Op-ed: Doctors are forced into running a business

A version of this op-ed was published on June 18th, 2009 in The New York Times’ Room for Debate blog.

In his recent address to the American Medical Association, President Obama noted that our health care system “rewards the quantity of care rather than the quality of care.” This perverse incentive leads to unnecessary and potentially harmful medicine, while also being a major contributor to spiraling health care costs.

Doctors enter the profession to care for patients, and most are not trained, or have the inclination, to run a business. But our health system’s incentives provide a strong motivation to do just that. In fact, doctors often find themselves in a position where the pressure to generate revenue becomes as important as how they practice medicine, and those who do not pay close attention to the financial bottom line are at a competitive disadvantage. It is no wonder that both physicians and patients are growing disenchanted with the current direction of American health care.

Some health policy analysts entirely blame the medical profession for the role they play in rising health care spending. And indeed, doctors have tremendous influence in the tests being ordered and treatments prescribed. But singling out physicians would be like wholly blaming the players for a proverbial game’s flawed rules. More important than focusing on the players, we need to change the rules.

That means re-aligning incentives to best serve the interests of patients. Physician payments need to be divorced from the volume of care, and associated with evidence-based patient quality measures and a reduction in medical errors.

Furthermore, we need to value the time doctors spend with patients. Instead of being encouraged to squeeze in appointments and rush through office visits, doctors should be incentivized to take the time to counsel and guide, along with improving their communication with patients, not only in person, but over the phone and on the Internet.

Clearly, successful health reform depends on modifying physician behavior. Doing so requires that we change the incentives that motivate doctors.

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  • http://www.bryantsstatisticalconsulting.com TexBryant

    There is no doubt that the rules governing provision of healthcare by primary care physicians are largely written by the payers–both private and public. It seems the biggest gorilla in the room is Medicare. Prevention is not a strong suit of Medicare as it should be. If there is to be national coverage for healthcare services, then Medicare is not the model to follow.

  • http://www.motionphr.com Jeff Brandt

    It is a business, like all companies that are in business, non-profit or not they have to be run to make profit or they will cease to exist. One of the major stumbling block in health care that I see is that the caregiver is the producer and is basically an hourly worker. The primary source of income for a practice is how many patients that a doctor can see per hour. There is no economy of scale.

    Jeff Brandt, motionPHR Personal Heath Record for the iPhone
    myMedicalMedBox a lite Personal Health Record for the Android

  • http://www.futurewaredc.com Chuck Brooks

    Running a business is nothing less than being of service to customers, who have to receive value before the business does. If running a business, any business, is a penalty then perhaps they should give it up and become Trappist monks. Or better yet, policy makers in service to the politicians who have created the problems that doctors complain about.
    Chuck Brooks
    FutureWare SCG

  • Matt

    In any profession, where what you are providing to the public is your time and your knowledge, there will not be economies of scale. That’s the downside to working in a profession – your income is limited to the time you spend doing it. When you take off, you lose money because your overhead doesn’t stop.

    The naivete of Kevin is indicative of many physicians on these blogs. Medicine has ALWAYS been a business, it’s just that until now it has always been a business where the government kept paying more and more. and physicians are extremely well compensated. Now the government is no longer increasing payments, and they are shocked! That naivete is reflected in statements like this:

    “Furthermore, we need to value the time doctors spend with patients. Instead of being encouraged to squeeze in appointments and rush through office visits, doctors should be incentivized to take the time to counsel and guide, along with improving their communication with patients, not only in person, but over the phone and on the Internet.”

    Who is this “we”? It’s physicians who need to value their own time and develop reimbursement models that compensate them for it. Instead, Kevin is looking to the government to change things and pay physicians more and in a manner he likes. Which is utter foolishness, of course, particularly when the government is trying to cut costs everywhere.

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  • HudsonMD

    I disagree on the pay for performance and outcome bonuses. I think that will cause further problems with access to care because doctors will not take on the difficult patients or older patients because that may affect performance data and in turn reimbursement. More focus absolutely needs to be on preventive care. Preventive care code reimbursement are some of the lowest. I make way more on a Level 5 office visit than any physical i could ever do.

  • christophil MD

    you write-
    Physician payments need to be divorced from the volume of care, and associated with evidence-based patient quality measures and a reduction in medical errors.

    not so fast – http://bit.ly/BTSHP

  • R Watkins


    “It seems the biggest gorilla in the room is Medicare.”

    Actually, the biggest gorilla is the AMA, with its secrecy-shrouded RUC committee. The specialist-controlled AMA lobbies aggressively for payment policies that overly reward procedurialists and penalize physicians who spend time and thought on their patients.

    Why primary care physicians continue to associate themselves with the extremely hostile AMA is a mystery to me . . .


