"Why America's Doctors Are Struggling to Make Ends Meet"


According to this article, costs of updating medical practices are driving some clinics out of business, as many of these expenses are not reimbursible under traditional insurance contracts.

Is the system is truly unfair to doctors, or should some practices fail no matter how great the industry is? After all, no industry has a zero failure rate and most doctors are quite rich. Should medical schools offer courses in business management, in addition to medicine? If a doctor is great at treating patients but is horrible at business, should there be a system to recruit these guys so their skills don’t go to waste?

Doctors in european countries get paid much less than US doctors as it is

Why should medicine be administered through a collective of privately owned clinics? Doesn’t it make the most sense from a societal good stand point to have centralized administration facilities (e.g., hospitals with economies of scale) that basically earn their cost of capital and no more? Having looked at several healthcare niches (such as physical therapy and oncology), I know that many of these specialty areas are consolidating, and that’s a good thing. If doctors make less money, that’s fine, they shouldn’t have gone into medicine to get rich anyway.

As to the business management point from OP, that is the reason we have a division of labor. Some people in the medical industry will handle the business side, so the doctors can get to doctoring in peace.

“Doesn’t it make the most sense from a societal good stand point to have centralized administration facilities”

The facilities could be centralized, but the administration need not be. For instance, you could think of the hospital like a mall. The mall offers certain services to its tenants, but each store still has to make rent. What actual form of organization of health care services is partially determined by the market and partially by government programs and regulation. What “should” these government policies be a tricky question. I think it is less than clear that your policy would actually maximize societal good.

For instance, when you talk of cost of capital, you likely are thinking of the businesses cost of capital. What about the cost of the doctor’s human capital. Years spent learning their trade before they can make money. For some small, independent clinic the extra profits go to the doctors as effectively compensation for their human capital. We already have a shortage of primary care physicians. If a central authority reduces their compensation further to have the cost of capital be zero, then how many people will become this kind of doctor (oh, but then you say they shouldn’t have become doctors anyway).

Lastly, I don’t understand why healthcare is somehow different from any other business. For instance, in the 1920s and 30s there was a lot of talk that societal good would be maximized by taking over X industry and reducing the cost profits to cover the cost of capital. This strategy has largely failed. There certainly are some cases where it makes more sense, like common pool resources where private property rights don’t work as well. Nevertheless, for most industries, it is better to let the market determine how firms organize themselves. To the extent that the current way doctors organize is conditional on a plethora of government policies, it is by no means clear what the next best step to take is. It makes the solutions very complex.

Division of labor is sometimes not realistic for small businesses like clinics. In the article, for example, the doctor makes business decisions by himself. He does not want to join a hospital to share administrative costs as he felt like a ‘“zombie” without control of his own operation’.

History has typically shown as an industry starts to get degrade, the next step is usually consolidation.

You can call it economies of scale (the positive argument), or reducing competition and increased prices (the negative argument)

Why do you think we’re seeing so much healthcare M&A activity now?

My premise is that healthcare should not be a business. It should be a regulated, widely socially available service with little if any profit motive. A wealthy, highly functional society deserves that. I’m not talking about Obamacare, which is a poor “solution” to a very real problem.

We discussed this in another thread. Medical school in the US is flawed and overly time consuming. The argument that human capital should be a consideration for doctors (beyond some basic level) is likewise flawed.

Medicine is effectively a commodity that is manipulated and resold to a captive base of consumers at above market rates. The US long ago crossed the line in terms of what would be considered ethically criminal behavior by the healthcare industry. Just because something is protected by laws (which are bought and sold) does not make it right. The system that exists today is one in which multiple layers of industry participants add on excessive fees, all of which gets passed to the consumer or the government (the consumer effectively). If you look at enough public companies across a broad enough swath of the economy, it’s not hard to reach the conclusion that healthcare is one of, if not the most, corrupt and disingenious sectors of the economy. The level of fraud in some of these organizations makes the blood boil.

Doctors want a better return on human capital? Fix medical school – the answer is reducing the investment, not increasing the return and penalizing everyone else in the process. This would also fix the aritifically low supply of doctors in the market, which would beneficially reduce wages as well.

I agree that barriers to entry for medicine in the US are too high. The first step to reduce healthcare costs would be to broaden medical school admissions, thereby increasing supply of medical professionals. Of course, the problem here is that AMA members have vested interest in the current system, but that’s another argument.

Even if a profitless system is ideal, I don’t think it would work in the US. The civil service attitude doesn’t exist here. Without a profit motive, potential doctors will go to other fields, drug companies will stop developing drugs, private hospitals will not open, etc.

It doesn’t have to be purely profitless, but it should at a minimum move away from the current system of price gouging (though pure profitless would be ideal). As for R&D, I don’t see why the government couldn’t subsidize some or most of the efforts by private companies since the government ends up subsidizing the costs anyway through reimbursement. I haven’t seen any data, but just subsidizing upfront instead of getting gouged might actually be cheaper. Private hospitals are very capital intensive, low return ventures to begin and probably don’t need to exist as it is.

