.

Even as providers have the freedom to set prices, consumers maintain the right to freely choose their providers, creating an environment in which patients manage their own care, looking to physicians for advice, with information on prices and performance. 

Several markets are generating product designs that combine elements of consumerism with elements of managed care, with the trend clearly toward a stronger role for consumer choice and a weaker role for management of those choices by physicians, insurers and employers. Consumers increasingly know about pricing, enabling them to better budget for out-of-pocket expenses, anticipate routine costs related to chronic conditions and choose among providers. The objective is for insurers and consumers to make more sensible decisions about care, avoiding costly tests and procedures that may not necessarily improve health outcomes. 

About the Authors

Kevin B. Sears, MHA,

is a director, BDC Advisors, Cleveland.

Robert A. Dickinson, MBA,

is a director, BDC Advisors, San Francisco.

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