Paying Doctors

There’s been a lot of talk lately about changing how physicians are paid as a part of health care reform. Many have recommended that pay for primary care physicians be increased, arguing that this will increase the number of doctors practicing primary care, leading to higher quality care along with lower costs. As a primary care physician I totally agree with this. There have also been bad ideas raised, such as returning to capitation despite how badly this idea has failed in the past. Today The New York Times has a round table on physician reimbursement.

Elliott S. Fisher, a professor of medicine and director of the Center for Health Policy Research at Dartmouth Medical School, recommends:

One approach that has shown some early promise is to combine the fee-for-service with “quality bonuses” and “shared savings” payments when they reduce spending growth for all of their patients. Doctors, hospitals and society should realize that slowing spending growth would not require dramatic cuts in income under a system where providers would be rewarded for better care, not just more care.

In general that is what some are now trying, but so far such ideas have been poorly implemented. One major problem is that it is hard to measure quality and tell what is really going on in all the offices around the country. At present incentive payments are so low that it often isn’t worth the administrative expenses to submit the data to qualify. General measures of quality often do not apply in specific cases. While practice guidelines are often written for a specific disease, in the real world patients have multiple problems and sometimes the recommended care for any specific condition is not the appropriate care for the individual patient.

Sometimes insurance companies will try to analyze whether a patient is receiving all the appropriate medications based upon diagnoses submitted. The entire concept is flawed as often diagnosis codes are used for suspected ailments to justify testing, and sometimes one person seeing a patient enters a diagnosis into the system which is simply incorrect. Even if they have the correct diagnosis, particular medications might be not be tolerated by certain patients, or a patient might simply refuse to take them. Sometimes the actions of doctors to help patients turns out to be counterproductive with regards to quality measurements. We might give a patient samples, or switch the patient to a generic medication they can receive for less than their insurance co-pay at certain pharmacies. To the insurance company it appears that the patient is not receiving a needed medication.

Steffie Woolhandler and David Himmelstein, associate professors of medicine at Harvard Medical, note that every system has its flaws:

There are a variety of bad ways of paying doctors, but no particularly good ones. Fee-for-service health care rewards the overprovision of care; capitation (a set monthly fee per patient) rewards underprovision; and salaries reward just showing up. The minority of physicians (and hospital administrators) who are motivated mostly by money will find a way to game an incentive system rather than do the hard work of providing excellent care.

Even paying doctors based on quality measures (using data from medical records that the doctors themselves create) can be fudged.

They support a single payer system, noting the tremendous cost savings on administrative expenses, but that still leaves the question of how to pay doctors unanswered.

Liam Yore, an emergency room physician, points out a serious problem with the current system:

The underlying cause, however, is a bias within the physician compensation system that extravagantly rewards surgical procedures performed compared to “cognitive” services like diagnosis and medical management. In the E.R., for example, sewing a facial laceration pays far better than accurately diagnosing a heart attack. The same principle applies to any procedure — from angiograms to colonoscopies.

The predictable consequence is that physicians gravitate toward lucrative procedural specialties. They perform more and more procedures, using expensive new technologies, driving costs ever higher.

Meanwhile, office-based primary care doctors struggle. The compensation for an office visit is a tiny fraction of that for the simplest procedures. The family physician must rush from patient to patient just to keep pace with static or diminishing reimbursement. Fewer and fewer medical students are going into primary care.

What we need to do is rebalance physician compensation away from procedures and toward primary care. Surgeons can easily earn three to five times the average salary of a family doctor. The compensation for surgical procedures should be reduced, and the savings realized should be applied toward increasing pay for primary care physicians.

Better-compensated primary care specialties would attract more doctors who would be able to spend more time with their patients. They would require fewer expensive diagnostic tests like M.R.I.’s and rely less on specialists. Accordingly, the use of expensive and invasive procedures would decline. Prevention, wellness and chronic disease management would be encouraged: enhancing quality and patient satisfaction, but at a far lower cost.

Primary care is the linchpin to successful health care reform. Ignore it, and reform will fail. Make it an appealing career choice, and the odds of success increase greatly.

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  1. 1
    Fritz says:

    As the study notes, there are no good systems.  As we move toward a governmental health care system, pay will be set by political power.  That will be entertaining.  The different specialties would be well advised to buy Congressmen as soon as possible.

  2. 2
    Ron Chusid says:


    Do you really think these issues aren’t already set by political power? It all comes down to speciality organizations lobbying a handful of large insurance companies which dominate the field as well as the government.

    The difference is that we are getting the more rational decisions from the government on this. While many have advocated increasing pay for primary care services relative to pay for procedures, Medicare has done the most to move in this direction. Even the move by Medicare in this direction has been limited by lobbying from speciality and surgical associations but they have done far more to reduce the discrepancy than other payers.

    When speaking of rationality and Medicare reimbursement, I should throw in that they do need to throw out the  highly flawed formula for annual changes. Everyone agrees it is flawed and every year Congress votes to override the formula, but it is time to just throw the formula out.

  3. 3
    Fritz says:

    Ron, I’m just saying that your organizations had best shift their lobbying dollars from working the insurance companies to paying off Congressmen.
    Just looking out for your interests.  🙂

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