Our Evolving Medical Profession
A week ago something quite unexpected happened to me; I received a house call from a doctor. I had seen him in his office earlier that day for a biopsy of a growth on my cheek. His visit to my house was precipitated by bleeding at the site of the incision he had made and had persisted for the next three hours. The last time a doctor had come to my home must have been 75 years ago. This had led me to the belief that medical house calls had suffered the same fate of the now extinct dodo bird.
Doctors no longer pay house calls for the simple reason that house calls are not a good use of their time. Indeed, the time they would spend traveling to and from a patient’s home essentially displaces time that their skills could have been more beneficially employed by seeing other patients. For the same reason, physician assistants (or PAs) generally meet with you before you are seen by your doctor so they can extract the medical history of your malady, often a time-consuming process which does not require the full breadth of a doctor’s expertise. Even PAs are spared the chore of taking various tests (such as X-rays, cardiograms or MRIs or recording your pulse or blood pressure) which can be performed a by less skilled nurse or technician. While this fragmented process is both time-consuming and frustrating for patients, it’s admittedly designed to provide competent medical services while maximizing the use of the skills of available medical personnel. You might think of this evolution in medical practice as simply doing for healthcare services what Henry Ford did for the manufacture of automobiles.
Enhancing the efficiencies of medical practices goes beyond simply getting the most out of medical personnel; it also extends to the support staff relied upon by medical professionals. Quickly receding into oblivion are the days when you could simply pick up a telephone and speak with your doctor. Sadly, it’s becoming almost as difficult to reach your doctor’s receptionist on the phone. That’s because most medical practices now employ automated telephone answering systems so your call is answered by a machine, not by a person. While such systems are ostensibly designed to quickly connect you with the right person in your doctor’s office, in reality they simply elevate your blood pressure because in many cases there is no menu choice available for what you are calling about.
In a previous article I lamented the sad state of our nation’s healthcare system. It’s not only the American public that’s adversely impacted by the flawed nature of our current healthcare system, but doctors, nurses and other medical practitioners are also victims of the evolving nature of their profession. Essentially, the revolution which is now encompassing the medical profession in the U.S. is primarily the product of changing demographic and economic factors including (a) the growing demand for healthcare services, (b) the involvement of private healthcare insurers, (c) the increasing sophistication and complexity of medical science and equipment and (d) the impact of medical malpractice claims.
In many respects the medical profession is a victim of its own success. Because of its advances in treating medical conditions, patients are living longer; and it’s no secret that the human body deteriorates with age. The greater longevity of patients is perhaps the factor underlying the increased demand for medical services. In addition, there are now many medical conditions which can be treated that were simply considered incurable as little as two generations ago. This has further added to the demand for medical services which in turn is partly responsible for the increased costs of those services. Although the number of practicing doctors in the U.S. almost doubled between 2004 and 2022, it is projected that by 2030 the shortage of doctors in the U.S. will have grown to 121,000.
Another important factor underlying the increased demand for medical services is the growing belief that medical care is the right of every citizen. That attitudinal change is responsible for the dramatic growth in governmental programs (such as Medicare, Medicaid, TRICARE and the Affordable Care Act) designed to enable more citizens to afford the medical care they need. Indeed, the ACA alone has enabled 26 million Americans to purchase healthcare insurance and thereby attain access to healthcare services. In addition, the ACA mandates the minimum scope of coverage that can be offered by private healthcare insurers and expands the scope of coverage provided by state-run Medicaid programs.
Although government funded healthcare programs now reach 150 million Americans (or approximately 43% of the U.S. population), more than half of our nation’s population still relies on private health insurance to help fund their medical needs. Private insurers, while protecting their insureds from catastrophic healthcare costs, nevertheless add greatly to the costs of providing healthcare. First, private insurers are for-profit institutions which means that up to 20% of the monies they collect from their insureds is used to fund their own operations and profits. By contrast, the Medicare program’s administrative costs are only approximately 3% of what it expends to provide healthcare coverage for the Americans it insures. Secondly, there are over 1,000 private healthcare insurers operating in the U.S. and each has its own scope of coverage and processes for reviewing and processing medical claims. This poses an enormous administrative burden on healthcare providers to satisfy the requirements for reimbursement imposed by the army of insurers that they are compelled to deal with.
A third factor increasing the costs associated with medical practice is the growing reliance upon medical tests and diagnostic equipment. This enables medical professionals to treat many maladies that were heretofore deemed incurable and to do so more quickly with less trial-and-error. Not only is the equipment needed to perform such tests expensive, but operating that equipment requires additional personnel to be added to the staffs that support those licensed healthcare providers.
