Hal Scherz

Last week, the National Commission on Physician Payment Reform released its recommendations, calling for the elimination of fee-for-service healthcare within the next 5 years. This organization, funded by the Robert Wood Johnson Foundation, is populated by physicians from academia, the insurance industry and from the public policy world. Having former GOP Senate Majority leader and cardiac surgeon Bill Frist serving as honorary chairman gives the imprimatur of bipartisanship and legitimacy. However, Dr. Frist, a former academic himself, has long favored a government supervised healthcare system, and is therefore less than objective in this regard.

The Commission was formed to assess by what means and how much doctors should be paid. Their position is that payments to physicians are one of the key drivers of escalating healthcare expenditures. They want to pay for the sustainable growth rate (SGR or "doc fix") by cutting physician payments for services, just as they aspire to hasten the implementation of the Affordable Care Act by fast tracking new and unproven concepts such as accountable care organizations (ACOs), patient-centered medical homes and value-based purchasing.

Sadly, the objectivity of this group has been clouded by its ideology and perhaps itsself-interests. Although physician payment is one of the components of healthcare costs, it is hardly the major driver. According to a 2012 study from Jackson Healthcare, compensation to physicians was 8.6% of healthcare costs, or $216 Billion annually- amongst the lowest of the major Western nations. Germany spends 15% of their healthcare costs on physician compensation, Australia 11.6% and France spends 11%.

Placing blame for runaway healthcare costs solely on physicians is simply an attempt to divert attention from the real perpetrators. In his recent Time magazine feature story, Steven Brill painstakingly outlined how hospitals throughout the country are generating obscene charges and profits. Over 30% of healthcare spending is generated by hospitals, a large share of which goes to managers and executives; many taking home seven figure salaries. Ignoring this, the Patient Payment Reform Commission wants to give the hospital administrators, through the new ACO model, even more control by directing payments to them, effectively making them the gatekeepers of reimbursements. The false narrative that has been created for public consumption is that in doing so, savings are created by consolidating and delivering care more efficiently and effectively. So far this is simply false.

Two of the major drivers of out of control healthcare spending are medical liability and the 3rd party payment system.


Hal Scherz

Dr. Hal Scherz is the Founder and President of Docs4Patient Care.