Reform Driving Physicians Out of Private Practice to Reduce Costs

By James Doulgeris and Richard Reece, MD |August 2, 2012

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August 3, 2012-  The following article appeared in the August 2, 2012 issue of Physician Practices.

When Edward Lorenz, a Harvard mathematician and meteorologist, coined the term “The Butterfly Effect” 40 years ago, he used it to simplify his broader “Chaos Theory” by saying that extreme weather in Texas or New York could be caused by a butterfly flapping its wings in Brazil. The Chaos Theory also holds that an outcome in any field of human endeavor is highly sensitive to initial conditions.\

When Congress passed the Affordable Care Act (ACA) in an attempt to redirect the unsustainable trajectory of our $2.9 trillion, extraordinarily complex healthcare system, it did so with about 2,600 pages of potential progenitors of the Butterfly Effect.

The casualties of the first flutters wrote large are being seen already. They are doctors being driven out of private practice and into the safe refuge of employment by hospitals, large clinics, and integrated health systems. These consolidated systems, with near monopolies in many geographic regions, will be powerful enough to demand higher rates and new fees from payers. As a countermeasure, government reformers are pushing accountable care organizations, with bundled bills, budgetary caps, and capitated rates, shifting risk to closed systems of physicians and hospitals.

Will big box medicine actually lower costs? There are valid grounds for doubt. If and how long the federal government can afford to keep the new system afloat with cash as it conversely heaps on mountains of new regulations and unfunded mandates lengthens the odds of success considerably.

Exacerbating the entire situation is the present public health concern of physician shortages building to crisis proportions as so starkly outlined by Annie Lowrey and Robert Pear in their July 28, 2012 New York Times article, “Doctor Shortage Likely to Worsen With Health Law.”

Putting physicians who have invested a decade or more in intensive training with six figure school loans out of business and into a big box lab coat is far removed from putting a general store owner out of business and into a big box retail vest. The level of dissatisfaction among physicians is already profound, and worsening. Of greater concern — they have choices other than clinical medicine and resources to pursue them.

So, the question is: Is driving a systemically distressed, contracting, dissatisfied and undercompensated physician sector to be forcibly absorbed by a traditional antagonist, but symbiotic hospital sector on the edge of distress itself and binding them together with miles of red tape and questionably reachable incentives going to reduce costs?

In a July 16, 2012 op-ed in the Boston Globe, Lynn Nicholas makes a compelling case that Massachusetts experience with “Romneycare” proves that reducing payments to hospitals doesn’t reduce healthcare costs; it just shifts them to someone else. The converse being true is equally logical. Shifting risks from one entity to another doesn’t reduce health costs; it just shifts risks – in this case from payers big enough to absorb them to providers, who are not.

One proponent of passing risk and reward to providers is David Lawrence, MD, chairman emeritus of Kaiser Permanente, who reasons that team-based medicine — coordinated care with physicians working in teams — replacing independent, fee-for-service physicians with structured organizations and salaried physicians, will bring order out of chaos with lowered costs¹.

On the other hand, Dr. Brenda Zimmerman and her co-authors in their groundbreaking book, “Edgeware: Insights from Complexity Science for Health Care Leaders,” believe that combining workable systems rather than unworkable master schemes and mixing cooperation with competition, rather than emphasizing one or another, is the key to success².

The smart money, however, is on the “Cyrus Vance 2 1/2 Rule,” which has proven true time and time again: “Always remember that everything takes twice as long, costs twice as much and works half as well as the original projection.”

Vance was Deputy Secretary of Defense back in the 1960s. His was no theory.

Richard Reece, M.D. is the author of "The Health Reform Maze."

Find out more about James Doulgeris and our other Practice Notes bloggers.

1 David Lawrence, “From Chaos to Care: The Promise of Team-Based Medicine,” Perseus Press, 2002
2 Brenda Zimmerman, Curt Lindberg, and Paul Plsek, “Edgeware: Insights from Complexity Science for Health Care Leaders,” VHA Inc, Irving Texas, 1998