How To Make Healthcare Innovation Happen - Regina Herzlinger, Professor at Harvard Business School

DR. RISHI DESAI: Hi, I'm Dr. Rishi Desai. Today, we have a very special guest, Regina Herzlinger, also known as Reggie, who's been named “the godmother of consumer-driven healthcare” because of her groundbreaking scholarly articles and books on the subject. As a professor of business administration at Harvard Business School for nearly 50 years, her focus has supported the explosion of wearables, telehealth, freestanding urgent care facilities, and health savings accounts, among many other innovations. She's a successful medical technology entrepreneur herself, a bestselling author, and an influential voice in shaping public policy. I'm looking forward to getting her take on the current state of healthcare in the US, and what she thinks we can expect in the years ahead. Thank you so much for being with us today. 

REGINA HERZLINGER: My great pleasure. I greatly admire what you do and applaud your success. It's magnificent. 

DR. DESAI: Well, given your breadth of experience, that's very kind of you to say. Maybe a good place to get started is how you got that breadth of knowledge and experience. What first got you excited about the healthcare space? 

HERZLINGER: I was always a businessperson, and I decided to become an academic. I liked doing research, and my business was such that I couldn't even get pregnant because I was always on a plane and I really wanted children. So I thought, “Well, I'll get a doctorate in business and teach in the school of business.” Which of course, “Fools rush in where angels fear to tread.” At that time, there were no women students, let alone women faculty at schools of business, but I did pursue it. I did my doctoral thesis at a neighborhood health center in Charlestown, where I tested whether the traditional tools that are used to measure productivity and enhanced productivity could be applied in a setting like that. The neighborhood health center was sponsored by the Massachusetts General Hospital and had incredibly dedicated, talented people, but it was horribly inefficient. It was off-the-scale inefficient compared to most businesses. I thought, “This is an area that's so important to everybody in the world.” Even then, it was very costly, and it could benefit from not only business tools, not just perfecting what exists at the margins, but from the innovation. 

I started my work on kind of two tranches, one tranche being, what are the public policy changes that would encourage and enable innovation? And secondly, how does one really innovate healthcare? There's a lot of talk about innovation, but it's mostly, “You should, you could, you might, you would.” But innovation, like everything in life, is 95% perspiration. How do you really get it done? I have been teaching that. I've been writing case studies about how innovative healthcare firms in all parts of healthcare—and not only companies, but non-profits as well—how they succeed and how they fail in delivery, insurance, digital health, biotech, med-tech—in virtually all fields of healthcare. 

DR. DESAI: If you can indulge me, we've had so many changes in the past 24 months. What would be one example of a case study that you could educate me and our audience on, in terms of how they put in the perspiration and made a difference? 

HERZLINGER: I've written two that are indicative of the changes, and they have to do with the hospital-to-home movement that began in response to COVID. We have very few hospital beds. We have 2.8 per thousand, as opposed to Germany, which has eight per thousand with an overall spending on healthcare roughly half of ours. When COVID hit, this minute number of beds got filled right away. So many people could not get the healthcare they needed. I believe that was the genesis of the hospital-to-home movement. By genesis. I mean, it's moving away from being an idea that people talked about endlessly, to being a reality, which it certainly now is. 

One case study is of the insurance firm, Humana, which dominates. It is the second-largest seller of Medicare advantage. Humana decided that it would implement hospital-to-home. It has done it in a fascinating way. It's carved out a huge portfolio of activities that would enable hospital-to-home, ranging from ambulatory care centers, ambulatory surgery centers, physicians who come to your home, other clinicians who come to your home, and they financed it in very unusual ways. Some of the financing was done in partnership with private equity firms, which is very unusual in healthcare. Healthcare's very siloed. You know, “I do it this way. That's the way I do it.”

The other case is about Phillips, which is also attacking the hospital-to-home market, but Phillips is techy, techy, techy. Phillips is an exceptional monitoring company, and it has invested heavily in monitors that enable the hospital-to-home movement. That sounds so easy, but those monitors have to talk to the hospital system, since the hospital system rarely talks to itself, let alone to outside monitors. It's just a daunting technological task. So those two, I'm not sure they're going to work, but they are examples of revolutionary changes in the structure of the healthcare system that have come about within the past 24 months. 

