Higher physician fees in the U.S. contribute to the country's high healthcare costs

The thrust behind higher healthcare spending in the United States on primary care and orthopedics versus in other countries is higher physician fees says a new study published in Health Affairs earlier this month.

The authors, Miriam Laugesen and Sherry Glied, professors at Columbia University (Glied is also the assistant secretary for planning and evaluation at the U.S. Department of Health and Human Services), compared the price of basic office visits offered by primary care physicians and hip replacements provided by orthopedic surgeons in Australia, Canada, England, France, Germany and the U.S. They also compared physicians' incomes after practice expenses, adjusting for different practice costs.

The study, "Higher Fees Paid to U.S. Physicians Drive Higher Spending for Physician Services Compared to Other Countries," notes that in 2008, per capita spending on physician services in the U.S. was $1,599, while per person spending averaged $310 for the same services in all other Organization for Economic Cooperation and Development countries.

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Public payers were found to pay 27 percent more to U.S. primary care physicians for office visits than they paid to primary care physicians in other countries; private payers paid 70 percent more. Public payers paid 70 percent more to U.S. orthopedic doctors for hip replacements than they paid to orthopedic doctors in other countries; private payers paid 120 percent more.

The study also found that the incomes of doctors in the U.S. exceeded those of their counterparts in the other countries in the study.

"American primary care and orthopedic physicians are paid more for each service than are their counterparts in Australia, Canada, France, Germany and the United Kingdom. The extent of higher payment is not entirely explained by differences in practice expenses, because net incomes vary by about as much as fees do," the study's authors wrote. "For the particular services examined here, higher U.S. incomes do not appear to be due to a higher volume of services. The difference in net incomes exceeds the differential in privately accrued tuition costs between countries. This relationship suggests that higher fees, rather than higher practice costs, volumes or tuition expenses, are the main driver of higher U.S. spending in these two areas."

The authors acknowledged that comparing data on physician services is challenging, especially in different countries, but, they said, it is well worth the effort because developing estimates of differences in public and private prices for these services provides "evidence of the general direction and magnitude of differences, and of the sources of these differences, (which) can provide a better understanding of the reasons for cross-national spending differences."

"There are always different reactions to international comparisons," said Laugesen in an email. "I see comparisons as providing a new perspective and providing information that can shed light on domestic issues – in any country, not just the U.S. The choice of what to do with that information is up to policymakers, and sometimes they choose to keep things the way they are, and other times international comparisons spur reflection, while sometimes it leads to concrete policy change."

Comparisons between the health system in the U.S. and health systems of other countries invariably raises the hackles of many healthcare organizations in the U.S., as did fingering primary care physicians for the high costs of healthcare in the country.

"We question the conclusion that physician payment rates are driving our nation's healthcare costs," said Peter Carmel, MD, American Medical Association president in an interview with American Medical News.

Comparing U.S. physicians' needed income to oversees doctors' needed income "is comparing apples to oranges," wrote Roland Goertz, MD, then president of the American Academy of Family Practitioners, in a letter to the editor of the New York Times. Goertz also wrote it is a mistake to conclude that U.S. healthcare costs are higher because of primary care physician income without taking into account the systematic flaws in the U.S. healthcare system.

"The U.S. system is out of balance with too much dependence on subspecialists and not enough value on primary care," Goertz wrote. "If we rebalance our system on primary care – as the other countries have done – we will see less cost due to prevention of conditions that require subspecialist care, such as hip replacements."

There are two lessons that can be taken from the study said Laugesen. "First of all, we need to be vigilant about the incentives for people to go into primary care," she said. "Rather than draw negative conclusions from this study about payment rates for primary care, I would say that we need to continually monitor the incentives for people to go into primary care."

"Second, we need to continually tweak the payment system and make sure services are priced appropriately, so that there is a relativity across similar services. Both of these things are already happening, and the medical profession is involved in that process."

Follow HFN associate editor Stephanie Bouchard on Twitter @SBouchardHFN.