Physicians

POLICY/PHYSICIANS: In which I criticize Uwe Reinhardt, really!

Uwe Reinhardt has written to the NY Times about What Doctors Make, and Why. It’s great that they print his letter–they should be featuring a whole lot more of his stuff in comparison to their penchant for printing out of touch loonies who don’t we think we spend enough on health care. But, here’s the fact that may take some of you a moment to digest–I  don’t actually think Uwe’s entirely correct here. Here’s what he says:

In “Sending Back the Doctor’s Bill” (Week in Review, July 29), you compare the incomes of American physicians with those earned by doctors in other countries and suggest that American doctors seem overpaid. A more relevant benchmark, however, would seem to be the earnings of the American talent pool from which American doctors must be recruited.Any college graduate bright enough to get into medical school surely would be able to get a high-paying job on Wall Street. The obverse is not necessarily true. Against that benchmark, every American doctor can be said to be sorely underpaid.Besides, cutting doctors’ take-home pay would not really solve the American cost crisis. The total amount Americans pay their physicians collectively represents only about 20 percent of total national health spending. Of this total, close to half is absorbed by the physicians’ practice expenses, including malpractice premiums, but excluding the amortization of college and medical-school debt.This makes the physicians’ collective take-home pay only about 10 percent of total national health spending. If we somehow managed to cut that take-home pay by, say, 20 percent, we would reduce total national health spending by only 2 percent, in return for a wholly demoralized medical profession to which we so often look to save our lives. It strikes me as a poor strategy.Physicians are the central decision makers in health care. A superior strategy might be to pay them very well for helping us reduce unwarranted health spending elsewhere.

Uwe’s right in saying that doctors pay per se isn’t a big enough share of medical spending (around 10%) that a cut in it would make much difference to overall health care costs. And he’s also right that we should change their incentives so that–at the least–they don’t make more by running up health care costs elsewhere in the system. And I’m including in that fixing malpractice, college debt and the other issues that make physicians feel under so much stress to increase their incomes.

And of course he’s right in saying that we need to gain some support
(or at least avoid outright opposition) of physicians if we’re to
reform health care.

But there are two points in which Uwe is only partially right, which means he’s partially wrong. (Yes, I did write that!)

First, other countries have their equivalent of Wall Street, and
plenty of their best and brightest become doctors (and make a decent
living all the same, as Michael Moore found out).

In fact in the US there are over 700,000 doctors. A decent chunk of
them do work on Wall Street or for drug companies or consulting
companies, presumably in part because the money is better. But it’s
just not feasible that all doctors could become Wall Street superstars.
According to this report
there are some 850,000 people working in the securities industry as a
whole, which I assume includes lowly clerks at regional Merill Lynch
offices as well as the hedge fund guys making billions. It’s not very
likely that more than a few tens of thousands of them are the well paid
Wall Street types that Uwe thinks doctors would otherwise become. In
fact despite the huge earnings of those at the top….

The average securities salary is now 5.1 times the average salary paid
in other industries, up from 2.5 times in 1990 and 4.3 times in 2003,
according to a recent report released by the New York state
comptroller….

And
five times other industry’s wages is not a millions miles away from the
average physician’s earnings compared to the average workers.

I admit that’s a crude analysis, but suggesting that most physicians
could trade in the stethoscope for a multi-million dollar Goldman Sachs
paycheck is stretching it. So I’m not sure that’s the right comparison
to make. After all perhaps their alternative is to become lowly-paid
professors of economics?

Secondly, and more importantly, Uwe of course knows but doesn’t
mention the most important part of physician demographics in the US. We
have a huge over-preponderance of specialists who both earn way more
than primary care physicians, and use considerably more resources. Of
course, this has been demonstrated at nauseam by two (of the very
limited number of) health economists who could be mentioned in the same
breath as Uwe–Victor Fuchs and Jack Wennberg.

Both have shown that the more specialists in an area the higher the intensity and cost per capita of the care that’s delivered there. Wennberg’s disciples have gone on to show that not only does this lead to more care, it leads to worse care.

What’s the rational answer?  Do what most other countries do and
restrict the amount of specialty positions available. Instead insist
that most physicians focus on primary care which is both cheaper to the
system and more cost-effective. Of course, doing that would be better
for the system overall, but it would be worse for individual
physicians–or at least for their incomes. It would though of course be
better for the taxpayer, who is funding the vast majority of that
specialty training. (You thought we had a free market? Don’t make me laugh!)

So paying physicians to spend less money elsewhere in the system is
a good start, but for real success in cost containment and improving
the value gained from health care spending, we need to fundamentally
change the supply structure of the physician workforce.

And whatever Uwe says, for many physicians–and of course the
medical and business infrastructure of hospitals, AMCs, and suppliers
that surround them–that is liable to be a painful process.

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Celeste Mulry Baldwin,PhD,APRNWilliam RosenblattDr. William Traversakakajoe blow Recent comment authors
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Celeste Mulry Baldwin,PhD,APRN
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Celeste Mulry Baldwin,PhD,APRN

This is an important dilemma in healthcare that has been slowly occuring over time, similar to the aging population totals. However, as an advanced practice nurse and clinical graduate faculty person I daily observe the operation of a specialty physician office and find that this work is not profitable for the physician because as you have addressed, there are student loans to pay off, costs for purchasing a practice to pay off, and with the low reimbursement rates at times 50% of the practice may not pay a dime. Many phyicians buy practices that provide them with minimal tools to… Read more »

William Rosenblatt
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William Rosenblatt

Mr. Reinhardt states that physicians can justify their high compensation because smart people like themselves can just as well get a job as a Wall St. analyst making far more money. The skills to land at a top 5 MBA program and survive the cutthroat process of breaking in to Wall St. are not the same skills as becoming a doctor. In fact there are about 750,000 physicians, but only about 50,000 Wall St. workers making more than $400k per year. And they don’t last long. Physicians don’t lose their jobs. So it is naive and silly to suggest otherwise.

