Free the Doctors


To: Kathleen Sebelius, Newt Gingrich, Commonwealth Fund, Robert Wood Johnson Foundation, Center for Studying Health System Change and health reform wannabes everywhere

Subject: The Syllogism

I learned this in high school. Let's see if I can remember how the structure works.

Major Premise:

Every innovation that improves quality and reduces cost, from the time of Galen to the present day, has been discovered on the supply side of the market (e.g., by Mayo, Intermountain, Geisinger, Minute Clinic, Teladoc,, etc., etc., etc., and by doctors here and there all over the country) and not on the demand side (e.g., by Blue Cross, Medicare, Medicaid, CMS, employer plans, etc., etc., etc.). 

 Minor Premise:

High-quality, low-cost care is a good thing. 


Buyers of care should tell the providers how to practice medicine. 

Whoops. Something's amiss here. Solution below the fold.


I Wish I Knew How It Would Feel to Be Free

If all successful innovations come from the supply side, then clearly we must liberate the providers. How can that be done? What follows are some ideas I developed with Mark McClellan. They first appeared in this Wall Street Journal editorial and are expanded in this Brief Analysis [link]. They involve liberating doctors, patients and entrepreneurs. Here's the provider part.

Problem:  Doctors are typically forced to practice medicine under an outmoded, wasteful payment system designed for a different century.  They should instead be allowed access to 21st century alternatives. 

Typically, doctors receive no financial reward for talking to patients by telephone, communicating by e-mail, teaching patients how to manage their own care or helping them be better consumers in the market for drugs. In fact, doctors who help patients in these ways will end up with less take-home pay. To make matters worse, as the insurers suppress reimbursement fees, doctors are increasingly unable to perform any task that is not reimbursed. Hospitals face the same perverse incentives. Facilities that figure out how to lower patient costs, raise quality and offer warranties and other guaranties are penalized for doing so. Unfortunately, high-cost, low-quality care is reimbursed at a higher rate than the alternative. 

Solution:  New Payment Opportunities. It should be as easy as possible for providers to get paid in better ways. We should be willing to reward doctors who raise quality and lower costs – including improving patient access to care, improving communication and teaching patients how to be better managers of their own care. What is needed is not pay-for-performance, but performance for pay — with ideas and proposals coming from the supply side of the market (which is more knowledgeable about potential improvements than the demand side).

Since Medicare is our largest payer and since private insurers tend to pay the same way Medicare pays, let's begin there. In Medicare, any provider should be able to propose and obtain a different reimbursement arrangement, provided that: (1) the total cost to government does not increase, (2) patient quality of care does not decrease and (3) the doctor proposes a method of measuring and assuring that (1) and (2) have been satisfied.

Case Study: Surgery with a Warranty in Pennsylvania. According to a RAND Corporation study, patients on the average receive recommended hospital care – such as an aspirin after a heart attack or antibiotics before hip surgery — only about half the time. There is also a lot of variation in quality. In Pennsylvania alone, the mortality rate for heart surgery among hospitals varies from zero to 10 percent. Even more surprising, hospitals usually profit from their mistakes. When patients have to be readmitted to deal with complications from the initial surgery, the hospital is in a position to bill again. 

Geisinger Health System in central Pennsylvania has discovered a better way — better at least for patients and their insurers. It offers a 90-day warranty, similar to the type of warranties found in consumer product markets. Specifically, Geisinger charges a flat fee that includes three months of follow-up treatment. If the patient returns with complications in that period, Geisinger promises not to send the patient or the insurer another bill.

The problem is that Geisinger loses money on the proposition even as it saves money for Medicare, Medicaid and private insurers. What we need are third-party payers willing to pay for such guarantees. They should be willing to pay more to hospitals that save them money.

Case Study: Efficient Treatment of Back Pain in Seattle. Virginia Mason Medical Center in Seattle has a modest goal: To produce health care as efficiently as Toyota produces cars. In fact, the senior staff has actually traveled to Japan to witness Japanese auto production firsthand.  Continuous quality improvement is part of its company mantra.

