Tuesday, August 24, 2010

THE PRESSURE TO KEEP PRICES HIGH AT A WALK-IN CLINIC, see below for my more recent commentary

The Pressure to Keep Prices High at a Walk-in Clinic

N Engl J Med 1989; 320:183-185January 19, 1989



A Personal Experience

It would be difficult today to be connected to medicine as either a provider or a consumer and not be aware of the existence of free-standing ambulatory care centers. Their usual habitat is along a suburban commercial strip, and their presence is generally announced by a well-lit sign displaying a hyphenated medical name, corporate-logo style. The ambulatory care center, known to much of the public as the “walk- in clinic,” is less well known to much of the medical community, perhaps because of its newness and the tendency of doctors and their families to visit their colleagues' well-established offices.

I intend to describe my experience at one such clinic so that the reader may understand the problems that I experienced personally as a “franchise doctor.” I want to show how the clinic’s management tried to keep the charges to patients higher than necessary, and how I was finally dismissed for not generating enough charges per patient. My dismissal and these pricing practices may be of general interest, because they bring into focus the relation between two necessary aspects of clinical medical practice — ethics and business — in a medical setting in which that relation is still evolving. It is important to emphasize that what follows occurred at one particular franchise within the corporation; however, colleagues with knowledge of other franchises have told me that my experiences were not unusual, especially for a comparatively large franchise.

For nearly four years, I worked full time in an ambulatory care center in a middle-class suburban town. I had six “permanent” physician partners, one after the other, and a score of part-timers, and the franchise had three different owners. Stated corporate philosophy evolved during this time from emphasizing “episodic care” along emergency room lines to stressing “continuous care” along primary care lines. Physicians today are asked to consider the clinic practice as their own and to make it grow and prosper as they would an ordinary community practice of primary care.

Many ambulatory care centers flourish in this mold. Patients enjoy the clinic’s accessibility and the doctor’s availability. The waiting time is rarely more than a half hour, and usually less than 10 minutes. The walk-in approach accommodates acute, relatively minor illnesses extremely well. The urgently ill come only rarely and are triaged. and those with severe chronic illness usually come only for peripheral problems, because they are already integrated into an institutional medical system. Referrals are made to internists or surgeons for hospitalizations and to specialists when warranted. General medical follow-up at the clinic is encouraged. When they work well, these clinics resemble the English model of general practice. And many do work well, providing efficient primary care of high quality.

Many doctors, including me, enjoy working at such clinics. The reasons include the absence of paperwork, billing hassles, scheduling rigidity, and on-call and hospital coverage, unless we desire it, and the presence of patient continuity, a well-trained staff, and a well-outfitted office.

The current trend in the business is to encourage the practicing clinic physician to purchase the rights to the franchise and become an owner-operator. The great majority of ambulatory care centers remain corporately owned, however, and pay the doctors a salary. In these clinics, the motivation to make a profit is greater for the corporation than for the doctor, yet the doctor effectively has the power of the purse in deciding the number and nature of medical tests and procedures and the cost of office visits. As if to counter this inherent difference in profit motivation, the ambulatory care center is structured so as to maximize corporate participation in the doctor’s decisions that bear on billing.

This is effected partly by splitting the nursing staff from the doctor administratively. At the clinic where I worked, only the nursing staff were corporate employees. The doctors remained outside the corporate structure because, technically, they were designated as independent subcontractors. Only a corporate employee — and therefore no doctor — could supervise the clinic.

The nurse-supervisor ordinarily took an interest in the revenue generated by the clinic, overseeing the accuracy of billing and the maintenance of proper corporate pricing. Last year, the nursing staff was empowered to assign the price level of an office visit on the basis of a corporate guide list (previously, designating the price per visit had been the doctor’s prerogative). The supervisor’s corporate credentials could be enhanced by greater clinic total revenue, the standard of a clinic’s value to the corporation. In addition, as a result of the comparisons and competition between clinics under the same corporate banner, staff morale varied with the generation of revenue. Monthly “bonus incentive” programs rewarded staff members of the clinic that had the best sales figures of one type or another. Such sales boosterism can lead to overzealous fee charging by the staff, especially when insurance eliminates price as a matter of direct concern to the patient.

