How ObamaCare Is Affecting the Practice of Medicine

If you ask Kathleen Sebelius, everything good that happens is partly the result of health reform. When bad things happen, she either says nothing or blames the result on someone else. What’s the truth of the matter?

Most of what the administration wanted to happen is not happening. But unintended things are happening — some good and some bad. What does this mean for the way doctors practice medicine?

On the plus side, consumer-driven health care has been given a boost and entrepreneurs are responding with products that seem to be far removed from the accountable care model the administration is pushing.

On the negative side, hospitals are merging and they are acquiring doctors. In the process, they are making the market less competitive, gaming third-party payment formulas and doing other things that make our health insurance premiums and our taxes higher than they otherwise would be.

Let’s start with what the Obama administration intended to happen. The clearest explanation of their vision of health reform comes from Harvard Medical School Professor Atul Gawande, who thinks that medicine should be more like engineering — with all doctors following the same script, rather than exercising their individual judgments:

This can no longer be a profession of craftsmen individually brewing plans for whatever patient comes through the door. We have to be more like engineers building a mechanism whose parts actually fit together, whose workings are ever more finely tuned and tweaked for even better performance in providing aid and comfort to human beings.

Karen Davis, president of the Commonwealth Fund, explains what this will mean for the organization of medical practice:

The legislation also includes physician payment reforms that encourage physicians, hospitals, and other providers to join together to form accountable care organizations [ACOs] to gain efficiencies and improve quality of care. Those that meet quality-of-care targets and reduce costs relative to a spending benchmark can share in the savings they generate for Medicare.

To assist in this effort, millions of dollars have been spent on pilot programs and demonstration projects to find about “what works” so the ACOs can go copy them. We’ve had demonstration projects for coordinated care, integrated care, medical homes, electronic medical records, pay-for-performance and just about every other faddish idea. Unfortunately, the Congressional Budget Office has found in three separate reports that that none of this is working (see here, here and here.)

When I say that none of these techniques work, what I really mean is that projects designed, approved and paid for by the demand side for the market aren’t working. As previously reported, many of these techniques actually do work when they are instituted by entrepreneurs on the supply side. But these innovations have nothing to do with ObamaCare. They are happening in spite of ObamaCare.

[Oops, there was one demo project that actually worked and worked well. The government is shutting it down.]

Meanwhile, more than half the doctors are working for hospitals and other institutions, rather than working in private practice. And as we have been reporting for quite some time, hospitals are using their new doctor employees to get more money out of Medicare. Even the Medicare Payment Advisory Commission (MedPac), the federal agency responsible for overseeing Medicare fees, has noticed — although belatedly — that hospitals can charge Medicare more for the same services than doctors can charge if they bill Medicare as independent practitioners. As reported in The New York Times:

Medicare pays $58 for a 15-minute visit to a doctor’s office and 70 percent more — $98.70 — for the same consultation in the outpatient department of a hospital. The patient also pays more: $24.68, rather than $14.50.

Likewise, the commission said, when a Medicare beneficiary receives a certain type of echocardiogram in a doctor’s office, the government and the patient together pay a total of $188. They pay more than twice as much — $452 — for the same test in the outpatient department of a hospital. (The test is used to evaluate the functioning of the heart.)

…From 2010 to 2011, the commission said, the number of echocardiograms provided to Medicare beneficiaries in doctors’ offices declined by 6 percent, but the number in hospital outpatient clinics increased by nearly 18 percent.

The other major unintended consequence is the boost to consumer-directed health care. In the health insurance exchanges, the cheapest plans are going to have deductibles of $5,000 or more. And lots and lots of people are going to choose the cheapest plans. Avik Roy reports that employers are going for Health Savings Accounts (or Health Reimbursement Arrangements) in a big way. Bottom line: millions of patients are going to be buying care with their own money, rather than with a third-party payer’s money.

I’m sure this thought is causing heartburn over at the Commonwealth Fund, where they view high deductible plans as “under-insurance.” But this development is viewed as an opportunity by health care entrepreneurs.

One study is predicting that the number of walk-in clinics is going to double in the next few years. The Obama administration doesn’t like them because they are not part of integrated care/coordinated care/medical homes/etc., etc., etc. Even so, they are doing what the ACOs are unlikely to do: lowering costs, increasing quality and improving access to care.

Comments (27)

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  1. Uwe Reinhardt says:

    What!? No music?

  2. Dewaine says:

    “One study is predicting that the number of walk-in clinics is going to double in the next few years.”

    The next battle in the war on health.

