To Cut Health-Care Costs, Put the Doctors on Salary

DANIEL S. GREENBERG

February 10, 1992|By DANIEL S. GREENBERG

WASHINGTON. — "Extreme remedies are very appropriate for very extreme diseases.'' That rule, laid down 2,500 years ago by Hippocrates, the father of medicine, is not reflected in the timid tinkerings with the health-care system offered by President Bush and his Democratic rivals.

Does anyone believe that another round of scrimping in the patchy Medicare and Medicaid systems will put health-care economics on a sound footing? Or that sick people will become wiser consumers of medical treatment if they have to pay more for insurance? Or that doctors will cooperate with schemes designed to hold down their billings? Or that tax credits will enable millions of impoverished people to buy health insurance?

The perverse genius of the American health-care system is its capacity for spending more and doing less. In 1980 the U.S. spent $249 billion, or 9.1 percent of gross national product, on health care. In that year, 12.5 percent of the population under 65 was not covered by any kind of health insurance. In 1989, the annual health-care bill passed $600 billion, or 11.5 percent of GNP, and the percentage of uninsured climbed to 15.7 percent. The U.S. leads the world in medical spending, but compares poorly with major industrial countries in life expectancy and infant mortality.

The real need in medical economics is to redirect that government and private insurance money toward useful purposes. A first step would be to take the wealth-seeking out of medicine by putting all doctors on very ample salaries, even above today's commonplace medical incomes of $150,000-plus. A mercenary element in medicine? As revealed in advertisements and articles in medical journals, a thriving advisory industry exists to tell doctors how to make money.

Assured income -- even at an average of $200,000 a year -- would be a bargain for the public, and would permit physicians to concentrate on health rather than on new ways to generate patient traffic and dodge the insurance rules. The million-dollar surgeons would be outraged, but sympathy for their plight is limited. The important point is that humane instincts and dedication to patient welfare abound in the ranks of medicine. But too frequently they must contend with monumental student loans and the high costs of comfortable living.

How could doctors be pulled into a salaried scheme? Simple. Pay their way through medical school and promise them an excellent living for quality service. For those already in practice, the lure would be steady, high income with far fewer hassles. Be ready for a stampede.

But doctor income accounts for only about 20 percent of medical expenditures. The big bills are from hospitalization. What can be done about that? In many instances, there's no alternative to hospitalizing a patient. The reality, however, is that the hospital industry remains over-bedded, despite many ward closings in recent years. Profit-seeking or non-profit, hospitals need cash flow and net income to stay afloat. Revenues come from patients, and patients are provided by doctors, who are the only ones who can admit patients.

According to a study by the nation's largest medical head-hunting firm, Ernst & Young/Jackson and Coker, average hospital revenues per physician from admitted patients rose from $448,000 in 1989 to $513,000 in 1990. ''Primary-care physicians are the lifeblood of hospitals,'' according to Randall W. Gott, the firm's director of research.

''In addition to their own substantial level of admissions and revenue,'' he added, ''primary-care physicians are responsible for a large portion of the admissions and revenue generated by specialists as a result of the extensive referral network they share.

''This is also why,'' he added, ''primary-care physicians are the most highly recruited segment of physicians sought by hospitals and medical groups at this time.''

Doctors play the admissions game because it's essential to their livelihoods. But what if their livelihood were assured, and admissions were made solely on the basis of medical judgment? The change could revolutionize the economics of health care.

Let's try it. Since nothing else works, there's nothing to lose.

Daniel S. Greenberg publishes the newsletter Science & Government Report.

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