  • http://www.bryantsstatisticalconsulting.com TexBryant

    “Running a business” can actually be invigorating if done well. A primary care site ran as efficient business has many rewards for all involved. If you browse the TransforMed site you will see physicians and staff running profitable businesses with the primary care physician spending more time with patients, no less. The best businesses follow Deming’s principals which happened to be embodied in the patient centered medical home concept. I emphasized just this fact in my last newsletter. I have talked to PCP who were involved in the TransforMed national project and they found there practices more exciting for having done so. Because of this success here in Michigan there are many programs helping physicians adopt this model.

  • joyce

    I thought you guys who went to med school were smart! Any professional who goes into a profession serving the public (vice working for the government, etc.) is going to be running a business. Why the surprise?

    Pricing is always an issue in practicing any profession. Hourly rates get you lots of hours. Per piece work gets you lots of pieces. He or she who does a better job, gets more clients. That offsets the temptation to fudge on results to up the hours or the pieces, as one would hope, conscience. The bottom line is that if you want to do a better quality job as a “whatever” professional, you will make less money than if you do only what you need to do to skate by, at least until market forces lower the demand for the “skater.” Doing a good job doesn’t necessarily buy you more income, it buys you more security in that income. That is life and that is called professional pride.

    I don’t understand the hate for the insurance companies. Much of medicine today would be simply unaffordable without insurance. If doctors weren’t getting more money with insurance than without (even with consideration of the overhead), they would simply choose not to take insurance. In my area, some doctors who are good enough to sustain their practices without the incentive of insurance do exactly that — not participate in any insurance plan.

    Finally, for all of the statements by doctors that they want to be paid on quality, every time you see negative feedback by patients about doctor services, the doctors get all defensive and annoyed that someone is questioning them or looking over their shoulder. Doctors really don’t want oversight, which is what a performance-based compensation system requires.

  • K

    RE: TransforMed

    I no longer received medical care at our local TransforMED clinic. What a nightmare. Open access scheduling means you can see the PA in urgent care. The last time I was shuffled off to the PA, the PA was unqualified to deal with my medical issue. Level 5-$300 bill to see a PA-no wonder they make profit. The treatment recommended was inappropriate when I called in with complications, another PA… My transforMED experience was more like a house of horrors than a medical home.

  • A Doctors Wife

    All a “business” is, is a legally recognized organization designed to provide goods and/or services to consumers. Physicians – solo, group or hospitalists – are all either running a business or part of a business. You can’t simply dismiss that reality or wish it away.

    The only way a business remains viable, whether for-profit or non-profit, is to generate enough reveune in to cover all expenditures out. The only real exception is that non-profits have the ability to go begging for donations should their revenue fall short of expectations, which is more often the rule than the exception.

    Clearly, successful health reform depends on modifying physician behavior. Doing so requires that we change the incentives that motivate doctors.

    The only reason my husband continues to practice is that he loves what he does.

    That and the fact that 28 others depend on him – his 12 staff, 10 spouses of staff and 6 children of staff. Really though, make that 30 since he also feels (as expected) a strong responsibility for me and our child too.

    How exactly would you tell him to modify his behavior when he works six days a week, 80+ hours a week (60 office hours, 10-15 paperwork and managment of practice, 5-10 post-ops and/or call resulting in having to go into the hospital for a patient), and is still tossing at night worried that this month’s payroll might not be met?

    How would you suggest he see fewer patients – spend more time than he already does, already averaging 95-minutes for a new patient and 15 to 22-minutes per patient for office visits, depending on reason for office visit – and still meet payroll, pay his malpractice, taxes, student loans and finally, hopefully, himself?

    As example, for a new patient visit, he is reimbursed $350.

    Sounds like a lot until you realize, the entire visit he’s had a nurse chaperone (cost for 90-minutes of her salary & benefits = $83), has overhead for rent, utilities, supplort staff, supplies, equipment etc. (cost for overhead per 90-minutes = $192), thus his “profit” for the 90-minutes = $75…or $50 an hour.

    Now if he billed 80-hours a week, and had only new patients, that might not be so bad – but his billable hours are about 50 a week, routine office visists reimburse no where near $50 an hour, and even then he and no other doctor actually gets paid for everything billed as you already know!

    And I don’t know about you, but I pay more than that to our car mechanic, plumber or HVAC service techs for an hour of their time….and don’t complain, when I need them and they do a good job, I’m happy to pay them their worth!

    Last year DH paid himself a salary of $140,000….working 80-hours a week average, 51-weeks last year – that’s right, he had one week vacation since his overhead doesn’t go on vacation anymore than his staff salaries go on vacation – they still have to be paid….so, basically, he averaged less than $35 an hour for what he actually worked and that was a reduction in take-home for him of $40,000 over the previous year, largely due to reimbursement changes from his private carrier contracts.