Another one is, I wrote a case about Fitbit about five years ago. In my nomenclature, it was a technology-driven company that was led by a techie. It had a zillion patents, but it was not that consumer-friendly, and it was a consumer product. It was competing with somebody—you wouldn't sleep at night if you were competing with them, and that is Apple. So now Google goes and buys Fitbit. Google's not terrific at consumer-facing innovations. Remember those Google glasses, those horrible things? So why is it buying Fitbit? Well, increasingly, clinical trials have to be done remotely—again in part because of COVID—and Fitbit, with its technological pros, could expand this watch into an even smarter watch, and wearable sensors and ways of detecting things that are very relevant to clinical trials. So COVID has profoundly changed the healthcare system. 

DR. DESAI: A couple of things that you just brought up. One is this notion of doctors going back out in the community, doing home visits. That strikes me as something that we always think of as a very old-fashioned way of doing things. Nowadays, a lot of people talk about the importance of healthy foods, eating whole foods, and cooking at home in the community to abate the onset of disease. Some of those ideas feel very old-timey. Then there's this other category of interventions like Google glasses and Fitbit, that feels very techy and kind of futuristic. I'm curious to get your thoughts on how consumers perceive these different technological innovations. If I said to someone, "Which of these are tech innovations?" They probably would say, "Fitbit, yes. Google glasses, yes. Doctors' home visits, no." That's not thought of as innovative, even though in many regards, it is. So I'm just curious to get your thought on what we define as innovative when it comes to consumer-driven changes. 

HERZLINGER: Well, anything that helps the consumers, either by empowering them or by making things more convenient when it comes to consumers, is innovative. You bring up a terrific point. The movement of physicians to the home would be economically infeasible without the technology, because the physician would have enormous traveling time. The emergence of telemedicine and these sensors—not just wearable sensors, but implantable sensors, that, for example, measure various characteristics of congestive heart failure that are very important to the physician. Those can be just transmitted to her wirelessly. 

When the physician comes to the home, if she were to come, it would be with tremendous information, a much more economically feasible kind of visit, and very different from the old fashioned visits. I still remember when a physician would come and he would know—there were no females, or none that I knew at that time—he would know nothing. It was really a daunting visit to try to help a patient about whom you have very little information. Today, were a doctor to actually come, physically, they would be armed with an enormous amount of information. 

I think patients love it. I know my daughter is an endocrinologist and her patients love Livongo, which is a way of monitoring diabetes or these semi-implantable wearable glucose sensors. Americans, of course, generally, are in love with technology, but they're hardly averse to the advances, especially the sensor advances in medical technology. 

DR. DESAI: When you zoom out over the last 50 years or so, 1971 to now, what would you say are the healthcare changes that have benefited consumers the most? We can focus on the US here. What would you say? 

HERZLINGER: You're not going to like this, but I went to MIT. My husband is an MIT Ph.D. physicist, and our entrepreneurial efforts were in medical devices, life-saving devices, like artificial hearts, and rabbit infusers that keep people who would otherwise bleed to death alive, and were one of the reasons in this horrible Boston marathon killing, that so many people stayed alive. Our machines kept them from bleeding to death. So I hate to say this, but technology has been amazing in its impact. I think that delivery and insurance have lagged seriously behind. There have been improvements in delivery organization, trauma centers, centers that focus on catheterization, imaging, things that take tremendous amounts of skill, but still, hospitals are very inefficient, very costly, very hard to access, and they're the heart of our healthcare system. 

The insurance industry, like the hospital industry, is oligopolistic. In English, that means no competition. Insurance, that's a $2 trillion industry. If you go to buy yogurt, you could buy 40 varieties of yogurt. If you go to buy insurance, there are two or three insurance policies. I cannot say that these very important fields have made the progress that they should have made, but technology has been awesome. Of course it costs too much. It's delivered by an oligopolistic, barely transparent PBM network. There are lots of things wrong with it, but the technology, most of it is amazing. 

