Follow the Money

This weekend’s NY Times had an Op-Ed by doctors Peter Bach and Robert Kocher about why medical school should be free for people willing to pursue a career in primary care.  Drs. Bach and Kocher note that primary care is critical to the successful improvement of quality and cost in the healthcare system and yet the American Academy of Family Physicians has estimated a shortfall of 40,000 primary care doctors by 2020.  Their point is that despite these statistics, the system is somewhat rigged against primary care physicians (“PCPs”)….it costs them just as much as specialists to go to medical school but they come out making 58% of the money ($190K vs. the $325K of the average specialist).  Thus, since we need PCPs far more than we need more specialists, let’s pay for PCP candidates to go to medical school but effectively cause those going into specialty care to cover the costs of those who remain as PCPs.  In other words, let those who will financially benefit from their career choice (specialists) subsidize those that, for all intents and purposes, go into a life of “medical public service” (my term, not theirs).  By making the primary care education free, Drs. Bach and Kocher suggest, we have the potential to dramatically increase the pull of people to primary care.

While this concept may be a good one in terms of attracting new people to medicine, particularly those who never considered the field because they couldn’t afford the education, it seems to me that it addresses only one part of a very two-part problem. It does not appear that there is a shortage of people who want to be doctors today, just a shortage of people who want to be PCPs.  Is the cost of medical school the real problem?  I am not convinced.  I think the bigger part of the problem is the opportunity cost of being a PCP.   Providing someone $200K of free PCP education when they can make that up in 1-2 years of working as a specialist may not be much of an incentive, particularly if they get an extra $135K or more every year for the next 35-40 years of their specialist career.  The PCP math just doesn’t work.  Lots of people already willingly fork over $200K or more for medical school, going into debt an average of $155K because they perceive the reward on the other side (high compensation) as the incentive.  Why aren’t we fixing that part of the equation far more directly?

Bach and Kocher do point out that CMS has attempted to find ways to increase PCP reimbursements for Medicare services (aka the income they make for taking care of Medicare patients after they graduate), but those have been “diluted by byzantine budgetary rules that cap total spending.”

This issue of how to turn meaningful incentives into byzantine exercises in futility is, to me, the essence of what goes wrong in policy-making.  By focusing on paying for education and not on higher compensation, we might just be making the objective of increasing the number of PCPs the subject of a giant Rube Goldberg machine.  While the Patient Protection and Affordable Care Act (“PPACA”) has a number of provisions designed to foster the minting of more primary care physicians, the vast majority of these are focused on subsidizing the educational side of the equation in a manner considerably less aggressive than suggested by Drs. Bach and Kocher.   However, some of these same incentives already exist and are poorly utilized.  For instance, there are existing programs that give physicians medical school loan forgiveness if they commit to work in underserved communities for periods of time.  PPACA expands these opportunities, which are already in existence and which is never completely full even now.

It is interesting to think about the different approach that a private corporation would take to solve the problem of finding a particularly difficult to recruit employee. First thing a company would do is raise the salary and benefits of the position to attract more candidates; second thing they would do is add signing bonuses and ongoing financial perks to keep them in the job; next thing would be to pay others to help draw in qualified candidates.  Companies are notoriously good at aligning financial incentives with job requirements.

If you are in a company and you want the company’s employees to achieve a certain goal, the standard method (aside from threatening them with firing) is to give them a clear, rapidly realized financial incentive tied to meeting targets.  For instance, say I want my sales force to sell more of the company’s blue thingies than its red thingies because of the extra blue inventory on our shelves.  The first action I would take as the CEO would be to raise the commission on blue thingies and reduce it on red thingies.  I do this in a way that is simple and clear and that delivers immediate gratification.  It goes something like this:  OK sales guys, I will give you $10 for every blue thingy you sell and $1 for every red one.  You will see the difference in your next paycheck in 14 days.  Guess what? the blue thingy shelves will be cleared by lunch-time.  Works every time.  What I do not do:  spend money figuring out how to provide free training to sales people on how to join my company.  In this instance, the PCPs need to be the blue thingies—by making it worth their financial while to take that career path, they are more likely to take the bait.  While paying for their education could be a step in the right direction, I don’t think it’s going to solve enough of the problem.

A few other PPACA provisions focus on getting more income to PCPs, which is, in my opinion, the more powerful incentive given its long-term pay-off.   One PPACA provision raises PCP Medicare reimbursement rates by 10% for a period between 2011 and 2016.  This is often talked about concomitantly with the idea that 32 million more people will be insured, so, the theory goes, there will be more patients available to deliver that extra 10%.  Unfortunately, this may amount to doctors losing a little on every Medicare patient (but making it up in volume) given the high overhead associated with primary care practices.  Many doctors already refuse to see Medicare patients because of the low reimbursement; by increasing their Medicare population, even an additional 10%, they may be giving up even more lucrative commercially-insured clients since they can only see a finite number of patients a day.  Additionally, this program is likely to come with a 6-12 month waiting period after graduation for new doctors to participate, so the immediacy of the incentive could be slightly diluted.  On top of that, 10% doesn’t close the gap between primary care incomes and specialty care incomes.  When you’re standing at the BMW dealership with your face pressed up against the window, a career in orthopedic surgery sounds pretty good (average salary about 3 times that of a PCP).

There are other PPACA programs that create financial incentives for PCPs who join up with Accountable Care Organizations (ACOs), where multi-disciplinary groups of physicians and hospitals work closely together and share both risk and reward.   The theory here is that by creating a highly coordinated and integrated system of care you can achieve better outcomes for patients, particularly chronically ill patients, and thus reduce the costs of care for the population of people served by the ACO.  Any money saved is then shared among the physicians in the ACO.  In a perfect world this is a great idea, but most people are not convinced that the ACO concept can be well-executed on a broad scale basis. Furthermore, I worry that the connection between an individual PCP’s efforts and their ultimate reward through the ACO may be both tenuous and a long-time coming, suggesting it could end up closer to byzantine than motivating.  There is also the risk that the ACO management organization can employ the same kind of creative accounting that Hollywood studios do to make blockbuster movies look like they lose money.  This could make it even harder for PCPs to cash-in on this ACO craze sweeping the nation.

Furthermore, as a practical matter not all PCPs will be able to participate in the ACO opportunity.  It is unlikely that PCPs can maintain small 1-2 physician practices and still effectively participate in ACOs given the high operating, insurance and technical costs of operating an ACO.  Nearly half of all physician practices today include only 1-2 practitioners.  It is likely that PCPs will either have to choose between remaining as small business owners, a highly prized way of life for many physicians, and going to work for a large corporate medical practice or hospital with tens or hundreds of physicians if they want in on the ACO action.

So here’s a crazy idea.  In addition to making medical school “free” for PCPs, what if we doubled the reimbursement PCPs receive for serving Medicare patients and cut reimbursement to specialists in half.  It is well known that access to PCPs can reduce patients’ hospitalization and improve clinical outcomes, so at least a portion of the costs can be recouped through avoiding costly care by applying good medicine.   To be honest, I do not know what the economic impact of that approach would be on our healthcare system, but we need to do something more drastic to make primary care an economically desirable long-term career path. At a minimum we need to start reimbursing PCPs to perform such activities as care coordination, tele-monitoring, data analysis to personalize treatment plans, emailing with patients, and all of the other “incidental” activities PCPs would undertake to improve the care of their expensive chronically ill patients if they got paid to do them.

As Deep Throat once said to Bob Woodward, “follow the money.”  As history has proven, the doctors will go where the money can be made.