I posted a note five days ago about how the cost of healthcare seems to be gradually declining (see: Decrease in Healthcare Costs May Persist as Economy Revives). A reader, Ajit Alles, responded with a comment that decreasing expenditures of health my result in a lower quality of care, which I responded to in another note (see: The Correlation between the Cost of Care and the Health of a Population). He has responded to this second note with the following comment:
As follow-up, I agree that we spend way too much on end of life care, but that won't be reduced without a cultural shift. People expect miracles from medicine based on what they hear on the news and see in TV dramas. We could spend less and get better results, but people have to first start accepting that modern healthcare has limitations, not the least of which is funding. The new push for genomic healthcare is a good example of unrealistic ideas being pushed for profit. If everyone thinks that they are going to get personalized gene targeted healthcare they are dreaming! I know I'm a curmudgeon in this regard, but we first need to have good basic healthcare before we get cadillac genomics....We in for-profit medicine must share the blame for pushing "new and improved" medicine that is unaffordable and only (marginally) benefits the few people who can afford it. I recently heard of a family that wants some genomic test done on their child with cancer. The test looks at sequence variation in multiple genes and provides a "report" of very limited utility since most of the variations have no specific treatment. The test costs about $25000 and is not covered by insurance ....The family can afford to pay for this so it's being done with the encouragement of the oncologist. There are others who peddle proteomics reports to desperate patients. Enough said. This is the road to ruin.
I would like to respond specifically to his suggestion that "[those of us] in for-profit medicine must share the blame for pushing new and improved medicine that is unaffordable and only (marginally) benefits the few people who can afford it." I agree that many providers participate in "for-profit" medicine. However, the nature of the healthcare enterprise is now changing to what has been called "Big Medicine" or "Big Med" (see: Physician Private Practice Declines; the Last Barrier to Emergence of "Big Medicine"; The Transition to "Big Med": Need for Emphasis on Standardization and Cost; Health Systems Use Their Regional Dominance to Muscle Insurance Companies). With the rapid decline of private physician practices, many of the key decisions about the future of healthcare will be made by the federal government, large hospital systems, health insurance companies, and Big Pharma. So while we indeed have a for-profit health system in this country, most of the resources will flow from institutions like the federal government and health insurance companies to large institutions like large hospital systems. The great majority of physicians will be hospital employees. I refer to this as the institutionalization of healthcare delivery. We need to better understand the consequences of this shift.
I think that this change will have a major effect on the incentives experienced by physicians. In previous notes, I have made the point that cancer patients receive better care if the treating oncologist is salaried and does not benefit directly from selecting the most expensive treatment. This idea becomes apparent, as one example, in the treatment of ovarian cancer patients where a private oncologist is incentivised to maximize revenue from patient "chair time" whereas salaried academic oncologists seem to be more inclined in select the preferable intraperitoneal infusion of chemotherapeutic agents (see: Patients with a Cancer Should Seek Treatment in Cancer Hospitals). This is the best therapy but complicated and with lengthy patient visits. Here's are a couple of additional articles about how oncologists are compensated for additional reading (see: Will the Sequester Cause Oncologists to Lose Money Prescribing Chemotherapy?; Who Pays Your Oncologist?).
For private oncologists, the so called "oncology concession" goes to their group practice and they themselves directly benefit financially from their clinical decisions (see: The Oncology Concession Under Attack by Health Insurance Companies). For a salaried oncologist, the "oncology concession" goes to the hospital whose executives may choose to pay their oncologists the internist market salary, retaining the difference. The hospital may then choose to reward its executives at a higher level for developing a bigger cancer center (see: Cancer Business Highly Remunerative for Sloan-Kettering Executives).
I believe that health system executives will be more highly compensated and physicians will be less so as a result of institutionalization. After all, it is the executives who are making macro compensation decision and it would be natural for them to reward themselves. Moreover, these same executives will also have critical decision-making power in terms of how "new and improved" medicine is delivered. I believe that most of decisions will be based on how such care is compensated by the various institutional payers.