  3. Dewaine says:

    The unnecessary consolidation of the health care industry is bad news. Creating an oligopoly (that isn’t naturally occurring) will solidify governments position in the market and will continue to result in worse and worse health care.

    • JD says:

      This could have lasting effects that are used against free-market health care making it hard to ever achieve good health provision. Very, very dangerous.

  4. Dash Rider says:

    Obama administration doesn’t like them because they are not part of integrated care/coordinated care/medical homes/etc., etc., etc .. Very very interesting

  5. Sammy says:

    “When bad things happen, she either says nothing or blames the result on someone else”

    -Kathleen Sebelius is a tyrant.

  6. Sammy says:

    “Most of what the administration wanted to happen is not happening”3

    – This is definitely due to the complexity and size of the bill. Its impossible to have legislation that large and expect it to be efficient.

  7. August says:

    This is a game of incentives. If the government can structure the incentives correctly it will improve, but that is pretty difficult.

    • Vince says:

      Government does not understand incentives at least not market/consumer incentives. They only understand incentives to drive more power and control their way. Proper incentives that give the consumer the control to decide their healthcare and health habits can be achieved through enhanced portability and increased market choice.

  8. Kenneth A. Fisher, M.D. says:

    The irony, Dr. Atul Gawande has to individualize every surgery. Protocols are fine, but they must be adapted to each patient’s individual conditions & needs.

  9. newheart807 says:

    Hospital and large corporation acquisition of physicians,i.e., the originator and owner of the revenue stream? Really??? Seriously??!!!!!

    Hmmmmmm, this has been going on under our noses for over two years now and the consequences will be staggering and de facto create Mega-HMOs throughout the country. Instead of dealing with tens of thousands of entities (providers) the Administration has shrewdly, in conjunction with the hospital and insurance lobbies, instituted standards that are more easily met by these healthcare conglomerates. While this has the benefit of creating a more streamlined system, will the resulting outcomes serve the American people well?

    This new Healthcare Nexus is essentially a shy monopoly. Whilst streamlining the administrative costs it substantially reduces competition and raises prices, as you have pointed out.

    The larger question is, how will it impact the care of the American people when a doctor or healthcare providers such as nurse practitioners, become employees as opposed to working for themselves?

    One only has to look to Great Britain, or to Canada to see the results-long waits for procedures in months or even years, where we wait a week; long waits in months to get an MRI or a CT scan where we wait a day or two and last, but not least, banker’s hours: You have a problem, sorry, we are closed.

    We are Americans and not Canadians or Britons. If we cannot get the care we need when we need it, and we cannot afford to pay for it privately, where will we go? We’ll go where we have always gone, the ER. A law intended to reduce costs will drive people to the most expensive care.

    The net result was probably best said through the voice of the deputy HHS secretary in charge of implementing the Exchanges when he asked what result the American People can expect-the best we can hope for is for people not to have a Third World experience.

    This is the standard for healthcare established by this Administration. This is now your healthcare standard. Change you can count on!

    This piece was written in January of this year, seven months ago:

    The choice is yours.

    Mitchell Brooks, M.D., F.A.A.O.S., CEDIR

  10. Brent James, MD says:


    It was helpful that you noted that many of these same techniques are working in private health care delivery. Specifically, systems-level approaches to delivering care – the stuff that Atul Gawande is talking about, at a technical level – requires a more nuanced approach. The aim is to generate a standard approach to identifiable care delivery processes. That frees our most important asset, the expert clinical mind, to focus on a relatively short list of factors where it can have better impact. Said another way, it is not hard to demonstrate that, with some exceptions, “you can’t write a guideline that perfectly fits any patient.” The humans who come to us for care are individually unique at a number of levels. Imagine, though, that you build and implement an evidence-based best practice guideline, then you ask clinicians to modify it on the basis of individual patient need. Track variations and patient outcomes, then feed those data back to the health professionals so they are regularly updating their shared baseline care delivery protocol – care is continuously improving, in terms of both clinical results and costs.

    This was first done by Dr. Alan Morris at LDS Hospital in Salt Lake City in 1991. It was done in the context of a randomized controlled trial looking a patients with a very severe lung disease called acute respiratory distress syndrome (ARDS). It led to survival in the most seriously ill subset of ARDS patients (ECMO entry criteria) increasing from 9.5% to 44%. It also reduced total costs of care by about 25% ($160,000 per case to $120,000 per case, at the time), and reduced physician time to manage these complex cases by about 50%.