DR. DESAI: You mentioned that there are 40 flavors of yogurt and only two of insurance companies. I would add that the two flavors aren't particularly tasty, either, which adds to the dissatisfaction. 

HERZLINGER: Right. I have always—and perhaps it will happen—I've pushed for what I call consumer-driven healthcare, and what that means is, when your employer—I don't know who you work for, Rishi, but my employer, Harvard University, my brilliant employer, pays me $28,000 less than they would. Instead, they take the $28,000 that could have been my salary, and use it to buy health insurance, and I get these two unappealing flavors, mush and mush. I would like to have that money—only if I buy Obamacare-compliant health insurance, but I'd like to have that money and to buy health insurance that I want. I work out a lot; I'd like to be rewarded for that. There are lots of things I want on my health insurance. I think if we were to get that money—only if we buy good health insurance—that you would see more than these two unappealing flavors, as you do in any consumer market. We don't need 40 flavors of yogurt, but we have them.

DR. DESAI: Yes, that's a really good point. I guess to the next point, a lot of folks, when they go and make any choice, it can be confusing and overwhelming. I'd like to know what you think technology has done for the folks in our society who are least educated, least capable of making a decision, simply because they don't have time to go and learn about it. Oftentimes it can be in another language. Maybe they don't have time to understand, in their own language, what things mean. How has technology helped them? Have you seen a widening of the gap between the haves and the have nots because of technology? Does it magnify that gap? 

HERZLINGER: Well, certainly, there is a gap between the haves and the have nots in healthcare, even in the UK, where people who are educated or connected get better, quicker access than people who are not educated and not connected. But the big problem in healthcare is, I don't know what good quality healthcare is. Maybe you do. I don't. I do know what good quality yogurt is. I do know when I buy a stock. I can tell whether that stock is financially viable or it's going to fall apart tomorrow. I can't tell any of that in healthcare. So I think what we need is what I call a healthcare SEC. The Securities and Exchange Commission made the financial markets, which used to be like healthcare: “Don't bother your pretty little head. I'm Dr. Wonderful. I'll do everything. I'm Hospital Wonderful, or Nurse Wonderful. Don't worry. You don't need all that information; it'll just confuse you.”

So the SEC made all that information transparent, and it is available to everybody because these journalists came in, Rishi. Not the propeller heads, but Michael Bloomberg, the motley crew with those silly hats, they're actually experts, financial analysts. Once they had the data available, which were trustworthy and uniform, they could translate it. They could take it from the arcane and translate it to people. 

So here's how markets work, in my view: People buy cars, and mostly, they have no idea what the heck that car is like, but there is a group that's pretty smart about buying cars. They buy cars and they talk about cars, and Consumer Reports writes about cars, and your local blog has a car, and it seeps down. 

Toyota is really a great car. But 30 years ago, who would buy a Japanese car? People thought things made in Japan were terrible, but smart people started buying Toyotas, writing about Toyotas. The buyers still didn't know how a car is made. When I go in a showroom, I see somebody lift the hood of a car. I think, "What the heck are you looking at? That's a computer in there!" But they communicate it. Even though you don't know a compressor from an alternator, they could completely communicate to you what a good value for the money is. 

What we need is not so much technology, in my view. What we need is some uniform, reliable source of data. People saying, “My Aunt Mildred, she told me that doctor was amazing.” Well, your Aunt Mildred, with all due respect, has no idea what doctor is amazing, nor, even, do other doctors. They may know their peers, but what do you know about the amazing doctors in Brockton, Massachusetts?

DR. DESAI: That makes a lot of sense. I think that continues to be the issue. There's this inequality of information that floats around, and that underlies what we see with health outcomes as well.

HERZLINGER: Well, I would say there is no information. I can tell you because I am an economist. I think I can tell you pretty much what is a good quality stock and what isn't. I cannot do the same in healthcare, because the information I would need to make that decision is not available. 

DR. DESAI: That makes sense. I'd like to then switch gears briefly, and talk about the future. What do you see coming in the years to come? I'm not imagining that you're a seer or an oracle of any sort, but probably the closest thing to it. So what are your thoughts on what's to come?