The medical profession’s reliance upon diagnostic equipment has had explosive growth over the past 50 years which can be traced to three factors beyond the profession’s basic desire to enhance the quality of its services. First, is the ever-present threat of malpractice litigation in the event of a failure to achieve acceptable results. In recent years the annual number of medical malpractice claims in the U.S. have been approximately 20,000 and the annual costs of defending and paying those claims have been in excess of $55 billion. In addition to imposing substantial costs on medical professionals, the threat of malpractice claims provides a powerful incentive for medical professionals to utilize the latest available diagnostic equipment before even making a diagnosis and embarking upon remedial action.
Second, professional liability insurers (not to be confused with healthcare insurers) in many cases have demanded that their insureds make use of available diagnostic equipment as a condition of coverage. Third, healthcare insurers accord great weight to the use of diagnostic tests in determining the amount of their reimbursements for medical services. This provides an added incentive for healthcare professionals to maximize their reliance on diagnostic tests. On top of these considerations is the fact that diagnostic equipment can be quite expensive. This causes hospitals and medical practices that acquire that equipment to seek maximum utilization of that equipment so as to more fully amortize it costs as well as the costs associated with those technical employees retained to operate it.
The economic pressures now being exerted on medical practices has begun to cause some fundamental changes the way medical services are provided in addition to the ways that individual medical practices have been changed as recounted at the beginning of this article. Perhaps the biggest change is that it is no longer economical for those entering medical practice to practice alone. The path to becoming a practicing physician is both long and expensive. On average it takes 11-15 years to become a doctor which includes four years of college, four years of medical school and up to seven years as a medical resident. The eight years of schooling can easily cost approximately $750,000. Although serving as a medical resident is a paying job, initial annual salaries are currently roughly $60,000 going up to $200,000 for senior residents. The result is that most individuals striving to become doctors remain significantly in debt by the time they actually receive a license to practice.
The costs associated with opening, equipping and staffing an office as well as building a clientele make it virtually impossible for newly licensed doctors to simply begin as a solo practitioner. Instead, they are compelled to become employees of a hospital or an independent medical practice group. Moreover, the costs associated with maintaining a group medical practice can be considerable. Professional liability insurance alone can cost $10,000 a year per doctor and significantly more for surgeons and obstetricians.
Young doctors are not the only ones being forced to change the direction of their medical careers. Both the federal and state governments, as well as private medical insurers, tend to be rather tight-fisted in paying for medical services. That has caused many senior and well-established doctors to simply refuse to accept medical insurance payments for their services. This enables them to charge their patients much higher amounts for their services. Although rejecting insurance reimbursement limits the number of patients who will seek their services, it is still an attractive alternative as it allows them to earn more while working less.
Because medical insurers tend to place a relatively low value on the services of doctors and attribute most of their payments to diagnostic tests, many primary care physicians with established practices have begun offering “Concierge Services.” Concierge doctors offer their services on a highly personal basis so that the patient is able to receive immediate attention and doesn’t have to overcome the barriers to service which have come to characterize modern healthcare practices; i.e. patient can actually speak with the doctor on the telephone and be seen within a few days, if not hours, of their call. Concierge doctors also hold themselves out as being able to refer their patients to medical specialists (sometimes located in distant places) who will also treat them on an expedited basis. For their enhanced personal services, Concierge doctors may charge an annual fee ranging from $5,000 to $20,000 in addition to what they may receive from their patient’s medical insurers for their services.
A variation on the “Concierge” practice is employed by doctors (usually medical specialists) with an established clientele who practice alone or in small practice group and offer their services on a highly personal basis. For this higher level of personal service, they also charge an annual fee (usually between $1,000 and $3,000) in addition to billing their patient’s insurer for their specific services.
To take advantage of the economic benefits of having a multi-layered staff as described above, it’s necessary to have a high volume of business. This factor forces doctors to practice in groups so that individual administrative personnel (receptionists, bookkeepers and office managers) as well as nurses, PAs, and technical employees can be utilized more efficiently. Similarly, the costs of expensive diagnostic equipment can be shared by a number of doctors, thereby more effectively amortizing the costs of that equipment. The result is that even relatively small medical practice groups may not be particularly economical. Another major changes now sweeping through the medical profession is the practice of hospitals’ acquiring medical practices. The same forces that are causing individual doctors to join medical group practices are also prompting medical groups to sell their practices to hospitals.
