Healthcare for Pre-Meds: An Industry 411
August 4, 2011
A commonly discussed topic on the wards during the third and fourth years of medical school is the health care system. Since the legislation passing health care reform in 2009, physicians are constantly talking about the possible changes, and students who have a thoughtful, informed opinion usually wind up standing out as a result of these discussions. The fact that it has also become a common topic during admissions interviews adds to the importance of understanding the health care system as a whole well before you actually find yourself immersed in it.
The American healthcare system is divided into three main components: consumers, providers, and payers. While it may sound strange to call them consumers, patients are being provided a service so that’s exactly what they are. Physicians, naturally, take on the role of the provider segment (along with nurses, paramedics, and many other healthcare workers whom the patient will encounter). Lastly, insurance companies round out the final segment as the payers who adjudicate claims and, for the most part, provide payment for services rendered.
As someone in or wanting to enter the medical field, it is important to understand the provider segment more deeply. Healthcare providers generally work in one of two areas: hospitals or private practice. As healthcare costs have soared over the last decade, more and more private practices are closing down and making room for hospitals. It is strange to think of, but hospitals are owned by larger businesses. One of the most important things to know about the healthcare system is that it is heavily regulated. If you think about it, it makes perfect sense; if you wanted to open a business in any field, you would need some permits and you would have to file certain documents with the government. But now imagine what it would be like to open an entire hospital – things are suddenly much more complicated. This is necessary to ensure safety and equality for all patients regardless of whether they are insured or not.
As medical providers, physicians mainly operate on a fee-for-service platform – this means that clinicians get paid based on the number of diagnostic and treatment exams they perform. At the end of every single patient visit, the physician fills out paperwork with a series of codes that are sent to the insurance groups for billing. Because of the regulation in this field, the largest insurance group in the United States is actually the government; the oft debated Medicaid (federal insurance for disabled and impoverished people) and Medicare (federal insurance for people over the age of 65) programs provide insurance for those that need it but may not be able to afford it for reasons beyond their control.
Without getting too political, one promising aspect of the recent health care reform is referred to as the Accountable Care Organization (ACO). Many groups called for changes to the fee-for-service system because it has the unfortunate side-effect of incentivizing hospitals and physicians to order tests that they might not otherwise have ordered just to increase their revenue. To avoid that problem, ACO programs were created based on a fee-for-performance system, with the eventual result that physicians will be paid for increasing their patients’ quality of life. The ACO programs will not start until 2013, giving health care providers and insurance companies the chance to understand the new regulations and then create ACOs across the United States.
Clearly, a strong understanding of our healthcare system will be essential to your future as a physician, and there’s much more that we could discuss. Many books, articles, and essays have been written on the subject, and that’s not likely to change anytime soon. The coming years will see significant change to the way in which medicine is practiced in the U.S. Many projects like the ones discussed here have already begun developing, making this a great topic to know during the medical school interview season. Understanding the healthcare system is an important step in becoming a contributing member of it!
I'm a current Tulane University medical student and an MBA graduate of the Johnson School of Graduate Management at Cornell University, and a long-time instructor and teacher trainer who continues to help students throughout the country. I've also done significant work behind the scenes, helping to develop and update study materials for both the MCAT and USMLE. I've been around long enough to see former students not only join me in medical school, but also be trained by me as new Kaplan instructors. While obtaining medical and business degrees has kept me busy, it hasn't stopped me from continuing to play soccer as a goalkeeper during both outdoor and indoor seasons.