-- Interviewed this summer by Medical Economics Senior Editor Wayne J. Guglielmo, Herzlinger discusses what's on the mind of the new breed of consumer and why doctors need to pay attention. She also offers advice on what it will take to succeed in the new market-driven health-care system.

Q In your book, you talk a lot about a new breed of consumers. Who are they, and how are they different from the old breed ?

A First, they're very busy. They're busy at work, where the bulk of studies suggests people are putting in longer hours. And they're busy at home, where they may be a single head of household or part of a two-career family. Being busy, in turn, has translated into a demand for convenience, and many service industries have reshaped themselves in response to that demand.

The new consumer is also better educated. In the past 30 years, the percentage of people who graduate from high school has gone from 50 to 80. At the same time, more people than ever before see education as a lifelong process, rather than something that terminates with high school or college. As a result, people are more self-confident, more willing to look things up themselves. Indeed, people used to think that they'd be better off if they abdicated to experts, because the experts were so much more knowledgeable. That's no longer so. People feel empowered in ways they never did, which leads to a second consumer demand for mastery.

Q Is this largely a middle-class phenomenon ?

A Not really. When it comes to health care, blue-collar or working-class people are as activist these days as middle-income and upper-income professionals and managers. Take a look at the Boston Herald. Now the Herald is squarely aimed at the tabloid reader--the blue-collar market, if you will. On any given day, the Herald features at least one world-class medical news story. Perhaps it's a version of a New England Journal of Medicine story on the effects of hormone therapy on women. But there's tons of health information in the Herald, and it wouldn't be there if that population wasn't interested.

A There's a good reason why many people don't know what managed care is: They don't pay for their health care directly. Their employers take a portion of their salaries and buy health insurance on their behalf. If people had the money to spend--and I'm not advocating that they use their own--they would be better informed about insurance.

It stands to reason: The average American family income is between $36,000 and $40,000.

A health-care policy can cost between $4,000 and $6,000. You give that amount of money to the average family, and they're not going to treat it cavalierly. They're going to learn more about what they're purchasing.

Q How do we move from a third-party to a consumer-controlled health insurance system ?

A Give employees the money to purchase health insurance directly. Now, the premium payment an employer makes is, in effect, part of an employee's salary. Why not give that to the employee directly, requiring by law that everybody buy health insurance?

We'd have to transfer those funds in a tax-neutral way. Right now, if I wanted to buy my own health insurance, I'd have to do it with after-tax dollars. Say, for example, that I were in the top tax bracket, which is around 40 percent. So for every dollar that I needed to pay for my health insurance, I'd have to earn nearly two dollars. What's needed is a law that enables everyone to deduct health insurance from their taxes, or that gives them tax credit for the purchase of health insurance.

When consumers pay directly for the health services they use, they'll not only learn more about what they're purchasing, but also accelerate the pace of innovation that will lead to the kind of health system they want.

Q In your book, you write: "Doctors seem oblivious to the convenience revolution. " How so?

A Convenience--making things easier for your customer--is not taught in medical school, as far as I know. But doctors should be concerned about convenience for two reasons. First, consumers want it--and sooner or later in this market-based economy, what consumers want is what they're going to get. Second, the lack of convenience diminishes the quality of health in our country. How? By discouraging well people from getting important preventive care, and chronically ill people from getting the ongoing support they need.

Q What can the practicing doctor do to make care for the chronically ill more convenient?

A Employ physician extenders, for instance. Professionals like these can provide the support that chronically ill patients need to help themselves. Patients don't have to wait a week to see them. And when you do see them, they're not looking at their watches: They have a lot of time to spend with you. If we had a focused system for dealing with chronic illnesses such as asthma or diabetes, these physician extenders--health educators, really--would be a natural part of that system. The reason is simple: Chronically ill patients who help manage their own diseases are healthier, and therefore cost less in the long run. So everybody in the system is better off.

Q This brings up the other characteristic of the new consumer--the demand for mastery, for self-control. Does this new assertiveness call into question the traditional doctor-patient relationship, in which the doctor is the expert and the patient the beneficiary of that expertise?

