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How Doctors Could Rescue Health Care

There are many reasons for this change. Young doctors now finish their training with substantial debt, often in the range of $150,000 or more. The prospect of assuming even more debt to start their own practice is daunting. Joining a multispecialty group means less financial risk and provides ready-made facilities and a staff to schedule patients and bill for services. Groups usually offer an income fully competitive with that to be expected in independent private practice. They often pay better fringe benefits than solo practitioners could provide for themselves.

Half of all medical students are now women, and soon they will represent nearly half of all practicing physicians. Women are more likely than men to choose some type of primary care practice, and I and others have found that many of them particularly appreciate the opportunity afforded by group practice to share responsibilities and to limit their working time. Many young male physicians are also glad to be working in a less competitive and more collegial environment, with opportunities to choose limited working hours.

In short, physicians are increasingly looking for arrangements that allow them to focus more on the practice of medicine and less on managing a business. They also want at least a little more time for personal and family life. Practice in multispecialty groups is the obvious answer. Single-specialty groups offer some similar advantages, but are not as attractive. They are smaller, have fewer resources, and will not be able to adapt as well to the new payment methods that government and private payers intend to employ.

Meanwhile, evidence has been accumulating that organized care by multi-specialty groups provides good medical service and has the potential of saving much money.8 This is because, as most clearly shown by John Wennberg and his colleagues at Dartmouth,9 much of the care prescribed and provided by independent specialists is unnecessary. Physician-owned not-for-profit groups, particularly those that pay their doctors at least partly by salaries, are not as likely to provide unnecessary services or to recommend hospitalization when it is optional. Their physicians have few financial incentives to do so, and the services of their specialists are coordinated with their primary care doctors, who usually recommend the simplest and least expensive choices consistent with good medical care.

However, today’s competitive health care market, with its private health insurance companies and fee-for-service payment system, severely limits the potential cost savings of a delivery system based on not-for-profit group practice. Private insurers contribute to high costs not only because of their profits and overhead, as already noted, but because doctors and hospitals have to pay the considerable costs of billing the insurance companies and collecting money from them. I favor a much less expensive single public payer system supported by a universal, progressive, designated health care tax. Fee-for-service payment gives doctors incentives to provide more services than needed and allows for fraudulent billing. It should be replaced by an advance payment to physicians for comprehensive care on a per capita basis.

To receive such payment, group practices would have to reimburse their physicians largely by salary. Regulations would require open enrollment of patients; to limit the risk of fixed payment for comprehensive care, groups would need public reinsurance or other financial guarantee to protect against the possibility that some patients might need expensive services.

There is much reason to believe that such a reformed system could deliver good care for all at considerably less cost and could also control cost inflation10—although such a system does not have the remotest chance of being legislated by our national government anytime soon. But what if, as seems likely, the rapid trend toward group practice that I have described were to continue, and almost all medical care were ultimately to be provided through multispecialty group practices? Despite the limitations imposed by the existing health care market, the advantages of organized care might become obvious not only to patients but to business employers and even to legislators and policymakers in Washington.

The question would then arise: If restructuring the delivery of medical care is so helpful, why not reform the insurance and payment of care as well? Supported by most of the medical profession and by most voters, major reform might finally be seriously discussed. It might become easier to pass legislation that created a system based on a tax-supported single-payer system, with prepaid comprehensive care for all. Obviously, there is no guarantee this would happen. Indeed, the odds would still be against it. But if most physicians were to be employed in multispecialty groups, the growing number of practitioners now supporting major reform would probably become a strong majority. This could well change the climate of opinion enough to influence legislation.

Dr. Francis J. Crosson, former executive director of the Kaiser-Permanente physicians’ organization and a prominent advocate for physician-managed groups becoming federally certified ACOs, believes that they will be essential for the future control of health costs.11 But unlike the broad reforms I favor, in the system he envisions these group practices would function in a competitive marketplace, in which public and private insurers would offer them financial incentives to improve care, and market forces would be expected to control prices. However, I am convinced that good affordable universal care will require major reform of all parts of the system because market forces and the current system have clearly encouraged excessive medical treatment and diagnostic testing. Insurance coverage will need to be replaced by tax-supported universal access to medical care, which should change from a competitive market to a not-for-profit social service.12

Hospitals, as we have seen, are now hiring more physicians to work in groups. As hospital employees, these physicians inevitably feel pressure to protect their employers’ income by filling beds and using hospital facilities for tests and procedures. They are less likely to control costs than physicians in independent not-for-profit groups. It is not yet clear which type of group will dominate, but those owned by physicians would probably be more supportive of reform.

