Your Future Under Obamacare: Big Medicine Getting Bigger

This is the first in a series of articles on the rollout of Obamacare and how the law will change our health care system. Each Wednesday in September, we will publish two articles -- one on the changes in medicine and medical care and one on changes in the insurance industry. We hope this series of articles will help you make better decisions when it comes to your health care and how you buy insurance.


Recently, there’s been an enormous shakeup in three traditionally stable professions — law, education, and medicine. But where law and education are moving towards decentralization and greater consumer control, medicine is moving in the opposite direction — towards greater centralization and less consumer (patient) control.

Why? Because the upheavals in law and education are being driven by market forces. In contrast, the upheaval in medicine is being driven by new government controls. Hence, Big Law and Big Education are struggling, while Big Medicine is growing.

This series of articles will discuss how the ObamaCare health law is fueling the rise of Big Medicine, what this will mean for patients, and how patients can respond to best protect their medical care.

There are three major components to Big Medicine. The first is a “remarkable” wave of hospital mergers, as recently reported by the New York Times.

These mergers are driven primarily by economic pressures, including declining reimbursements from Medicare (and from private insurers who typically peg their payments to Medicare rates) as well as costs of expensive, new, mandatory electronic medical record systems. Mergers give hospitals greater leverage in their negotiations with private insurers and increased efficiencies of scale with electronic record keeping, billing, and other administrative overhead.

According to the New York Times, the mergers are “transforming the economics of health care” by “creating giant hospital systems that could one day dominate American health care.”

The second component of Big Medicine is the shift of doctors away from independent private practice and towards becoming hospital employees. Doctors face many of the same pressures as hospitals. As eWeek reported, “Doctors are abandoning their private practices to join large health organizations so they can lower their costs and meet government mandates on electronic health records.”

By becoming hospital employees, doctors lose autonomy, but enjoy more regular hours and a more predictable salary. In return, hospitals gain access to a guaranteed supply of patients from their employee-physicians. Last year the Washington Post reported, “[T]he number of physicians who own their firms dropped from 57 percent in 2000 to 43 percent in 2009, and it’s projected to continue falling to 33 percent by 2013.” As oncologist Patrick Cobb recently told CNN, “We have a joke that there are two kinds of private practices left in America. Those that sold to hospitals and those that are about to be sold.”

The third component of Big Medicine will be Accountable Care Organizations (ACOs). ObamaCare encourages hospitals and doctor to band together into large ACOs to contain Medicare health costs. The ACOs would be paid according to how well they met government benchmarks for “outcomes” and “quality.” ACOs that spent less money on patients than the government deemed necessary would be financially rewarded; those that spend too much money would suffer. In essence, government will use financial carrots and sticks to reward ACOs for practicing medicine according to its guidelines.

It’s informative to contrast this growing consolidation of American medicine with the opposite trends in law and education.

Noam Scheiber recently described the ongoing shakeout in “Big Law” following the collapse of the housing bubble and the subsequent recession:

“Stable” is not the way anyone would describe a legal career today. In the past decade, twelve major firms with more than 1,000 partners between them have collapsed entirely. The surviving lawyers live in fear of suffering a similar fate, driving them to ever-more humiliating lengths to edge out rivals for business. “They were cold-calling,” says the lawyer whose firm once turned down no-name clients.

According to Scheiber, corporate clients previously willing to pay high legal bills started using alternatives like contract attorneys and “legal process outsourcers.” University of North Carolina law professor Bernard Burk has described this as a combination of “outsourcing, downsourcing and insourcing.”

The shakeout in higher education (“Big Ed”) is also being driven by unhappy consumers. Glenn Reynolds (aka “Instapundit“) has written extensively about the “higher education bubble“ of skyrocketing college tuitions outstripping any reasonable expected return:

As more young people see friends and relatives with degrees serving coffee and living in their parents’ basements, the idea of borrowing tens of thousands of dollars to attend a traditional university will become less appealing. More focused skills training will probably become more common, and growing numbers of students and parents will opt for less costly online classes...