A study in Minnesota compared the cost growth of retail clinics compared to the emergency department, urgent care clinics and physician offices.

Costs are all venues rose, suggesting the more providers in an area doesn’t necessarily lower costs. The axiom of competition lowering prices doesn’t apply in healthcare.

Physicians make up for lost revenue by simply doing more. There will always a demand for care, evidenced by universally long waiting lists. Ways to squeeze in more patients, and subsequently performing more tests, can always be found.

In the current physician payment environment, any threat to physician revenue can be responded to by doing more.

Congress is currently meeting to discuss alternatives to the payment system. Our friend Pete Stark actually gets it right in his statement:

The current payment system rewards physicians who increase the number or intensity of the services that they provide, irrespective of what is needed. This drives up spending. Unfortunately, spending growth has not been matched by an equivalent improvement in outcomes. Our recently enacted legislation provides a window of opportunity to look at how physician payment rates are updated. We need to use this time to examine payment system reforms that encourage better care coordination, higher quality care, and more efficient use of resources.

The typical answers bandied about are pay for performance or capitation/bundled payments.

Pay for performance has its own problems, discussed earlier this week.

That leaves capitation, which essentially is a fixed payment over the course of care. In theory, physicians and hospitals would be incentivized to provide to most cost-effective care in order to achieve maximal financial benefit.

This approach was tried in the 1990s, with sharp backlash from patients. Why? The American public likes unfettered access to tests and will push back against any perceived financial reason obstructing that desire.

That is why any movement towards a capitated payment model needs to be accompanied by a comprehensive patient education campaign to convince patients that too many tests are not in their best interest.