Monday, August 13, 2007

Physicians and Health Plans - Third Parties are Killing Physician Entrepreneurship

I champion doctor innovation and entrepreneurship. (1) I believe doctor entrepreneurs, freed from third party shackles, can lower costs, better care, provide superior service, and give consumers more choice and convenience. This will take a consumer-driven system with consumers responsible for their own health care decisions and spending more of their own money.

John Goodman, PhD, founder and CEO of the National Center for Policy Analysis (NCPA) in Dallas, and Regina Herzlinger, professor of business administration at Harvard Business School, senior fellow at the Manhattan Institute and author of Who Killed Health Care? (McGraw-Hill, 2007) agree with me.

Goodman says:

In our fee-for-service payment system, doctors are slaves to the way they are paid. It doesn’t matter whether the payor is public or private. It also doesn’t matter whether we are in the United States or Canada. Doctors have no freedom to repackage or reprice their services. More specifically, regardless of how they repackage, they cannot reprice. So almost any innovation that raises quality or lowers the patient’s cost means less – not more- income-- for the physician.

Herzlinger says:

Entrepreneurs avoid health-care delivery because status quo providers, abetted by legislators and insurance companies, have made it virtually impossible for them to succeed. Unlike other U.S inducers, consumers do not set prices. A third party -- government or an insurance company –- not only sets prices but goes so far as to specify procedures and kinds of patients to be covered.

Herzlinger’s solution?

Luckily there is a solution; consumer-driven health care. Let’s take back our $2.2 trillion system from the suppressing status quo and allow consumers to reward entrepreneurs. Until we control our health system, the entrepreneurs who could reform it –and make our lives better – will continue to look elsewhere for opportunities – who can blame them?

Until we stop passively letting third parties dictate the terms, prices, and conditions of patient engagement, we’ll perpetuate our government and health plan controlled system. The alternative is to put consumers in the driver’s seat through use of high deductible plans and HSAs. It’s important to be realistic about our future health system – government run systems (Medicare, Medicaid, the VA, and state-run children’s insurance and corporately-dominated health plans - will not go away, but consumer-driven care may change the system for the rest of us who prefer freedom to choose what kind of health care we want.


1.Richard Reece, Innovation-Driven Health Care: 34 Key Concepts for Transformation, Jones and Bartlett, 2007.

2.John Goodman, “Entrepreneurs,” NCPA Policy Report, August 13, 2007.

3.Regina Herzlinger, “Where are the Entrepreneurs in Health Care,” Wall Street Journal, July 19, 2007.

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