What we have here...

Lawmakers and the public in general have no idea how the business and practice of medicine operates. None. When you read statements from many representatives, you see such simplistic, anhistoric thinking that pessimism about health care reform is the only logical response.

Or so it seems from media reports. The New York Times, whose quality seems to be dropping by the femtosecond, reported this week on salaried vs. traditionally paid physicians. This could have been a terrific article, if the reporter knew anything.

Let me catch you up a bit. Doctors are generally paid in one of two ways. They are either salaried employees of a health care system, or they are on their own, billing insurers and patients for the services they provide. For the latter, it is not precisely true, as the Times reports, that, "the more procedures and tests they order, the more money they pocket."

My perspective on this is pretty intimate, as I have two jobs; one in which I'm salaried, the other in which I'm a traditional fee-for-service private practice doc. In my private practice, I am paid a modest fee for seeing a patient. If I order one of the few tests I offer in my office, such as an EKG or a chest X-ray, I can bill for that as well. But the fees are pretty much set. Medicare decides what "fair" reimbursement is, and the rest of the insurers follow suit. If my rent goes up, I cannot raise my fees. If I want my patient to get more procedures or more tests, I can't profit from it, although I could if I owned big, fancy machines. Doctors who own their own stress test machines, etc, can make more money, so that incentive is certainly there. But for the average primary care physician, there is no incentive to "do lots of more". The only incentive built into the system is to see lots of patients so that you can pay the rent.

In salaried models, even though an individual physician might not profit from ordering more stress tests, the system as a whole might, and it wouldn't be unusual for a large health care employer to let its doctors know it. If I work for hospital A, but send my tests to hospital B, I'm robbing myself; from there it's a short walk to thinking that ordering even more tests from hospital A must be a good thing.

Of course, the more centralized things are, the easier costs would be to control, and there are certain advantages to unified, campus-based health systems like Mayo, but some of these are overstated. From the TImes:

Michelle Griffiths, 41, of Edmeston found a lump on her breast six years ago. During cancer care at Bassett, Ms. Griffiths's appointments to see her oncologist and primary care doctor are often scheduled on the same day. One doctor will sometimes accompany her during a procedure performed by another, and each has her complete medical history.

"The communication amongst all of my doctors is impressive," said Ms. Griffiths, who works as a database administrator for the insurance company New York Central Mutual. "They always call each other or shoot each other e-mails."

From my own private practice, a small but hardly unique anecdote:

One day, a patient came to me with a lump on his neck. I was rather concerned, and phoned up an oncologist and an ENT while the patient was sitting in my exam room. In minutes, I had set up appointments with both, relevant tests, and by the next week, he had started therapy for his cancer.

While this process may or may not be easier at Mayo or Cleveland Clinic, it's not unique to them.

Changing our system to encourage employment of physicians is an enormous undertaking. If we are to consider it, we had better make sure it's really a good idea. How could we possibly encourage tens of thousands of independent physicians to suddenly become employees, or struggling hospitals to find money to pay them? Philosophically, though, we have to remember where we've come from.

The Flexner Report on medicine in America was released 100 years ago, and was a damning document, highlighting the primitive, disjointed state of American medical education. According to the times, "Abraham Flexner wrote a landmark report that argued teaching hospitals should be staffed only with salaried doctors." This imprecision is unfortunate. What Flexner found was that most medical schools were owned by doctors whose income depended on tuition. This model encouraged them to admit as many students as possible regardless of quality or qualification. Flexner recommended scrapping this model of medical education, and folding medical schools into existing universities. He recommended paying medical professors not through tuition receipts but by salary to help accomplish this. This may seem like a subtle distinction, but what was accomplished was the professionalization of medical education.

Most people don't know how the American health care system works, including our lawmakers. This ignorance is going to get us in some deep trouble, and so far I've seen nothing to assuage my pessimism about health care reform.


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I understand your distinction between private practice and salaried practice quite well, but what about what I'll refer to as "Very Large Group Practices" (VLGPs) for lack of a better term?

Example: Here in upstate NY my primary is one of four primaries in a local group practice, but that group practice is one of many (including most medical and surgical specialties) that operate together. All billing is from a single central office, they have their own fully equipped labs and their own fully equipped imaging/radiology department.

From the number of referred tests/images and specialty referrals I get within this VLGP, I'd assume that my primary is getting some sort of quid pro quo for all the referrals. Do you have any info on this sort of practice?

Doctors who own their own stress test machines, etc, can make more money, so that incentive is certainly there.

To what extent does that create an incentive to purchase unnecessary equipment, especially in wealthier markets? Doesn't that drive overall costs up?

And if that's true of individual physicians, isn't that also true of hospitals and clinics? If an entire medium sized city could be well served by one MRI machine, but each hospital makes more when it uses its own equipment, doesn't that lead to inefficiencies?

The MRI(s) in a medium-sized city serve not just that city, but the population of much larger geographic area. My experience with an MRI is that the setup, the scan, the prep of the data, etc. take an average of 30 minutes. That's only 48 people/day if the unit is available 24/7.

And never needs servicing.

For those who think that "spam" and "fresh meat" are contradictory, I present to you #4.

By D. C. Sessions (not verified) on 26 Jul 2009 #permalink

I felt the same way about President Obama's comment about docs being anxious to pull tonsils for profit. My daughter spent a couple of years fighting repeating bouts of strep throat, and I tried to talk two different pediatricians (in two different states even) into ordering a tonsillectomy. They both told me that they do everything they can to not take out tonsils, in contrast to the practice of 40 years ago. So even POTUS's medical knowledge is way out of date.

