Doctors' Pay

http://www.nytimes.com/2009/11/08/business/economy/08view.html?emc=eta1

As Robert Frank points out attached, the United States spends twice as much per capita on health care as many other nations, yet achieves inferior outcomes by such varied measures as life expectancy, preventable deaths from specific illnesses, and infant mortality. Much of that performance gap stems from the fact that many of the nation's 45 million (there's that disputed number again!) uninsured fail to receive needed care.

The spending gap stems largely from a conflict inherent in how American physicians are paid. Elsewhere, most doctors are salaried. But, under most American health plans, including Medicare and Medicaid, doctors are reimbursed according to how many tests and procedures they perform. As Frank points out, we all believe doctors recommend only those tests that they sincerely believe to be in their patients' best interests but we also know that additional tests, in the interest of being "thorough," will provide more income which can lean us in the direction of my relative: moral hazard. Moral hazard is not just a place we find at the big banks.

Frank quotes an article in the NY Times where Atul Gawande described an entrepreneurial subculture in McAllen, Texas in which doctors prescribe roughly half again as many tests and procedures as those in otherwise similar Texas communities. McAllen, he argued, is where American health care is heading.

And, the good news is that Dr. Gawande identified some health plans, like that of the Mayo Clinic in Minnesota, that have sidestepped the incentive problem by putting doctors on salary and operating their own hospitals. Such plans, which provide superb care and high patient satisfaction at significantly lower cost than conventional fee-for-service plans, would become more attractive under proposed legislation (I'll have to go along with Frank's position on that because I have no interest in reading 1174 pages of the proposed bill or bills).

It was my privilege to have been a part of annual executive physical process at the Mayo Clinic which was paid for by the company I worked for and it was exceptional. It was also my privilege to have served on the Board of the UT Southwestern Medical Center (one of this country's Top Ten hospitals) for the last 22 years. In both cases, the commitment to patient care is exceptional.

So, why hasn't the Mayo model caught on? One factor against quick expansion of the Mayo model is that many current doctors chose their profession hoping to earn lucrative pay, which they might not be able to do in a nonprofit clinic. But there is hope for more doctors who choose to view their profession as a "calling" working in nonprofit clinics. The incentive, aside from the exceptional reputation of places like the Mayo, is that doctors at such clinics can spend more time healing patients and less time fighting insurers.

According to Robert Frank (who is both an economist at Cornell University and co-director of the Paduano Seminar in Business Ethics at the Stern School of Business at New York University), any of the current health reform bills would encourage movement toward a Mayo approach. I'll take his word for it!