A I don't think so. It's just that doctors must learn to accept--as many already have--that today's patients are more knowledgeable than those in the past. If for example a patient says, "But I read B, C, or D in the 'Mayo Clinic Family Health Book,' " or "I got B, C, or D off the Internet," that's not necessarily a hostile patient. More likely, that's an informed consumer who wants to discuss different points of view with her doctor-- who looks to her physician to help her make sense of the disparate pieces of information she's gathered. Doctors shouldn't begrudge patients this kind of assertiveness, but rather make it part of the process of dealing with them. After all, well-informed patients are often healthier patients.

Q In the final chapter of your book, you write, "The health-care providers who flourish in this new market-driven system will give customers the mastery and convenience and the focused, cost-effective services they want." You've already discussed some ways that doctors can meet patients' demands for mastery and convenience. What are some things they can do to deliver "focused, cost-effective services"?

A They can think about specializing in some way. That might mean affiliating with groups that specialize in managing certain diseases. The management of cancer, for instance, doesn't just require oncologists. It requires a lot of people in the community.

Q We now touched on one of the major concepts in your book--the idea of the "focused factory," a group of professionals and others who come together as part of an interdisciplinary team to accomplish a goal. How does this concept relate to primary-care doctors, who, by definition, must cover a wide spectrum of health-care services?

A The concept relates very well to primary-care doctors. For example, as chronic diseases are increasingly carved out, primary-care doctors can occupy a point in the system--typically at the community level--at which my asthma, say, is monitored and supported. Or they can become focused factories in non-chronic-disease primary care. Or, as in the Mayo Clinic, they could be part of a diagnostic focused factory. Any one of these more focused roles actually enhances what the primary-care system can deliver.

Q And you believe that physicians should be in control of these "focused factories." Why do you think that's so important?

A The reason is that physicians know what patients need. When push comes to shove, it's these kinds of people who make the biggest changes in our economy. It's no accident, for instance, that Bill Gates is the head of Microsoft. Gates eats, breathes, and sleeps software. He really knows what he's doing. The same is true in other industries. Phil Knight, who heads Nike, was an athlete. In health care, the doctor is in that kind of position.

Physicians have a tremendous opportunity not only to participate in this revolution, but to lead it. Of course, they'll need managerial advice, and that's where insurers or physician practice management companies can help.

Q Does this mean the end of managed care as we know it?

A Increasingly, managed-care organizations will take on the role that insurance companies typically play--the role of broker. Brokers give you a choice of many options. They'll package these options for you and tell you what the pros and cons are. But they aren't directly involved in the industry that they're insuring.

Now having said this, I should tell you that, until recently, I was a member of Harvard Pilgrim Health Care--an HMO--and I'm still an HMO member. Harvard is partly staff model. I believe in this classic HMO model, but it can't be replicated. Other classic HMOs weren't just businesses--they had a clear ideology and culture behind them. Kaiser has existed since the 1930s. Group Health Cooperative of Puget Sound was driven by a socialist belief in the sharing of health care.

You can't take this kind of idealism and use a cookie cutter to stamp out more classic HMOs. So the diminishing number of staff-model HMOs will survive because there are still people like me who want them. But the other HMO models are going to have a lot of trouble. Already, health activists are using the legislature to stop them from rationing health care. And if these HMOs can't manage their health-care costs, the employers who select them primarily on price will look elsewhere.

Q What's the role of government within this new market-driven health-care system ?

A In my fondest dreams, government would provide a safety net for the poor and would also devote a lot more resources to public health, by which I mean public health education. In a market-driven system, the government must also ensure that the information provided to consumers by insurers and providers is accurate, prevent insurance companies from discriminating, and vigorously enforce the antitrust laws, which are in the public's interest.

Plus, the government must make sure that consumers don't cheat. That can happen in two ways: The first is not to buy health insurance, which we already mentioned. The second is for consumers to misrepresent their health status. Insurers and focused-factory providers must have accurate health-status information about the members they enroll.

As in the case of the stock market, the term "market" doesn't imply the absence of government. It means that government is there to ensure that consumers retain control of the market.