Sunday, January 31, 2010

Fee-for-Service or Salaried Medicine? Part I

I am qualified to opine on physician compensation formulas, because I’ve spent hard time on both sides of the payment seesaw. For the first 10 years of my career, I was on salary. We were told, however, that we could earn productivity ‘bonuses’, but these rewards were trivial. An ‘employee of the month’ parking spot near the entrance would have been worth more, especially during the frigid Cleveland winters.

After 10 years, I moved over to the dark side, where I was paid for each service I provided. In Part I this week, I present pros and cons of salaried medicine. I suspect that I've overlooked some of the advantages and drawbacks of paycheck medicine, so  I hope that readers will correct my errors and omissions.

Good Stuff About Paying Gastroenterologists a Salary
  • Lowers health care costs by underpaying specialty physicians
  • Eliminates financial conflicts of interests. The colonoscope is not a capitalist tool.
  • Reduces unnecessary medical procedures as gastro docs would rather read The New York Times than scope for free. This not only increases gastro docs’ knowledge of the world, but also reduces job cuts at the Times and other newspapers facing financial challenges.
  • Lowers medical costs by reducing the volume of GI consults, since primary physicians know there is a high threshold for pulling the ‘scope trigger’.
  • Dinner with the family every night since salaried physicians turn their beepers off at the appointed hour.
  • Strengthens character by shielding salaried specialists from greed and other sins and temptations.
  • Creates more relaxed and rested GI specialists. Every minute of alloted leisure time is taken. Hey, the boss is paying! I know this because I've been there.
  • No need to devote even 2 neurons to payroll, overhead and cash flow issues.
  • No hustling for patients.  For me, this was the sweet spot of salaried medicine.

Crummy Stuff About Paying Gastroenterologists a Salary
  • Eliminates an important incentive to increase performance.
  • Patients often told that the schedule is full. Why squeeze in a patient ?
  • Patients with acute issues are often directed to urgent care centers or emergency rooms by staff personnel, or physicians, who have been affected by the shift work mentality of a salaried culture.
  • Creates fun turf conflicts when salaried gastroenterologists spar with salaried primary care physicians over which of them should go the to ER to see a diverticulitis patient at midnight. Since neither will get paid for the encounter, each graciously volunteers that the other do the doctoring deed. Here’s a hypothetical conversation that every emergency room physician has heard repeatedly.
Internist: “Diverticulitis is a pure gastrointestinal condition and you should admit the patient STAT!”

GI Guy: “I did an internal medicine residency also. We never dumped on our specialists. Aren’t you an internist? Would you ask a pulmonary specialist to admit a patient with a cough? Would you ask a nephrologist to admit a patient with a urinary tract infection? Are you a real doctor or a triage machine?”
  • Loss of professionalism when medical policy and employment edicts are issued by ‘suits’.
  • Measurement, monitoring and tracking of absurd performance standards that can be used to provide ‘bonus’ payments to compliant physicians. Read: You will be docked if you don’t fall in line.
To my salaried colleagues, please don’t grab a pitchfork and head to Cleveland. Many of you are excellent physicians and don’t sit around reading The New York Times like I do. Remember, for half of my career, I was one of you. There are clear advantages to the health care system when financial conflicts of interests are reduced. Nevertheless, I maintain that financial incentives can increase quality and performance in any occupation, and that the profit motive can be a force for good. Conversely, employees who are paid by the hour or by the week, may be less likely to provide the highest levels of personal service, although I admit that this is a generalization.

When I enter a hardware store that is a family business, I am greeted at once by smiling human beings who are anxious to assist me.  When I enter a big box warehouse retail outlet, I have to hire a private investigator to track down an employee who is under cover, hoping that I will at least be told the longitude and latitude of my desired purchase. 

Fee-for-service medicine is often demonized, but is it really the enemy?

Next week, Part II: the good, the bad and the ugly of coming off salary.


