My Problems with the Business of Medicine

My family reads what I write here and I struggle sometimes with that knowledge. Exactly how free am I to write stupid things and reveal embarrassing secrets? I handle this in the style of our times: denial. Sometimes, though, I am reminded that they are out there in Al Gore’s internet when they send me their opinions about my writing. After receiving the following email, I realized that instead of writing about a small thought that belongs in a larger argument, I should have just written the whole thing.

Where did you get the idea that Universal Health Care meant that the Doctor was not compensated for his services? My understanding is that you (the Doctor) would be compensated for your services, at a possibly reduced rate the same as Medicare and Medicaid compensate the Doctors. While I know this is not the full amount, you are under no obligation to accept the patient in the first place. There are Doctors all over this country that do not accept Medicare patients for this exact reason. However, if you hope to have Hospital privileges, the Hospital’s policy will trump yours.

Just curious. Mom.
For some background, she is responding to my post No Right to Health Care. I wrote it because the more I read about Medicare, Medicaid, and the “funding” of physician services (hat tips to KevinMD) the more frustrated I get. It’s been happening a lot lately. It’s the frustration of having to enter a system that (in my mind) shouldn’t be allowed to function the way that it does. Supply and Demand curveI’m a strong believer in markets. I believe in the meeting of supply, demand, and value complete with a fulminate crush on Dagny Taggart. These days, I’m frustrated over that fact that the value of the service that a physician provides is not strongly coupled to what he can charge, and instead his recourse is to make his salary through volume. I started writing this during exams, so in that spirit I offer you a medico-economic vignette.


The value of having access to a physician (let’s say you have diabetes) that can take an active role in your care, help you correct some mistakes that are leading to uncontrolled glucose levels, and not only extend your life but help you extend it without the complications of the disease is incredible! But as only one man, the number of people for whom he can do this is limited. His service is not scalable.

Even if this person has their own insurance to pay for this care, that payment is likely standardized (we pay $25 per check-up, $40 for new patient consult) and based off of the standardized prices from Medicare/Medicaid. Even if the patient isn’t on these government programs, he is still affected by their prices. So our doctor has little control over the price he can charge.

For a patient with options (amazing Dr. A or mediocre Dr. B), her power in the market is to choose which physician gets her business. Dr. A’s power in the market is to provide a better service so that patients will choose him over Dr. B. But this is only an advantage so long as 1) Dr. A has the space in his practice to accept this patient and 2) there aren’t enough patients for Dr. A and Dr. B to both have full practices. If there were too many patients for Dr. A and Dr. B to handle, then it wouldn’t matter which was better since everyone needs to see a doctor (in our two doctor microcosm) and both practices are full.

Doctor visitNow Dr. A is working full time, handling as many patients as he can in a manner that is still excellent, and he is not making enough money (under the fixed pricing) to pay the bills for his practice, malpractice insurance, employee wages, and to then pay himself a wage befitting someone excellent. Because he cannot change what he charges, he must make it up in volume. The only way for him to increase his volume is to drop the quality of his service and speed up his appointments. He does this.

ViseHis patients are less satisfied on average and he is less satisfied on average. But he has to pay the bills and he has to pay himself a salary that makes running his own practice more attractive than quitting for hospital work, so he continues with the higher volume. The prices do not change with inflation and the vise tightens. He is forced to do cosmetic procedures on the side like Botox injections and instead of popping a cyst on a teenager’s face, he lances it so it will qualify as a “procedure” (which pays better). He makes Friday “Stress Test Day” and has every one of his Congestive Heart Failure patients come in for a complete workup because insurance pays well for this. He didn’t get into medicine to be fixing wrinkles or to spend his time figuring out ways to game the system of physician reimbursement. He just wants to do his job, at his price, and help people in the way that he finds rewarding.

Now his insurance premiums have gone up. Unlike his pay, the increase in insurance premiums has kept a healthy lead on inflation. If he continues running his practice this way, he’ll go bankrupt and lose it. He doesn’t want to even think about what would happen should one of his patients sue right now. It would ruin him. So he decides to opt-out.