Treatment of back pain, a source of considerable medical spending nationwide, is an example of how Virginia Mason is changing its approach to health care. Under the old system, a patient with back pain would first receive an MRI scan and other tests before referral to a physical therapist.  Under the new system — which cut the cost of treatment in half — patients are first sent to therapy and receive an MRI scan only if the therapy doesn't work. Yet while this improvement in efficiency saves money for the payers, it makes the providers financially worse off. As in the case of Geisinger, Medicare should negotiate a new payment arrangement one that is win-win for Medicare and Virginia Mason.

Implementation: Streamlined Approvals. For the reform to be workable, the transactions must be easy to negotiate and consummate. Paperwork and time delays are the enemy of entrepreneurship. However, given a willing Medicare administration, the process of reform should not take long. There are already low-cost, high-quality pockets of excellence just waiting to be replicated. And once Medicare changes its payment system, all other payers would not be far behind.

Implementation: Relaxation of the Stark Restrictions. Another essential ingredient is allowing doctors and facilities to work together as a team — making needed improvements and profiting from those improvements. To facilitate this change, we must repeal or relax regulations that prohibit profitable provider arrangements. 

Comments (26)

Trackback URL | Comments RSS Feed

  1. Vicki says:

    Great Nina Simone pairing. Love the snail.

  2. Stephen C. says:

    I also like the snail. Makes you feel sorry for the docs.

  3. Joe S. says:

    Do you realize you are the only health policy guy in the country that is saying “free the doctors”?

  4. Bret says:

    Agree with you, Joe. This is the only web site where you are going to find a post like this.

  5. Ray says:

    It’s SO rare to read something that is not a rehash of something else. John, thanks for having an original thought… or thirty.

    Too bad we can’t get more people to listen.

  6. Jeff Munn says:

    I love your argument, as far as it goes. But it seems a corollary is that right now the system is closed to alternative entrants (ie, those who are not MDs). What is your view on alternative care? Midwives,nurse practitioners, chiropractors,acupuncturists, physical therapists? Are they part of the solution as well? With few exceptions, these services are not even discussed because they are not currently reimbursable by insurance (Medicaid, Medicare or otherwise).

    It is one thing to reform the payment system to allow doctors to come up with more innovative solutions. It is another to open the doctors themselves up to competition. But if your parameters are met (higher quality, lower cost, and a way to prove both), it seems you should be open to providers who are not doctors. Is that right?

    In my experience, the doctors only want to take this “supply side innovation” model so far. And as you know, the fewer suppliers there are, the higher costs will be.

    Thanks as always for challenging our assumptions, John.

  7. Mark Head says:

    The REAL demand side “solution” is for the patient to never become a patient by being healthy enough to not need avoidable, preventable, and/or unnecessary medical treatment. While not always at the control of the TRUE buyer of services – the human being – a substantial portion of utilized medical services are avoidable where the patient lives in such a way that avoidable medical conditions are actually avoided. Incentivizing people through employer-sponsored health management and wellness plans can and is achieving improved behaviors when coupled with better access to information and to advocates who support better decision-making by the buyer of medical services.

    Freeing the providers is part of – but not all of – the answer. Individual responsibility to maintain personal health is needed, too, and there should be a cost associated with failure to do so.

  8. George Beauchamp says:

    Thank you, John,
    You know how much I appreciate Plato’s distinction, the difference between “slave doctors” and “doctors befitting free men.” With thought leadership like yours, there may be a chance that both we as citizens and as physicians may share the advantages of the latter.

  9. Jennie Fiedler says:

    This is a very refreshing change from the streams I have been following up on. I agree that the demand side is broken here (I have NO love for the insurance industry, period), I take responsibility for my own health by taking proper care of myself and adhere to the yearly exam recommendations of my doctor. However, the supply side of health care is hemorraging, and it needs to be stopped. I especially like the warranty idea a lot. Paying for prevention and innovation just makes so much more sense.