Dr. William Travers
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Dr. William Travers

There are 32 industrialized nations on earth and 31 have a single-payer system. The US stands alone in relying on the private sector to provide our healthcare. The result? Americans spend 16% of GDP on health care whereas France, Germany, Japan and Canada spend about 8%, or half of what we spend per capita. That amounts to about $1.1 trillion each year in waste, money we would save if we moved to a national health care model. This total far exceeds the entire discretionary part of the Federal budget. We need a single payer system or we are doomed to… Read more »

akaka
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akaka

Without going into too much depth on the rest, the government considers physicians to be independent businesses and punishes perceived “collusion” among them to an absolutely ridiculous extent. There are cases where there were two groups of physicians in a given specialty in an area, the predominant insurer cut reimbursement, both groups dropped the insurer and were then found guilty of anticompetitive practices even without collaborating together. Any attempt to strike by physicians (ignoring the issue of the relatively small number of employee ones) would be illegal collusion and would get destroyed by the courts.

anoni
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anoni

At what point does a provider decide to stop accepting insurance or medicare as payment: How hard is it for a doctor to establish a cash-based customer pool that can outperform just accepting medicare/insurance? Of urban, surburban, or rural markets where is it easiest to establish the business model? And then what about the specialty vs general? Generalist like concierge is just cash up front, but specialists perhaps need just fewer high-fee customers. What prevents providers from achieving this type of cash flow, revenues? Finally, what prevents providers from just declaring strike, accepting cash-only payments? (are NPs/residents able to prevent… Read more »

joe blow
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joe blow

Matt Holt just pulled a 180 on this. his stance has always been that the AMA was trying to create a cartel on the number of doctors and artificially restrict their numbers to inflate incomes. Now he does a 180 and actually claims that more doctors = HIGHER healthcare costs, not lower. Furthermore, he advocates FEWER DOCTORS by slashing residency slots for specialists. Maybe he finally woke up to what I’ve been saying all along: healthcare is not a free market and increasign the number of doctors makes costs HIGHER, not lower. Witness New York City, the highest doctor/patient ratio… Read more »

joe blow
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joe blow

“what technically prevents Walmart from creating residency slots?” You need a hospital to have residency slots. Last time I looked Walmart was not in the hospital business. “or for that matter what prevents a specialty hospital from creating slots? it seems like the cheap labor might offset any requirement costs- like maybe charity care?” Specialty hospitals already do have residency slots. “Are the residency slot just “cartel style, good-old boy system”, or is it cost prohibitive somehow for the market to train people to meet demand.” Residency slots are funded by the federal government via Medicare. The balanced budget amendment… Read more »

Suvi
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Suvi

drthom, About the problem of attracting students to primary care: two small points. Some years ago I heard an elderly dentist talking to a much younger one about how it used to be he had to send patients out for much specialty care. But more and more, as dental technology improved, he found he was able do more difficult tasks himself. And isn’t the same going on in medicine? For example, in matters of cardiovascular health, so much more can be done in prevention now. So less need, relatively speaking, for the cardiologist, at least among the under 65 crowd.… Read more »

akaka
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akaka

What Uwe did not have space to go into and you apparently do not recognize by blithely saying other countries have Wall Streets and competent doctors is the relative pay of professionals in each country. It is not just doctors who make substantially more here than they do in other countries. So do lawyers and MBAs (who, strangely, you never hear anyone demand take a pay cut). Coupling this with our postgraduate professional education system, it’s hardly unfathomable that cutting physician salaries (and the ensuing prestige hit/physician complaints all over the media) would convince desirable applicants to simply apply to… Read more »

anoni
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anoni

what technically prevents Walmart from creating residency slots?
or for that matter what prevents a specialty hospital from creating slots? it seems like the cheap labor might offset any requirement costs- like maybe charity care?
Are the residency slot just “cartel style, good-old boy system”, or is it cost prohibitive somehow for the market to train people to meet demand.
thanks

bev M.D.
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bev M.D.

Peter;
Why don’t you read it once you find it in the fiction section? I will, too, and then we can have an intelligent discussion.

Peter
Guest
Peter

“In reality it’ll all be through price.”
“The Medical Home or Gatekeeper model should look increasingly attractive on a price basis, even (especially?) to patients. Laws in some states may have to change to (re)enable this; the free marketeers have a point on this score. Of course, none of this moves towards universal coverage.”
The separate but equal argument?
“This book offers fundamental change and issues a plea to the nation’s physicians to lead the way.”
Book must be in the fiction section.

Larry Nelson
Guest

We also need to fix the health care system as well. As a patient and a former employee (I used to work at a famous hospital on Long Island) of the health care system – I have first-hand knowledge on how the care system works in America. Close to 100,000 people die each year in hospitals due to medical errors. The hospital I worked at had too much administrative waste. There was endless paperwork in processing patient information. Many of the positions, especially in the non-medical areas, were filled through nepotism. Many of the supervisors and mid-level managers at this… Read more »

bev M.D.
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bev M.D.

Merrill;
Actually, this book was reviewed in the June 28, 2007 issue of the New England Journal of Medicine. The concluding sentence of the review says;
“This book offers fundamental change and issues a plea to the nation’s physicians to lead the way.”
It’s on my list to read.

Merrill
Guest

Your final comment about needing a reorganization of how medicine is practiced, and how this will be painful for many physicians is spot on. I wonder why Arnold Relman’s book, “A Second Opinion,” which discusses this issue in depth, has received no attention in the press or even the specialized health care journals.