A Transaction Based on Trust

The consumer of health care is unlike any other consumer, and the product he purchases is unlike any other product. This is something that those who embrace “consumer-driven medicine” choose to ignore.

Advocates like Harvard Business Professor Regina Herzlinger insist that if we just
put the consumer in the driver’s seat, giving him both  transparent pricing and a little “skin in the game,” the consumer  could put a lid on health care prices while demanding the best quality care.  Herzlinger is particularly hopeful that the baby-boomers, a group she describes as “the most manipulative, the most narcissistic and the most effective generation this country has ever seen,” can do the job. (Why one would want such a group setting priorities for our health care is beyond my understanding; I’ll return to this point in a later post.)

Last week I spoke at the Massachusetts’ Medical Society’s Leadership Forum on the rising cost of care.  In two earlier posts (here and here) I’ve described what other speakers had to say about how and why Massachusetts is running into trouble trying to fund its experiment in universal care.

In my speech, I explained why I don’t think that “consumer-driven medicine” is the answer. I don’t believe the “consumer” can rein in healthcare spending.  As an alternative, I proposed a “patient-centered” model of health care which depends on patient and doctor, working together.

Begin with the flaws in the consumer-driven model. First, it assumes that the patient has the same power that a buyer has in the commercial marketplace. But in truth, the patient does not have nearly as much leverage as other consumers.

To exert influence in the market for flat-screen TVs or laptops, all
that the buyer has to do is postpone his purchase: eventually
competitors will come into the market, offering a very similar product
at a lower price, and the consumer wins.  But if you are a cancer
patient who needs a $45,000 drug, you can’t put off the purchase—even
if you have a 20 percent co-pay. And if you did postpone buying, it’s
not likely that the next new cancer drug would be any cheaper. In fact,
if history is any guide, it would be more expensive.

The same can be said of most of the medical technologies designed to
treat serious illnesses. Keep in mind that the bulk of our health care
dollars are spent on patients who suffer from severe chronic illnesses.
Health care economists talk about the 80/20 rule: 80 percent of our
health care dollars are spent on 20 percent of the population. These
people are not hypochondriacs. They are seriously ill, and they are not
bargain-hunting. As a result, they have very little power to drive
prices lower.

The second problem with the consumer model is that it assumes
patients are in a position to judge the quality of the product.  I
remember, a few years ago, reading a story in the Wall Street Journal
describing how, in this brave new era of healthcare consumerism, “new
rating systems . . .will make it possible for people to shop for a
hospital the way they shop for a mutual fund.”

Did we learn nothing from the 1990s?  Just as most people are not
cut out to be their own money managers, most people are not qualified
to do their own medical research.

To rate the quality of a hospital, you need to know more than
whether patients found it pleasant. When I wrote about the hospital
building boom a few weeks ago, and asked “can we afford the
waterfalls—and other luxury amenities?” more than one hospital insider
posted a comment warning that the mahogany paneling may be masking
understaffing and other dangers to the patients’ health.  (See comments

Too often, reports “rating” hospitals tell us only what percent of
patients died following a particular procedure. To begin to grade the
hospital, I would want to know more. What was the “quality of life” for
the patients who survived? Did they spend the next two years warehoused
in a nursing home before they finally died, or did they go home and
play with their grandchildren? What was the “quality of death” for the
patients who survived? Were they in great pain? Were palliative care
services available at the hospital?

How many of the patients who went under the knife didn’t really need
the operation in the first place? (“This,” a hospital COO in New York
once told me, “is the question they never ask. And, in terms of
exposing patients to unnecessary risks, that’s the most important

I also would want to know about co-morbidities: were the patients in
some hospitals sicker? How did the report card adjust for risk? How
many patients acquired infections why in the hospital? How many were
readmitted? What is the rate of errors in that hospital?

I am not suggesting that we shouldn’t try to compare care in various
hospitals. But “outcomes research” is still an infant science. It’s
complicated because outcomes are complicated. Such research should be
done by panels of doctors and researchers. (Ideally, the panel would be
made up of health care professionals from another state who do not
compete with the hospital and who are not part of its referral network.)

In other words, this is not something the consumer can do. The
consumer is not a physician. He isn’t a researcher. He isn’t a
scientist. He’s not in a position to adjust for risk, to weigh all the
variables, or to analyze how the situation could improve.

This brings me to the essential reason why the health care consumer
can’t comparison-shop and find the best care at the lowest price. Even
if the prices for health care were made transparent, the product is
not.  There are just too many variables, too many unknowns. Healthcare
is not a commodity, like a refrigerator—often the product is quite

This is why there is no Consumer Reports for health care. While
Consumer Reports can rate mid-priced refrigerators briskly and clearly,
in a way that makes comparisons easy, it is often all but impossible,
even for a physician, to be positive of the relative benefits of a
great many medical treatments. Think, for example, about the
uncertainty surrounding early detection and treatment of prostate
cancer, which I wrote about here.

