August 14, 2013 6:39 pm
America’s doctors, like Wall Street, need a cultural shift
By Gillian Tett
How can America cut its healthcare costs? The question is generating political heat in Washington right now. No wonder. Healthcare spending now stands at an eye-popping 17 per cent of US gross domestic product. And next year, President Barack Obama’s divisive “Obamacare” reforms will take effect, extending insurance to a much wider part of the population than ever before.
But as politicians trade ideas (and insults) about cutting costs – with proposals ranging from better use of information technology through to insurance exchanges – there is another issue that needs to be discussed: doctors’ pay.
ON THIS STORY
- Obama enlists poll veterans to roll out reforms
- Obama attacks Republicans over healthcare
- States wage war of words over ‘Obamacare’
- White House hails benefits of ‘Obamacare’
- Changes to US healthcare law raise alarm
ON THIS TOPIC
- Global Insight Republicans enjoy best of both worlds on Obamacare
- Doctors weigh use of online medical records
- Obamacare’s online market put to test
- US court rules for Obama on healthcare
In recent years, doctors in America have received relatively high levels of remuneration, running about 60 per cent higher than the industrialised world average, according to data from the Paris-based OECD. But the absolute pay level is not the key issue at stake. What really needs to be debated is the system of incentives.
Most notably, in recent years about two-thirds of US doctors have been paid according to a “fee-for-service” system, meaning that they receive remuneration every time they see a patient or provide a treatment.
This differs from the pattern in much of Europe or places such as Singapore, where doctors tend to receive a base salary (which may then be topped up with private practice). It also differs from a third approach, called capitation, which pays doctors according to the health of the total population.
Until recently, America’s doctors generally assumed that FFS was superior to the other two systems, since it creates tighter relationships between doctors and patients, and incentivises the medical staff to work hard. It also chimes with free-market American entrepreneurial values; or so the argument goes.
But FFS has a big downside, too. It can create an incentive for doctors to make potentially unnecessary, duplicate treatments. It reduces incentives for collaboration or cost-sharing. In a sense, it can create cultural patterns not dissimilar from those seen on parts of Wall Street: just as an “eat what you kill” bonus system has encouraged financiers to do unnecessary deals and trades, an “eat what you treat” medical system can tempt doctors to offer excessive, duplicate treatments.
It is difficult to measure how much this has or has not actually raised healthcare costs, since there has been surprisingly little research. Some doctors deny that it has a significant impact, compared with the bloated costs of, say, administration. “While there are certainly some doctors providing unnecessary procedures due to fee-for-service, it is extremely unlikely that this is the root of our healthcare cost problem,” says Stephen Kemble, a physician. But other doctors disagree. And analysis of international practices conducted 15 years ago concluded that “payment by salaries is associated with the lowest use of tests and referrals compared with FFS and capitation” and appeared to offer much cheaper services.
Another way to look at the issue, though, is to peer at the (few) medical centres in America that have shunned FFS. Take the Cleveland Clinic in Ohio. Doctors there have chosen to work under a salary-based system for some time. This has encouraged much tighter patterns of collaboration; so much so that it has also enabled the centre to reorganise its doctors into more efficient, patient-centred units.
As a result, levels of patient satisfaction have risen and – at the same time – Cleveland has drastically reduced duplicate procedures. Similar tales are found in places such as the Mayo Clinic or Kaiser Permanente group, which also shun the FFS model. Or, as Toby Cosgrove, head of Cleveland Clinic, says: “We have to recognise that people do what you pay them to do – it’s about incentives. If you pay doctors to do more of something, then that’s what they’ll do. If you put the emphasis on looking after patients, they’ll do that.”
Can this idea spread? It has, to some degree. The experience of groups such as Cleveland and Mayo has helped shaped the design of Mr Obama’s healthcare reforms, which encourages doctors to operate more collaboratively. Other hospitals are looking at copying elements of the Cleveland approach. Attitudes are also shifting among medical students.
A survey by Merritt Hawkins found that: “A great majority of final year [student] residents would prefer a straight salary or a salary with production bonus in their first year of practice.” That is partly because debt-laden medical students want stability – and do not want to navigate the opaque complexities of the insurance world.
