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Paying doctors | Health care system | Heatlh & Medicine | Khan Academy - YouTube
Channel: Khan Academy
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SPEAKER 1: I'm here with
Professor Laurence Baker who's
[2]
a professor here at
Stanford Medical School,
[4]
and what are we
going to talk about?
[6]
LAURENCE BAKER: Well,
we pay physicians
[7]
a lot of different
ways in this country.
[8]
And I thought it would be useful
to spend a minute thinking
[10]
about the different
ways that we do
[11]
that, the concepts,
organizations,
[13]
different practices
that are out there.
[15]
SPEAKER 1: So, literally,
how do physicians
[16]
receive their compensation?
[18]
LAURENCE BAKER: Yes.
[18]
SPEAKER 1: OK.
[18]
LAURENCE BAKER: Yes.
[19]
So we can go through this in
a couple of different ways,
[22]
but there are three ways that
we can start out talking about,
[24]
three general ways
that we organize
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the payment of physicians.
[27]
And they turn out to
be fee for service--
[30]
SPEAKER 1: Fee for service.
[31]
Let me write this.
[31]
Fee for service.
[32]
Keep going.
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I'll catch up.
[33]
LAURENCE BAKER: Yes, sometimes
we say FFS, Fee For Service.
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SPEAKER 1: FFS.
[36]
OK.
[37]
Makes sense.
[38]
LAURENCE BAKER: Second
one, we call capitation.
[41]
And the third one,
of course, salary.
[42]
SPEAKER 1: Too close
to decapitation for me,
[44]
but maybe it's not related.
[45]
But OK.
[47]
And then salary.
[48]
LAURENCE BAKER: And then salary.
[49]
SPEAKER 1: OK.
[49]
And so fee for service.
[50]
That seems to be a
little bit common sense.
[52]
Is that literally it?
[53]
LAURENCE BAKER: Fee for service.
[55]
In a fee for service
system, a physician
[57]
gets paid a fee for every
service that they do.
[59]
It's kind of like
going to a restaurant.
[61]
You order the drink.
[62]
You order a salad, maybe
an entree, a dessert.
[65]
The restaurant keeps a
list of all the things
[66]
that you ordered and,
at the end of the night,
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there's a price
associated with each one.
[70]
And you add up the
price associated
[72]
with each of the things you got.
[73]
That makes your total bill.
[74]
That's the fee for service--
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SPEAKER 1: I see.
[76]
And so this is kind of what
a doctor in private practice
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would face.
[79]
LAURENCE BAKER: Well, doctors
can be paid fee for service
[81]
in a lot of different
arrangements.
[82]
So they might be in private
practice paid this way.
[85]
Some physician groups
are paid this way,
[87]
and fee for service
concepts come up, even,
[89]
in large organizations, like the
Stanford Medical School where
[92]
some people are sometimes paid
for their work in a hospital
[94]
according--
[95]
SPEAKER 1: I see.
[95]
But the general idea is that if
they're not providing service
[97]
or if there's a slow
day then they're
[98]
not going to be
making money that day.
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LAURENCE BAKER: Right.
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Right.
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The more services they do,
the more expensive services
[104]
they do, the more
costly that they do,
[105]
the more revenue that their
practice will generate.
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SPEAKER 1: I see.
[107]
And we'll talk later about
whether that's a good idea.
[110]
LAURENCE BAKER: Of course,
that has implications
[112]
for the way that physicians act
and the way that they practice.
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SPEAKER 1: So what's capitation?
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Because I'm not
familiar with that.
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LAURENCE BAKER: So
capitation-- the general idea
[120]
is to do something quite
different than fee for service.
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The term capitation comes
from the Latin, per head.
[126]
SPEAKER 1: Oh so it is related
to decapitation, literally,
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per head.
[129]
[INTERPOSING VOICES]
[131]
LAURENCE BAKER: So we're going
to pay physicians per person
[133]
that they have in
their practice,
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and the kind of building
blocks of a capitation system
[137]
would be, one, a
panel of patients
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who are assigned to a doctor.
[141]
So the doctor might
have 1,000 patients
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for which he or
she is responsible.
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We'll call that group
their members, their panel.
[149]
Sometimes people call
it their covered lives.
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Second piece of a
capitation arrangement
[153]
is an agreement about
what the physician is
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going to be responsible
for under the agreement.
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So we might say it's primary
care services, all the office
[160]
visits, and basic
tests, and follow-ups
[162]
that those patients
might need, but maybe not
[164]
their hospitalizations or their
expensive surgeries, things
[167]
like that.
