Reimbursement: Medicine's Achilles' heel?

A message to all physicians from the chair of the AMA Board of Trustees, William G. Plested III, MD.

By William G. Plested III, MDis a thoracic and cardiovascular surgeon from Brentwood, Calif. He served as AMA board chair during 2003-04, and as AMA president during 2006-07. Posted Feb. 2, 2004.

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Not long ago, I wrote about how physician payments have progressively and inexorably decreased over the past decades (link). I likened this to the "limbo" dance where the inescapable result is that the bar is finally placed so low that the dancer collapses. I still feel that the analogy is an apt one, and I'm going to continue to write about reimbursement intermittently because I feel that this issue represents one of the -- if not the most -- important threats to our profession today.

I am certain all will agree that our medical liability crisis is our most important immediate threat, and I certainly do not intend to diminish in any way the importance of this problem. I am convinced, however, that this will be corrected. This travesty has grown so tremendously that the only way that American medicine will ever survive is to drive a stake through the heart of this tort evil. The alternative to destroying the medical liability system is simply to destroy medical care, which won't be the American public's ultimate choice. Unfortunately, in some areas of the country, there will be grave damage done to access before people wake up to that reality, but it will happen.

The problem with payment is much more dangerous because it is much more insidious.

Many more irate people are against us, we have very few identifiable allies to our position, and we are poorly equipped to advocate on our own behalf. This certainly doesn't describe a position of strength. On the other hand, if nothing is done, the results, in my opinion, will be quite destructive to our profession.

One of the most basic necessities for any system of payment to be accepted is a perception of fairness. This is particularly important when dealing with the payment that one can expect in return for conscientious hard work. In our society, except for a few notable outliers, compensation is based upon the need for a service and the availability of those who can provide the service (classic supply and demand theory).

We also have placed a premium upon the intellectual preparation one needs to provide any particular service or perform any particular job. Physicians historically have fared well in this scheme because of our prolonged and intense training requirements and the critical need for the services that we provide.

A number of parallel phenomena have seriously impacted the ability of physicians to maintain a stable level of reimbursement. The entitlement mentality of a growing portion of our public has relentlessly led to a campaign for the proposition that health care is a right. And of course, anything that is a "right" should be free.

Politicians and government have played into this with entitlement programs that may be a godsend to many but are plagued by a lack of planning and horrendous cost overruns caused by shameful overpromising. The classic triad of overpromise, underfund and shift the blame perfectly describes the politicians' management of government health programs. Because of overpromising and underfunding, no government health program is fiscally sound.

The final component of this trilogy is the shabby treatment of physicians by politicians and government. Doctors are constantly scapegoated for today's high cost of medical care. Furthermore, a variety of schemes even punish physicians for high costs.

The true cost of modern health care is an extremely complex subject, however. Suffice it to say there are a myriad of reasons for escalating costs. That physicians should receive the lion's share of blame and even be punished is preposterous. Nevertheless, that is exactly where physicians find themselves.

The managed care debacle provides an excellent illustration of the problems physicians face.

Our government contracts with physicians to provide care for their entitlement programs. Physicians by contract agree to accept the government fee schedules, which historically are low because these programs were developed to assist those without the financial means to care for themselves.

In the managed care experiment, the government also allowed insurers to contract with physicians and to set their own reimbursement rates through the "negotiated contract" between the insurer and the physician.

Three obvious problems have been catastrophic for physicians.

First, there is no negotiation because of the massive inequality between an insurer with hundreds of thousands or millions of lives on one side and an individual physician on the other.

Second, government has allowed insurers to use antitrust laws (never intended for such use) to prevent collective bargaining by physicians.

Finally, insurers have been allowed to use fee schedules based upon government programs originally designed for low-income populations, as noted above.

In fact, insurers have even been allowed to discount significantly from these government rates the amounts they pay physicians.

Insurers respond to any complaint from a single physician with a take-it-or-leave it response. Any organized complaint from physicians is met with an immediate antitrust threat. The result is that managed care -- widely touted by insurers as a marketplace solution -- in reality was not a marketplace solution at all.

In fact, managed care abuses arguably are the most flagrant example of monopolistic behavior in modern times.

Insurers bludgeoned a relatively helpless sector of our public, i.e., individual physicians, with reimbursement decreases that were nothing short of draconian. This was accompanied by record-setting, huge salary increases for insurance company executives and employees. Now that physicians have reached the point of utter frustration, insurers are bemoaning the fact that they "stabilized the cost of health care," but now, because of greedy physicians demanding more money, the cost of care is again escalating.

For me, the most distressing part of this entire scenario is that it is so predictable. I cannot believe that we physicians were so gullible and so easily led down this primrose path. Even worse, it is not over yet, and insurers are unveiling new tactics to continue these alarming trends.

William G. Plested III, MD is a thoracic and cardiovascular surgeon from Brentwood, Calif. He served as AMA board chair during 2003-04, and as AMA president during 2006-07.

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