We need more comparative-effectiveness research, ranking the
effectiveness of various drugs, devices and procedures. Traditionally,
the health care industry has avoided head-to-head comparisons because
those with a financial stake in the market know that there will be
winners and losers.  But today, as we move toward evidence-based
medicine, Medicare is likely to begin insisting upon comparative
information before agreeing to cover a product.

Even so, there will always be grey areas in medicine, in part
because medical science is always evolving and always changing. Most
patients don’t know—and perhaps don’t want to know—that the science of
medicine is riddled with question marks. But as anyone who has ever
been seriously ill soon discovers, the more one learns about a disease
and the odds of success with possible treatments, the more ambiguous
the situation can become.

This is why “Uncertainty” is, as Dr. Atul Gawande puts it, “the core
predicament of medicine. . .  Uncertainty is the thing that makes being
a patient so wrenching, being a doctor so difficult, and being part of
the society that pays the bills so vexing . . .” In Complications: A
Surgeon’s Notes on an Imperfect Profession, Gawande emphasizes that,
despite the enormous progress made in the 20th century, medicine is
still a young science: “With all that we know today about people and
diseases and how to diagnose and treat them, it can be hard to grasp .
. . how deeply the uncertainty runs.”

Kenneth Arrow, the father of health care economics, made the very
same point as he carved out his field: “Uncertainty, as to the quality
of the product is perhaps more intense here than in any other market.”

In sum, the healthcare market is different from any other market
because it is so much harder for the purchaser to evaluate what he is
buying.  Adding to his dilemma, unlike other shoppers the patient knows
that he can’t rely on a friend’s experience with the product. Every
body is unique. While two consumers may drive pretty much the same
value from the same mid-priced refrigerator, a particular course of
treatment can have a drastically different effect on two people.

Nor can the consumer rely on his own past experience. Three-quarters
of health care dollars are spent on products and services that the
patient has never purchased before and most likely hopes never to
purchase again.

To make the patient’s dilemma even more wickedly difficult, he knows
that there are no warrantees, no guarantees, no returns. And if he’s
unhappy with the outcome, he may be stuck with something far worse than
a bad haircut. As a consumer he is in a uniquely vulnerable position:
He can’t sample the product beforehand. There is a very real
possibility that it could do him more harm than good. Yet, even if it
proves useless, he is expected to pay for it.

This is how the purchase of healthcare is different from any
transaction that takes place in the commercial marketplace. And this is
why the purchase of healthcare must be a transaction based on trust.
How could the patient possibly go forward if he didn’t trust the
seller? This is a market where caveat emptor cannot apply.

I believe that this goes to the heart of the difference between “the
consumer” and “the patient.” When advocates of consumer-driven medicine
talk about the patient as a consumer, often the relationship between
patient and doctor begins to sound adversarial.  And in truth, in most
markets “caveat emptor” is a good warning. The buyer cannot trust the
seller to put the buyer’s interests first. So the buyer must demand the
best product at the best price.

By contrast, the physician is a professional who has pledged to put
his patient’s interests ahead of his own. The patient must trust in his
doctor’s knowledge and professionalism. Otherwise, the health care
market couldn’t function. Who would submit to a painful, invasive
procedure if he didn’t trust the doctor?

Healthcare economist Victor Fuchs sums up the situation: “The
patient-physician relationship is very different from the one that we
accept in commercial marketplaces because it requires patients and
health professionals to work cooperatively (rather than as adversarial
buyers an sellers). Mutual trust contributes to the efficiency of

But what about the uncertainty of medicine? Does all of this mean
that the patient must simply trust (or hope) that his doctor has the
“right answer”?

Not at all. Tomorrow, I’ll talk about shared-decision-making and
“patient-centered” medicine—and suggest why patient-centered medicine
could help curb healthcare inflation, making universal coverage
possible, nationwide.