    We’ve now applied the same method to more than 100 care processes, totally about 80% of all care delivery in the Intermountain system, with broadly similar results. One big problem: Almost every time we eliminate waste and reduce operating costs under a fee for service payment system, it damages (!!!) operating margins – we create windfall savings for purchusers (commercial insurers, Medicare, Medicaid) while taking a significant financial hit. That’s why we’re shifting to various forms of bundled or capitated payment. Under those approaches, when you create savings through higher quality those savings come back to the care delivery group and their patients.

    BTW – this approach, of “standard work” around which an expert clinician varies on the basis of individual patient need (a core form of “personalized medicine”) is exactly the organizing principle behind most retail clinics and walk-in clinics. It’s the main reason they work.

    Also, this approach is almost impossible to pull off as a stand-alone, individual clinician. It requires a group of professionals working together with good data support. It doesn’t require physician employment – some IPAs have done quite well with it – but it does require a consolidator function to support the participating practices. That’s one good reason that integrated care delivery systems are expanding – although much of the market consolidation that is taking place under the PPACA does not necessarily represent this sort of coordinated care.

    • Don McCanne says:

      Brent James and Intermountain have been providing leadership in demonstrating the type of integrated health care systems that we desperately need. But he is right regarding the response to ACA. It appears that ACO models will incorporate some of the less desirable features of managed care that prioritize business goals over patient care goals. Brent James has shown us that prioritizing patient care clearly improves quality, and an improved business model automatically follows.

      Those of us who support single payer also support integration of health care in the Intermountain style.

  11. Don McCanne says:

    It is not only in the exchanges that high-deductible health plans are becoming the new standard. PwC reports that, in 2012, HDHPs were offered by 12 percent of employers as the only option, but in 2014, 44 percent of employers are considering HDHPs as the only option.

    This may be great news for CDHC advocates, but Karen Davis is right. For far too many, this constitutes underinsurance, especially when an associated HSA is either empty or non-existant. Underinsurance not only creates financial hardship, it also impairs access to essential health care and results in adverse health outcomes.

    In a few years, the nation will be very unhappy with our health care financing system, but that will be because CDHC prevailed, not because of most the other features of the Affordable Care Act.

    • Ron says:

      You say, “In a few years, the nation will be very unhappy with our health care financing system,…”

      There is an old saying, “Every system is perfectly designed for the outcomes achieved.”

  12. David Lenihan says:

    I am so happy to live in a country where the government knows everything….and better than anyone else. Never, since Animal Farm, has an institution been so smart.

  13. Hank Preiser says:


    I have been reading your diatribe against ‘Obamacare’ for the past couple of years and have come to the conclusion that you and your backers have not presented a viable alternative to a fair and just consumer oriented, universal health care system.
    Could you just crunch in summary of what you propose to help solve the health crisis in America that would be fair and equitable to all players without throwing the baby out with the bathwater?
    Most of what you profess , from my point of view, is couched in fear mongering and slick public relations bordering on the weak defense of a hideous profit-driven system , that benefits the industry and screws the consumer.
    I would love to be proven wrong.

  14. David Boucher says:


    How long do you think MEDPAC and Congress will allow CMS to continue paying hospital-owned physician practices 70% for office visits and 100% more for EKGs?

    • Greg Scandlen says:

      I wonder why hospital-owned physician practices are so welcomed by the central planners, but physician-owned hospitals are all but illegal now.

  15. says:

    I want to share with you a “random thought” I sent to Stanley Feld. I think I’m asking some pretty good questions, and I am predicting that hospital-employed doctors will in some cases turn out to be disasters for all 3 sides, doctors, and hospitals, and, not least, patients. Here’s what I sent Stanley:

    Interesting post. As I think about it, I wonder how many layers of bureaucracy will be able to interpose their collective wills on the actions of the physicians that become employees of hospital organizations in one way or another? The head of the organization, almost always a non-physician, is likely to be the big decision maker. However, at least in theory, he/she must report to a Board who, in the law, at least, is ultimately responsible for the care patients receive from physicians in their employ or, for that matter, are simply members of the medical staff. Most board members are generally clueless about how to take care of patients. But these lay people will be willing to assume that the management policies in their fields of business can be imported to the practice of medicine. The operating assumption will inevitably be that the docs aren’t capable of being their own managers. Cascading downhill from the carpeted offices, at almost every level of responsibility in the organization, are employees who will almost always not be physicians, but who have the responsibility for the management of those who are. Then there is the process of billing and collection for the work of the doctors, again the work of non-physicians. Hospitals are notorious for not knowing how to do this job right. Finally there is the inevitable discontinuity of “managers”, who seem always to be either moving up or simply moving around, leaving behind policies and procedures they crafted, but from which they have departed before it is shown that they don’t work as well as it was hoped that they would.