Doctors are fleeing private practices for the security of hospitals, and the exodus will be a disaster for U.S. health care.
On the surface, doctors taking on salaried jobs at hospitals might seem like good news for health care costs. One driver of health care inflation is the “fee for service” model, which gives doctors an incentive to deliver the maximum feasible number of billable services per patient. Salaried positions, on the other hand, are supposed to keep down costs, because you get paid the same no matter how many tests you order.
But it’s not that simple, as the NYT notes:
“In many places, the trend will almost certainly lead to more expensive care in the short run,” said Robert Mechanic, an economist who studies health care at Brandeis University’s Heller School for Social Policy and Management [...]
Many of the new salaried arrangements have evolved from hospitals looking for new revenues, and could have the opposite effect. For example, when doctors’ practices are bought by a hospital, a colonoscopy or stress test performed in the office can suddenly cost far more because a hospital “facility fee” is tacked on. Likewise, Mr. Smith said, many doctors on salary are offered bonuses tied to how much billing they generate, which could encourage physicians to order more X-rays and tests.
Absorbing private practices is just one more way hospitals can make themselves bigger and more powerful. The market power of hospitals relative to insurers is already one of the most pernicious market imbalances in U.S. health care. This trend will only make it even less balanced. The bigger hospitals get, the more they can jack up their prices—up to 44 percent higher according to one estimate.
Pace Mechanic, this isn’t just a short-term problem. The more doctors start working in hospitals, the less sustainable our current health care system looks in the long term.