Pay me how?

For all the forty-eight years I worked in the corporate world I was paid a salary. My salary was based on 40 hours of work each week although many (too many) weeks it was far more than 40 hours. Yes, I have to admit there were times it was less than 40 as well.

What I was paid was designed to be competitive with my peers and also based on my performance, what value I added and how I did that. I was not paid by the number of PowerPoint presentations I prepared or the number of Excel spreadsheets created or even the number of meetings I attended. Admittedly if I received my pay that way I might have prepared even more presentations and scheduled more meetings. Add on payment for each e-mail and a villa in Monaco is mine.

By now you may know where I am going with this.

Seven hundred thousand physicians more or less in the US and virtually all who are in private practice are compensated on a fee-for-service basis. Not only that, they generate their own demand for services and often are financially involved with facilities providing additional services on a fee-for-service basis where demand is generated by the physician. In fact, through the services they order physicians control about 70% of all health care spending.

Even if you accept the premise that most physicians are motivated only to serve their patient in the best way possible, there remain strong incentives to spend money on health care. Fear of being sued is one, but patient demand is another and that demand is driven by advertising and the mistaken belief that more is better and the more sophisticated the technology the better.

While I readily admit the practical task of changing from fee for service to a salaried cadre of physicians is daunting, it is difficult to see how real reform of the health care system can occur within the current structure.

Being compensated on a fee for service basis may be fine if the goal is to increase income by the services you render or where the customer is not only price sensitive but more importantly able to be objective in the purchase. After all, unless you drive a 1954 Mercedes gull wing roaster you probably don’t care who changes your oil.

Capitation payment, that is a set monthly fee for each patient regardless of the patients use of a physicians services, has been tried in the past and is now the “in thing” in Massachusetts where they struggle with increased health care costs after expanding the number of insured and encouraged adverse selection.  Critics of capitation say it encourages the physician to avoid providing care, proponents say it encourages use of routine services so that more costly care is avoided and thus both the physician and patient benefit. However, under this model for a physician to increase income he or she must negotiate a higher capitation rate or increase the patient base.  There is also the issue of patient mix, that is, does the physician have a capitation rate that accurately reflects the health risks of his patients?  Clearly, the use of capitation does not remove all the negative incentives.

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No claims to file, no malpractice to pay, no justification for each procedure I want to order, no referrals…I like it!

So the question remains can the health care system ever deliver consistently high quality health care (or even measure it) in the most efficient manner across the country with several hundred thousand physician entrepreneurs operating in individual offices?  

Would the strongest incentives for high quality, efficient health care be possible with networks of employed, salaried physicians focused not on running a business, but on caring for patients with their salaries based in part on the quality of the care provided?

Now, that would be health care reform.