  10. William Boyles says:

    Extremism in the defense of liberty is no virtue.

    Th ideal would be online all-payer fee schedules updated by physicians in real-time for all payers. This is the only pure market. This would cause the most important shift in national health reform, a reduction in provider incomes to match perforance.

    To argue that American doctors are innovative is self-delusion. We need more than anything a complete and total revamping of the supply of medical labor driven by a market which matches income with skills.

    If ordinary productivity standards for other industries were applied, more than half of all physicians would have reduced incomes, and the supply of physicians assistants and nurse practitioners would be doubled to match the actual skills required in the medical labor force.

    Most doctors are overpaid for what they do. The market would be far less sympathetic than this image of a supply-side medical labor force you imagine.

  11. Ftimmins says:

    To Joe S.

    As a point of curiosity, do you object to the notion of “freeing the doctors”?

  12. Joe S. says:

    To: Ftimmins

    I do not object to freeing the doctors. I am totally in favor of it.

  13. James Gordon, MD says:

    Thank you so much for sharing your response with me.

  14. Free the Doctors | Sean Khozin, MD, MPH says:

    […] the doctors and good things shall follow. In a recent blog post, John Goodman reminds us […]

  15. Robert Berry says:

    Eight years ago I liberated myself from all third party contracts and have thus been free to innovate according to the needs of the patient who has become the payer. I have advertised my prices in the local newspaper and on billboards. You can review my prices on my website at

    Many of my patients are uninsured truck drivers who find themselves ill while on the road. If it is something simple that I feel comfortable handling we will do a visit over the phone and I will charge their credit card. I call the prescription into a national chain and they can pick it up at their next stop. They save money and time and are treated by a physician who knows them – not a doc in the box.

    Patients with moles or cysts come in and ask me how much it will cost to excise these unsightly or bothersome things. I give them a quote and they decide right then and there whether to schedule an appointment.

    I have a few patients who live in other states (but who have visited me here) who pay me for visits by email using their credit card or by sending me a check.

    Practices like mine save money over others providing similar services but that bill insurance. My annual overhead is about one-third that of other family practices and require 3 full time employees fewer to achieve the same purpose. The price of visits to my office run anywhere between an oil change and a brake job. Why do we need insurance for routine health care? In fact, the cost of carrying out the transaction runs about $40 per patient visit – not much less than what patients pay here for a typical visit. My practice shows that Americans neither need nor can afford third party payment for primary medical care. On average family docs in this country receive about $300 from patients and their insurers each year. The vast majority of Americans can afford this including those on Medicare and Medicare. Give these folks healthcare vouchers that they can spend on outpatient services and the doctors will be free to serve the patient because the patient is the payer. Eliminate tax favoring for employer based health insurance and working America will purchase high deductible policies and pay directly for routine care.

    Direct payment will free the doctor. We need policies that encourage direct payment for routine medical care.

  16. Chris Ewin, MD says:

    Thx Robert,
    Direct practices are the way to go for primary care…Access to quality care at a reasonable, transparent price.
    In terms of performance for pay, it’s the consumer that decides whether the Doc is performing.
    The demand is high for our services.
    I love my my fee for care (retainer) model. It’s nice actually working for the patient and not having third parties as go-betweens. And not surprising…the patients are thrilled to have a trusted, board-certified PCP who knows them personally like the back of their hand….
    We do a survey every month to see if our patients like our service…..They’re satisfied b/c they pay us….
    The KISS principle applies….
    Also, I have no problem with patients who want to have access to primary care by NP’s and PA’s…It’s a good option if they are satisfied with their care…Those who advocate it can go to Walmart or CVS…but, we need to hold those practicing primary care to the same high standards as a board certified family physician or internist…

  17. Ernest J. Bordini, Ph.D. says:

    Nice thought if you assume a production model for surgeries, but there is no way to lower cost for educational preventative services and time spent doing so, since the outcomes may not be measurable for many years. Also does not work well for diagnostic procedures, good diagnosticians dont only consider one question or problem per visit or rely on one one test.

