Calling Dr. Henry, Dr. John Henry

NEW YORK ( TheStreet) -- The dirtiest secret in the U.S. health care sector is the reason its costs keep going up.


Doctors like the fee-for-service business model. It gives them autonomy. They can run their own clinics, charge what the market will bear, and their decisions won't be open to question because, well, they're doctors. If they want to push tests at facilities they own and make insurers pay, they're doctors. If they want to try unproven therapies, or choose expensive "cures" over cheap ones, and take a little something-something from the supplier, that's their business.

Health reform threatens this autonomy. It turns doctors into employees of hospitals or other large companies. As doctors, it means someone else is driving their daily decision-making process.

At the heart of health reform is a demand that doctors submit to this. The fee-for-patient business model only works at scale. Efforts to capture this business model through "concierge medicine," described here at Wikipedia, only work for the healthy and well-off.

In this entry at The Health Care Blog, Michael Millenson writes that the uncovered scandal of the last four years is that, despite billions of dollars in sweet, sweet stimulus cash, doctors and hospitals have continued to resist the implication of electronic health record technology, namely its ability to make better decisions than doctors make on their own.

You see the same thing in resistance to using checklists. But, as the CDC notes, checklists work -- they dramatically reduce the rates of infection in hospitals where they are used.

And the same resistance is seen in oncologists questioning whether the IBM  ( IBM) Watson computer can really help them in diagnosing cancer.

As Forbes reports, they find it "difficult to imagine" that an algorithm can mimic their own perspective. Well, it can. It's also scalable.

Fortunately, there are increasing signs that vendors are seeing opportunity in delivering real change investors can believe in:
  • Insurers such as United Healthcare  (UNH) and Cigna  (CI) are buying huge piles of fee-per-patient business, as Bloomberg reports, in high-risk populations such as the elderly. They are making investors happy this way, according to Trefis at Seeking Alpha. This should lead to the fee-per-patient business model entering the mainstream.
  • The next step is for insurers to buy providers, connecting their income to the expenses of care, creating an incentive to save money rather than spend it. Wellpoint  (WLP) recently prepared for this by hiring a hospital director as its new CEO, as ModernHealthCare reported.
  • By combining their own health record groups, General Electric  (GE)and Microsoft  (MSFT) are now going to market with a system called Caradigm that delivers more advanced workloads, and is approaching the ability to use big data stores for decision support, according to
  • As I wrote a few weeks ago, CVS Caremark  (CVS) and Walgreens  (WAG) are continuing to transform their pharmacy networks into small clinics, staffed by nurses and physician assistants, delivering basic care at lower cost than general practitioners can in offices.

For doctors, it all points to less autonomy, both financially and in their decision-making. From directing the care of their patients, they are becoming cogs in a larger health care machine, just as the fable of John Henry ( explained here by Wikipedia) foretold what would happen to manual laborers.

At the time of publication, the author was long IBM, GE and GOOG.

This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.

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