But getting the mainstream medical establishment to embrace a shift away from FFS will be almost as tough as persuading Wall Street bankers to overcome their addiction to bonuses. It is a timely reminder of why the task of reforming healthcare will require a cultural change as much as any political diktats or grandiose economic plans.
Copyright The Financial Times Limited 2013. You may share using our article tools.
Please don’t cut articles from FT.com and redistribute by email or post to the web.
You may be interested in
- Prosecutors strike unusual deal with ‘London whale’ 353
- State of emergency declared as forces storm Cairo protest camps 419
- Apple/Icahn: High-hanging fruit 77
- Finance: Balance sheet battle 244
- The crude things that can go boom 63
- A spot of growth will not take the heat off François Hollande 176
- Private schools are heading for a crunch 459
- Android’s momentum eats into Apple’s bragging rights 425
- China is the key to saving endangered species50
- Uncertainty for corn after US biofuel shift 50
- Egypt’s democracy dies a violent death 85
- Egypt takes a step back towards bloodshed and tyranny 473
- Central banks struggle to convince investors 94
- Rational about superstition 95
- Joan Edwards – a curious case of a generous donation 30
- Concerns grow over Indian industrials’ debt burdens 42
- Telefónica wins deal to provide smart utility meters in UK homes 21
- EM de-coupling story was always over-hyped36
- Technology: Vanity or visionary? 380
European doctors can run their offices with one staff person. Americans need a whole team, including specialized payments and insurance staff, mainly due to the expensive bureaucratic burden imposed by the insurance industry. The external costs imposed by the American insurance industry are totally ignored, while the direct costs are barely mentioned. Add on the huge cost of making hospital administrators rich from coast to coast and it’s no wonder care outcomes badly trail costs in America. Short version: we Americans throw away much of our money on useless and/or overpaid labour in the medicine business.
‘How did you come to conclusion that the medical publications are colluding in conspiracy with agro and pharm industry’?
A recent article finds the opposite (http://www.paecon….ssue61/Offer61.pdf, p. 90)
‘A study found that 10.9 percent of articles in the New England Journal of Medicine were ghost written in this way, 7.9 percent of articles in the Journal of the American Medical Association, and 7.6 percent in The Lancet (Wilson and Singer, 2009; Singer, 2009; US Senate Committee on Finance, 2010). In psychiatry, enterprising doctors seek to define new disorders which are treatable by drugs. Ordinary social attributes, like shyness or sadness, increasingly become medicalized (Healy, 1997;Lane, 2007). Richard Horton, editor of The Lancet, has defended non-disclosure of conflict-of-interest, on grounds that it has become impossible to prevent. He preferred the term ‘dual commitment’. This position was contested by the editor of the British Medical Journal (Horton, 1997; Smith, 1997). Marcia Angell, for two decades the editor-in-chief of the top medical journal in the United States, The New England Journal of Medicine, has written that ‘It is simply no longer possible to believe much of the clinical research that is published, or to rely on the judgement of trusted physicians or authoritative medical guidelines. I take no pleasure in this conclusion, which I reached slowly and reluctantly over my two decades as an editor’ (Angell, 2009; Healy, 2012).’
Thank You for your explanation Mr. Nassim. The distinction between treatment and prevention objectives could have been highlighted. The pharmaceutical industry role is to invent products that either treat or manage disease conditions. It is preposterous to accuse those businesses or hint at placing responsibility for clients behavior. Doctors in civilized countries absolutely emphasize the message of prevention priorities. If some people fail to pay attention and become patients then how does it indicate culpable medical industry, hell bent on spreading illnesses to profit from it?
PS I regret the previous post leaning toward personally offensive, provocative remark tone. There are certain aspects that people can control about health and others are left to destiny. I have never meant to convey the idea of an absolute perfect health condition in human population self-determination through life choices alone possibility.
