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Controlling Physician Oversupply Through Certificate of Need

Published online by Cambridge University Press:  24 February 2021

John T. Tierney ,
William J. Waters  and
Donald C. Williams
John T. Tierney
Affiliation:
Rhode Island Department of Health
William J. Waters
Affiliation:
Rhode Island Department of Health
Donald C. Williams
Affiliation:
Office of Health System Planning, Rhode Island Department of Health
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Abstract

By 1990 the aggregate supply of physicians in the United States is likely to exceed the population's requirements by 10 percent or more. State and regional aggregate and specialty-specific surpluses may be more extreme. Since the demand for physician services appears to be determined to a significant degree by the supply of physicians, the number of physicians who can maintain financially viable practices in a region is not likely to be limited effectively by the normal market interaction of supply and demand. Excessive physician supplies may, however, have a number of deleterious effects, including rapid escalation of health care costs, fragmentation of patient care, and a decrease in the quality of patient care.

In this Article, the authors review the potential effectiveness of a number of policy interventions that might be employed to optimize physician supplies in areas of excess. They evaluate the following alternatives: (1) a limit on the number of medical school graduates; (2) control of physician residencies by number and by specialty; (3) creation or implementation of incentive policies; (4) control by hospitals—indirectly by limiting the number of beds, or directly by denying staff privileges; (5) widespread development of HMOs; (6) direct employment by the federal government of the majority of practicing physicians; and (7) creation of certificate of need for physician licensure. The authors conclude that, at least in the short term, certificate of need'for physician licensure is the alternative that shows the greatest promise of enabling the number and specialties of physicians providing patient care in areas facing a physician surplus to be managed in such a way that the populations of such areas can obtain adequate medical care at a reasonable cost.

Type
Article
Information
American Journal of Law & Medicine , Volume 6 , Issue 3 , Fall 1980 , pp. 335 - 360
Copyright
Copyright © American Society of Law, Medicine and Ethics and Boston University 1980

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References

1 The most recent projection of a physician surplus of 59,000 in 1990 was reported to be included in the September 1980 Draft Report of the Graduate Medical Education National Advisory Committee (GMENAC). Sorian, Special Report: GMENAC Draft Report, 34 WASH. REP. MED. & HEALTH (insert), Sept. 15, 1980.

2 Morrow fc Edwards, U.S. Health Manpower Policy: Will the Benefits Justify the Costs?, 51 J. Med. Educ. 798 (1976).

3 See, e.g., U. Reinhardt, Physician Productivity and the Demand for Health Man Power: An Economic Analysis 7-14 (1975). · .

4 See note 6 infra and accompanying text.

5 This figure is based on 1976 American Medical Association (AMA) Masterfile data (M.D. only). In the same year more detailed self-reported data from the Rhode Island Cooperative Health Statistics System indicated that 1,440 nonfederal patient care physi cians were active in Rhode Island, providing a physician to population ratio of approxi mately 155 per 100,000. This ratio is 113 percent of the 1976 U.S. nonfederal patient care physician to population ratio (137/100,000, M.D.s only), and 167 percent of the unweighted mean patient care physician to enrolled population ratio of six large health maintenance organizations (HMOs) (93/100,000). GEOMET, INC., HMO's … Their Potential Impact on Health Manpower Requirements 6-6 (1974) (final report under contract no. NIH 72-4403 for the U.S. Dep't of Health, Education & Welfare (Aug., 1974)). These comparisons do not account for differences in the age structure (a primary correlate of resource utiliza tion) between Rhode Island's population and reference populations. Even after adjusting for such factors, however, considerable differences remain between the ratios observed in Rhode Island and those required for an adjusted reference population. Accordingly, unadjusted measures are used herein for simplicity.

6 L. Goodman, Physician Distribution and Medical Licensure in the U.S., 1976, at 23-24 (1977). States wth higher nonfederal patient care physician to population ratios were New York, Massachusetts, Connecticut, California, and Maryland. Id.