  1. As an Internist who counts several Gastroenterologists as my friends I am sympathetic to their plight.Doing "scopes" is no fun for the performer or the "performed" and the likelihood of misuse is minor.
    Your specialty has experienced procedural payment cuts that encourage your investigations to be compared to a "ram-blam its over Sam" scenario and then have some of your more sanctimonious peers complain that short procedural times are proportional to an increase in missed findings.
    Unfortunately there is no bright ligt at the end of Medicine's tunnel as Washington and its goons attempt procedures to reform healthcare with an absence of medical consultation

  2. I agree that fee-for-service has been unfairly demonized, but there is a downside. There are physicians who take advantage of this pay model by inventing scores of needless but costly procedures, from which they of course benefit financially, and then crying "defensive medicine makes me do it." I don't know what the answer to this problem is, though more oversight by state medical societies and hospitals might help stem the abuse.

  3. It is not fee for service alone that is the problem. It is determining which fee for which service. The incentives of the presently constructed system are to do things to patients since that is what fees are allocated to pay for.

    There are modest if any payments for actually caring for patients when it does not involve some sort of instrumentation.

    Listening, problem solving, integration, and coordination is charity work and is valued at either nothing or next to nothing. Cultivation of expertise in this arena reminds me of an article in the WSJ a few years ago:

    The Art of Showing Pure Incompetence at an Unwanted Task
    by Jared Sandberg
    Friday, April 20, 2007provided byWSJ

  4. All good humor is funny because it contains truth that is presented in an unexpected way. Since I am not an M.D., much less a gastroenterologist (my professional degree being the much dreaded J.D.) I can only imagine that what you say is true. It is my experience in supervising salaried federal employees that persuades me that it is true ("It's not in my job description, and I will file a grievance if you ask me to do it."). You will be happy to know the I decreased the ranks of two useless professions (lawyer and bureaucrat) by retiring a year ago.

  5. I am not a physician. I am however a salaried executive at a healtcare vendor company. Myself along with millions of other Americans work at salaried positions and don't have the attitude that you have assigned to "high paid" salaried physicians.

    We don't do less because it's easier, we don't tell a customer to go away because it will mean extra work or longer hours, we don't read a newspaper when we are supposed to be working, we don't shutoff our cell phones and run out of the office at 5PM, we don't take extra leisure time because "the boss is paying" and we don't pass our problem customers off to other staff members.

    We do try to perform so that the company can achieve it's goals and yes we can receive a bonus if the company does. That's part of our incentive. but sometimes we don't get a bonus because the company has not met its goals. We still follow the behaviors and ethics listed above.

    You paint a very bleak (but probably true) picture of a group of individuals with very poor work ethics. Perhaps I'm living in wonderland, but maybe salaried physicians need to take another look at the HIPPOCRATIC OATH and why they are in the field. Physicians deserve good pay. Patients deserve good care.

    Maybe the issue is with the incentives, not with the pay? Instead of fighting for salaried vs. fee for service the fight should be to ensure that physicians are properly compensated. Then the expected behaviors should be laid out.

    You seem to associate "salaried" with "extremely low paid". If that's the case, then that should be addressed. If not, then the physicians you described need to have their work ethics examined and adjusted.

  6. I thank everyone for their thoughtful comments. I have a few to direct to the anonymous commenter above. Your points are excellent and I agree with them. First, I am not besmirching all salaried physicians and others. Indeed, I was compensated with a (low) salary for 10 years. In addition, I admit in my post that my point that salaried folks may not deliver the highest level of service is a generalization.

    I hope that the example I offered at the conclusion of the piece about the difference between 2 types of hardware stores illustrated the point well. This was not a hypothetical example, but an experience that I’ve had repeatedly, as I suspect you have had as well. Indeed, the attorney commenter above you, seemed to be sympathetic to my point.

    You are correct that an incentive for high performance for salaried individuals can exist, if the salary is high enough. I still believe, however, that a compensation based on productivity, stimulates job performance more directly. The difficulty here, as stated by the Medical Contrarian, is how productivity is defined. At present, they system favors procedures, like I do, over time spent with patients.