[167]
So you have some
group of patients.
[169]
You have some agreed
set of services,
[170]
and then you would define a
payment, which in the jargon
[173]
gets called the PMPM the
Per-Member Per-Month.
[176]
SPEAKER 1: Per-Member Per-Month.
[179]
And who is making this payment?
[181]
It is, I guess, the
employer of the doctor.
[183]
So this definitely would not be
the case with a-- oh, go ahead.
[186]
LAURENCE BAKER: So it would
be the insurance company,
[188]
generally, that's going to
pay the doctor this payment.
[191]
So when an insurance
company, let's
[192]
say Blue Shield Blue
Cross, Aetna, Cigna,
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any number of
different companies
[197]
that might be out there, has
an arrangement with a physician
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that they take-- some number
of their insured people
[205]
become part of the
panel of that doctor,
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they could arrange to pay that
doctor on a capitation basis,
[211]
by saying, you've got
1,000 of our patients.
[212]
Here's what we're going to
pay you to take care of them.
[215]
SPEAKER 1: I see.
[215]
And it seems to
make a lot of sense
[216]
for the insurance
company, because now you
[218]
don't have this incentive
for the doctor to--
[220]
LAURENCE BAKER: You change the
way the whole incentive works.
[223]
So now, if a
physician gets, say,
[225]
$25 per member per month for
taking care of their 1,000
[228]
patients-- they get
$25,000 a month--
[230]
they've got to do what needs
to be done for those patients.
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But they don't get paid extra
if they do something additional,
[235]
if they do a more expensive test
as opposed to a cheaper test,
[238]
they get paid the same amount.
[239]
So you take away
the incentive that
[240]
exists in a
fee-for-service system that
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tends to get people to
try to do more things,
[244]
or at least creates
a world in which it's
[246]
possible to do more things
and get paid for it.
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SPEAKER 1: And it's more
predictable for the doctor,
[251]
too.
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LAURENCE BAKER: Well, it could
be predictable for the doctor.
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Although, in some
sense, it's predictable.
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And in another sense, it's not.
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An important difference between
fee-for-service and capitation,
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we'll say, in health
policy, is associated
[262]
with risk or this
concept of risk.
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And when we talk
about risk here,
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we mean financial
risk associated
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with the health of the
patients or variations
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in the needs of the
patients in a given month.
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So if you're being
paid fee-for-service,
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the doctor doesn't
face any real risk.
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If it's a bad month,
everybody's sick,
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everybody needs lots
of care, they're
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going to get paid for
delivering that care.
[285]
Under capitation, the doctor
does face more of that risk.
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They're getting
paid a fixed amount.
[288]
They've got to deal with
whatever the patients need.
[289]
SPEAKER 1: I see.
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In a high-volume
month, the doctor
[293]
takes the hit in capitation.
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But in a low-volume month,
the insurance company
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takes the hit.
[297]
So it goes both ways
and kind of evens out.
[298]
LAURENCE BAKER: Right.
[300]
The doctor benefits in
the low-volume months.
[303]
Right?
[303]
The doctor kind of averages out.
[305]
In a good arrangement, this
will be sort of even over time.
[307]
The doctors will come out OK.
[309]
But these risk issues have been
problems in some capitation
[312]
arrangements, especially if
you're a small doctor practice
[314]
and you've got a lot of
variation from month to month.
[316]
Maybe you're not
a great manager.
[318]
You can go out of business
if you have a few bad months.
[320]
SPEAKER 1: Who
decides that it will
[322]
be capitation or
fee-for-service?
[323]
Is it the doctor's
choice or the insurance
[324]
company says, you will do this?
[326]
LAURENCE BAKER:
So, over time, it's
[327]
been a bit of negotiation
back and forth.
[328]
So insurance companies
have preferences
[330]
about how they do
this, and doctors
[332]
have preferences about
how this happens.
[334]
And so sometimes some of
it's driven just by history.
[337]
The Medicare
program, for example,
[338]
got started in the 1960s
when fee-for-service
[341]
was the most common way
for physicians to be paid,
[343]
and that's largely
persisted in that program
[346]
for historical reasons.
[347]
It's just worked out that way.
[348]
In the 1990s, a
lot of health plans
[350]
decided, the insurance
companies decided,
[352]
that, in the private
market, they'd
[354]
like to do more
capitation, so they did.
[356]
And they started pushing
these arrangements,
[358]
trying to get
physicians to agree.