7 Two alternative methodologies have been used to project Rhode Island's future physician supplies. The first method is based on a simple linear extrapolation of 1970 to 1976 AMA Masterfile physician data for Rhode Island, adjusted for activity status, and bounded on the upper side by a simple linear extrapolation of 1954 to 1976 physician licensure data. The second method, which is used to project total physician supply only, is also based on a simple linear extrapolation of AMA Masterfile data. However,;in this projection technique the percentage relationship of the Rhode Island supply to the total U.S. supply was calculated for each year during the period from 1970 to 1976 and linearly extrapolated through the projection period. Rhode Island's future total physician supply was then determined by applying the projected percentage to the Graduate Medical Edu cation National Advisory Committee's (GMENAC's) projections of national physician supply. Graduate Medical Education National Advisory Committee, GMENAC Staff Papers: Supply and Distribution of Physicians and Physician Extenders, at 67 (1978). The results of both methods are displayed in Table 1, and population projections are combined with the numbers of total, primary, and nonprimary care physicians projected by method one and the numbers of total physicians projected by method two in Table 2. Similar national data are presented in Tables 3 and 4, respectively.

The data sources for Table 2 are: Rhode Island Health Services Research, Inc. (popula tion estimates), and Rhode Island Department of Health, Office of Health System Planning: Series B (population projections).

GMENAC, U.S. Dep’t of Health, Education & Welfare, Interim Report, Table 15 (Apr. 1979).

GMENAC, U.S. Dep’t of Health, Education & Welfare, Interim Report, Table 15 (Apr. 1979).

The more conservative supply projection (method one) indicates that - in 1990 Rhode Island will have a total physician to population ratio of 231 per 100,000. However, the 1990 total physician to population ratio of 306 per 100,000 projected by method two is possible, since the national total physician to population ratio projected by GMENAC is 220 per 100,000 and the physician to population ratio in Rhode Island historically has exceeded the national ratio. Nonetheless, even the more conservative physician to popula tion ratio projected for Rhode Island (220) is 161% of the 1976 U.S. ratio (137), and 237% of the mean unweighted ratios of six large HMOs (93).

8 This figure is based on method one, supra note 7.

9 See, e.g., Iglehart, Controlling the M.D. Spiral, 9 Nat’l J. 866 (June 4, 1977); Lyle, Citron, Sugg & Williams, Cost of Medical Care in a Practice of Internal Medicine, 81 Annals Intern. Med. 1, 3 (1974).

10

For the Rhode Island data, see unpublished data from Rhode Island Health Services Re search, Inc., on file in the Office of Health System Planning, Rhode Island Department of Health. For the United States data, see Gibson, National Health Expenditures,' 1978, 1 Health Care Financing Rev. 3 (1979).

11 Gibson, supra note 10, at 2, 9.

12 See note 21 infra.

13 See U. Reinhardt, supra note 3, at 15, 16.

14 Chase, City of Doctors: Will Surplus of M.Dj be Good for Patients? Look at San Francisco, Wall St. J., Mar. 13, 1980, at 1, col. 1.

15 Council on Wage and Price Stability, Executive Office of the President, Physicians: A Study of Physicians’ Fees 120 (1978).

16 U. Reinhardt, supra note 3, at 8.

17 Havighurst, Health Care Cost-Containment Regulation: Prospects and an Alter native, 3 AM. J. L. & MED. 309 (1977); Enthoven, Consumer-Choice Health Plan (First of Two Parts), 298 New England. J. Med. 650; Enthoven, Consumer-Choice Health Plan (Second of Two Parts), 298 New England J. Med. 709 (1978).

18 The "consumer choice" strategy is viewed by its proponents as an effective, pre ferred alternative to direct economic regulation of the health care market. Basically, proposed competing systems would attempt to change the financial incentives for both consumers and providers in the health care market. In particular, the consumer choice strategy would attempt to create a financial framework in which both consumers and physicians (providers) could benefit from forming and joining organized systems that would use health care resources in a cost-effective manner. Key elements of these proposals in clude a degree of consumer choice of competing health care plans for providing needed health care services over a specified period, limits to the health care coverage provided by employers that is not taxed as income, and mechanisms for both consumers and providers to share in any “savings” realized. For a more detailed description see Enthoven, supra note 17.

