Doctor private practices are caught up in $1 Trillion health insurance B2B negotiations

Call it the mother of all high value B2B negotiations– estimated at $1 Trillion  and 40% of total health-care spending in the US. This from research by Robin Lee of NYU who made a great presentation of  his work at Yale  School of Management, last month.

When you hear of doctors going broke with private practice , and that 50% doctors in the US are in private practice you start understanding the importance of the $1 trillion B2B negotiations in the US health-care market. Here are how things work in this industry in the B2B sense:

  • Insurance companies pitch to employers (B2B) and employers try and get the best deal they can and employees are increasingly asked to pay more by way of co-pays. But more on this B2B piece in another post.OK there is some B2C here when individuals buy health insurance.
  • Insurance companies negotiate B2B with the hospitals/doctor practices. Individual  practice doctors are offered very low reimbursements and they are in no position to negotiate with 5000 patients compared to the 100,000 in hospitals. Why? one more  reason is that hey- they are doctors just wanting to do a small business, passionately interested in their patients,reputation and expertise. Here is a doctor'story, and many doctors today find it simpler to work for a hospital because apart from getting better pay there are less headaches that come with running a small practice.

When a doctor closes a small practice or small business even to join a larger hospital – you can be sure that (a) the office loses a tenant (b) some of the doctor's office employees get laid off (c) the pharmaceutical/medical equipment company rep's jobs shrink. The latter because now the hospital account rep just sees one more doctor.

But the real harm is to the patient who does not see a private practice doctor. For routine ailments, there is no preventive medicine than a good private practice doctor, who can really save money for the whole system by timely, patient-centric  personal involvement.

Becoming a physician is hard work of many ,many years  and doctors need to be motivated by at least reasonable rewards from the insurance system including both the government and private sectors. If more doctors give up private practice in America, it cannot be good for the people or the economy.

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