If you think that everyone knows about the deleterious effects of sugar, fructose and fast carbohydrates then you are clearly mistaken. The article in the AFP – the journal of the Royal Australian College of General Practitioners – that I mentioned says that the reasons for obesity are not clear. The cynicism of the authors of this article is unbelievable. Here is the link:
The idea that putting labels – often wilfully misleading labels – on manufactured foods and beverages is sufficient warning to the uninitiated is wrong. It is clearly a compromise thought up by the supermarkets and the industrialised food industry. Ordinary people spend 2-4 hours each day in front of their TV and watch many thousands of adverts which tell them the benefits of these same c***p products. The idea that advertising does not work is preposterous.
HIV is best handled by prevention not medication. I would have thought that was pretty clear. Sadly, there is no money to be made in prevention whereas plenty is to be made – in advanced countries – for lifelong medication. Hence anything other than condoms is dismissed – condoms may work in theory, but loads of people don’t always use them. It is a bit like proposing abstinence to teenagers in the USA. Smart in theory but thoroughly impractical.
“…..And analysis of international practices conducted 15 years ago concluded that “payment by salaries is associated with the lowest use of tests and referrals compared with FFS and capitation” and appeared to offer much cheaper services…..”
Correct 15 years ago.
Your article was true 15 years ago. Good old telephone, fax machine, electronic medical records, insurance preauthorization requirements for procedures, etc have changed all that. There also insurance mandated patient chart reviews etc.
Gillian, you should really go and do some fresh in-the-field research before writing articles like this rather than dusting off some old ones and reprinting it.
Triviliazing “…bloated costs of, say, administration…” is factually wrong. If you have done your research well you would have found that administrative costs are growing the fastest in going after healthcare dollars.
Doctors’ income have gone down markedly in the last 3 years due to capitation programs and Medicare mandated cut backs.
Also, employed and salaried doctors are indeed growing very fast but patient dissatisfaction is also growing directly proportional with it. You get what you pay for.
It’s easy to bash U.S. doctors and the tests they order until you personally need them.
Also John Burns (NYT London Bureau Chief after his cancer treatment) said during a C-Span interview (to paraphrase) that he likes a friend’ statement “The UK has the kind of medical system I want for my country.
The U.S. has the kind of medical system I want for my family.” (hear it at 42.19 at http://www.c-spanv…g/program/JohnBur).
Of course FFS has a pernicious effect! It moves the focus of the bonus system from the patient to the physician. It will have exactly the same corrupting influence as Eat what you kill (curiously apt for doctors) bonus systems anywhere, including Wall Street and the City of London.
VSO: I totally echo your sentiments that those in society who take the effort to lead healthy lives by way of diet and physical exercise should not be expected to subsidise those who don’t.
nonetheless we should still be addressing the incentivisation structure within the healthcare industry because lifestyle doesn’t explain every single illness and condition under the planet although God knows it explains a lot. And I should know because I had a so called chronic non- reversible and potentially hereditary eye condition according to the great and the good in the medical profession and suffered from the myopic and self serving nomsense they lulled me into accepting for over a decade and when I started to challenge what they told me i was told that my condition could not be influenced by environmental factors and that the thinking that bad diet led to eyesight diorders was quackery- that’s Harley Street for you.
So I understand both sides of the argument: as a taxpayer, I don’t want to be lumbered with the consequences of bad behaviour by other citizens- what we have famously referred to as moral hazard-, but as an individual who was stuck between a rock and a hard place during what arguably were the most valuable years of my life because the doctors I had were either self serving or incompetent and my parents who were largely responsible for my lifestyle during my teenage years when the onset of this eye disorder took place thought that the way they raised me was the best thing since sliced bread. Hence why I argue that we need a 2 pronged approach. Yes individuals need to be made more personally responsible for their health. but doctors need also to be forced to take a more constructively patient oriented agenda towards eliminating the conditions which patients face rather than just taking the more lucrative path of cultivating a customer for life …..
“Further to the above. Here is an article in the most recent printed-edition of the “National Geographic Magazine”. It pulls no punches and shows the direct link between sugar and what doctors like to call the “metabolic syndrome” AND “I challenge anyone who can find an American medical magazine that dares to write the obvious. They are all bought and paid for the pharmaceutical and agro industries.”