19 The estimated excess of physicians results from a comparison of the projected supply, see Table 1, supra note 7, with the state's physician requirement, which was based on its 1975 physician to population ratio, adjusted for demographic changes.

20 See Iglehart, supra note 9; Lyle, Citron, Sugg & Williams, supra note 9.

21 Auster, Leveson & Saracheck, The Production of Health, An Exploratory Study, 4 J. HUM. RES. 411,431-36(1969).

22 While more conclusive results require longitudinal analyses of a study population’s use of health services and the effect of that use on the population's health; status, it appears that the productivity of present health expenditures could be increased by re allocating medical care expenditures to socioeconomic and environmental interventions. Office of Health System Planning, Rhode Island Dep’t of Health, The Productivity of Health Expenditures, Preliminary State Health Plan 7-163 (1978).

23 Rhode Island Dep’t of Health, the Way We Live 29 (1977).

24 The AMA has' rebSiiimerided that half of all physicians should be in primary care. Stevens, Health Manpower, in Regionalization and Health Policy 115 (E. Ginzberg ed. 1977). See also Endicott, The Distribution of Physicians Geographically and by Specialty, at 62-63, presented at the Spring Meeting, Institute of Medicine (May 8-9, 1974).

25 Scheffler, Weisfeld, Ruby & Estes, A Manpower Policy for Primary Health Care, 298 New England J. Med. 1058, 1060 (1978) (referring to the Health Professions Educational Assistance Act of 1976, Pub. L. No. 94-484, 90 Stat. 2243 (1976) (amends Title VII of the Public Health Service Act)). The authors noted that the U.S. Bureau of Health Man power found that almost 53% of medical residents in 1977 already were training in family practice, general internal medicine, or general pediatrics. The authors recommend, in fact, that the percentage of physicians in these specialties should be increased to 60 or 70%. Id.

26 id. This supply composition approaches the percentage (67%) observed in six large HMOs, a form of health care delivery often noted for its efficiency. See GEOMET, INC., supra note 5.

27 Rhode Island Health Services Research, Inc., Nonfederal Physicians Providing Patient Care in Rhode Island—November 1, 1975, at 34-37 (1977).

28 Projection method one, supra note 7, which mqkes this prediction, admittedly is crude. Among other things, it does not take into account the potential impact of Pub. L. No. 94-484, Health Professions Educational Assistance Act of 1976, which attempts to encourage the education of more primary care physicians.

29 This conclusion is based on AMA Masterfile data concerning nonfederal, patient care physicians only. See L. GOODMAN, supra note 6, at 23-24.

30 The designation of geographic areas, facilities, and population groups as Primary Medical Care Manpower Shortage Areas makes them eligible sites for placement of federal physicians and other medical care manpower under the National Health Service Corps. The designation also provides priority status to applicants for federal assistance under the Urban Health Initiative Program, the Rural Health Initiative Program, the Migrant Health Center Program, and other health-related programs.

Nationally, more than 1,200 Primary Medical Care Manpower Shortage Areas were designated at the end of 1978. Approximately 27 million people, or more than 10% of all Americans, live in these shortage areas—half in rural and half in urban areas. U.S. Dep’t of Health, Education & Welfare, 6 Health Resources News 2 (1979).

31 Rhode Island Dep’t of Health, Health Planning, and Resources Development, Regionalization—Concepts and Practices, at 1-2 (1977).

32 Stevens, supra note 24, at 107. V

33 American College of Surgeons and the American Surgical Association, Surgery in the United States, at 81 (1975).

34 E. Ginzberg, Men, Money, and Medicine 10 (1969).

35 Bodenheimer, Regional Medical. Programs: No Road to Regionalization, 26 Med. Care Rev. 1125,1140-44 (1969).

36 R. Stevens, American Medicine and the Public Interest 68 (1971).

37 Smith, , Carter Attempt to Limit Doctor Supply Faces Tough Going in Congress, 203 Sci. 630 (1979)CrossRefGoogle Scholar.