[360]
They were successful
for a while.
[361]
And then, lately, it's been
a little more-- physicians
[363]
have said, we don't
like capitation so well.
[365]
We'd rather go back
to fee-for-service.
[366]
That's working better.
[367]
So the negotiations have gone
a little more the other way.
[369]
SPEAKER 1: Have
there been studies
[370]
that showed when doctors who
are compensated under capitation
[375]
don't order as many services
or perform as many services?
[379]
LAURENCE BAKER: So
the literature on this
[380]
is pretty clear that
it makes a difference.
[383]
We would like to think that
it doesn't make a difference.
[386]
SPEAKER 1: Most of them
are all about the health
[388]
of the patient, but--
[390]
LAURENCE BAKER: Well, so there
are hundreds of thousands
[393]
of doctors in the country
and, undoubtedly, out there
[396]
are some that pay close
attention to the financials.
[398]
But I think, actually,
you're right.
[399]
Most of them probably don't,
on a day-to-day basis,
[401]
pay close attention.
[402]
And at the end of year,
they'll see the financials
[404]
from their practice.
[405]
Maybe they don't
think it through.
[406]
SPEAKER 1: But if you got
to pay the college tuition,
[407]
then all of a sudden,
hey, maybe an MRI
[409]
wouldn't hurt or a little
extra this or that.
[412]
LAURENCE BAKER: I think
that's part of it.
[413]
But the other thing that I think
is going on in the background
[416]
is the general, maybe
almost subtle-- the things
[419]
that you don't notice
that create a system
[421]
and let a system evolve
in a particular way.
[423]
So doctors like to do
things for their patients.
[425]
Patients like to have
things done for them.
[427]
A fee-for-service
system creates a world
[428]
in which everybody
is fine with that.
[430]
You can do that.
[431]
And so, pretty soon, you
get used to doing that.
[433]
Which becomes the
first thing you
[434]
think of when you do
these extra things.
[436]
SPEAKER 1: Right.
[436]
Neither party, neither the
doctor nor the patient,
[438]
has any incentive,
really, of saying, wait.
[441]
Who's paying for that?
[442]
Oh no, someone else is.
[443]
OK.
[444]
LAURENCE BAKER: And it
creates in the background
[446]
these incentives for people
who develop new products
[448]
and services to develop them.
[449]
And it makes it
easy for a hospital,
[451]
say, to put in a big
new piece of equipment
[454]
that they're pretty
sure they can pay for.
[455]
And once it's sitting there
and you pass it every morning
[458]
on your way into the
hospital, it just
[459]
becomes that much
easier to use it.
[461]
And so it sort of guides
the evolution of our system
[464]
in a way that has
led us to a point
[466]
now where we consume
a lot of health care,
[467]
maybe, sometimes, health
care that we don't need.
[469]
It's often health care
that's beneficial,
[471]
but it's all costly,
and so that sets us up
[473]
for the kind of dynamics and
the challenges we have today.
[475]
SPEAKER 1: How common is-- maybe
we should talk about salary
[478]
before we talk about
how common they are.
[481]
LAURENCE BAKER: Yeah, we can
pick that up as we go along.
[484]
Fee-for-service and capitation
have been ebbing and flowing.
[487]
Frankly, in the US at the
moment, fee for service
[490]
is a very common way
for people to be paid.
[493]
Capitation is declining.
[495]
There are still places--
[496]
SPEAKER 1: So even
though fee for service
[498]
was where everyone
started, capitation kind of
[500]
went a little bit
[INAUDIBLE] and then no one's
[502]
really a fan of it.
[504]
Or the doctors
aren't a fan of it.
[505]
LAURENCE BAKER: Picked up.
[505]
The doctors were less of a
fan, and so the arrangements
[508]
have been shifting more toward--
insurance arrangements that
[510]
would use more
fee-for-service these days.
[512]
So the US is,
definitely, I think,
[514]
majority fee-for-service.
[515]
SPEAKER 1: Who decides what
the panel-- because it sounded
[517]
like the insurance
companies would
[518]
pay for part of the
panel of a doctor who
[520]
would be under capitation.
[522]
LAURENCE BAKER: So these
kinds of arrangements
[524]
can, in practice, get
kind of complicated.
[526]
So the concept of paying
per head is clear,
[529]
but there will be
variations that go on.
[530]
So if you change the
scope of services,
[533]
you change the arrangement--
If you have a primary care
[535]
arrangement for capitation,
that's one piece but,
[537]
of course, it leaves off
the MRI or the surgery.
