Almost everyone finds the work of the doctor to be admirable, as the men and women in white coats rush to our aid at a moment's notice to nurse us back to health from the worst of illnesses. However, our health system alters the incentives related to compensation for doctors. Our FFS (fee for service) system pays each doctor based on the services they provide, and coupled with an environment where malpractice is placed under the microscope, the patient's best interests are not always the primary incentive for medical professionals.
Let's turn back to the classical view of our doctors. Most Americans view medical professionals in general as embodiments of extremely admirable qualities. In a 2012 Gallup poll, 70% of people responded that the honesty and ethical standards of doctors was "very high/high." 75% of respondents reported the same for Pharmacists and 85% for Nurses. These were the three highest percentages in the poll, and the percentages for all three have steadily increased since the early 1980's when the first version of the poll was released. What drives the positive view Americans give to our medical professionals? Perhaps it is the Hippocratic Oath, a pledge taken by most physicians to practice medicine ethically and honestly. Another possibility is the exorbitant investment medical professionals put into their profession. All medical professionals go through rigorous undergraduate years, and many need to attend 2-4 years of graduate school plus additional residency years. By this time, only those who really love and respect the job are left. Of course, it could be because of the trust we place in these professionals, and the quality care we usually get in return. While all three are valid explanations of this phenomenon, it is very difficult for doctors to follow through on their oath in a health care system that offers false incentives.
FFS pays the doctor based on the amount of services provided by the physician. It is pretty clear how this system of paying doctors has led to the most inefficient health care system in the world. A simple foot procedure for a patient can turn into an opportunity to provide preventative care in other areas as neither the doctor nor the patient have anything to lose. Fee-for-service drives an overuse of services that are unneeded by both the patient due to its payment system.
Another important piece to understanding the motives of doctors is the rising trend of malpractice suits in the United States. In any case of malpractice, a patient needs to prove that substandard care resulted in an injury. A patient must prove a few elements to be eligible for a settlement including: the existence and a breach of duty between a doctor and patient and a causal relationship between the breach and the injury and the existence of plausible and reasonable damages. While the quantity of malpractice lawsuits has decreased since the mid 1990s, the average damage award has increased by more than 88%. The result is a hospital culture where doctors are wary of the amount of money on the line. According to a Health Affairs study, Doctors who are concerned that they might get sued are more likely to order unnecessary tests and procedures than those who don't fear retaliation. The phenomenon, known as "defensive medicine" has significantly driven up costs in our system. In an environment where an extra test may prevent a malpractice suit while having a low impact on a checkbook, it is easy to see why inefficiency issues persist. While insurance is available for medical malpractice cases, the percentage of the work force that is insured is unclear.
Health analysts are optimistic about a new payment system, called "bundle payments." Bundle payments pay the hospital, acute, and post-acute care givers a single amount based on the illness that a patient has. Therefore, doctors would be less inclined to give unnecessary tests that would decrease their profit. On the other hand, doctors will be incentivized to give quality care. Episodes only end after a 90 day period. Thus, insufficient care that puts a heart-attack patient back in the hospital after only a week will also result in lost profit. While this solution looks promising on paper, it remains to be seen whether actual changes will surface.
Inefficiency can be attributed to many of the failings associated with FFS. Two issues, surrounding the basic payment system and malpractice suits, have helped drive up costs and lead doctors to making medical decisions that are not necessarily in the best interests of the patient. While doctors continue to be viewed as admirable people, the incentives driving their actions are not reflective. A reform of the health care system should recognize this disconnect.