Thursday, June 12, 2014

Health Care Organizations  Versus Individual Doctor

Every single social task of major impact . . . is increasingly entrusted to institutions which are organized for perpetuity and which are managed by professionals, whether they are called ‘managers,’ ‘administrators,’ or ‘executives.'

Peter Drucker (1909-2005),  The Age of Discontinuity, 1969

We live in a society of organizations where knowledge, amplified and concentrated by computers, is king.   Organizations with the capital and skill to organize physicians into teams  to take advantage of and to apply knowledge will prevail over individual practices.
As much as it hurts me to say this, organizational dominance  is the reality, or as Peter F. Drucker described as a  “discontinuity” (The Age of Discontinuity,  1968-1969).   

In his book, he described four major discontinuities;  1) genuinely new technologies, i.e the computer; 2)  major change in the world economy, i.e., one global shopping center; 3) every social task entrusted to institutions organized for perpetuity and run by managers; 4) knowledge as the central capital, the cost center, and crucial resource of the economy.

These discontinuities, whether physicians  accept  them or not,  has contributed to the decline of small independent practices.  

Still, there has been a resurgence of these practices with the evolution of concierge/direct pay movement,  but these practices may have a minor impact without some centralized source of capital and organizational strategy.  

Organizations like MD/VIP has taken a stab at creating an organization to implement this strategy, and others like the American Association of Physicians and Surgeons are holding national meetings to promote ways and means of developing these independent practices.   As more of these practices become evident,   and as direct pay ambulatory care centers kick in,  hospitals may adopt networks of direct pay practices  and  invest  in direct pay ambulatory surgical centers.

There is no question that new organizations  with new business models with enough capital and entrepreneurial management  are in the horizon.      To date,  government-backed business models such as Accountable Care  Organizations and Health Insurance Cooperatives are off to a rough start (see  Henry Aaron, “Here to Stay – Beyond the Rough Launch of the ACA,” NEJM, June 12, 2014; and Louis Radnofsky, “Mixed Bag for Health Co-Ops): WSJ,  June 12, 2014).  

At the same time,  there is little doubt if Republicans win the Senate,  a 80% possibility according to odds makers, “Republicans can be expected to advance targeted proposals to eliminate the ACA’s most unpopular and unworkable aspects and substitute market-based alternatives.  Such proposals will embrace the possibility of a more decentralized,  less regulatory, and more consumer-driven model of health care.” See Joseph Antos, “Health Reform after the ACA,” NEJM, June 12, 2012.

The defeat of Republican House leader, Eric Cantor, in Virginia, largely because he spent too much time in D.C. and too little time in his district,  signals the  end for many Washington-based incumbents . 

 His successor, David  Brat, an economics professor,  is very much a Free Market advocate.  His election victory may foretell  of  a return to free-market principles and a rejection of government  health care regulations and controls.  

If this proves to be true,   direct pay care by physicians  and their organizations,  may gain traction.   The main impact so far of  ObamacCare health exchanges  has been to raise premiums and deductibles to unaffordable levels, which has opened the flood gates to more affordable direct pay practices.

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