[540]
And what would
happen in those cases
[541]
is the health plan would have
an arrangement for primary care
[544]
services with some
doctors under capitation.
[546]
Then they would have
other arrangements
[548]
with other doctors.
[549]
They might, say, have
a capitated arrangement
[551]
with some cardiologist
to do the cardiology.
[553]
Or they might have
an arrangement
[554]
with some cardiologists
to pay fee for service
[556]
to those cardiologists,
so when the--
[557]
SPEAKER 1: I see, so
it's a big mix-up,
[559]
but obviously
there's an incentive.
[561]
If you are being
paid capitation,
[562]
you want the healthiest people
in that capitation panel.
[565]
LAURENCE BAKER: So
there's another incentive
[567]
that's in the background.
[568]
And that's a selection
kind of incentive.
[570]
So it's, again, a thing where
I think doctors probably
[573]
don't think about this, most
doctors, on a day-to-day basis.
[575]
But it's a subtle force
operating in the background.
[579]
If you're getting
capitation and you
[580]
can take actions that would
get you a healthier patient
[584]
bunch for that same $25,000,
say, you end up a little bit
[588]
ahead at the end of the month.
[589]
And doctors don't, I think,
like to shift patients off.
[592]
And there's laws that prevent
certain kinds of activities.
[595]
But, subtly in
the background, it
[596]
helps the system evolve
in that direction.
[598]
And so we would probably see
some of that kind of thing
[600]
happen.
[601]
SPEAKER 1: OK.
[601]
And salary is what we imagine.
[603]
This is how most of us get paid.
[605]
LAURENCE BAKER: Salary
is what you imagine.
[606]
It's an agreement to be paid
a certain amount per year
[608]
for some amount of
work [INAUDIBLE].
[610]
SPEAKER 1: This would be
from the insurance companies,
[611]
wouldn't it?
[611]
LAURENCE BAKER:
So what happens--
[612]
we talk about these three
as being different things,
[614]
but when you get to the
real-world interpretation,
[617]
or real-world looking at
systems that are out there,
[621]
what you'll see is often
mixes between these.
[623]
And so one of the pieces
of disentangling this
[627]
is multilevel systems.
[629]
And that's where
salary becomes kind of
[630]
important to think about.
[631]
So one common thing that happens
is physicians group together
[635]
into larger practices.
[636]
And that larger practice
collects the activity
[639]
of all the doctors that
work in that practice, bills
[642]
for that from an insurance
company, and then disseminates
[644]
or distributes the
money among the doctors.
[646]
And so what you will
often see in real life--
[648]
and that complicates
the inference here--
[650]
is, say, a large practice
that billed an insurance
[652]
company on a
fee-for-service basis
[654]
for the collective activity
of all the doctors,
[656]
takes that resulting pool
of money and divides it up.
[658]
Maybe pay some of
the doctors a salary.
[660]
Maybe pays them a salary
with some sort of bonus
[662]
that depends on how
much work they did.
[664]
And does other things.
[665]
And so sometimes the incentive
that an individual doctor,
[668]
sitting in a room with
a patient is looking at,
[670]
might be different than
the incentive based
[672]
on the managers of that
practice who might then
[674]
want to get the
doctors to do something
[676]
that's different than--
[677]
SPEAKER 1: But the general
idea is that-- I mean,
[678]
the only way to get a salary
is if there's some organization
[680]
between the doctor and the
insurance companies to kind
[682]
of--
[683]
LAURENCE BAKER: Yes.
[683]
SPEAKER 1: --insulate
the doctor.
[684]
LAURENCE BAKER: So one of
the important pieces here
[687]
that we think about is that
fee-for-service works in almost
[690]
any physician practice, a
solo practitioner, one person
[693]
working by themselves, or
two together could do this.
[696]
Capitation almost
always works in any kind
[698]
of physician practice,
with the exception
[700]
that, if you're a very small
practice, the risk you face
[703]
from month to month,
depending on the sickness
[705]
of your patients, might put you
out of business if you're not
[707]
really on top of it.
[708]
So we like to think
capitation could work in
[710]
any practice, but
really only larger ones.
[712]
And salary is a nice
incentive in a lot of ways
[715]
but requires you to
have a big organization
[716]
to be able to do this.
[718]
And so some of the differences
you see in how physicians get
[720]
paid have a lot to do with
the size of the organization
[722]
they work in.
[723]
SPEAKER 1: Makes complete sense.
[724]
Well, thanks for that.
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