Doctors Vindicated

There are two schools of thought about what's wrong with modern medicine:

  1. The doctors are at fault.
  2. The payment system is at fault.

Strangely, the first camp includes almost all researchers (read: other doctors) who write for medical journals as well as almost everyone in the health policy community.  On this view, doctors (unlike lawyers, accountants, engineers, architects, etc.) are creatures of habit, stuck in their own (imperfect) ways of doing things.  The public policy problem: how to get doctors to adopt the best practices, learn to use computers, work in teams, adopt safety protocols, etc. in the face of psychological resistance.

The opposing camp consists of yours truly and a handful of others.  Our view is that doctors are just like other professionals.  They respond to economic incentives.  The policy problem: how to change the incentives in the perverse way doctors are paid.

So who is right?


See more Botox pictures here

New evidence that it's the payment system, not the doctors, is at fault comes from the field of dermatology.  Large numbers of dermatologists are practicing two completely different styles of medicine – one for patients under the traditional payment system and another for cosmetic patients, who pay with their own money in a free-wheeling laissez faire marketplace.  The same doctors have different appointment systems, different waiting rooms, different treatment rooms, etc. – depending on who is paying the bill.

According to a New York Times investigative piece, patients who are seeking treatment for acne or psoriasis go straight into voice mail at one doctor's office.  But a full-time staffer fields calls on a dedicated line for patients seeking Botox treatments.  The waiting room for cosmetic patients is "luxurious, with soft music and flowers."  For medical patients, the facility is more spartan.  A cosmetic patient may find the examination table covered with a sheet, rather than a paper liner.  Cosmetic patients are more likely to find valet parking.  They are more likely to get a follow up call from a nurse.  And, they are more likely to see a real doctor.  Increasingly, dermatologists are hiring nurse practitioners and physician assistants to see their medical patients.

One survey of practices in 11 cities found that patients waited significantly more days for an appointment for a mole examination than for Botox treatment.  In some cases, medical patients waited as much as 3 or 4 times as long.

So, what's going on?

In one payment system, third-party-payer bureaucracies decide what activities they will pay for, what they will not pay for, and how much they will pay.  In this system, doctors have no freedom to repackage and reprice their services.  In the other system, doctors are free to repackage and reprice continuously – making patient-pleasing adjustments and profiting from those adjustments.

Returning to the two schools of thought, both want to change the payment system.  But the approaches are radically different.  One wants to control doctors.  The other wants to liberate them.

  1. People in the first camp want to figure out how medicine should be practiced and then pay doctors only if they do it the right way.
  2. People in the second camp want to free doctors to make continuous improvements and financially benefit from those improvements.

Comments (20)

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  1. Joe S. says:

    In the first camp I would put the Commonwealth Fund, the entire HHS bureaucracy and almost everyone who writes for Health Affairs.

    In the second camp, I can’t think of anyone other than the NCPA and Regi Herzlinger.

    This is clearly David versus Goliath.

  2. R. Bar says:

    This so hilariously wrong, it is hard to start a discussion since there is almost no point of reference.

    First, JG build up a strawman. I have yet to see the first serious paper or editorial that lays the blame of the US health care mess primarily on physicians.

    He then points out that patients willing to pay a high price for cosmetic services receive more comfort and convenience. I don’t know what this example is supposed to prove; maybe: if you are paying a lot of money, you get preferential treatment? If we spend more money, health care will be more pleasant in general? Why does one need an elaborate example for that?

    And then the conclusion:
    “People in the first camp want to figure out how medicine should be practiced and then pay doctors only if they do it the right way.
    People in the second camp want to free doctors to make continuous improvements and financially benefit from those improvements.”
    It appears that JG favors the typical free market approach to health care: if doctors do good work, they should be able to charge more, and the quacks and borderline performers are weeded out by the free market. The problem is that most patients can only judge certain aspects of medical care, such as convenience/comfort, time spent, friendliness etc.
    These are all important things, but they are only a small factor of a reasonable quality assessment. The best psychiatric hospital is not Dr. Phil practicing at the Hilton.

    JG, revised:
    1) People in the first camp want physicians to be resourceful and have the insurance pay them only for services that are known or assumed to have a reasonable chance to help the patient. (If a patient wants elective services, he will have to pay for them on his own.)
    2) People in the second camp want a market free of any restrictions such as board certifications or insurance review/regulations; the patient’s – sorry, consumer’s – power will bring us blessings such as luxurious waiting rooms with soft music and flowers for Botox patients, and, for the low price segment, brain surgery in the garage at rock bottom prices.