Total revenue is of course the product of the number of patients and the average charge per patient. The number of patients is the less controllable variable and can only increase slowly, month by month, even in the best-run clinics. Therefore, many of the staff’s — and corporation’s — hopes for “better numbers” rely on increasing the charges per patient, something that, short of increasing prices, can only be achieved by performing more tests or upgrading the charge for office visits. With staff nurses and morale hanging in the balance, some doctors may feel pressured to keep charges up.

Doctors themselves are not neglected with regard to incentives. Their salary changes from an hourly wage ($28 per hour in 1987) to a commission (22 percent of the gross billing) once the latter amount exceeds the former. And beyond incentives, there lies persuasion. The doctor is visited every other month or so by the company’s medical director, whose principal duty in these visits is to educate the doctor about ways to increase charges. Such medical topics as quality of care are not ordinarily addressed in these meetings. A handful of practicing doctors known as “regional medical directors” perform a similar function by circulating memorandums with pricing tips and by holding informal staff meetings at local clinics. At one such meeting, the regional director pointed to the x-ray machine and exhorted the staff “I want to hear that baby humming!”

The corporate president and founder, a physician, led this boosterism by example. A memo he circulated told us that our corporation had been criticized by Blue Shield for not having ordered enough laboratory and x-ray tests. No other doctor to whom I have spoken has ever heard of Blue Shield’s requesting to be billed for more tests. At my first meeting with the corporate president, he said he expected that I would order chest films routinely on all patients with the diagnosis of bronchitis. Over my doubts he assured me that there was much written medical consensus on this point. At staff meetings, he reinforced the concept that we were much more likely to be sued and to lose lawsuits if not enough laboratory and x-ray tests were ordered. I do not recall his ever discussing the more basic aspects of medical-legal risk management.

The corporate predilection for testing was expressed in the idea that routine diagnoses should be accompanied by routine tests (and x-ray examinations). These tests, once defined from above as routine, could then be ordered by the nursing staff before the doctor saw the patient. Perhaps such an arrangement can work between a doctor and nurse who are familiar and comfortable with each other’s judgment; doctors reluctant to allow nurses this privilege were to be reported to the regional medical director, according to a corporate memo circulated to nurses.

Clinic doctors nevertheless remain the single most important factor in determining clinic revenue, through their discretionary power to order testing. This importance can be underscored by looking at the range of amounts doctors charged per patient. Until recently, corporate headquarters sent out a monthly list of the average per-patient charges billed by each of the 50 or so doctors working at the corporation’s 35 franchise clinics. The reported range (excluding the one or two most extreme) was about $54 to $80 — even wider than it might appear at first glance, because the irreducible minimum was $35 to $40, the fee for a standard office examination (titrated with some brief visits). Therefore, some doctors were adding in the neighborhood of $20 per patient in tests and visit fees, and others were adding twice as much or more. The upward pricing pressure here was subtle — the list ranked doctors in order of their charges, with those charging the least at the bottom. The doctors who seemed most in favor politically — the regional medical directors — were in the mid to upper part of the list. The message doctors were given may have been that to work one’s way up the corporate ladder, one had to work one’s way up the patient-pricing ladder. The message that one should avoid being at the bottom of the ladder was considerably less subtle. The three full-time doctors who were at the bottom of the list a year ago are now all gone. One was told he would be fired if his charges did not increase. He resigned. Two were fired. Of these two, one was given absolutely no explanation, verbal or written. I am the other. I was told directly (but never in writing) by the corporate president that I was being fired for not having charged enough per patient.

