The New Health Care for Profit Doctors and Hospitals in a Competitive Environment (1983) / Chapter Skim
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Economic Incentives and Clinical Decisions
Economic Incentives and Clinical Decisions
Pages 103-124
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From page 103... ...
These concerns range from the fear that such enterprises will skim off all the profitable patients and leave the voluntary and public sectors with mounting bad debts to the fear that patients will lose their trust in the medical profession. There is also an emerging controversy over the possibility that for-profit health care entails some economic incentives that may affect day-to-day clinical decisions.
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From page 104... ...
For instance, some economists would like to see the physician more free to serve as the patient's agent, taking into account both the medical and economic consequences of alternative clinical decisions. Other economists think that a greater role of economic incentives could exacerbate current problems.
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From page 105... ...
However, in practice, many physicians act as if things were clear-cut and develop "standard operating rules" or "clinical policies" that dictate what should be done (Eddy, 1982~. These clinical policies may be highly complex, such as: "If signs A, B
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From page 106... ...
In contrast to medical training, which emphasizes the single best course, economists are trained to believe that there are an infinite number of potential solutions, the selection of which should depend on individual preferences, and that the most efficient allocation of resources will be achieved if everyone pursues his or her own selfinterest in a market economy. Furthermore, although physicians have traditionally seen medical problems in terms of immutable laws of chemistry and physics, economists have been expanding the realm of economic analysis, with its emphasis on individual choice and tradeoffs, to include politics, the family, and natural selection (Becker, 1981; Wilson, 1978~.
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From page 107... ...
The dominant mode of payment is fee-for-service, and, more important, fees are heavily weighted toward laboratory tests and diagnostic and therapeutic procedures in contrast to time spent talking with the patient (Schroeder and Showstack, 1978; Showstack et al., 1979~. The hypothetical "physician as a perfect agent" would be available and willing to spend time with the patient, investigating the problem, pondering the diagnosis, and calculating the alternatives.
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From page 108... ...
may receive a capitation payment covering the annual primary care of its enrollees, but if the group orders too much hospital care, its share of the plan's net income will be smaller (Luft, 19811. The incentives to provide services are reversed in some systems fee-for-service has a bias toward more services while the fixed budget of a HMO sets up a bias toward fewer services but in each case economic factors are present that could influence clinical decisions.
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From page 109... ...
The economist tends to be denominator oriented, focusing on the influence of economic variables on various decisions, such as whether individuals experiencing a given set of symptoms decide to see a physician. The physician is typically numerator oriented, focusing on persons who come to the office for care.
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From page 110... ...
They are highly profitable, have proliferated rapidly, yet rarely result in a definitive change in treatment outcome (Showstack and Schroeder, 19811. Is this evidence of economic incentives influencing practice patterns?
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From page 111... ...
Economic Incentives and Clinical Decisions 111
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From page 112... ...
Therefore, it is unlikely that differential health status accounts for all the observed differences in hospitalization rates between enrollees in conventional plans and prepaid group practice HMOs (Luft, 1981~. However, the observed differences in hospitalization rates do not necessarily reflect physicians' decisions whether to treat patients.
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From page 113... ...
surgery, and come-and-stay surgery (i.e., the patient is admitted on the day of the operation) really involve minimal changes in clinical practice; they are primarily production process decisions concerning the most efficient way to carry out a specific task.
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From page 114... ...
More important, as we will soon discuss, the data do not indicate why or how the difference occurred. Incl:ividual versus Collective Patterns of Practice This brief review suggests that, despite the physician's general view that economic incentives do not influence clinical decisions, various
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From page 115... ...
After all, the concerns about for-profit enterprises in medicine stem largely from the notion that care will suffer.2 The first step in this examination is the recognition that medicine abounds with situations in which alternative clinical strategies are available with no scientific evidence indicating which is preferable. The second step is the recognition that despite this physicians may have strong preferences concerning these alternatives and that there may be a correlation between economic incentives and these preferences.
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From page 116... ...
Third, although the medical literature offers little useful guidance, the practitioner constantly makes ad hoc observations that tend to support and reinforce whichever view is initially held. Suppose the decision concerns a service that, given the available research, is truly in the gray area, such as bypass surgery for two diseased coronary arteries.
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From page 117... ...
Economic Incentives and Clinical Decisions 117
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From page 118... ...
The variability was concentrated among the less severe cases in which the research is not definitive, further supporting the notion of differences in the gray area. Although the wide variation in patterns within practice settings may have idiosyncratic origins, such as the teachings of an influential professor or a memorably bad experience with an alternative strategy, there also seem to be consistent patterns of care related to the method of payment and other economic incentives.
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From page 119... ...
Furthermore, most clinicians appear to be unaware of costs or to believe that a third-party payer, not the patient, will foot the bill. Summary and Conclusions Much of this paper has been devoted to an attempted reconciliation of the apparently opposing opinions of physicians and economists concerning the influence of economic incentives on clinical decisions.
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From page 120... ...
A possible explanation for both sets of evidence is that there is often a wide range of acceptable clinical practice, even though each clinician may believe in his or her own way. If clinicians sort themselves into different practice settings whose economic incentives are consistent with aggressive or conservative practice styles, we will observe clinical patterns that appear to be shaped by economics, although the clinicians themselves see no such effects.
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From page 121... ...
"Health Status and Health Care Use by Type of Private Health Coverage." Milbank Memorial Fund Quarterly/Health and Society 58:4 (Fall 1980)
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From page 122... ...
"A Controlled Comparison of Cardiac Diagnostic Test Use in a Health Maintenance Organization." Presented at the Annual Meeting of the Robert Wood Johnson Clinical Scholars. San Antonio, Tex., 11-14 November 1981.
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From page 123... ...
"Health Care Delivery in Maine I: Patterns of Use of Common Surgical Procedures." Journal of Maine Medical Association 66:5 (May 1975)
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