The greatest resistance to reform would come from the private insurance industry. But with the savings that a reformed health system would generate, it should be possible for whatever agency collects the health care tax to buy out the industry’s investors. Some current employees of insurance companies might be usefully employed in a new single-payer system. Moreover, it seems likely that the jobs lost in health insurance companies would be offset by new jobs created through the expansion of an economy relieved of unsustainable health costs.

I do not underestimate the complexity of the task or the strength of opposition to reform by vested interests, and by conservatives who rail against a “government takeover” of health care. Reform could be delayed for years, or indefinitely. However, the status quo will soon no longer be tenable because of rising costs. New thinking about major reform and private health insurance will be necessary.

Private investor-owned health insurance appeared quite suddenly in the final few decades of the last century, reaping the profits from the health coverage that employers were offering to their employees. But except for a brief and unpopular era of cost control by “managed care” in the 1990s, the private insurance industry has not contributed anything to the health care system nearly comparable in value to the costs it has added.

In some European countries, private insurance companies are an integral part of popular and less expensive health care systems, but they are usually not-for-profit and are closely regulated by government. In Switzerland, for example, the government mandates universal not-for-profit private insurance coverage for most medical services; it also requires uniform benefits and controls costs by regulating insurance premiums and the fees paid to physicians. The government also owns most of the major hospitals. In view of our distinctive political and economic traditions, and cultural diversity, we could not easily adopt this or any other foreign system. We will have to find our own health care solutions.

Health reform might begin in the states. Vermont has recently approved a single-payer system that includes a public board to develop a global health budget and new reimbursement methods to replace fee-for-service payment. The board will help physicians to form multispecialty groups that can accept prior payments for comprehensive care of patients. Many other details remain to be worked out. Federal permission for the state to pool all government health care funds will be needed before the plan can become operative, which is estimated for 2017.13 Similar initiatives may be introduced in other states; if successful, state plans would encourage Congress to enact national reforms.


The net effect of the reformed system I have described here on the government’s costs can only be guessed at, but savings would be very large. Any initial increases in expenditures owing to expanded coverage would certainly be more than balanced by savings later on. However, government would hold the ultimate cost-controlling weapon because it would determine the rates at which it reimbursed groups for prepaid, comprehensive care, and would thereby have full control of health care expenditures. If everyone (including politicians and government officials) were in the system, there would be little chance that the government would underfund it, or allow its services to deteriorate.

Such reforms are the best—perhaps the only—hope of preserving the benefits of Medicare and Medicaid and achieving affordable universal access to care. In today’s political climate these reforms have no chance, but this could change if physicians continue to join groups and transform the organization of medical care. If encouraged by public opinion and by physicians, the members of Congress might see the clear advantages of the group practice model. They might then legislate the broad reforms in insurance and payment that would make this model much more effective. If that were to happen, the medical profession would have made an important, although unplanned, contribution to the rescue of the US health care system.

  1. 8

    Kenneth H. Chuang, Harold S. Luft, and R. Adams Dudley, “The Clinical and Economic Performance of Prepaid Group Practice,” Toward a 21st Century Health System, edited by Alain C. Enthoven and Laura A. Tollen (Jossey-Bass, 2004); and Brent C. James and Lucy A. Savitz, “How Intermountain Trimmed Health Care Costs Through Robust Quality Improvement Efforts,” HealthAffairs, Vol. 30, No. 6 (June 2011). 

  2. 9

    John E. Wennberg, Tracking Medicine: A Researcher’s Quest to Understand Health Care (Oxford University Press, 2010). 

  3. 10

    Arnold Relman, A Second Opinion: Rescuing America’s Health Care (PublicAffairs, 2010). 

  4. 11

    Francis J. Crosson, “The Accountable Care Organization: Whatever Its Growing Pains, the Concept Is Too Vitally Important to Fail,” HealthAffairs, Vol. 30, No. 7 (July 2011). 

  5. 12

    Relman, A Second Opinion

  6. 13

    Anya Rader Wallack, “Single Payer Ahead—Cost Control and the Evolving Vermont Model,” The New England Journal of Medicine, Vol. 365 (August 18, 2011). 

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