7 thoughts on “A Transaction Based on Trust

  1. Excellent piece Maggie,
    As I am sure you expected, here is my two cents. When talking to patient’s about making medication decisions I used this simplification which I believe can be extrapolated to represent all of medical care. There are only two reasons to undergo treatment (or tests, interventions, medical care etc).
    1. To add quantity to your life, i.e. emergency bypass, meds for blood pressure etc.
    2. To add quality to your life.
    Those are the only two reasons, the underlying problem here is that the value of each of these reasons to a particular person is deeply seeded in psychology, personality, age, personal experience, family tradition and a miriad of other completely unpredictable factors. In some cases the overall goal is not even evident to the patient. So the quality of the product can be defined only by one person, you. To make matters worse you often have to trade some of one to get the other, and as you aptly put, “no guarantees, no refunds”. To further complicate this, the priorities change over time, if I am 20 y/o I am hopping for aggressive treatment to maximize quantity, at 90 please leave me alone!!! These products are not mutually exclusive, somtetimes you get both and other times you get neither. The only way to do this right, in my humble opinion, is to sit with each patient and discuss thier goals for our relation ship. I told all of my patient’s to address me as they felt comfortable (matt, dr, etc) and that I was thier health care guide and educator, I would not make decisions for them, just supply them with the best information to help them make decisions for themselves. (in the case of my elderly patients who were accustomed to the paternal doctor/patient relationship I tried to know them and thier family well enough to give them what they wanted….. me making the decision).

  2. One of the greatest problems we face in delivery of health care is that a lot of people are expecting the government to create a “magic bullet” that will make care affordable, not rationed and of highest quality. To a significant degree these can be conflicting goals given human nature.
    I think there is a limited but definitely non-zero ability for the consumer to direct care and lower costs. My wife is currently on Lexapro, for example, which is covered under our current insurance with a $25 co-pay. Next year we are being “steered” toward a new HDHP with HSA option (we will have the standard PPO option available to us but I suspect it will be quite expensive). As a result, the drug benefit won’t kick in until the entire deductible is met.
    That means paying the full cost of medications out of pocket. If we only pay $25 a month, we’ll pay it and stay on the Lexapro without asking more questions of our doctor. But once we have to start paying $80 or more, it’s time to ask about the feasibility of Celexa instead of Lexapro. Celexa is the “previous generation” of Lexapro, more or less, and has a generic equivalent that costs about $10 monthly. So if we discuss it with our doctor and if it makes sense to try the cheaper medications, we will (knowing we can switch back if it doesn’t work for her or causes significant side-effects).
    In that sense, “consumer driven” health care does have a place in lowering costs. I would agree with Maggie that there’s only so much health care consumers can do with respect to “comparison shopping” for medical procedures and office visits, and any attempt to “rate” physicians and hospitals by the patients is bound to have flaws.
    It’s easier to use “consumer power” with prescription medications, though, because it’s easy to get comparative pricing AND the quality of the product is almost certainly going to be the same. If Pharmacy A quotes $60 for a drug and Pharmacy B quotes $100 for the same medication, it’s a no-brainer to use A. But that doesn’t translate to variable-quality office visits, treatments and procedures; a $60 office visit is no bargain compared to a $100 office visit if the former is likely to be less effective and have less satisfactory outcomes.

  3. Maggie,
    I agree with you completely – the patient working together with a trusted (and trustworthy) doctor is essential. Alone, the patient, no matter how educated, is utterly lost in the morass of medical uncertainty.
    But here’s the problem. This necessary “trustworthiness” among doctors is being forcibly stomped out, terminated with extreme prejudice. Here’s why:
    1) Healthcare rationing is unavoidable. But we’re Americans and Americans don’t ration – so we’ve deputized the big insurers and the government to do the unavoidable rationing covertly.
    2) The final common pathway for covert rationing is at the bedside.
    3) Those running the covert rationing program – whether we finally give the honor to private insurance companies or the feds – MUST make sure the doctors anwer primarily to their REAL customers (i.e., them), and relegate the needs of patients to merely a secondary concern. They do this by gaining control of the physician’s professional viability, a task now fully accomplished. Hence, the classic, fiduciary, trusting doctor-patient relationship is being purposefully and systematically destroyed.
    The mandate that doctors are to ration healthcare covertly at the bedside has been pronounced formally “ethical” by the ABIM Foundation, ACP-ASIM Foundation, and the European Federation of Internal Medicine. (See: Medical Professionalism in the New Millennium: A Physician Charter. Annals of Internal Medicine, Feb. 2002, Vol 136, p 243). It has been sanctioned by the U.S. Supreme Court (See Pegram et al. v. Herdrich [98-1949], 530 U.S.211, 2000.)
    Such systematic destruction of the classic doctor-patient relationship completely marginalizes patients within a hostile healthcare system. It fundamentally undermines medical professionalism. And I’m afraid, it precludes the kind of shared decision-making you correctly champion.
    Such shared decision-making will only work if the doctor is able to truly place the patient’s needs before all other considerations. Under a covert rationing paradigm, destroying the ability of the doctor to do this is Job One.
    Real healthcare reform will require recognizing the need to ration and agreeing to do it openly, then unleashing the American genius to focus on the technology, the information systems, and the reforms that will keep the necessary rationing to a bare minimum – and authorizing doctors to vigorously advocate for their individual patients within a transparent system of rules.
    Until then, patients can either hope for the best in a healthcare system that’s stacked against them, or they can begin demanding tools for empowerment – a demand, once voiced, that frustrated American doctors and alert American entrepreneurs (who will necessarily have to work outside the current system) will begin to figure out how to meet.

