Doctor-Patient Relationship Becoming More Businesslike

By Amir Zaman, WEA Insurance employee benefits specialist

June 1996

If you’re sick and tired of reading about changes in the health care delivery system, you may want to skip this column. There’s not much to report other than change.

Shift in relationships

One obvious sign of change is consolidation in the health care delivery system.

Not long ago, most hospitals, clinics, and physicians were independent. These days, however, it’s very likely that your hospital, clinic, or physician is part of one or more provider networks; some of which may be regional or even national in scope. That’s because health care businesses have been buying or merging with others at a rapid pace over the past few years.

There is a noteworthy — and to some, a troubling — trend in this consolidation: the relationship of the physician to the patient is changing. Previously, most physicians practiced independently. How and how much they treated their patients was solely their decision. But that’s becoming less and less true. These days, the organizations to which the medical providers belong have a significant say in what physicians should and shouldn’t do for their patients. In addition, the way in which medical care is reimbursed is affecting the amount of services physicians are providing.

Consider a recent article in The Wall Street Journal that detailed the aftermath of AT&T’s decision to shift 30,000 of its managers and their families — about 100,000 people in all — into managed care under the umbrella of a health maintenance organization (HMO). Most of AT&T’s unionized workers had joined HMOs in the early 1990s, but the company continued to provide its management ranks with traditional health benefits. The cost of providing the traditional benefits was rising at almost twice the rate of the HMO. So, AT&T began urging its employees to join an HMO.

One employee’s longtime personal doctor refused to join the HMO, and she had to search for another doctor within the HMO. Four doctors turned her down before she found one who would take her. She felt it was because doctors were reluctant to take more patients at the rates the HMO paid them.

“The doctor-patient relationship,” she says, “is getting very businesslike.”

The relationship between doctors and their patients may be more businesslike than in the past because the way doctors are getting reimbursed for medical services is changing.

How your dollar is spent

To understand that change, compare two of the more common methods used to reimburse doctors.

Fee-for-service system: Under traditional health insurance plans, patients could go anywhere they wanted for medical care, and their doctors were compensated for every office visit, test, or procedure they performed. This “fee-for-service” system gave doctors a powerful financial incentive to overtreat because they earned more by doing more. And, without a mechanism to ensure that all services performed were appropriate and necessary, the cost of providing health care skyrocketed under plans that reimbursed on a fee-for-service basis.

To control these rising costs, larger employers and the government (through its Medicare and Medicaid programs) demanded and got fee discounts from doctors. But, to recoup revenue fees lost through discounts, doctors simply raised their fees, thereby passing costs on to those who had no so such discount arrangements. In addition, many doctors also increased the total number of services they delivered. Overall, this nullified much of the savings generated by fee discounts and costs continued to rise.

Large employers continued to complain and so payers looked for other ways to wring savings out of health care. One of these methods — capitation— turned the fee-for-service concept on its head.

Capitation plans: Under the capitation system, usually used by HMOs, doctors receive a fixed monthly payment for each patient who signs. If they provide more services to a patient than they’re being paid for, they take a loss. However, if they provide fewer services, they keep the difference. Thus, the capitation system gives doctors a powerful incentive to deliver fewer services — a direct opposite of the incentive in the fee-for-service system.

Most doctors working under a capitation system deny that they do less than what is necessary for patients, but the very concept of capitation is unsettling to many patients, and has changed how they view their physician’s role in their care.

In the same Wall Street Journal article quoted earlier, a pediatrician who switched to the HMO says a family that had been with him for more than a decade left for another doctor after he refused to refer two children to a specialist until the medicine he had prescribed for their ear infection had a chance to work. He believes the parents would have accepted his judgement under the old fee-for-service insurance plan, but stated they now worry that his decisions may be shaded by financial interests. Under the rules of his HMO, if he refers too many cases to specialists, he could get less money, but he says those rules don’t influence his decisions.

Living with the system

As the consolidation of provider groups continues, and as more is done to create incentives for doctors to perform fewer rather than more services, patients will continue to experience changes in the way their health care is delivered.

That’s not a welcome prospect for most people who would like to settle in with a doctor and have reasonable assurance that they will be able to receive necessary medical services and have their claims paid. While that may remain the bottom line, one thing appears certain: how patients receive care and how those services are reimbursed tomorrow is likely to be very different from today.

Posted May 31, 1996