Physician Compensation

Does The Economist magaizine have the right healthcare Rx?

The cover story of this week’s Economist examings healthcare reform in America (“This is going to hurt“).  The story recounts some of the many ills of the U.S. healthcare system: too many uninsured, too expensive, and low quality outcomes.  This is not news.  What does The Economist propose to fix the American healthcare system?  


  • Pay doctors a salary.  In general, I support this idea, but it only works if doctors are employees.  Medicare would never pay doctors a salary; they could never track how many patients they saw or how much work they did.  The only way Medicare physicians would be paid a salary was: 1) if they were direct employees of Medicare or 2) they worked for employers who decided to pay them a salary.  For instance, if large, centralized healthcare systems (e.g., Kaiser Permanente, Mayo Clinic) took payments from Medicare directly, it could pay their own physicians a salary.  Salaried remuneration decreases physician incentives to work hard compared to fee-for-service payment, but since overtreatment rather than undertreatment is one of the main problems in the U.S., the salary system could work.  See my own research on how physician compensation affects surgery rates.
  • Get NICE.  The Economist believes that America could use a cost-effectiveness agency like the UK’s NICE.  I agree.
  • Align incentives.  Will pay-for-performance improve health care?  The Economist thinks so but I am skeptical that it will have a large impact.  Medical care is so complicated that paying for better outcomes on one dimension will distract providers from focusing on less measurable, but perhaps more important dimensions.  For instance, the Economist advocates that paying bonuses in Sweden lead to shorter wait times.  However, in the UK, setting the goal that all patients should be treated within four hours of arriving at the emergency room, lead to some perverse incentives.  “Thousands of people a year are having to wait outside accident and emergency departments because trusts will not let them in until they can treat them within four hours, in line with a Labour pledge.”

Overall, The Economist has some valid ideas of how to improve health care.  However, broad pronouncements will not get the job done.  We need a systems approach in order to decrease the amount of unnecessary medical services and increase the quality of the important medical services that are given.  Like any reform, this is easier said than done.


  1. Hey Jason,

    The issue with NICE is when it becomes a means for denying care. Presumably it would use the statistical value of a life to make decisions, but, if access to care becomes rationed (a la single payer plans, different, of course, from what you are proposing), then a broad standard could deny care to those willing to pay for it.

    Obama talks about his grandmother who received hip surgery after being diagnosed with a terminal disease. Two weeks after the surgery, she died. Any rational calculation by a NICE-like organization would have denied the surgery. But Obama admits that such a denial would have been hard for him to bear; indeed, he says that he would have paid for the procedure himself. People come to the US from around the world for medical treatment, often to bypass NICE-like dictates.

    NICE might be fine to help doctors identify the best treatments, but it seems easy for it to devolve into a means for rationing access.

    Hope to see you soon!

  2. Hi Jason,

    I really enjoy your blog!

    I agree with most of your analysis here.

    – I however think there is another way Medicare (if it still existed or if there was one larger overarching publicly financed with a number of NGO private provider based Insurer/provider organisations) could monitor quality as well as quantity of care amongst Doctors who received a salary. The creation of a tiered access Electronic Health information system. I am currently in Israel and everything medical is electronic. It is quite a help- not only can the administrators monitor, but the Doctors themselves can do their own self reviews- they can review the last 5 years of care for one patient- If there is a problem that seems to be multi-faceted and the patient keeps going back and forth- the GP can simply call the specialist to talk about a treatment plan.

    – I do think something like NICE could be of added value to Doctors interested in keeping updated about large evidence based information for different health cases. It can be quite helpful- almost like having another Doctor or two in the room to talk about different treatment options and their success rates. I agree with Charlie that I would not want to see this become a means for denying care- but I disagree with him about a few things. First- I lived in London and the NHS which is infamous for finding ways to minimise costs in an over-arching over-general way did not seem to as of yet fnd a way to use NICE to deny care all out. Second- US health Care is already being rationed- has been for some time now- and it is being rationed by profiteering for profit companies.

    – ALigning incentives: wold use a different term. Re-fashioning incentives. A lot of incentves thought to work in the US have either never worked or stopped working. We need to thnk outside of the box and look at how we can design incentives that will address the outcomes we truly want. The difference between the Sweden Case and the Uk Case you mentioned is huge. In Sweden, the government set aside extra funds for the regional councils that were able to cut down wait times- first the Regional councils had to do the work- and then they got the extra funding. In the UK, in this example- the government made a goal saying all patients COMING TO the Emergency Room had to be seen within four hours- this was a political commitment- not a medical one to improve health outcomes supported by a financial incentive that could improve the quality of care further. However, in the UK they also experimented with GP Fundholding and encouraged GPs to design preventive services that cold cut health costs and allowing GPs to hold onto the funds that they saved. This seemed to work well. So I think it is the way the incentive is designed that is important. I also saw Hospitals in the UK design a triage system in the Emergency rooms. This system created two separate wait lines. One wait line was for Critical cases and one wait line was for non-critical yet serious injuries. They staffed each wait line with appropriate staff. More nurses and Interns and a few residents and a few Doctors were attending to the non-critical wait lines. Nurses came out to assess and prioritise patients. Patints were seen and treated for the emerging issues. While a separate staff was attending to the critical care wait line and the nurses also came out to the wait line to assess and prioritise. That was pretty neat. I am not sure if that was a response to the four hour limit- or to something else- but is it not interesting that often when political pledges like that are made no one clarifies things like ‘çritical care’ or non critical care.

    Thanks again!

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