A Managed Care Memoir: A Physician's Whistle-Stop Journey

Regina E. Herzlinger, DBA


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Reporting from the healthcare battlefront, in his book, Dr. Richard L. Reece gives us fascinating action views of its massive transformation. Beginning with Minnesota's embrace of managed care in 1983, Reece presents blow-by-blow accounts of its subsequent fall and the rise of consumer-driven healthcare by 2003.

I have known Dick Reece for more than 30 years. If anybody should write this important historical account, it is he: He is a physician whose ardent support of his profession and the people it serves has never wavered; an economic historian who skillfully analyzes the strategies underlying the restructuring of the sector; and an objective, engrossing reporter with a nose for the telling anecdote.

As editor-in-chief of Minnesota Medicine, from 1975 to 1990, Doctor Reece, a pathologist, first became interested in the impact of managed care on physicians, patients, and the health system. (His editorials on managed care were later collected in Transformation of Medicine in Minnesota [1988].) Because Minneapolis was one of the crucibles of managed care, he decided that a book on the history of the modern movement and why it rose and fell was in order. A Managed Care Memoir is a 20-year chronicle of managed care and its impact on physicians and patients -- clinically, culturally, and economically -- and how this transformation led to the evolution of consumer-driven healthcare.

Reece's topic is a fascinating one. How did managed care, an economically aberrant concept, take hold in our great healthcare sector? After all, there is no other sector in the US economy in which a third party manages the work of independent professionals. No managed lawyers. No managed consultants. No managed contractors. But, yes, managed healthcare.

The voyage begins with our Presidential Dr. Stangelove, Richard Nixon, who in the early 1970s saw health maintenance organizations (HMOs) as the salvation to US healthcare cost problems. His administration sponsored legislation that required employers to offer HMOs and supported them with massive subsidies. One of the Nixon administration's key advisors, Dr. Paul Ellwood, a Minneapolis practitioner, convinced Park Nicollet Clinic to begin their own HMO in that market in 1983. HMOs exploded, taking out the University of Minnesota Hospital along the way.

A chorus of Cassandras, paid by and/or supportive of the status quo, worried about managed care from its conception. But the object of their concern, the academic medical center, could take care of itself, thank you very much. The predictions of the health economists, dryly quoted by Dr. Reece, were especially notable for their stunningly wrong mindedness. Although, in 1985, Columbia University's (New York) Eli Ginsberg grimly warned that academic medical centers "are much more vulnerable than assumed" and Harvard's Rashi Fein opined that "there is no way they can compete on price," by the late 1990s most of these institutions had become oligopolistic giants whose market dominance enabled them to enforce massive hikes.

Much more vulnerable, and far less bemoaned, were the fragmented physicians who felt bullied and stripped of professional autonomy by managed care technocrats. Reece, virtually alone, foresaw this problem early on. And in one telling essay after another, he details the failures of the systems that harmed these physicians.

Instead of managing care, many of the organizations formed to do so died from the twin illnesses of incompetence and greed. These devils caused the collapse of Oxford in the New York City area; the integrated delivery systems nationwide; the Nashville, Tennessee area's hapless physician practice management systems; and MedUnite, a consortium of large insurers created to achieve its eponymous goal. Along the way, Reece rails against the hundreds of millions of dollars that the CEOs of these failed firms pulled out of the medical system to line their pockets.

Finally, Reece turns to new hopes in the rise of computerization and self-care -- interviewing some quirky innovators, such as Ed Roberts, the inventor of the first PC, who in his late 30s decided to become a physician; Tom Ferguson, the healthcare IT guru; and other ehealth luminaries. He also turns to consumer-driven healthcare, in 2 interviews with me.

This book is not without flaws. As a self-published manuscript, it has distracting typographic errors. And, as a chronology, some of its information is repetitious. Last, Reece does not understand that consumer-driven healthcare inevitably requires risk adjustment of prices to protect the sick. But these are mere quibbles.

Reece has a fascinating story to tell. He tells it well. And how can one fail to admire a man who dedicates his book to the American physicians "for holding on to their principles in changing times"? Bravo!

About Dr. Reece:

Dr. Reece has written 1500 articles, editorials, and commentaries. He is cofounder of the High Performance Physician Institute, which teaches clinicians how to implement electronic health records, and works closely with the Health Information Management Systems Society to put on IT roadshows for ambulatory care. He serves on the advisory board of the Center for Practical Health Reform. The Center advocates basic universal coverage, a national information infrastructure, and reform of the medical liability system. The Center's main concern is that the current rate of health inflation is unsustainable and may lead to such an erosion of private coverage that the existing health system will suffer economic meltdown. Finally, he serves on the Medical Advisory Committee for America's Top Doctors, a New York City-based organization that selects America's top physicians through a process of peer nomination and election.

This work was supported by the Harvard Business School, Boston, Massachusetts. which supports research out of its endowment. Harvard Business School does not accept grants or contracts for research.