4: Free Enterprise is good too.

As preparation for starting a medical practice with my physician wife in 2003, I read a lot of books and magazine articles about medical practice management.  In a number of the magazine articles, the authors expressed their opinions that many medical practices experience problems because they are not run as businesses.  My interpretation of this was that our new business should be operated just like any other business.  As a person with an MBA who had recently worked in corporate America, this perspective made sense to me.

From the start, I attempted my best to operate our business in a businesslike manner and to build an example of a successful and well-run small business.  However, I discovered that our enterprise was anything but free.  Despite the fact that we offered a necessary service which was in short supply in our city, huge insurance companies pretty much dictated the prices that we could charge.  And, the Federal government dictated how much we could collect from a Medicare participant.  Most people are not aware that even if a Medicare participant had agreed to pay more than the government’s specified amount, accepting this level of payment would have put us afoul of Federal law.  I was told that it would have been considered unethical to refuse to treat a patient who would not pay us, plus if the patient were to get ill due to our refusal to treat, we could be subject to a crushing malpractice lawsuit.

In the end, we found that the various legal and insurance pressures made it impossible to profitably operate our business, so we left for greener pastures.  My wife took a job that paid a lot more, was less stressful, but which didn’t involve treating patients.  One important point is worth remembering: (I am certain that I will restate this in other sections) Insurance companies may believe that they save money when they reduce the amounts that are paid for medical treatment.  However, that is a short-term situation.  In the longer term, physicians will stop treating patients, and fewer young people will be willing to enter the field.  This will result in physician shortages, and will negatively impact everyone’s access to healthcare.

After seeing that medical practices are not free enterprise, I initially concluded that socialized medicine is the way to go.

Ultimately, I modified my position somewhat.  Socialized programs can work okay, but some of our best values come from well run private ventures.  The problem with our status quo is it is neither socialized nor free enterprise:  we have the worst of both worlds.  At this point, I believe that we would be best served by a system of socialized and private medical providers, just as we have public schools and private schools.

I have already explained the rationale behind socialized (or public) medical clinics in Section 3.  One good reason for wanting privately-owned clinics too is that by doing so, we create a competitive market for the goods and services needed, and that competition is beneficial.

For example, if we only had government-owned medical clinics, then the government would be the only entity that hires physicians.  In such a world, the government would be able to underpay physicians, resulting in fewer people choosing to become doctors, resulting in physician shortages and reduced access to medical care.  However, if there were also privately owned medical clinics, then those private businesses would be able to bid up the prices of the physician’s services so that the physicians’ pay would ultimately be set by the market.  People who believe that the free market does a good job of allocating resources and setting prices would agree that this is a good thing.

There’s something else too.  If the privately owned medical clinics were operated efficiently, then I believe that they would be relatively affordable.  Many average people would be able to see a private doctor and pay for the doctor’s services if the business were run efficiently like other businesses.

What sort of efficiencies am I referring to?  I will discuss this area in another section.

Then there is the issue of choice.  People have choice when they purchase other items, why not when they purchase medical care?  When purchasing an automobile, some people just want transportation, and they purchase the least expensive thing out there.  According to my quick search of the Internet, the least costly car to purchase new is currently the Nissan Versa, which can be purchased for around $10,000.  Then at the other end, you have people who want something fancier, so they spend north of $100,000 for a Porsche or Mercedes, or perhaps more than $1 million for an exotic.  Many people settle for a Toyota Camry which costs around $25,000 new.  Granted, we’ll get all the government required safety features (airbags, etc.) regardless of what we buy.

So it could be with a person’s healthcare purchase.  Some people would go for the Nissan Versa level clinic.  This bargain basement type clinic might not take appointments, so patients would need to expect a wait.  They would typically see a nurse practitioner or physician’s assistant, and they might not see the same provider every time.  At the other end of the spectrum is the Ferrari level medical clinic.  Patients at this clinic always see the same doctor, appointments are almost always available at the patients’ preferred time, even if that’s outside normal business hours.  There is valet parking, or the doctor can come to the patient’s location.  And the office is very luxurious.  However, as with the car purchase, most patients will find something in the middle that balances their preferences against their financial means.