    If he doesn’t watch the bottomline and the clock, it is HE who takes the hit at the end of the day, not his nurses, not his billing manager, not his receptionist – they all EXPECT a raise for a job well done….he gets what’s ever left, and each year that’s getting to be less and less and ya know what? At some point we just can’t do it anymore and our community, a rural community, will be out one more doc.

    I’m just glad he’s less than 15-years to retirement, if he can manage to keep up the schedule he has that long.

    Perhaps the biggest issue isn’t modifying physican behavior, but rather that we’ve divorced patients from the true cost, thus they don’t question how much something is unless they don’t have insurance?

    When is the last time you’ve had a patient question you with “how is this going to change management?” for a test, procedure or medication?

  • Matt

    Sounds like your husband should move away from the reimbursement model that he is currently in – where he is paid by third parties, and go to something different. The third party payers aren’t going to change until physicians do. What incentive do they have? It will be difficult, but will it be any more difficult than continuing down the path you’re on?

  • Terry

    Contrary to many of the above comments, physicians do not, by definition, have to RUN a business. They can become employees. After all they provide a service, just a very valuable one. E.g. Physicians working for Kaiser on salary are not businessmen. Now whether this is an attractive option for physicians is a totally different question….

    I think many have missed the basic point of the article however: that the reimbursment rules and legal regulatory framework should be changed to incentivise whatever kind of physician behavior that we want to see as a nation.

    IF we believe that 6 minutes of face time is insuffucient for a PCP visit, then change reimbursement – perhaps capitation is better than procedure based? (with appropriate safeguards!) Perhaps salary based? Perhaps bonuses for positive patient health outcomes (e.g. a poorly controlled diabetic becomes more well controlled, a obese pt loses some weight?) Difficult targets, but worthy ones! We could even pay physicians to specialize in dealing with patients who are non adherant (sounds like a fun subspeciallty!)

    As for physicians avoiding sick pts to avoid bad outcomes on their records and poor payments – in the UK PCP’s are paid MORE for having sicker patients (similar to how the German wellness fund private insurers are paid more for insuring sicker patients).

    The wall street journal article was laudable for pointing out some serious problems with the model of linking pay to meeting standard of care targets. That does not mean that we should automatically abandon the idea completely however – perhaps we just need to ACCNOWLEDGE the sort of excellent research that has revealed these problems and constantly MODIFY the rules appropriately. I refuse to believe that we cannot find scientific methods to roughly estimate physician performance – put some of the MIT boys on it, we put men on the moon after all? I agree that considerable latitude should be allowed for physician autonomy, all should be 100% transparent to all involved, and appeals should be allowed by physicians.

    I find it very difficult to believe, as a citizen, scientist, and future physician myself, that the best course of action is to continue with business as usual. Also I feel that well defined and constantly reviewed guidelines, defined by physician professioinal bodies (irrespective of links to payment) are the best way forward to ensure quality care. The model of expecting busy individual physicians to be personally on top of every new development in the vast field of medical knowledge is impractical, in part shown by the remarkable safety improvements of fields that have produced strong standard guidelines (anesthesia, obstetrics).

    TO A POINT (and no further), standardization should be the goal. Where that point is, should be a goal of intensive and constant scientific research.

    I hope that the Obama administration, with its professed love of science, is able to bring more science to the legal frameworks governing our society. Of course getting ANYTHING done in the US legislative minefield is virtually impossible, so all this talk is likley to fizzle out into a giant anti-climax.


  • http://www.motionphr.com Jeff Brandt

    I have been an hourly consultant for 20 years and the only way to achieve an “Economy of Scale” is with technology tools. This one thing other than litigation that healthcare has the most fear of. EHR, telehealth, decision support, PHR over time will save the physician time and allow them to make more money. Example: PHRs, most business from banks to Home Depot have figured out that if you train the customer to work for you, you will make more money, e.g., ATM, self check out lanes. The Health care industry needs to embrace technology not fight it because it is not going away. Yes, the way you practice will change but the way you are being paid is also changing. Technology tools are like any other instrument, you learn how to use them to your advantage,

    Jeff Brandt motionPHR for the iPhone
    MyMedBox for Android

  • Susan H

    Sarah Palin’s resignation highlights a huge potential risk to docs and nurses: charges of abandonment.
    Politicians are apparently free to quit when the economics or stress of their job is not in their favor. Lawyers too; one case that comes to mind is Leslie Abramson taking the Menendez brothers’ fees for their first defense, but when the money was gone so was Leslie.
    But docs and nurses are civilly and criminally liable for alleged abandonment if they ‘quit’.
    One case in New Jersey had nurses charged criminally when, after months of pleading for release from what looked like indentured servitude (the nurses had been recruited from abroad under pretenses very different than what their working conditions and provided housing turned out to be), they were advised by counsel that they could, after of course providing safely for their patients, leave the job.
    Look it up, fascinating case. Docs also must have some stories to tell.

