The Over-Regulated Healthcare Marketplace

June 9, 2016

Many physicians are considering a private care model in response to growing pains stemming from healthcare reform. But how long can they function without oversight?

The changing environment of healthcare has had a significant impact on the medical profession, and in particular, with physicians. Let's look back at some of the more memorable changes that have impacted the healthcare business for doctors over the past few decades:

• Out of the hospital and into the home - it costs too much to deliver in-patient care.

• Oligopolies take over healthcare - but do they really control cost?

• Pharmaceuticals are big business - patients pay more and more to get the medicine they need.

• HMOs are born - insurers pay physicians less for the privilege of accepting their plan and getting access to "their" patients.

• Insurers merge and control the marketplace - bigger market share means bigger profits.

• Limited networks that "control costs"- vertical integration means bigger is better, but it's not the payer or the physician who wins, it's the delivery system.

• The internet makes everyone a diagnostician - good and bad information spreads faster than ever.

• Introducing mid-level providers - if physicians are too expensive, move to lower paid providers.

• Advanced communication technologies - new ways to connect, but no way to get anyone on the phone anymore.

• Deductibles get out of hand - move more of the cost to the patients, beyond copays. Deter them from seeking care, even though they are insured.

• Obamacare - bending over backwards in order to cover a growing population that needs healthcare.

• The digital information age hits medicine - gathering, protecting, and using more and more information also takes more time and more expense, not less.

What can we learn from all of these changes? Reducing costs in all segments of the delivery system is paramount because American businesses pay heavily for healthcare and they want those costs controlled. And it all starts with what is the easiest to control - the independent physician.

Too much of the medical dollar has drifted away from physicians - not to reduce costs of healthcare, (which has only increased over time) - but toward the administration of medicine. It also means that decisions are being moved away from the physicians who are at the front line of care delivery, which might even be worse.

So what might future changes to the healthcare marketplace look like?  New, alternative delivery models are starting to appear, but many of them involve moving away from the care of the general population. Delivery systems will become polarized into two camps: The one that delivers care via the third-party payer that cares about high volume, low cost care, and the other that delivers care in a private model. As the pressure continues to grow in the form of cost containment, utilization control, and decision making on a global basis, the private delivery system will also continue to grow as an alternative for those who wish to pay for what will become the "luxury" of care, in a way that suits their wants and needs.

In the long term, there is the concern that in order to maintain a high-quality public system, the alternative private system will have to be controlled by regulation. Other countries have found ways to marry the two systems together.  It will be interesting to see if the free market approach that we profess to have in our country will allow for a private system that is relatively unfettered for very long.