  4. I agree. See what you think:
    I get quite tired of the cogent, paragraphed, yet obscure logic associated with this arcane system of Health Care Economy… We’re Americans, we decide with our hearts…We buy Hummers, and Prius’s.(Prii?) I tend to see “health” as a Common Good. And thus I am interested in systems that promote mutual regard. Most of these systems are cultural, not ecomnomic.

  5. ddx:dx, Dr. Rich, Tim and
    dr. matt–Thank you for your comments.
    First, ddx:dx, I like your poem–and you blog–very much. I’d urge everyone to take a look at the poem: http://poemd.blogspot.com/2007/07/market-forces.html
    I agree that healthcare is a common good. The problem is that in this country, we don’t have the solidarity to have great respect for the common good.(I have a theory that healthcare in France is as good as it is because the French feel that nothing is too good for another Frenchman. In other words, as you suggest, it’s cultural.)
    “Mutual regard” is, I think, something that needs to be taught in our Med schools (if it isn’t too late to teach it then.)
    Dr. Rich–
    I think that in the next few years we will begin to openly test the effectivenss of various treatments, drugs, devices and procedures–and this will lead to open rationing–of a sort–as we weed out the ineffective and over-priced treatments. treatments.
    The Medicare Payment Advisory Commission (an independent panel that advises Congress on Medicare spending) has already called for “comparative-effectivness research” that involves doing head-to-head comparisons of various treatments. Drugmakers, device-makers and even some surgeons have long opposed such research because they know there will be winners and losers.And often, the most expensive and most profitable product or service will be the loser.
    (The three leading Democratic candidates have also called for comparative effectivness reserach to be done by an unbiased institute that has no financial stake in outcomes.)
    This will happen because Medicare knows it needs to contain costs, so it knows it needs this research in order to make wiser decisions about what to cover–and what not to cover. (Private insurers are likely to follow Medicare’s lead).
    This is “rationing” in the best sense: it is saying that, as a society, we are not willing to pay more for less effective products. And we want to be sure that benefits outweigh risks before covering products. (Of course if an individual doctor wants to prescribe the product and an individual patient want to pay for it, they will be free to do so.)
    But most people now agree that we need “evidence-based” medicine based on unbiased reserach into the effectivenss of treatments, and that that evidence should be used to establish guidelines for best practice.
    OF course, those guidelines will always be changing as we learn more . .
    Tim– I agree with you that consumers can have an effect when it comes to choosing generic over prescirption drugs. And its my understanding that, in most cases, the generic is just as good. (In other words, we really are talking about
    “commodities” which are, by definition,
    Though since every body is unique, some patients may have a different reaction to the generic.
    Your plan: to talk to your doctor about it, try the less expensive drug and see how your wife reacts to it is a good one. And it’s a good example of the “shared decision-making” I’ll be talking about in my next post.
    Dr. Matt– I agree that a person’s priorities change over time. When my children were very young, I would have gone through virtually anything (five rounds of chemo, whatever) to stay around for them.
    Now, however, they are more or less grown and no longer dependent on me, and so my willingness to walk through fire to live another six months or even two years is much less.
    In terms of the doctor making the final decision for the patient, I don’t think your elderly parents are alone in wanting the doctor to weigh in at the end. Some patients want more autonomy than others.
    I will also be talking about this in my next post on “shared decision-making”
    Thanks again for your comments — I hope more people will join in.

  6. Maggie,
    First of all, let me thank you for participating in our program at the Massachusetts Medical Society earlier this month on cost in health care. Your perspective did much to balance what is currently being offered by managed care plans. I agree with you that all of us, physicians and patients alike, need more and better information in order to make better decisions regarding cost and quality. Even so, the role and responsibility of the physician in helping to make decisions will never be replaced by a “consumer driven” model.
    Secondly, don’t write us off so fast! The Massachusetts plan may have many flaws and we may have a long road ahead of us but nobody really fully understands the cost-access-quality equation. It is true that we have the most doctors per capita and the highest costs per capita. But, we also have among the highest average incomes per capita and a high percentage of citizens who are employed in the health care industry and who place a high value on giving others access. At this time our uninsured rate is less than 6% (compared to an average of 15% throughout the country). If we stopped now many would consider us a success. But we are not stopping now.
    The conference that you participated in was sponsored by the Massachusetts Medical Society and was designed to reveal a variety of perspectives regarding cost. Our purpose was to get right to the core question and confront our potential weaknesses so that we can deal with them. The audience- which was over capacity- was made up of health care leaders from throughout the state.
    This is how success is achieved. Watch and learn.