    More tests mean more costs up front, but less so in poor treatment for the wrong thing, but all the insurers will look at is it costs more for a work-up at comprehensive clinic than at the phrenology clinic or the clinic where the diagnostic assessment consists of the patient telling the doc they need medicine x because they have common symptom B as they saw on television.

    Create an outcome based reimbursement system and you will create a system where the best docs only take the less severe cases. The only way to bring quality back into the system is for Medicare physician fees to come more into line with what the better doctors see from private patients and to allow and create better incentives versus penalties for proper diagnosis in the first place.

    In most cases reimbursement for reviewing records is not allowed and time for report preparation is grossly underestimated. It creates a system where records are not sought, and review of findings and reports are often so brief they must be redone.

    Fact is, the fees people are paying into the system are too low. It may be unpopular to say you need to pay more for better services, but years of promising more for less is being now followed with more promises of more for less.

  18. John Goodman says:

    To Jeff Mumm and William Boyles:

    I do favor opening up the market – especially to nurses, physician’s assistants and others. I do not favor fraud. I do favor free markets.
    I have no opinion on how much doctors should be paid. If they are free to repackage and reprice their services, productivity (and patient welfare) should rise.

    To Ernest J. Bordini:

    Not sure I agree, but I’m willing to let the market decide. See my chapter on how I envision some of these problems being solved.

  19. Stanley Feld says:

    Bravo John

    Well articulated.

  20. Steve Austin says:

    I read with great interest your notion that insurers/payors are actually hindrances to reform. You make a compelling argument that I must agree with and, to my own dismay, I must further admit that a governmental entity (Medicare) may actually serve as the driver for the necessary reform. That really flies in the face of my free market bones–but so does the banking fiasco we’re dealing with. But I digress….
    Notwithstanding my agreement with your points, I do not perceive the medical profession as having ever been interested in promoting anything other than its own elitist agenda, which may be a huge drawback to any kind of reform, be it driven by supply- or demand-side. Granted, your article allows, rather mandates, that reform not cost the doctors in lost revenue, but when are we ever going to deal with the notion that this form of public service has an innate right to $.5 million + salaries, while our teachers and police grovel for a fraction of the wage? Doesn’t add up to me, though I realize med school is no small financial proposition.

  21. Steve Seater says:

    I have used Minute Clinics staffed with nurse practitioners for primary care. My experiences have been most satisfactory. This prompted me to do a little research into the field of advanced practice nursing and, not to my amazement, I discovered that nurse practitioners enjoy haigher patient satisfaction than do doctors in a majority of cases. Why not give all primary care to nurse practitioners and specialty care to MDs? Wouldn’t this save lots of money and still provide excellent care? My visits cost me less than $50.00.

  22. Felix Rogers, D.O. says:

    Thanks John. As a physician I agree. For another case study in both the value and reimbursement issues associated with innovative programs look at the following web site. This is a comprehensive approach for the treatment of High Cholesterol, lab work through script, which clearly provides the higher quality at a lower cost and with more convenience but the reimbursement model for physicians is problematic.

  23. Ravi says:

    You know how much I appreciate Plato’s distinction, the difference between “slave doctors” and “doctors befitting free men.” With thought leadership like yours, there may be a chance that both we as citizens and as physicians may share the advantages of the latter.

  24. […] timid idea: let doctors participate in “gainsharing” in federal pilot programs. Our bold idea: Free, liberate, release, unshackle, untie, untether, uncage, unpen, emancipate once and for all […]

  25. Raymond Kordonowy MD says:

    I agree that we need a free (er) market. The most basic, fundamental aspect of any economic model is missing in the present payment schemes. This is accountability- both from the provider’s end as well as the consumer end. Any model that doesn’t deal with this will never be fair or maximally competitive. This is probably why you don’t hear much from physicians on this topic (a hunch only).