Why do doctors contract with large networks to provide care at a deep discount? Do they expect to get more business from those relationships? If so, does that additional business ever arrive at their examining room? How many other physicians in their area are also contracted with that network? If there are many, are they merely joining to maintain their patient base?
Have they actually done the math to determine the impact of the discount on their finances?
Here’s an admittedly simplistic analysis of the financial impact of a discounted patient visit.
- The “non-discounted” price would be $100
- The discount is 20%
- The net profit on the average patient visit (non-discounted) is 30% (an unreasonably high number, but easier to work with for our purposes)
The doctor makes a profit of $10 per discounted patient visit, and therefore must see three times as many patients to justify that 20% discount. And that’s before one factors in the additional fixed costs associated with the larger patient load – more parking, more staff, a larger waiting room, more examining rooms, and more of his/her professional time.
Perhaps more physicians are “doing the math”, and that is why managed care firms are having a much tougher time getting discounts.
The network deep discount model has other fundamental flaws, flaws that are only now beginning to be fully appreciated.