The Personal Physician (concierge medicine)

He’s heard (everyone has) about concierge medicine and “cash only” clinics. Opting Out means no more worrying about Medicare codes and billing procedures. No more being second-guessed by insurance companies saying that they will not reimburse for a CT because they don’t feel it was indicated (no, they didn’t go to medical school and no, they have never seen a patient). No more having to worry about a piece of legislation that would cut Medicare reimbursement by 5%.

Gulliver bound by LilliputiansOnly he’s trapped. In the interim of dropping his Medicare patients, seeing to it that his billing is changed and that no new claims are filled in the next two years, and educating his patients about the changes, his malpractice insurance premiums continue to consume what’s left and he has no chance for air. Gulliver himself couldn’t escape the net of obligations that are binding him to this system and taking away his freedom. In the time it takes to change, he’ll be bankrupt anyway. He closes the money-sink that was once his shining creation. He locks the door on his practice.


Right now, this is what medicine looks like to me. Terrifying, right? I have hopes on hopes that I am wrong and that there is a way to avoid Dr. A’s fate (maybe I’m awfulizing). And I know that there are plenty of doctors running practices, making money, and living comfortably but unless they are completely free of the forces that took down Dr. A in my example, they’re just the last line before the firing squad. Even if I manage to escape it (as physicians do by having concierge or cash-only practices from the start), I don’t want any other physicians to have to deal with it. It’s unjust.

I know that I don’t have the whole story and that a few times in my example it might seem like I’m getting ready to fight a windmill, but I do want the whole story and am desperate for it. This winter break I’ll be reading books on the Health Care system for leisure! I want this information before I’m going to need it. I don’t know about others, but my medical school doesn’t have any sort of class or series of lectures to prepare us for the business of medicine and from what I’ve heard, you’re supposed to just sort of “pick it up.” No thanks.

All of this has me seriously considering (I’ve all but paid the registration fees) to take time off from medical school (or between graduation and residency) to get an MBA. These fears have also made me want to have an active role and voice in stopping the machine that’s eating away at the livelihood of physicians (the potential of a well-read blog). There are many heads to the Hydra, and if that means changing Medicare/Medicaid/Insurance to instead be a promise from the government or insurance company to fully reimburse a physician (based on his established prices) or taking the verdicts of malpractice cases away from citizens and putting them in the hands of medically-trained judges in some sort of specialized Health Court, so be it.

You need look no further than the field of cosmetic surgery to see how this should all be working in the first place. If he had been a surgeon, Surgeon A would have the freedom to change his patient volume and price in response to increased demand for his excellent services. Mediocre Surgeon B would have less demand at the same price, but could increase that demand by lowering his price and then still make a good wage through an increase in volume. While Surgeon A will always have the ability to make more than Surgeon B, they both have the freedom to make what they’re worth in the market of cosmetic procedures. Patients win under this system as well. They have the power to trade the outcome/risk of the procedure (as it differs between surgeons A and B) against the price, and may choose the increased risk of having an unfavorable Rhinoplasty under Surgeon B (the risk is acceptably small to them) for a savings of $5,000 on the procedure. And by participating in this market, the patient’s demand ensures that there will always be a supply of surgeons vying for their business.

Cosmetic surgery is this wonderful exception because the majority of it is not governed by the pricing of any organization other than the market for the service.

I wish all of medicine was operating in this way and am not excited that it isn’t. I do not want to enter a system where my hands are tied (price control outside of market forces), I’m blindfolded (no business education), and I have no power to change it. It removes incentives for physicians to do better (as does any ceiling) and I think everyone is worse off (except the insurance company).

Therefore, since brevity is the soul of wit, and tediousness the limbs and outward flourishes, I will be brief: that’s why I was upset about the idea of a right to Health Care the other day. I believe that if legislation was ever passed to make this happen, it would be underfunded and the taxpayers wouldn’t pick up the tab (as paying for things is politically unpopular). The coins would instead come out of the physicians’ pockets, squeezed with a few more turns of the screw. And who are physicians to complain? We’re in it to help people so why would we care about the money? Isn’t it our duty and moral obligation to provide care to the sick and injured, regardless of ability to pay?

