Killing Marcus Welby

If ObamaCare really called for the creation of "death panels," the first victim of these in vented tribunals would have been Marcus Welby MD, the character in the hit 1960s television show that followed the daily dramas of a small-town family doctor.

The health legislation doesn't call on government tribunals to euthanize seniors, as some fanciful critics claim, but the bill does kill off private-practice medicine.

ObamaCare envisions that doctors will fold their private offices to become salaried hospital employees, making it easier for the federal government to regulate them and centrally manage the costly medical services they prescribe. To get this control, ObamaCare creates "Accountable Care Organizations," which are basically hospitals coupled with local doctor networks that the hospital owns.

The only way health plans can improve their profits is by cheapening the product that they provide, in other words, holding down the cost of the health coverage that they offer.

Under ObamaCare, an ACO is supposed to take "accountability" for local Medicare patients, who in turn get most care from providers working inside the ACO's network. To encourage efficiency and cost-cutting, an ACO can share in the savings it achieves from more closely managing its assigned pool of patients. The idea is to give doctors a financial incentive to better coordinate care and reduce their use of costly medical services.

The ACO concept was coined in 2006 by the same Dartmouth health researchers who famously found that higher Medicare spending doesn't correlate with better medical outcomes. Their data was controversial. Some experts refuted the findings. Even so, it became the intellectual foundation for ObamaCare's vision of "bending the cost curve"--that you can improve medical outcomes by cutting Medicare spending. The ACOs have become Washington's most fashionable vehicle for pursuing that prophecy.

In many ways, the ACO concept builds on the 1990s approach to "capitation," in which health-maintenance organizations gave doctors a lump sum to care for a group of patients. This arrangement put a financial onus on doctors to cut costs. The concept lowered spending but was unpopular with patients, leading to a backlash against managed care.

Even if the Obama team dresses up the same concepts in a new acronym, their regulatory impulse to tightly manage how these organizations operate tilts the ACOs into the hands of hospitals. It forces doctors to sell their medical practices to these networks if the physicians want to maintain what they're paid by Medicare.

Obama's health-care czar, Nancy Ann DeParle, laid bare this financial coercion. Writing recently in the "Annals of Internal Medicine," she said that "the economic forces put in motion by [the Obama health-care plan] are likely to lead to vertical organization of providers and accelerate physician employment by hospitals and aggregation into larger physician groups." Physicians, she said, "that accept the challenge will be rewarded in the future payment system" as ObamaCare "reforms" how doctors are paid under Medicare.

The Obama plan contains other economic forces that will drive such "vertical integration" in which doctors become employees of hospitals and health plans. For one, under ObamaCare, health plans will see their revenue (premiums) and costs (medical benefits) largely fixed by government regulation. So the only way health plans can improve their profits is by cheapening the product that they provide, in other words, holding down the cost of the health coverage that they offer.

In turn, the only way to cheapen health coverage is to control the medical services consumers can access. The only way to tightly control the use of medical services is to exert more leverage over the doctors who order the tests and treatments. That means health plans will need to maintain tight networks of providers to exert more control over doctors--or else own the physicians outright. So expect to see health plans doing their own "vertical integration"--buying out medical practices, just like hospitals are doing.

According to a recent survey of health executives, 74 percent said their hospitals or health systems plan to employ more physicians over the next 3 years, and 61 percent plan to acquire medical groups. The doctor-recruitment firm Merritt Hawkins said that 45 percent of physician job searches last year were for direct employment of a doctor by a hospital, up from 23 percent in 2005.

In 2005, more than two-thirds of medical practices were doctor-owned, a share that was largely constant for many years. By next year, the share of practices owned by physicians will probably drop below 40 percent, according to data from the Medical Group Management Association. Hospitals or health plans will own the balance of doctor practices.

So the next time you see your doctor, it may be far from home, in an office park built by your nearest hospital. Thanks to ObamaCare, Marcus Welby is taking down his shingle. He's becoming an employee of General Hospital.

Scott Gottlieb, M.D., is a resident fellow at AEI.

Photo Credit: iStockphoto/Bluberries

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