Health Affairs, 23, no. 2 (2004): 69 doi: 10.1377/hlthaff.23.2.69 © 2004 by Project HOPE	New Online   Pay Cuts For Medicare Docs   Access To Care Woes   Public Coverage More Efficient   Empowering Consumers

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Physicians

PROLOGUE

Challenges For Physician Practice

The reason for medicine’s predicament was always the same. Everyone knows that whoever pays the piper calls the tune. But no one wants an insurance company or a government bureaucrat to diagnose their illness or prescribe its treatment. Hence Blue Shield and Medicare both earnestly forswore any intent to interfere with professional practice. But it was not a promise that either private or public payers could keep. In the 1990s managed care vainly sought to solve the inherent conflict by "aligning incentives" with capitated payment schemes that gave doctors a financial stake in limiting services. But the concept requires participation of carefully integrated health systems that could not be rushed into existence overnight and was egregiously oversold.

Now we are back to square one, except that after a generation of gradual decline in the prestige of the professions in general, medicine’s claim to autonomy is respected less than ever. Patients still depend on doctors to diagnose and treat their illnesses. Doctors still hold exclusive power to order hospital admissions. But the more payers treat them as mere economic animals, the more doctors act that way, as the following papers show. A decade of falling reimbursement rates for many types of physician services has reduced the appeal of the traditional revenue-restoring strategy of indiscriminately driving up volume. Instead, Hoangmai Pham and colleagues find that the focus of doctors’ efforts to increase their incomes in the twelve cities covered by the Community Tracking Study (CTS) has been investment in ancillary services such as imaging and lab testing.

In a second CTS paper on physicians, Larry Casalino and colleagues detail the growth of single-specialty practices and the additional opportunities that these groups have exploited to raise their revenues. At the same time, these authors find that the growth of multispecialty group practices—on which the promise of managed care and managed competition was based in theory—has stalled and perhaps declined. A third paper by Michael Chernew and colleagues details another aspect of the changing environment: the overlap of health maintenance organizations’ (HMOs’) physician networks in the wake of the managed care backlash.

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