    When comparing professional medical providers to other professionals or businesses, there are certain soft costs rarely acknowledged which are borne only by the medical profession.
    (Of course the first most obvious is therisk of being targeted by the med mal mental anguish industry).
    Instead of always being on the defensive, why not ask for parity in other professions—lobby to subject lawyers and politicians and insurance execs to the same personal risk as medicos?

  • Okulus

    I don’t have so much difficulty running a businness as I do having to run a business with third-party payers that appear to behave as if they have no accounting to anyone. One good way to avoid complaints and re-filing: send no EOBs. Wait a few weeks. Just don’t say anything.

  • Robert Berry, MD

    Physician practices are not typical businesses. Doctors who accept third party payment have almost no control over their per patient revenue. They don’t set or even negotiate the prices of their services – it is dictated to them by Medicare, Medicaid, and commercial insurers. They also have little control over their costs since accepting third party payment comes with contractual requirements concerning claims adjudication, etc. So, doctors are squeezed at both ends. A typical service oriented business can increase price if there is a lot of demand for their services and cut personnel if demand is down.

    The best solution for doctors, especially primary care doctors, is to not sign any third party contracts. Just say no.

    Dr. Brian Forrest of Apex, NC has and he reports an annual overhead of about $80,000 with one office assistant. He is also able to spend about 30 minutes with each patient – and his net income is higher than the average made by family docs in this country.

    Of course, most docs discount this possibility out of hand. It can’t work, they say. It is working already. There are other primary care docs who have been doing direct payment for years – including me.

    Jeff Brandt thinks technology can enable docs to mass produce the doctor patient encounter. No patient wants to feel like cattle and no doctor worth their salt wants to provide that kind of care or continue on their treadmill.

    Kevin says the govt should reimburse for emails, phone calls. Realistically, this is not going to happen. However, it can happen once doctor and patient can negotiate reimbursement on terms acceptable to both. Then doctors can provide services that patients want including access to the doctor without the patient being there and still be fairly reimbursed for his time and expertise.

  • http://www.motionphr.com Jeff Brandt

    Robert Berry, MD,
    You took my stance out of context. Technology is only a tool like any other medical tool that you use. With any new tool there is skepticism and rightfully so. Technology can only make you more efficient. Would you hire a builder that only used manual hand tools to build a house for by the hour pay? I no longer what to visit a doctor that does not have an EHR just like I do not want to visit a dentist that doesn’t have ultra sonic cleaning equipment.

    I have run small business all of my life and they are very difficult. I also understand your frustration with the payment system. Small businesses have no “Economy of Scale”, that is the reason there are few left in the retail space and the Walmarts of the world have taken over. Most of us don’t like it but everyone seams to want cheaper and faster. The same reason that we are buying so much junk from China.

    If you have a boutique practice that cater to a richer demographic that is great. I have a friend that has the same type of practice but I cannot afford the additional $1500/yr for his service plus pay 100% out of pocket each time I visit.

    Technology as I mentioned can only help you do your job more efficiently and with less errors but it like everything else is not for free. It will take your time and money to implement.

    I never said EMR/technology will save you time in the encounter. Initially it will cost you time, a lot of time. The saving is on the back end, charts, prescription handing, billing, better coding… But you have to admit there are not many family practice doctors that spend 30 min with their patients as you do.

    You might want to check out a lower cost alternative to EHR http://www.simplifymd.com/ It looks interesting.

    Thanks for the conversation,

    Jeff Brandt
    motionPHR for the iPhone
    MyMobileMedBox for Android

  • Anonymous

    Though I appreciate everyone’s viewpoint, I think Dr. Berry’s point was a home run.

    It’s doctors, not government, who are in the best position to reform healthcare. The single most important step that can be taken to reform healthcare is for doctors to stop accepting third party payment. If every single doctor changed their payment model to cash/credit cards, that would change patient-doctor relationship, the private insurance industry and government insurance. Everyone orders lobster because they believe the insurance industry has convinced the consumer it’s free. However, the truth is it’s not really free and in the end we all pay.

    If doctors would charge reasonable rates, there is no reason why those seeking health care shouldn’t be willing to pay for it. We all pay for food, gas and many other services. We may not all be able to afford lobster, but thus far no has ever died because they can’t afford to eat lobster.

    Get the third payer (insurance) out of the practice.

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