Should we pay doctors to ignore patients?

by on July 25, 2008 at 5:19 am in Medicine | Permalink

Here is one interesting proposal for reforming Medicare:

Each fee is meant to reimburse the doctor for the time and skill he
or she devotes to the patient. But it is also supposed to pay for
overhead, and this is where the problem begins. To Medicare, a doctor’s
overhead (or “practice expense”) includes such items as rent, staff
salaries and the cost of high-tech medical equipment. When the agency
pays a fee to a doctor who has performed a CT scan, it is meant to
cover some of the cost of buying or leasing the scanner itself.
Services using more expensive equipment generate higher fees.

…The cost of a CT scanner is fixed, but a doctor earns fees each time it
is used…a scanner becomes highly profitable as soon as
it’s paid for.

In contrast, the doctor-patient visit, which
involves no expensive equipment, offers no significant profit
opportunity. So the best way for a doctor to make money in his practice
is not to spend time with patients but to use equipment as much as

Get this:

Doctors who do their own CT scanning and other imaging order roughly
two to eight times as many imaging tests as those who do not have their
own equipment, a 2002 study by researchers at the University of North
Carolina found. Altogether, doctors are ordering roughly $40 billion
worth of unnecessary imaging each year…

So what’s the solution? 

For their time, doctors should be given a stipend for each of their
patients. It should be larger for patients with complicated medical
conditions and smaller for those who are healthy, and it should not be
influenced by the number of services or tests a doctor orders.

overhead, doctors should be paid an amount that covers the typical cost
of tests and treatments needed to address a patient’s condition. This
strategy – known as “case rate” or “prospective” payment – is standard
in American hospitals. The hospital receives a payment for dealing with
a patient’s underlying condition rather than individual payments for
each test and treatment. This approach offers no incentive to run
unneeded tests, and it has been credited with substantially slowing the
growth in Medicare payments to hospitals.

Of course this penalizes patients with chronic conditions, namely those which show more complications over time than average for the specified class of ailment (e.g., Bill Walton’s foot).  At some margin of unexpected complicatedness, the money runs out and people find it very hard to get their doctor on the phone or for an appointment.  If the relevant alternative is death, this policy is relatively egalitarian; if the relevant alternative is a smooth recovery, this policy is relatively inegalitarian.

I believe this idea deserves serious consideration.

Addendum: Via Mark Thoma, here are other ideas.

1 joe July 25, 2008 at 8:02 am

one set of “doctors” that have their own equipment and over use it are chiropractors.

2 DK July 25, 2008 at 8:34 am

An easy test for each of these ideas would be substitute “teacher” for doctor and “student” for patient. Fixed payments? tried that, led to legislation mandating including special ed students without enough funding. Paying based on average test scores? Tried that too, look at no child left behind for all the problems with that one. Random assignment to schools instead of choice? “Random” has been captured by high real estate premiums to buy houses in the neighborhoods eligible for the best schools. Geography will have to be considered too in assigning HMO’s.

3 dWj July 25, 2008 at 8:47 am

For most things we buy, we pay for a final product. We don’t pay Ford a certain amount for its steel, a certain amount for its R&D, a certain amount for its capital costs — we pay for a car. If Ford builds cars for which consumers are willing to pay more than Ford’s expenses, Ford will do well; if not, then not. That’s their business, and is supposed to be their field of expertise; they should figure out how to build the best (as defined by consumers) car the most efficiently, and not simply build it in some plausible fashion and imagine the consumers will reimburse them.

Come to think of it, I wonder whether Ford’s current managers are doctors.

4 Rich B. July 25, 2008 at 9:15 am

Wasn’t this the whole theory about massive savings from switching for “pay for service” to a “capitation” with HMOs in the 1990s?

Didn’t it not work in the 1990s?

Won’t the same reason it didn’t work for HMOs in the 1990s make it not work for Medicaid today?

5 Rob July 25, 2008 at 9:37 am

Why don’t we just give the subsidy to the patient, and then let the patient purchase whatever medical care he/she wants?

6 Kevin Postlewaite July 25, 2008 at 12:46 pm

Another option to deal with this is that we could just nationalize all of the expensive medical equipment!

7 young girl July 26, 2008 at 12:34 am

After having lived overseas in a couple of countries that offer society wide medical care paid for by taxes and the government. I can’t say that I ever saw any serious downsides. That may seem strange coming from someone used to the US system but I’ve had less health care coverage and more hassle to get in to see a doctor (and I’m quite healthy in general with no cronic conditions – mostly injuries and infections) than I ever had overseas, even as a guest. Simple, quick and effective. I do not understand the motivations of doctors in the US.

An example, I went to the doctor one week. I had been dealing with a swollen pinky finger. Turned red, puffy, then white then started to turn purple at which point I went to the doctor (about 5 days of this). It was pretty obvious I had some sort of tissue infection. What does the doctor do? Orders blood tests to make sure I don’t have gout! Think about this, pinky finger, healthy young woman, doesn’t drink much or often, exercises, reports no injuries to the finger, etc. etc. Boy does everyone who looks at her finger say – wow what an infection.

Doctor refuses antibiotics, sends me for blood tests and to come back in 4 days. I go back. Pinky finger is now fully purple, am in serious pain and cannot work because I cannot type. Doctor finally, after an argument, orders antibiotics. The strongest antibiotics they have at a really high dosage because it’s such a bad infection.

Someone please tell me our system isn’t broken and this was just a really stupid doctor? But no, from my limited knowledge that doctor just got paid for two office visits from my insurance company when one of less than 15 minutes should have been all that was needed.

With a well educated and well-informed society (much improved over 20 years ago) one would begin to think that patients with a higher understanding of their own health and body care would need less time with a doctor unless a complicated or cronic condition arose in which situation most people that have access to information would be asking their doctor for advice because they don’t actually know what is wrong with them. But no, we’re still the stupid masses that don’t know much about our bodies and have to pay the price – both in lost work and in higher insurance premiums because doctors are the gate keepers to drugs that will help. (This is not an advocation for unregulating drugs nor for overprescription of antibiotics.)

8 Alex July 28, 2008 at 7:51 am

Chiropractic has a long history of great doctor-patient relationships. Although many of my colleagues out in the field have overused modalities in the past, the new push towards evidence-based practice is starting to weed those individuals out as studies have shown that most modalities such as ultrasound and STIM are not effective over typical chiropractic adjustments.

9 meter July 28, 2008 at 1:28 pm

Perhaps this kind of billing is unique with regard to hospitals and Medicare.

10 Sal Paradise July 28, 2008 at 9:24 pm

young girl,

Sounds like the ‘wonderful’ socialized Japan healthcare system. If you think the US system is bad, try going for care in Japan. I waited with a 104 ºF fever for 2 hours before being able to see a doctor (that was awesome) despite having had my temperature taken when I went in the door.

I have never had anything but good experiences in the US, and nothing but bad in Japan. Anecdotal evidence to be sure, but most Americans I know here have experienced much the same. Long waits, poor level of care, unnecessary tests, and outdated shitty medicine in insufficient doses.

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