By military wife (not verified) on 26 Jul 2009 #permalink

'It' goes along with continuity of care; accurate, easily-accessible documentation (medical records) for safe access to only those elite permitted. Conquering that task shall be no small feat.

Donna B.,

My example may have been poorly chosen, but there must be some equipment that individual hospitals have mostly so they can claim to be better equipped than the competition, which would be an example of how competition in medical care drives prices up.

A very enlightening post. Many details about how healthcare actually works are missing from the debate, as are any sort of solution other then a more public system. From your perspective, what should we do as a country?

or is that a previous post that I just need to dig up?

Solutions? You want solutions????

How could we possibly encourage tens of thousands of independent physicians to suddenly become employees, or struggling hospitals to find money to pay them? Philosophically, though, we have to remember where we've come from

That's why i say we nationalize the whole sector, doctors, hospitals, what have you, and everyone get paid a salary by the govenment. Of course this is not my idea. if i remember correctly, historical efforts at national health insurance since the early 20th century have all been successfully blocked by the American Medical Association. while Roosevelt favored the national insurance plan, he had to scuttle it from the social security, not for lack of AMA's clout. but of course every doctor paid to the lobbying pool to secure their proverbial bottom line. it's interesting acutally to see the medical community rally behind the individual mandate. at least you no longer have to shift the cost of treating the uninsured to those insured and then turn around blaming the insurance industry for their profit-driven ways. so the NY Times writer didn't know the minutiae on how doctors charge their patients, but nothing he said was substantively wrong. Medicare reimbursement is probably not your major source of revenue anyways. it's just a reference point for you or your group practice to negotiate higher rates for private insurance. and as trusting patients we have no choice but to caugh up what you say your service is worth. this is the elephant in the room nobody is talking about

Ugh. Well, i've written bits and pieces, and I'm no policy wonk, but i'll bet I can put something together, for my peeps.

Yes, everything in this post is ok. The healthcare industry works in a way that they dont want to have medicines which cures the diseases like diabetes or hiv, they want to simply produce drugs that just controls the diseases, only then the patient will be a regular consumer of the medicines and business will happen for both doctors and pharma's

Amarjit Singh Kullar

Are you fucking kidding me? What a tool.

By Monkey Pox (not verified) on 28 Jul 2009 #permalink

...dont want to have medicines which cures the diseases...

Bullshit. The profit margin on an actual cure for HIV or diabetes would be astronomical. A vaccine for AIDS would be, quite literally, priceless.

Of course, I'm arguing with a spambot, so how foolish am I?

By LanceR, JSG (not verified) on 28 Jul 2009 #permalink

Our wonderful HMO system rewards doctors for NOT doing stuff. We get letters and report cards comparing us to our peers. We are told we need to be better at being cheaper doctors. Paradoxically, the worst doctors are often listed in the "best" categories in these reports. Monies owed to the "worst" doctors on the list (often among the real best doctors) are denied and paid to the "best" (cheapest) doctors.

By The Blind Watchmaker (not verified) on 28 Jul 2009 #permalink

Blind Watchmaker;

You mean like the "oncologist" who told my wife that the kidney tumor she had was "just a misshapen kidney, probably had it all your life, nothing to worry about."

The whole time, she had fluid buildup in her gut, shortness of breath, difficulty eating,....See "Big Guns" Take Aim at Tough Case, and the continuation.

Of course she was also obese, so it was cheaper and ever-so-much better to say "It's in your head, go home and relax. Lose 100 pounds."

It's hard to see how it could get worse, but I'm sure the politicians will find a way.

There are other ways to fun physicians. Funding is in flux where I practise, and I am learning about the different systems of necessity.

We are publicly funded (Canadian) but there is a hierarchy of how one can receive payment in primary care.

Fee-for-service is the most familiar: billing the payer for each service (some cosmetic procedures are unfunded so the payer becomes either the patient's insurance co or the patient himself, but in general we bill OHIP or WSIB- Ontario Health Insurance or Worker's Comp). Then there are a series of capitated models wherein each physician signs up a certain number of patients and is paid a flat fee per head (depending on age and comorbidities) plus a percentage of billing as per the fee-for-service model.

The government likes to keep us shadow-billing in order to reassure itself that it's getting good productivity. And it is.

The goal of the gov't is to get physicians "salaried," so it has control of physician pay (currently it pays what we bill plus capitation, so it's hard for it to predict what it will pay next month). The goal of the physicians is to care for patients and maximise pay, but keep control of our money. Currently, the balance is pretty good.

More stuff to think about.

Hey PAL,

I take small amount of issue with your example of your head/neck cancer patient.

Isn't your ability get such a patient into tests and specialists so quickly is, to some extant, a function of the fact that you are at least nominally affilliated with a larger, fairly centralized hospital system that employs/works closely with a large number of specialists?

I rotated at a more rural clinic/hospital system with a much less centralized system. We had a similar head/neck cancer patient on the first day of my rotation, and he still didn't have an appointment with a similar specialist at any of the nearest tertiary care centers three weeks later. My preceptor ended up having me call to my primary clinical site and swing him an appointment in the ENT resident's clinic - a hefty 2 and a half hour drive from the patient's home, and at least a couple of weeks after he really should have already received some sort of more extensive testing.

I have no statistics at all on how common that scenario is.

Yet it seems logical that the advantages talked about from the more Mayo-like system exist on a continuum scale. Maybe not every system can or should be as deeply connected as they are at a Mayo or a cleveland clinic, but one as nebulous and unconnected as the situation I described is hardly tenable either.

yeah, well, there is a huge difference between metro and rural areas, to be sure.