Is It Really All About the Money?

By Suneel Kamath

They both knew it the moment it happened. Our steep, sloping driveway finally got one of us after all these years. It was a few winters ago now. My mom and dad were shoveling snow when my dad slipped on some ice and instead of breaking his fall, he broke his wrist. What happened in the emergency room was, although emergent and important, exactly what I expected it to be. They gave him painkillers, set the broken bone, placed a temporary cast, and gave him an arm sling. What happened in the orthopedics office 2 weeks later though, was very unexpected.

He went there expecting a discussion of the various treatment options. To his surprise, the orthopedist said flatly that he needed surgery. My father is an engineer with basic medical knowledge, but he knew there must be some route involving a cast. There was no mention of a cast or anything else that didn’t involve surgery for that matter. When specifically asked about non-surgical options, the doctor said that they were possible, but he was unlikely to heal well without surgery.

My dad got a second opinion from another orthopedist who said that a man in his early 50’s with no medical problems except borderline high cholesterol will do well without surgery with only a slightly prolonged recovery time compared to surgery. He chose that route, and with the help of his new orthopedist and physical therapy, his wrist healed well and his strength and range of motion are back to normal. It is obvious that treatment strategies that do not involve cutting a patient open are always preferable when effective, so why was there so much reluctance to even mention non-surgical treatments?

The answer is multifactorial, as always. Surgery may offer a slightly faster recovery time. Orthopedists are surgeons, and as such, enjoy performing surgeries and believe them to be more effective than other options. No one should fault them for that. The dirty secret in this case is that an orthopedic surgeon is paid far more for operating on someone than he or she is paid for casting based on the fee-for-service payment model. Fee-for-service is just as it sounds, a doctor is paid for every service he or she delivers. Generally in the United States, surgeries and procedures such as cardiac catheterization for heart disease, upper endoscopy for acid reflux or laser eye procedures for cataracts are highly paid and thus there is the temptation to do more of them in lieu of other options.

Two other physician payment models exist as well: capitation and salary. In capitation, a physician is paid a fixed amount of money at the beginning of the year per patient that he or she takes care of that year. The exact amount is determined based on how healthy or sick each patient is. The physician then delivers care spending out of that original fixed amount and keeping the remainder for his or her own compensation. Often times the insurance company and the hospitals and clinics are all one organization, commonly labeled health maintenance organizations (HMOs). This system has the advantage of discouraging excessive testing and treatment and encouraging preventative care, as it will prevent future serious and costly illnesses that would in turn reduce the physician’s compensation. It can also reduce bureaucracy because the hospitals and clinics are in the same organization as the insurance, reducing time and money spent on paperwork and other administrative work. The disadvantage is that capitation can also discourage necessary medical care as withholding care will increase the HMOs’ profit and thus the physician’s compensation. Additionally, there is the temptation to select only healthy patients since they will pay their fixed fee and likely need very little of it, allowing the HMO and the physician to keep a larger share as compensation. Most HMOs are run by ethical people and heavy regulation helps to keep everyone in line. However, there have been less reputable HMOs in the past that fraudulently withheld necessary care leading to serious disability and at times, death. Unfortunately, the capitation model offers no internal safeguards against this type of fraud.

The salary payment model is easiest to understand because it is so common in other lines of work. In health care, a doctor negotiates a salary with the hospital, clinic or private practice. The employer sets the number of hours or patients required for the physician to earn that salary. The strength of this payment model is that it applies no financial pressure to the physician. He or she will not make more money for performing more procedures or ordering more tests nor by reducing tests and procedures because the salary is fixed. The physician is free to use clinical judgment without financial influence. The downside is there is no physician incentive to work beyond the negotiated number of hours or number of patients. It is imperative that employers set adequate yet not excessive minimum work requirements.

From this brief discussion, it is clear that each model has its advantages and disadvantages. So how do they stack up against one another? A number of research studies have attempted to answer that very question. The results for primary care doctors such as family physicians and general internists are mixed. In one study, capitation lead to reduced cost and paying by salary actually increased it, but another study showed that there is no difference between the three systems of payment. It appears more studies will be needed to come up with a clear answer in the realm of primary care.

Studies comparing physician payment models in specialties such as cardiology and orthopedics are harder to find, but one study from the University of Washington had some interesting findings. It compared fee-for-service, capitation and salary in three different HMOs located in the Midwest and West Coast. They examined five specialties: cardiology, gastroenterology (GI Specialist), orthopedics, ophthalmology and ear, nose and throat (ENT). They looked at common procedures in each field such as cardiac catheterization and angioplasties for cardiology, colonoscopy and upper endoscopy for GI, hip and knee replacements for orthopedics, cataract surgery for ophthalmology and tonsillectomy and ear tube placement for ENT.

When comparing fee-for-service with salary, patients were 2.9 times more likely to get a left heart catheterization and more than 5 times more likely to get an angioplasty just because that patient’s cardiologist was paid per procedure in a fee-for-service practice compared to a cardiologist in a practice that pays a salary and no additional payment for doing more procedures. In orthopedics, patients were 1.52 times more likely to get a total hip or knee replacement with a fee-for-service surgeon compared to one paid by salary. In GI and ENT, there were similarly increased rates when comparing fee-for-service to salaried physicians. ophthalmology did not show any significant differences. Interestingly, salaried doctors were as likely and at times less likely to perform a procedure compared to doctors working in capitation-based practices.

It is important to note that these differences were not always consistent between the three HMOs enrolled in the study. The results in cardiology were the most impressive and also the most consistent. It is also important to note that this study was an observational study and only suggests a correlation between fee-for-service and higher likelihood of doing procedures. This study alone cannot prove that one caused the other. However, it confirms our intuition that if there is a monetary incentive to do more procedures and surgeries, generally people will try to get that incentive. Obviously, much more research is needed to answer the types of complex questions we need answered in order to reform our ever-changing health care system.

References
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