HERZLINGER: I think what we saw during COVID, which were tremendous changes in the delivery system, for example, these health hubs that CVS has. CVS has 10,000 stores. Walgreens has 8900 stores. Amazon is going into providing healthcare. They're not doing brain surgery there; they're not treating infectious diseases there, but they're taking care of the needs of people in convenient neighborhood locations. I think that's very important. 

I think the ambulatory surgery movement, the freestanding urgent care and emergency care, all this breaking up of hospitals located in center city and disseminating care out in the community, I think that will grow. It will be good for people because it'll be more convenient, and it will also be less costly to get that kind of care. That will be abetted by telemedicine, which right now is primitive, but which will become refined. For example, a group of my students started a telemedicine firm about which I wrote. One was a guy from Google, one was a woman-child psychiatrist from India, one was a computer scientist from Nigeria, and they started a company, that's doing very well, to provide mental health to caregivers who were so overwhelmed by COVID and all the strictures on them, especially lately.

I think that technology will help, sensors will help, more convenient healthcare will help. I believe I warned you, I went to MIT, so I think CRISPR gene therapy tools will be very useful. MRNA will eventually be used not only in vaccines, but in the many genetically-derived diseases. All of these innovations in delivery in what's called digital health telemedicine: wearable sensors, implantable sensors, and technology that can cure and perhaps prevent diseases that are now considered incurable, in toto, they should control the rate of increase of healthcare costs. In my view, they will reduce it and lead to much better quality healthcare.

The cruel fact of the US healthcare system is that despite the incredible wealth of this country and the charity of its people, roughly 30 million people remain uninsured and many millions more are underinsured. I see that these innovations, which change sites from very expensive ones to lower-cost ones, from hard-to-reach ones to convenient ones, vastly improve communications technology, and the ability to know just how sick you are and create a panoply of effective cures. I think they will control costs, and by doing so, they will make healthcare available, finally, to many more people—hopefully all the people in the US and in other countries. 

DR. DESAI: We have a lot of early-career health professionals in our audience. I'm curious, what is your advice for folks who may be just starting their career, in terms of how to approach one that is similar to yours in some way—not in the specifics, but in the sense that they can get what they want out of life?

HERZLINGER: I meet many young people who are in clinical care or who are scientists or are involved in artificial intelligence, or other forms of using technology. I think what they're lacking is an understanding of how to make their great thoughts and their great ideas happen. All too often, I meet young people who've worked out something spectacular, which I could have told them has no chance. Not no chance as a technology or whatever it is, it's great, but no chance. It'll never be adopted. I think a very important part of one's education, if you are a scientist, a physician, a clinician, is to try to understand the environment that you're working in, and how your ideas can be broadly disseminated, so you don't end up a frustrated old coot. 

Not to be self-serving, but I've spent 35 years teaching this subject. I have written a book about it, called Innovating in Healthcare, which will be published by Wiley next year. But in addition to that, I made a MOOC for Harvard edX, and it's available for free. It is a synthesis of the lessons from five or six case studies of successful and unsuccessful healthcare businesses. Some of them are nonprofits in delivery, in insurance, in medical technology, and biotechnology. I would urge them to watch that with something like it, so that before they fly off and spend years and years on working on something that, despite its being wonderful, is simply infeasible, that they know that it's infeasible. Or if it is feasible, what are the realistic next steps to making it happen? I wish that Osmosis offered a course like this. How can you be a successful innovator? Not a business mogul. You want to be a business mogul? Great. But how can you actuate your ideas so they're just not lying around someplace?

DR. DESAI: Thank you so much, Reggie, for joining us today. That was fantastic. I appreciate your wisdom and your humor. I know our audience gained a lot, so thanks for joining us today. 

HERZLINGER: It's been a great pleasure to be here. I can't tell you how much I admire what you've done, but please add a course on innovation to all the rest of the marvelous things you've done. 

DR. DESAI: That's a great suggestion. The appetite is out there, we know from students, to learn more about healthcare innovation. Certainly getting that content out there makes a lot of sense. I appreciate you bringing that up.

I'm Rishi Desai. Thanks for checking out today's show. Remember to do your part to flatten the curve, and raise the line. We're all in this together.