Supply of Medical Services

In Support of Corporate Medicine

Arnold Kling and Michael Cannon believe that the idea of the physician as a lone independent craftsment is out-of-date.  The authors contend that healthcare quality would improve and costs would drop if physicians adopted a more corporate environment.  Larger organizations, such as the Mayo Clinic, Kaiser Permanente and Veterans Affairs all benefit from economies of scale and a team-based medical approach.  Nevertheless, physicians generally are loath to accept this organizational structure, because they do not want their own authority and decision-making abilities undermined by a larger corporate structure.  Below are some excerpts from their article “Does the Doctor Need a Boss?

  • “Medicare’s payment system generally does not reward coordination. Instead, Medicare and other fee-for-service payers tend to favor technologically intensive specialist services over those of general practitioners who might be best suited to play the role of project manager. The mismatch between payment systems and patients’ needs can be seen in the fact that the supply of gerontologists is not increasing, in spite of the obvious demographic basis for greater demand and the value gerontologists can add as project managers for those who are least able to coordinate their own care.”
  • “…the markets for legal and accounting services are dominated by corporate providers that can hire, coordinate, and monitor the services of those specialists. In medicine, transaction costs include the costs of soliciting input, sharing information, and coordinating treatment among multiple clinicians, often across space and time. Thus it is not unreasonable to think that delivering health care effectively, particularly for complex patients, could require a corporate model of organization.”
  • “In a corporate setting, a doctor would not have a business or administrative function. The doctor would not worry about what is billable and what is not. Instead, the doctor’s job would be to serve patients according to corporate standards. The doctor would be paid a salary, with increases, bonuses, and other incentives that take into account direct observation of the doctor as well as patient satisfaction and peer evaluations.”
  • “There is nothing magical about a corporation as an organization. Corporate bureaucracies are inherently inflexible, imperfect, and unimaginative. Competitive market pressures force corporations to overcome those limitations and are therefore essential to improving medical care. If corporations risk losing customers when they fail to keep pace with market standards for excellence, they will find a way to improve—or go out of business.”


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