Monday, November 14, 2005

Physician Self-Referral

Newt Gingrich has taken note of a problem that has been growing for some time - physician self-referral. The problem is larger than Gingrich depicts, as he speaks only of referrals to physician-owned hospitals. The problem also exists for medical testing facilities, and even for equipment within an individual doctor's medical practice.

Gingrich attempts to avoid tripping over his own feet toward the end of the piece, where he explains that either barring physicians from practicing in hospitals in which they have an ownership interest, or requiring specialized hospitals to take all cases within their specialty, is consistent with his being a "free-market conservative":
As a free-market conservative I strongly favor competition. In fact, I think Adam Smith's description of markets creating more choices of higher quality at lower cost was one of the great breakthroughs in human productivity. His publication of "The Wealth of Nations" in 1776 was as liberating as our own Declaration of Independence the same year.

Yet Smith recognized that sellers often try to create phony markets. He warned that when businesses get together they are often conspiring against the consumer. Businesses can see a financial interest in rigging the market so that it minimizes competition or sets prices. This same temptation to conspire against the consumer can be found in the emerging specialty hospital movement.
And it is present in the auto industry, oil industry, medical insurance industry... anywhere you find a monopoly or oligopoly. Newt is correct to identify the problem of self-referral, which can raise the cost of medicine and hurt the bottom line of community hospitals, but he's somehow overlooking the forest. (Also, I am not sure that Smith would have endorsed Gingrich's notion that the solution to this problem is government regulation, nor for that matter that he would approve of either of Gingrich's specific proposals.)

I don't think Mr. Gingrich actually hates monopolies and oligopolies. I don't think he's particularly concerned about business collusion or price-fixing. He was a dogged advocate of extending copyright protections for the benefit of major media corporations. He was an avowed enemy of the FCC and proponent of relaxed ownership restrictions for ownership of television stations, to the extent that his subsequent attempt to enter a $4.5 million book deal with Rupert Murdoch resulted in a significant public backlash. He has all-but-declared that traditional health insurance should be abolished in favor of medical savings accounts. He wants to limit redress for victims of medical malpractice, no matter how legitimate their claims. His heart does not bleed for the plight of the little guy doing battle with the big corporation, nor for an uninsured person scrambling to afford medical care.

The best explanation for Gingrich's stance is that the various health insurers, hospital corporations, pharmaceutical companies, and health care industry interests that back his various initiatives fear for their bottom line, in the event that independent specialty hospitals cherry-pick the most lucrative patients and treatments. We may eventually get meaningful health care reform in the U.S., but if Gingrich truly wishes to be part of such a reform movement he should come clean about his actual agenda.


  1. Mr. Gingrich writes about physicians' conflict of interests in his article on physician ownership of specialty hospitals in Saturday's Post. However, he doesn't tell us about his own conflict of interest. His Center for Health Transformation receives major funding from the American Hospital Association and HCA, two organizatons that have spent years trying to put physician owned hospitals out of business. How much did he get for this article, which just repeats the hospital line?

  2. Great blog I hope we can work to build a better health care system. Health insurance is a major aspect to many.