How should doctors be paid?

Most doctors are paid by some version of how they have always been paid–what is loosely called “fee for service.” The notion is simple: the doctor gets paid for each encounter with a patient, whether this is an office visit or a major surgical operation. Thus the more the doctor does, the more he gets paid. It seems fair. After all, shouldn’t we get paid for the work we do?

The fee-for-service model, however, has long had critics. The most fundamental objection is that it rewards doctors for doing things. In an environment like that, one in which the more one does the more he gets paid, the doctor is tempted to do things that don’t need to be done, or choose the thing to do for which he gets paid more rather than the thing that pays less. In the ideal situation, of course, the doctor won’t consider those things–rather, he will put the patient’s best interests first. But doctors are human, and fee-for-service presents a doctor with a fundamental conflict of interest.

The alternative to fee-for-service is some sort of payment system in which the doctor is paid a salary that is the same no matter how much he does. This is currently done by some large practices, including the Mayo Clinic. Critics of this salaried system believe that, without financial incentives, doctors will simply not work as hard. Other physician groups blend together the two approaches, with a salary supplemented by some sort of bonus for doctors who do more.

The debate is more than a financial one–it is also a philosophical one. Most free market enthusiasts strongly support fee-for-service; those who favor tighter regulation of medical care, often including one of various single-payer models, are typically open to salary-based payment models. Salary-model systems also are frequently used by Health Maintenance Organization (HMO) systems.

Historically, organized medicine has been strongly opposed to paying physicians by any other method than fee-for-service. Seventy-five years ago, physicians who accepted salaried arrangements were ostracized by their peers and sometimes even penalized. This view has changed to some extent, but I think it is still fair to say that most American physicians favor traditional fee-for-service.

For myself, I favor a salary model (or salary plus a modest incentive for extra productivity) for what I do. I work in the field of intensive care, which lends itself well to this. Other specialties are somewhat different. My job, in effect, is to be like a firefighter waiting in the firehouse–if the PICU is busy, I work harder; if there are less patients, I can ease up. After all, we pay firefighters whether or not they are fighting a fire.

I see no reason why physician payment strategies must be all one thing or all another. It seems to me that whatever evolves from our current chaotic situation could find a place for both approaches. Hard work should be rewarded. However, and this is a big however, we need to understand the inherent conflict of interest of traditional fee-for-service medicine. Also, not all rewards for hard work need be financial ones.