And my answer today, as it was yesterday, is no. It is shortsighted to think that ignoring the value of a service results in the best for anyone or that physicians feel obligated to provide something that is valued (in theory) but not rewarded (in practice). I believe in the opposite approach. Paying attention to the value of a service and rewarding the difference gives everyone the incentive and ability to do better and gives the consumer better options for obtaining it. If you still don’t believe me that this matters and that physicians do care about the rewards of their service, then go to any medical school on Graduation day. Look to your left, look to your right. Neither of them will be going into Family Practice.

P.S. For any physician that reads this, shakes his or her head and then mumbles, “You. Idiot.” please take the time to tell me what I’m missing. I cared enough and it bothered me enough to write this long thing, so it goes without saying that I would want to know what’s right more than I care to avoid the embarrassment of being publicly wrong. I know I’m over my head here, so please use the comments section to give me the education that I so sorely need.

Cheers, and thanks for sticking around till the end. topher.

5 Responses to My Problems with the Business of Medicine

  1. #1 Dinosaur says:

    Please! You need no “education”, my friend. You hit the nail on the head. Every last piece of your analysis was completely accurate, not to mention beautifully written.

    Don’t bother with the MBA. That’s another racket entirely; all it does (so they say) is open up management opportunities, but those by definition have nothing to do with practicing medicine, and will suck your soul as surely as the rest of the events you have so neatly laid out.

    Suggestions: frustratingly fewer than you’d think. Don’t worry about an EMR; the actual financial return vs the cost is miniscule. Do your own billing in-house; it’s not really as difficult as some say. Work with as few staffers as you possibly can. (Personnel will be your biggest expense.) Strongly consider a cash-only practice from the git-go. It’ll take you longer to get up and running, but you’ll have a firm base out of the reach of third parties who desperately want a piece of you.

    Hard as it is to believe, though, the rewards remain real even as we struggle with the finances.

  2. Rob says:

    I disagree with Dinosaur (we often do).

    What you are addressing is the issue of P4P. If we were paid by our quality and not just quantity, we would be happier. The problem is that quality takes more time and, when done right, more money up front. I don’t agree with the insurance companies determining a definition of quality and pinning it on us (as most fear P4P will become). I think we physicians need to control the game, and EMR has been a wonderful way for my practice to accomplish this. We have very high quality (by many objective measures) – in some cases over 3 times the national average. Yet my income is very high and I work only 4 days per week. How? Our EMR is the #1 reason for this. It allows us to adopt systems that promote quality without burdening us with the work of keeping track of everything.

    I have a hard time with Concierge medicine because I feel an obligation to my Medicare and Medicaid patients. While it would clearly be what is best for me financially (I could make far more money than I am now if I converted my practice), I would be basically offering good care to the rich, which is not what I went into medicine for. Concierge medicine works wonderfully in the individual physician setting, but it fails miserably when systematized. That is why poor people don’t get cosmetic surgery. While this is OK with cosmetics, we don’t want a system that says diabetics only get good care if they are rich.

    I do think the MBA is a waste (Dinosaur and I do occasionally agree). It does not help if you go into regular practice. My suggestion is to find innovators who are excelling at medicine in both ways. I have many friends with stories similar to mine – running the system so well that finances are no longer a reason to avoid improving quality. Cash-only is financially wise, but I would not want to give up the social benefits of helping the poor and elderly. There is no way I would start a practice and not do EMR – the benefits are incredible if done right.

    Just keep your attitude of humility. Don’t think you know a lot and go visit practices that are doing what you want to do. They do exist.

  3. […] Topher at The Rumors Were True ponders what someone coming out of medical school should to to best fit into a broken system. Do you pick and choose what insurances (if any) to accept? Do you get an MBA? […]

  4. Adrian says:

    Looking back, that was long! However, it was interesting and insightful. I don’t know the American system well enough to suggest anything, but going on the information you’ve given, I can identify with your views and concerns. I do agree with Rob, and he’s right about you having the right attitude.
    You’ve got the right idea in self-education regarding the health care system, because surely it is possible for a physician to earn his worth without compromising his level of care – you just have to find it.

  5. […] winter break, I went to my Uncle Neurphysiologist for some advice. As you may have gleaned from this story, I’m about ready to give up on the idea of practicing medicine and to start devoting my life […]

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