I am neither absolutist nor doctrinaire in avoiding laboratory tests. Like all clinicians, I order my share of x-ray films that I know will be negative, of cultures whose outcome will not necessarily change my treatment, and so forth. A test can be reassuring in its negativity and can reinforce the need for compliance when it is positive. By a standard of absolute necessity, I order too much. By the corporation’s financial formulas, of course, I did not order enough.

There was neither implicit nor explicit criticism of the quality of my professional care, as it was explained to me. A “bottom-line” financial assessment had merely been made. Another, more satisfactory doctor in my place would have had a lower threshold for testing and would have generated more money for the corporation.

This hypothetical replacement would not necessarily have been a worse doctor, for questions of when to test are delicate ones, without right or wrong answers, and subjective in the extreme. I make no criticism of and got along well with, almost all my fellow doctors whose charges exceeded my own. One would need to know a doctor’s actual clinical decisions intimately before any comment would have meaning. Indeed, knowing a doctor’s charges may be only slightly more important in determining his or her medical worth than knowing his or her shoe size. My objection is to the corporate view that such charges are, in effect, a measure of a physician’s medical worth.

In some ways, it is difficult to find fault with a corporation’s focusing on the bottom line to increase profits. Such is the nature of business. Such is also the crux of the problem. The ethos of medicine and the nature of its primary concern — human health and emotions — make medicine a commodity less amenable to harsh business realities than other economic goods such as automobiles, hair spray, or lumber. The question therefore arises, not whether a corporation is doing good business, but whether it is giving medicine and physicians proper respect when it considers a doctor’s pricing profile in its decisions on hiring and continued employment.

Granting, as I do, that good doctors can be found at all levels of the pricing spectrum, I nonetheless hold that medicine’s ethical pact with its public is subverted when higher-charging doctors are favored in hiring. Such a practice takes advantage of the relatively low price sensitivity of the typical clinic patient with health insurance. Medical consumers, enticed by convenience or advertisements to meet “today’s family doctor,’ are offered a product that costs more, on average, than it would if the corporation hired and employed doctors without regard to their pricing profile.

I imagine that every doctor in private practice can on occasion think of a patient as a dollar amount couched within a symptom, but I also imagine that doctors regularly pull back from such thinking by virtue of their education and morals. The dangers here are the institutionalization of the impulse to greed by the corporation and the individual physician’s subsequent removal from personal responsibility for carrying out the actions that follow from that impulse.

Lastly, these actions by my former employer occur at a time of much public discussion of high medical costs and possible ways to contain them. There is considerable doubt about whether medicine can get its own house in order or whether it needs some governmental coaxing. If the public and the third-party payers come to believe that they are being manipulated by the growing corporate segment of primary care, the desire for governmental intervention may build, to the detriment of doctors who act responsibly.


38 Athens St.

Boston, MA 02127


  1. A lifetime ago, I wrote this article that was published in the New England Journal of Medicine. It brought me "15 minutes of fame" early in 1989, with coverage in the Boston Globe, Boston Herald, Washington Post, New York Newsday, and NPR, and some lecture requests shortly thereafter. I haven't thought very much about this article since then, but last night I met a fellow Yale alumnus who had written to me contemporaneously, and who reminded me of the article, and the thoughts behind it. I went to search for it online, and you can only see it with a current New England Journal of Medicine subscription; so I thought would make it accessible it here.
    I've made a go of solo medical practice in a similar venue since that time: managing my office, designed originally along the lines of a HealthStop, but since molded as a medical practice by yours truly.
    My ultimate conclusion about the thoughts here, particularly in the context of the recent battles over "health care reform" is that patients and doctors would do better if there were more price-responsiveness and responsibility for the patient rather than having "third-party", huge, nebulous, anonymous, distant governmental or corporate entities taking care of healthcare pricing. Buying health care should be similar to buying other medium-size purchases , somewhere between major appliances and automobiles probably, wherein price responsiveness rests with the patient. The closest analogue out there probably is the medical savings account model. RSB

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