    Every compensation system will be flawed and have its own inherent conflicts. Most folks in most occupations tend to feel that they are underpaid for the work they do.
    I agree that the current system is far from ideal. How do we reform it? I don’t expect that specialists will donate their income willingly to primary physicians just to make it fair.

  7. That'll preach, brother. I spent 9 years as an Army physician, and it was more or less as you describe. This was in the 80s when no one was shooting at us and military ressembled a very large HMO.

    I do miss the pleasure of informing people on 6 Percocets a day that I wouldn't scope them for their nausea and bloating. That would
    be the kiss of death in a private practice.

  8. Does anyone think that fee for service might just increase the number of unnecessary procedures by 10-20% I think it does - we do it because we get paid to do it.

    I think that elimination of the extra 20% would make a big difference in the pace of the day...really I do!

  9. an excellent blog, dr. kirsch. i've spent the past hour reading it and it confirms all of my experiences as a 1st year resident. some observations i've made in my limited experience as an MD:

    1. most of the patients i see in the hospital have health problems due to their own lifestyle (poor diet, obesity, lack of exercise, smoking, alcohol, street drugs). many chronic illnesses fall into this category. i've seen many "frequent fliers" in the hospital and ER because they come in and get treated, then go home and resume their previous lifestyles, then come in to get treated ...

    2. patient's don't care that you don't think they need a test - they want to see fancy imaging, specialty consults, blood work, and procedures done on them. after all, that's good, thorough patient care, right? gone are the days when a doctor could say "plenty of fluids, bed rest, and take 2 tylenol". i think many patients view doctors as the means to get tests that they want done.

    3. the ER is the most abused area of healthcare (at no fault of the ED physicians). it's basically a massive outpatient clinic for people who don't want to go through the hassle of scheduling and keeping appointments with an outpatient pcp. i've seen people come into the ED for things like prescription refills, sore throats, and other things that can obviously be treated in an outpatient setting. i can prob count on 2 hand the number of times i've seen an ER patient and thought "this was appropriate use of the ER".

    4. people in the ER assume no financial responsibility for their health care. it's a common occurrence for a patient to tell me they can't afford $4 a month generic medications, but then they also smoke 1-2 packs of cigarettes a day.

    5. hospitals have a built in slave workforce known as residents. with regard to how residents are treated, i really think it's a hospital money issue than trying to provide the best training. it's an antiquated, abusive system that promotes hazing and ridiculous work hours in the name of training and education. and despite all the acgme work hour rules, there are widespread violations and work hour falsifications.

  10. To the anonymous new physician above, have your program director make Whistleblower required reading for all housestaff! Thanks for the kind words and best of luck in your training.

  11. Thanks for the comments by the healthcare executive. I guarantee that on my slowest day, I work much harder per hour than you do. Maybe that's why I mind the extra hour after cramming in a 16 hour day into 9 hours. It's a skill I doubt you have and one that takes physicians years to learn

    This brings me to my biggest opposition to salaried medicine. It paves the path to the corporate practice of medicine. My experience is that providers are the only true patient advocates and that payers look at any way to cut costs. We work for the patients and the "executives" should work for us and not the other way around.

  12. I am always amazed at the criticism that the profit motive drives physicians to over prescribe. Imagine that; the supply side of the equation wants to maximize revenue. Physicians over prescribe because patients have already paid for the service. Physician practice to the policy and help the patient maximize their return. Both sides are pushing prices and cost upward, and the insurance companies are left with the only option of increasing rates, and decreasing or denying coverage. Imagine how much everything else in the world would cost if all industries operated this way. True competition requires opposing pressure between supply and demand, and putting physician on salary would not solve that, it would only create new problems.

    I have heard that in a salaried environment, physicians spend more time with individual patients. This is often touted as a good thing, but it is only a good thing if patient care is improved by it. And not just the patient the physician is seeing, but all patients in the system. It is not about the quantity of time, but the quality. I would expect physician to spend more time with individual patients in such a system. I would also expect them to work shorter hours and see fewer patients. Such a system doesn’t benefit those in waiting in line.