  3. Thomas A. Coss says:

    Stunning – Physicians and other care providers are humans and respond to incentives. Included in those incentives is the desire to improve outcomes of patients.

    The challenge health care faces is that uncertainty exists, and biology is amazingly complex. Perhaps working on uncertainty and understanding biology would be the easier first steps.


  4. SK says:

    Dear R. Bar,

    So who decides if physicians are being resourceful and what constitutes appropriate care? In our current mess, it’s the insurance companies and they just want to maximize their profit margins. Free markets are not free of all restrictions, only those that hinder innovation and cost effectiveness.

  5. Roger Beauchamp says:

    In a competitive market, if one wants to do better financially, they must provide a better service or produce the same service as their competition in a more cost effective manner. All WANT to adopt practices that help achieve that goal.

    I would say: People in the first camp want to figure out how medicine should be practiced and then pay doctors only if they do it THEIR way. The common practive may not be the best practice in all cases. If it is made illegal to think or do otherwise, how does medical science advance? Too many intellectuals believe that care can be mass produced like a product on a manufacturer’s assembly line, if only they would be put in charge of the process. It just does not work that way!

    John McCain has made a bold and brilliant choice for a running mate. It will give him the opportunity to convince people, that it is he, who is the real agent of change. He needs an equally bold appraoch to health care reform. His current policy is psychologically flawed. The opponents simply have to say: “He wants to TAX all of your health care benefits. They do not have an open ear for any of the rest after hearing that statement. Universal excludeability mutes that argument. Also, economically, it creates more market competition by restoring individual rights and freedom of choice to responsible citizens, treating direct payment for services the same as payments made with insurance dollars.


  6. Elan Rubinstein says:

    God help us and the US health care system if, responding to “free doctors to make continuous improvements and financially benefit from those improvements”, our already chaotic comes to more closely pattern after the triumph of individualism in ATLAS SHRUGGED. Dear middle class or chronically ill patient: You are on you own, because government support is inadequately funded to help.

    On the contrary, I think our system is in for more technology assessment tied to payment, and IT solutions that take practice guidelines to the provider level. The question is how far will our government go in the direction of NICE in the UK and CADTH in Canada – on the drug side, even as NICE moves from explicit pharma manufacturer profit & price controls towards evidence-based “value” of pharmaceutical interventions.

    The current pattern to soaring health costs is that employers dump employee health benefits, increasingly cost-shift to employees, reduce benefits, eliminate pensions and eliminate retiree health benefits. Individual coverage is much worse, thanks to medical underwriting and lack of risk pooling or community rating.

    Will cost shifting and medical underwriting be enough to “encourage” people not to use health benefits? Remember, the RAND Health Insurance Experiment made clear that when people reduce use of health resources, they do it across the board – they don’t just reduce “unnecessary” services. Because how do they know what’s necessary (and if they’re very sick they’re not in a great position to figure it out)?

    In McCain’s ATLAS SHRUGGED health future scenario, I hope there will be no more Terry Schiavo’s in the press to discomfit people, allowing them to visualize the consequences of these policies!

  7. Ralph Weber says:

    I am speaking in front of the AAPS next week on financing Free Market healthcare on just this topic.

  8. John Graham says:

    I hear you, Dr. Goodman, but why don’t the doctors change the payment system?!?!? I’ve gotten to the point where, whenever a doctor contacts me to complain about 3rd party payers, I say: “OK, just quit and set up a concierge practice.” Until the doctors decide to act, I’m not going to ride to their rescue!

  9. George Beauchamp, MD says:

    Dear John,

    I agree with your conclusions, but not necessarily your premise. Given good information (very, very difficult to get with so much ambiguity and many unknowns), doctors will spin on a dime and immediately change their practices. Witness what happens every time they encounter a complication of their treatments (nothing changes practices more quickly than poor outcomes). And I venture to say that their moral behavior goes well beyond economic incentives; i.e., even if one is compensated less for doing the right thing, we are quite likely to do so. Thanks for all you are doing for the future of medicine.

  10. Chris Ewin says:

    The information for transitioning practices is available and the emergence of different practice styles in different areas are a valuable lesson to all physicians in their own marketplace. Whether Fee For Service, Fee For Care (reatainer like 121 MD) or Fee for noncovered medical services like MDVIP), physicians must choose which practice is best for their community, patients and self. We no longer have to work for the government nor the insurers. We work for our patients….
    The KISS principle applies…
    Not many of you out there know my patients like I do nor do you have to run my small business…
    One size does not fit all…Chris

    Chris Ewin, MD, FAAFP
    immediate past president, SIMPD

  11. doctorsh says:

    The entire argument that healthcare costs in the country is based on the premise that a third party is paying the bills.
    This is the wrong premise. Third parties have greatly increased the cost of medical care in our nation. Having insurance tied to employment is the other downfall of our system.
    Individual responsibility and free market reforms has brought down the cost of care in every other industry in our country, it will do the same when given the chance.