Anyway, the point is that the current system really only exists to enrich the few at the expense of the many. Someone could claim that many things are like that, but most commodities are not – medicine happens to be one of the few commodities that is so “tighly held” by the vested interests that it gets away with excessive pricing. That’s detrimental to the society as a whole, and in the case of the US, is going to one day have massive global consequences if we don’t fix the problem.

Actually a good case study you guys should all look at is what happened to Taiwan. They nationalized healthcare, and it is working well. The govt said “we are paying $X for this service and $Y for that service. period.” Healthcare costs fell a lot, and while many of the private hospitals went out of business, it is working for society as a whole.

I’ve experienced health care in a bunch of different countries. I can say without a doubt that I have never needed a hot shot over trained American doctor for any of my medical problems. The shit for brains doctors I have in India are perfect for all of my medical needs.

However, when I get in a terrible car wreck or develop cancer I will want super expensive genius people working on me.

Therefore to me it makes sense to create two tiers of doctors:

Doctor Lite: should be about as well paid as the guy who does tech support on your computer. I’d be more than comfortable with him just having an undergrad degree in “Basic Doctoring” with about a 1 year internship. Good enough. They are the people you see unless you get really unlucky. In a way these people are like the med students you see at a hospital except they are paid to be there marginally well and they never graduate to specialization. Since they would only cost about $30’s/hour we could all afford them out of pocket.

Doctor Heavy Duty: The other should be paid > 500k base and probably a lot more cause I’m gonna want that guy to be the balls as my life will be in his hand. Cancer, Major Surgery, other complicated stuff. These people would have to be rock stars and would be compensated as such. Therefore we’d all just buy a big put option on our health in the form of major medical insurance.

/My father and 3 brothers are doctors

I find it interesting people want to socialize health care and remove profit incentives in one area while defending merit-based pay in finance. Given the board’s demographic it’s not surprising, but seems a bit over the top. I’m in finance too, but will pay up for quality in a doctor more than just about any field and find most people spare little expense when it comes to important medical procedures. I’ll shop on price at the grocery store and for home repair, but not on my health. The med school process certainly isn’t perfect, but it weeds out the bottom-feeders that think of degrees as expenses rather than earned through hard work and intelligence (aka many MBA programs). The difficulty, tuition, and time provide barriers to entry, and if there was no earnings incentive there’d be very few quality doctors.

I do think the US’s healthcare system is highly dysfunctional and nowhere near the quality it should be relative to other developed countries, but to rip the medical profession for corruption and high pay is a pretty bold claim given the industry we come from. I haven’t seen many doctors come out with scathing letters against former employers’ greed and corruption, and while the average salary is pretty high there’s not nearly the amount of outliers earning several million plus.

Also, medicine costs are so high because R&D doesn’t come cheap. Drugs are extremelely regulated, and the cost of failure is huge - look at a pharma company’s stock reaction when a drug is denied. Patents expire and former cash cows lose their pricing power overnight. Finally, the government certainly has a reimbursement system of “we are paying x for this and y for that.” There’s thousands and thousands of codes for all kinds of procedures and treatments - if anything this system is way too complicated and creates a bureaucratic nightmare.

Maybe there should be two tiers of doctors, but then insurance would be so high for these lesser-skilled doctors they’d have to raise costs to stay in business…maybe if you sign away the ability to sue?

I don’t think people are that upset that doctors can afford nice houses and cars. I think they’re upset that stopping in to get a 15 minute physical exam and a blood test can run up to $750, and that’s if there’s no problems found. If there is any issue found, then the bill can easily get into the multiple $1000s.

Probably not so much of that ends up goeing into the doctor’s pocket. More ends up going into the insurer’s pocket, and then the insurer feels like the other side of a game of “pay me when you’re well, and I’ll find a reason not to pay you when you’re sick.”

I agree on the doctor-lite idea…which is kind of what you get with Nurse Practicioners. Probably the most important thing from both a cost and a health perspective is early detection, but most people don’t go in for annual or semi-annual check ups and tests becase, as bchad said, they are exorbitantly expensive for many. I know a remodeling contractor that pays $1600 for his families healthcare per month. He’s not about to pay a deductible as well unless its something he knows is serious.

Detection needs to be inexpensive and paying doctor-lite salaries as opposed to full doctor salaries could help in that direction.

Undersupply of medical practitioners, high insurance costs, overlitigous patients, abundance of government funding, and overprescription of tests and treatment all contribute to high healthcare costs.

Isn’t a DO kind of like a doctor-lite?

Nurse practitioners are like doctor lites (what is “DO”?). They can actually provide diagnoses and prescribe some medicine. I think ChickenTikka wants more people to have this sort of role. If you go for a check up today, you might see a full doctor, even though a nurse practitioner might be able to provide the same service for that visit.

DO = Doctor of Osteopathic Medicine

They actually do have that in India. You have your basic MBBS doctors (MBBS is a bachelor’s degree) and more specialized ones…

No, DO is a full doctor like MD, not doctor lite at all.