In reply to Mr. Nassim’s assertion:
Have You ever heard of Diabetes type two onset, obesity and disease correlation effects? There is no plot or conspiracy in America. Almost every New England journal of medicine issue tackles “metabolic” syndrome aka diabetes 2. How did you come to conclusion that the medical publications are colluding in conspiracy with agro and pharm. industries? I am pretty crazy. Some of the FT readers manage to beat my score with remarkable consistency here. Yes, it is true that a huge percentage of food in supermarkets, disgustingly even bread is laced with sugar. So what? There are FDA content labels on packages for consumers promptly to see before determining whether to cause glucose, insulin spikes roller coasters offered by the food industry. That is a part of liberty for people to ruin their health. Name one compelling argument for private, income generating entities to worry about you or your family’s health? Succinctly speaking if many consumers do not care to think for themselves about diet conceivable detrimental consequences then yes. There are pills invented by another industry, consumers who turn themselves into patients can head to the nearest pharmacy and pick the remedy to negate ruined metabolism to some degree. In free countries people can decide about lifestyle.
If the topic of damaging health at the expense of tax payers by SNAP aka food stamps recipients, eating c**p then the government should but can not in America to overcome legalized corruption system design effect, agro business pulling congressmen strings. Bloomberg in NYC, medicaid expenditures budget allocation soon to crowd out other priorities did want to educate people, guzzling 1500 sugar laced beverages to spare themselves from self induced genocide by diet, sinking everybody else fiscally due to diabetes, strokes, hypertension conditions budget priorities “conversion” only to end up being accused of the lack of sensitivity toward indigent residents. There is neither an easy solution in the free society nor conspiracy.
There is in fact some good recent research, e.g.
Higher Fees Paid To US Physicians Drive Higher Spending For Physician Services Compared To Other Countries
Miriam J. Laugesen1,* and Sherry A. Glied2
+ Author Affiliations
Health Affairs September 2011 vol. 30 no. 9 1647-1656
Higher health care prices in the United States are a key reason that the nation’s health spending is so much higher than that of other countries. Our study compared physicians’ fees paid by public and private payers for primary care office visits and hip replacements in Australia, Canada, France, Germany, the United Kingdom, and the United States. We also compared physicians’ incomes net of practice expenses, differences in financing the cost of medical education, and the relative contribution of payments per physician and of physician supply in the countries’ national spending on physician services. Public and private payers paid somewhat higher fees to US primary care physicians for office visits (27 percent more for public, 70 percent more for private) and much higher fees to orthopedic physicians for hip replacements (70 percent more for public, 120 percent more for private) than public and private payers paid these physicians’ counterparts in other countries. US primary care and orthopedic physicians also earned higher incomes ($186,582 and $442,450, respectively) than their foreign counterparts. We conclude that the higher fees, rather than factors such as higher practice costs, volume of services, or tuition expenses, were the main drivers of higher US spending, particularly in orthopedics.
Also see the Commonwealth Fund’s Health Scorecard and other publications,
And the recent comprehensive survey by the Journal of the American Medical Association
Also the sensational article by Stephen Brill in Time,
Bitter Pill: Why Medical Bills are Killing Us
a big thank you Gillian to tackling this issue head on. As somebody who was given the run around by the medical profession for more than a decade, I have developed the greatest distaste for the healthcare industry which i take to include every element from doctors, dentists, through to the pharma and healthcare products industry. the whole lot is riddled with conflicts of interests and vested interests which make the financial industry look like the epitome of integrity. Add the fact that in most of the developed world most of the costs associated with healthcare are covered by general state budgets with no individual burden sharing whatsoever and we can all start to see why the healthcare industry is considered the most recession proof. When you start to understand that people can smoke, drink, take drugs and engage in other behaviour which objectively speaking guarantees a day of reckoning and merrily let the the state assume the costs of treatment, then we know why healthcare expenditure just keeps on growing. That the pharma industry is completely happy with this state of affairs. Indeed, they are constantly on the look out for new diseases : just witness the latest move by the ABA to classify obesity as a disease. Talk about ambulance chasing by the legal profession. This is entrepreneurialism of a whole new kind….
We need to do two things: incentivise individuals to be more proactive about their own health by shifting the cost of healthcare back down to the household level and introduce results driven remuneration amongst physicians. On this basis doctors would prescribe courses of action or treatment which tackle the root causes and not merely the symptoms of their illnesses. These two measures would improve our health on a per capita basis in society as well as reduce the costs of healthcare.