The consolidation of the medical profession has also entered a new stage. More and more hospitals are being acquired by for-profit entities. Those entities have been in the forefront of the movement to make medical practices operate like business enterprises, with strict divisions of labor and strong internal guidelines which severely limit their doctors’ interactions with their patients. Some of these acquisitions are being made in leveraged buy-out transactions with the purchase prices being financed with high levels of debt. This places additional pressure on the hospital and its medical professionals to cut costs which is reported to have detrimental effects on the quality of their patient services as well as keeping their compensation low. It also places pressure of doctors to encourage their patients to undergo expensive procedures.
While medical practice groups and hospitals are trying to find ways to expand their practices and cut their costs, medical insurers are under equal, if not greater, pressure to expand their businesses and limit their payments to medical service providers. Prior to the enactment of the Affordable Care Act with its mandatory coverage requirements, medical insurers would protect their profit margins by simply not providing coverage for certain expensive medical procedures as well as refusing to cover “pre existing conditions.” They would also carefully screen potential insureds before offering coverage. These practices were greatly restricted by the Affordable Care Act forcing medical insurers to develop new business practices to protect their profit margins.
One such technique was to require that certain expensive medical procedures be precleared as a condition of coverage. If a medical issue could be alleviated by taking medications or via physical therapy, an insurer might reject responsibility for a more expensive surgical procedure. In other cases, the insurer might decline to pay for a medical procedure recommended by the insured’s doctor claiming it was experimental or had a low percentage of success. In some cases the insurer would employ “questionable” business practices, such as paying less than the amount charged by the attending physician claiming that it exceeded what was “ordinary and customary” for the services received by its insured. In other cases insurers would delay responding to claims submitted by their insureds (as opposed to hospitals and medical practices). In doing so, they would claim that they never received the claim, a ploy sometimes used multiple times with respect to a single claim hoping that their insured would simply give up efforts to pursue the claim.
A business strategy more recently employed by medical insurers is to offer “Medicare Advantage” policies. Such policies are issued to individuals covered by Medicare and purport to cover services beyond those covered by Medicare. Not only do these policies purport to cover the amount the insured would normally have to pay as the co-pay obligation under his/her Medicare coverage, but would also cover medical services not comprehended by Medicare such as dental and vision services, prescription drug coverage, housing assistance and fitness programs. Under Medicare Advantage plans, the insured’s Medicare benefits are paid to the insurer which in turn pays the provider of its insured’s medical services. This arrangement, however, allows for mischief by the insurance company which may refuse to pay for major medical bills. At least one insurer offering Medicare Advantage coverage is currently being investigated by the Department of Justice for a variety of abuses.
Although the operations of hospitals, medical practitioners and medical insurers have been undergoing major changes in the past forty years, the healthcare revolution is far from over. The costs of medical care in the U.S. are out of line with those in other countries which means that there will be continuing pressure to bring those costs more in line with those in other countries. The most promising way of doing that is to eliminate the private medical insurance industry and go to a single-payor healthcare system like those used in all other developed nations. This will not only eliminate the monies siphoned off by healthcare insurers but also will reduce the administrative burdens now imposed on healthcare providers.
A second path to lowering medical costs is to make even greater use of technological advances. Artificial intelligence is about to go mainstream and this will greatly reduce expenses and error in making medical diagnoses. Also, cell phones are now carried by virtually all Americans and those devices are rapidly being equipped to record and transmit medical data which holds the promise of reducing the need for many categories of medical support personnel.
A third path to lowering medical costs is to place greater emphasis on preventive healthcare. Other areas of professional practice have adopted procedures that avoid problems while the medical profession has focused primarily on addressing health problems once they appear. By moving toward a greater use of preventative medicine, healthcare costs can be further reduced.
Unfortunately, the path to better healthcare in the U.S. is about to suffer a setback. The Trump administration has cut funding for the NIH and the CDC, two agencies which guide the nation’s public health policies. It has also cut $2 billion in grants to Harvard, much of which is used to perform medical research. Even more devastating are the cuts to Medicare and Medicaid in the budget bill recently passed by the House of Representatives. The Medicaid cuts may cause healthcare to become extinct in portions of rural America where hospital care is already quickly disappearing. The cuts to Medicare, while significant, could have a smaller impact IF (but only if) they are prioritized on the basis of “means testing” and not simply applied to the reimbursement for all medical services. While the nation needs to drastically cut its annual fiscal deficits, the demand for healthcare will only continue to expand which means that it is an area that requires further investment and not fiscal retrenchment.
To be sure the revolution in U.S. healthcare is far from over. Nobody is happy—not the doctors, not the patients, not the government and not even the healthcare insurers who are struggling to simply remain a part of our healthcare system.