TO THE EDITOR:
My compliments to Gottlieb and Einhorn for their excellent article "Current Concepts Review. Managed Care: Form, Function, and Evolution" (79-A: 125—136, Jan. 1997) and to the Editor for its publication. One area that was not discussed was the mechanism that enables health-maintenance organizations (HMOs) and preferred-provider organizations (PPOs) to exact continued fee reductions from orthopaedic surgeons and other physician providers. A major change resulting from a switch from indemnity insurance to managed care is that patients no longer purchase physician services directly from the physician. The actual purchaser has become the HMO or PPO, and the patient has passed the physician-selection authority to the managed-care plan. Now a limited number of managed-care plans select from hundreds of physician providers in a given market area (fewer buyers than sellers), a distinctly different situation than when thousands of patient purchasers selected from hundreds of physicians (more buyers than sellers). According to the economic rules of supply and demand4, this equation now favors the managed-care purchasers who offer physicians so-called take-it-or-leave-it contracts with ever decreasing fees (regardless of the mechanism of payment) as there is a relative surplus of physicians. For orthopaedic surgeons, who have lost patient volume because of gatekeepers as well as the continual over-production of new orthopaedic surgeons compared with the number who retire each year, this excess of physician supply is only worsening. The United States Government, through its Medicare program, is currently planning to decrease surgeon fees by 10 to 15 per cent in January 1998 by changing to a single-payment conversion factor. As this will likely be followed by payment decreases by private managed-care plans, the ultimate outcome will be that the income of orthopaedic surgeons will decline an additional 20 to 30 per cent after accounting for business overhead expenses (assuming that practice volume remains constant). The only long-term solutions to perpetual loss of income will be for surgeons to group together in large enough numbers to initiate provider-sponsored health plans that will enable surgeons to market their services directly to patients again (so that there are more buyers than sellers) or to wait until enough orthopaedic surgeons leave practice for a scarcity of orthopaedic surgeons to result.
Ron Clark, M.D.: North Valley Surgical Associates, 1184 East 80 North, American Fork, Utah 84003
Mr. Gottlieb and Dr. Einhorn reply:
Organizations such as HMOs and so-called PPOs have gained an upper hand on physicians in areas where managed-care plans have become the dominant purchaser of health services. If current trends continue, more people will be enrolled in managed-care plans in the future and fewer will carry indemnity insurance3. To the extent that things remain as they are now, we agree with the scenario that Dr. Clark envisions. However, stasis may not be the hallmark of the next decade in health care.
Competitive forces currently are driving the health-care industry to develop new models of physician-patient and physician-HMO relationships. Developments in the marketplace hold out the potential that physicians will not be captive to the managed-care plans. Rather, negotiating strength and clinical autonomy, including the ability to set fees and practice medicine free from third-party intrusions, may once again come under the control of the physicians2.
Among the emerging entities are the physician-practice management companies. Such a company acts as an intermediary between physicians and managed-care plans, providing services to the physicians and making their offices more efficient. In addition, the company serves to band together large groups of physicians so that they can gain leverage in contractual negotiations with managed-care plans1.
Recently, the Justice Department has relaxed rules on physician-run HMOs, opening the way for physician-sponsored managed-care plans, so-called provider-sponsored organizations, that can compete directly with traditional HMOs. Another entity, the management-service organization (more commonly known as MSO), provides administrative services to physicians, but unlike physician-practice management companies it has no claim on the revenues and assets of the practices under its umbrella. Therefore, the MSO itself is not exposed to the financial risks of the medical practice.
All of these entities have one thing in common: physicians are in charge of organizing other physicians into larger organizations that can either compete directly with the HMOs or use their combined numbers to negotiate with the HMOs for a better deal. Whether or not the HMOs have reached the height of their clout in the health-care marketplace remains in doubt. However, it is certain that managed care will face increasing competition from more nimble and savvy physicians, adept at the terms of the new marketplace and determined to hold on to their professional and clinical autonomy.
Scott Gottlieb, B.A.: Mount Sinai School of Medicine, New York, N.Y. 10029-6574
Thomas A. Einhorn, M.D.: Department of Orthopaedic Surgery, Boston University Medical Center, 720 Harrison Avenue, Suite 808, Boston, Massachusetts 02118-2393