Further to the above. Here is an article in the most recent printed-edition of the “National Geographic Magazine”. It pulls no punches and shows the direct link between sugar and what doctors like to call the “metabolic syndrome”
I challenge anyone who can find an American medical magazine that dares write the obvious in this area. They are all bought and paid for – either by food and drink manufacturers, or the pharmaceutical industry. Any magazine that steps out of line will not get advertising dollars. I don’t know what Adam Smith would make this particular “invisible hand”
The glaring notion of business of America is business is shining bright in its exceptionalism according to GDP percentage allocated by the society to healthcare with inferior outcome to comparably wealthy countries. The pharmaceutical industry had managed to lobby before prescription benefits got included in Medicare to prevent the largest insurance scheme in the country to engage into price negotiation on drugs. Generally, Medicare statutory is obligated to offer treatment coverage without price consideration criteria. Hence, these two factors steer pharmaceutical product price increases annual trajectory along with healthcare costs exceeding inflation rate.
I surmise that there is a clandestine agreement between the pharm. business and the US gov. where the industry keeps its R&D investment in the USA for the privilege to set whatever they want prices on products, caps free. The previous sentence isn’t meant to be taken seriously other than the notion of blank check by the government offered to politicians sponsors corporate interests model. The medical equipment manufactures thrive on the ability of physicians to order tests and labs, diagnostic facilities getting paid for these services. In return, there is the demand for equipment purchases and upgrades cycle.
Many doctors in America do not like to accept Medicare, refuse it more specifically and insist on cash payment prior to rendering services. Why? Because they can in this country. I think the cultural shift that has been called for is nothing short of revolutionary, would absolutely jar the medical establishment in the most broad sense of the word reaction to the call of arms in defense of model. Hence, only by government policies can changes in the system occur.
I forgot to mention the issue of medical malpractice risk for doctors that makes it logical to refer for tests if those in accordance to medically acceptable standards in America are necessary or else failure to perform professional duties, serve as the “proof” in civil litigation of practicing medicine in negligent manner toward the patients. This civil liability system is moronic! You do not ask random people from the street to determine if there is engineering patent violation because of the lack of knowledge about intricate issues. There is the specialized court for patents. Why is it different for the medical sector where decisions by jurors are made based on emotions rather than objective capacity to render an opinion about professionalism or the lack of it by people who have studied for a decade to learn about human body physiology?
PS I remember turning on the TV a couple of weeks ago, tuning to CNN to watch the news. Instead of that content information there was the broadcast about 100 years old woman being tortured in the hospital with scheduled MRI tests, hospitals pumping hundreds of thousands of dollars from the final days of elderly, who probably would have been more comfortable and happy in hospice. Having said that, I have NO right to judge what other families should decide to do. I just find it peculiar that in America the notion of let’s prolong the life beyond a certain biologically programmed at DNA level futility is taken to such extremes without the cost constrains in existence. Again my sincere apology for this candid opinion, void of cultural, humanistic empathy which most Americans do possess in abundance unlike me. The question remains “unanswered” whose interests are served by “restoring health” of idling zombies on ventilators even though they are someone’s great grandparents at any price for the country, while hospice can offer dying with dignity at a fraction of hospitals cost? Cultures are shaped by propaganda everywhere on earth. There is nothing exceptional about Americans.
A lot of the remarks of Hall104 are entirely correct.
Pharmaceutical prices in the USA are a multiple of what the NHS pays for similar chemicals, for example.