  12. Ed Harper says:


    You have our vote!!!

  13. Dr. Bob says:

    As I started to read your Health Alert, I was about to get angry, when I suddenly realized that my old adage the “you can always tell a doctor, but you can’t tell him much” basically echoed your thoughts. Collaboration , cooperation, and communication are not part of the thinking of doctors today. Competitive best describes them, and all it does is make physicians take it on the chin even more.

    Keep up your good work.

  14. Catherine Daniell says:

    More on the doctor vs. payment structure debate and comments in health business news at, here —

  15. M Muenzer MD says:

    R Bar, nice try of wiggling out of it. As a physician I can assure you that it truly feels the way JG presents it.

  16. M Muenzer MD says:

    Dr. Bob, again, where do you get your notion from? Pretty much all my colleagues in my department and in my hospital in a Boston suburb are teamplayers and good ones at that. Why would I ever want to compete with an internist or neurologist? I am glad he or she is here and can help me take better care of my patients.
    Colleagues of my specialty work very nicely together, by nature and because we actually need each other. You never know when an unexpected emergency puts you in a tough position and the one that you assume we see as “competition” will help me out. And they always do.
    Sorry, cannot validate your concerns. Are you a physician?

  17. M Muenzer MD says:

    Thank you, John, for framing and wording this post so pointedly!

  18. Beverly Gossage says:

    Before 1943 few in this country had any form of health insurance. If they did, they called it hospitalization, because it only helped with unexpected expenses in a catastrophic situation at a hospital.

    The premiums were very cheap. It didn’t cover doctor visits, prescriptions, maternity, or many other conditions that are now expected to be covered by health insurance.

    Most people made every effort to stay healthy and tried to set aside funds in the budget in case a family member needed medical care. They had a friendly relationship with their local physician.

    In the 1950’s my father was a car mechanic and traded services with our doctor in case he needed to treat one of our family members.

    We have now become a nation of unhealthy people who see no direct correlation to our life style choices and our wallet. We expect the top of the line care and want someone else to pay for it.

    We want the insurance company to accept everyone and not base premiums on potential risk because that isn’t fair. Then we wonder why premiums are so high and many people choose not to have insurance until they have a health issue.

    We expect our employer or the government to pay our premiums to an insurance company who should then pay for any conceivable claim we have. Then we wonder why we haven’t had a raise in three years, and complain about how much is withheld in taxes from our paycheck.

    What if we all purchased our own plan like we do our car and home owners insurance? What if it had nothing to do with our employer. (For over 50% of employees of small businesses this is reality.)

    Many of them have already purchased a private health plan.

    They now realize this:
    1) The healthier you are when purchasing, the lower the rate. Once you have a policy, the carrier cannot raise your rate or drop you based upon your claims (Lesson:apply while you are healthy)
    2) If you stop smoking, and lower your weight to within a normal BMI, you can save between 30%-70% on the premium (Lesson: make healthy choices and save)
    3)The younger you are, the lower the premium (Lesson: since the majority of the uninsured are young and healthy, most could afford a policy)My 26 year old pays $37 a month for 5 million dollars of coverage.
    4)The higher the deductible, the lower the premium. An HSA qualified plan limits your out of pocket. (Lesson: pick the low premium, budget for the small things and use your insurance plan to protect from the catastrophic)
    5)Aprivate plan is truly portable. (Lesson: you never have to consider a health plan when considering a career.)
    6)Nearly all carriers now offer individual policies giving more choice to the consumer.
    7)Most states have a high risk pool for those whose health issues prevent them from purchasing a private plan.

    Maybe so many employers not offering health insurance has a silver lining. People have found a better alternative.

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  20. Gerald Clarke says:

    I am an ophthalmologist, doing LASIK (totally Free Enterprise) and cataracts (mostly Government paid) We definitely have to compete for both groups of patients, so while there is a difference in ‘waiting rooms’ – different age groups, different teaching materials, etc., the competition for the patient is equally fierce. The benefit for us in the cataract group is that the patient is allowed to purchase extras – premium lenses, post op laser touchups, and these profit sources drive the competition. We work just as hard for each group because 1) I like what I do and I do it well and 2) I make a good living, an honest living, and I work hard for it.