Pharmaceutical companies – and doctors – are keen to ensure that HIV is treated by medication and not in any other way. The ideal pharmaceutical is patent-protected, expensive and to be taken for the rest of the patient’s life. There are other approaches which they refuse to investigate or to publicise:
A great number of medical chronic medical conditions are caused by a poor diet. This is well-understood but doctors are in denial and they insist on treating it as a pharmaceutical or surgical problem. The following two books should be made essential reading to all physicians:
* Why We Get Fat: And What to Do About It – by Gary Taubes
* Fat Chance: Beating the Odds Against Sugar, Processed Food, Obesity, and Disease – by Robert Lustig
As an example of the insidious relationship between food manufacturers and medical publications, the latest issue of “Australian Family Physician” had an article entitled “Obesity: Recommendations for management in general practice and beyond” in which the statement “Prevention is failing due to a poor understanding of these determinants …” i.e. we don’t know why people get obese. The article was written by a board member of Nestlé Australia
ReportReligion, religion , religion; thats what its all about. The fantastical stories that we have invented for oursleves over centuries, even millenia, are the root of much trouble in this world. We canno | August 15 12:54am | Permalink
I would be interested to know what ” potentially unnecessary duplicate treatments ” you are referring to. I am sure the Cleveland Clinic is to be applauded, but I would suggest that it is due to the tighter patterns of collaboration that you mention rather than the algorithm that describes how the payment for providing medical care flows from the consumer to the provider. Also, it is surely insulting for some hospital administrator to claim that physician’s emphasis is not on looking after patients. As for the foreign systems of payment by salary being associated with the procurement of fewer lab tests, I can only say that it is due to their good fortune in not having to deal with the members of the American Bar Association who will claim their client is harmed by omission of this service especially at a stage where it is unlikely that such a test will reveal anything pertinent.
That any sane nation, having observed that you could provide for the supply of bread by giving bakers a pecuniary interest in baking for you, should go on to give a surgeon a pecuniary interest in cutting off your leg, is enough to make one despair…
Geroge Bernard Shaw
Before the change away from FFS could occur, there would have to be a solution on how single or small groups of physicians (or patients) could measure their effectiveness. This probably would include a posting of charges for the service provided or treatment for comparison. That would take a huge cultural shift.
In Europe, medical specialist expenses are only 3.5% of the total healthcare cost. The pressure on MD’s to reduce their salary is structured to bring it to 2.5%. At the same time, consultants earn millions by restructuring management and procurement: the job of hospital management which management obviously fails to do properly. What conveniently does not change is the system of routing medical expenses back to pharma.
A central bureau of statistics in Europe tells us that the life expectancy of a 5-yr old in 2011 is only 6% more than that of 5-yr old in 1981. Similarly, the life expectancy with chronic disease increases with 67%, thanks to the billions of public funds put into development of factory food and medication! This is the reason why is becomes a little expensive. Genes as the reason? Too fast a change for that. External factors: perhaps chemical factories learned to deliver tasty material that should not classify as food. Government advises to eat enough dairy and meat, although independent science shows that animal proteins are responsible for the lion’s share of chronic disease. Then medication: blockbuster revenues cannot do without lifetime prescription and prescription to healthy people. Besides the disputable effects of ‘herd’ medication on the individual (of the 80 statin users, only one may come close to targeted cholesterol levels) other pills are taken to deal with side-effects. Usually each MD is advised to prescribe a basket of pills, although pharmacology scientists are quite confident that 5 or more pills is not evidence-based because of interactions! 67% increase of chronic disease, and maybe a quadrupling of pills per diagnose.
Perhaps time for MD’s and their clientele to consider Hyppocrates: Let food be thy medicine and medicine be thy food. Consider plant-based nutrition, get rid of the ‘golden arches’ poison chains of this world, ban hi-fructose glucose syrups, get rid of the gluten-allergy by banning Monsanto’s 3 types of GMO supergluten in wheat. This will for sure improve people’s immune system. It’s often not a lack of passion with MD’s, it’s a lack of info and pressure from their context. The only effect of demotivating MD’s is that this potentially critical layer between peoples’ interests and pharma’s commercial strength will disappear, and we do not want that.
MOST POPULAR IN COMMENT & ANALYSIS
TOOLS & SERVICES
- FT Lexicon
- FT clippings
- Currency converter
- MBA rankings
- Today’s newspaper
- FT press cuttings
- FT ebooks
- FT ePaper
- Economic calendar
- FT Live
- How to spend it
- Social Media hub
- The Banker
- The Banker Database
- fDi Intelligence
- fDi Markets
- Professional Wealth Management
- This is Africa
- Investors Chronicle
- Pensions Week