38 Organized medicine has chided the government for this abrupt change in policy direction. While some criticism may be warranted, the federal government,, including Congress, might more appropriately be taken to task for its uncritical acceptance of the expansionist manpower recommendations of various advisory groups—such as the Carnegie Commission, whose members consisted mainly of university presidents, of medical and dental school deans, and of professors. Bloom, & Peterson, , Physician Manpower Expansion ism—A Policy Review, 90 Annals Intern. Med. 249, 255 (1979).CrossRefGoogle Scholar

39 Smith, supra note 37.

40 This is the number of years required to complete the requisite residency and fellowship programs in the longer medical or surgical subspecialties.

41 Stevens, supra note 24, at 117.

42 Health Professions Educational Assistance Act of 1976, Pub. L. No. 94-484, 90 Stat. 2243 (1976) (amends Title VII of the Public Health Service Act). See also Scheffler, Weisfeld, Ruby & Estes, supra note 25.

43 Scheffler, Weisfeld, Ruby & Estes, supra note 25.

44 Wechsler, Dorsey & Bovey, A Follow-up Study of Residents in Internal-Medicine, Pediatrics and Obstetrics-Gynecology Training Programs in Massachusetts—Implications for the Supply of Primary-Care Physicians, 298 New England J. Med., 15, 19-20 (1978).

45 Graduate Medical Education National Advisory Committee, Gmenac Staff Papers: Social And Psychological Characteristics In Medical Specialty Geographic Decisions iii (1978). In April of 1979, Gmenac issued an Interim Report summarizing their progress in developing their recommendations to the Secretary of Hew. Graduate Medical Education National Advisory Committee, Interim Report (1979). Their final report was submitted to the Secretary of HEW (now HHS) in September of 1980, but is not yet available.

46 Office ' Of Statewide Health Planning And Development, California Health And Welfare Agency, Graduate Medical Education In California—a Position Paper (1978).

47 Id.

48 Such Incentives include: (loan forgiveness) the Health Professions Educational Assistance Act Amendments of 1965 (Pub. L. No. 89-290, 79 Stat. 1052), the Comprehensive Health Manpower Training Act of 1971 (Pub. L. No. 92-157, 85 Stat. 431), and several similar state-sponsored programs; (direct placement as governmental employees) the National Health Service Corps; (preferential medical school admission) the Comprehensive Health Manpower Training Act of 1971 (Pub. L. No. 92-157, 85 Stat. 431), the Physician Shortage Area Scholarship Program, and similar state programs in Illinois and Kentucky; (internships) Intern and Residency Matching Program; (provision of, or financial assistance for obtaining, clinic or office facilities) the Hospital Survey and Construction Act (Pub. L. No. 79-725, ch. 958, 60 Stat. 1040 (1946)), the Sears Roebuck Foundation, the Cook County Hospital Program, and the Columbus-Cabrini-Cuneo Medical Center Program; and (placement assistance) AMA-Project USA, American Medical Student Association-Project USA, the National Health Service Corps Preceptorship Program, the AMSA-National Health Service Corps Advocacy Program, and a similar program operated by the Michigan State Health Council. For a more complete listing, see Eisenberg & Cantwell, Policies to Influence the Spatial Distribution of Physicians: A Conceptual Review of Selected Programs and Empirical Evidence, 16 MED. CARE 455, 459-62 (1978).

49 Eisenberg & Cantwell, supra note 48, at 455.

50 Health Planning Council, Inc., Distribution of Physician Appointments and Ad missions at Hospitals in Rhode Island, 1971 and 1977 (1978).

51 See Havighurst, supra note 17; Enthoven, supra note 17.

52 A health maintenance organization (HMO) is

an entity with four essential attributes: (1) an organized system for providing health care in a geographic area, which entity accepts the responsibility to pro vide or to otherwise assure the delivery of (2) an agreed upon set of basic and supplemental health maintenance and treatment services to (3) a voluntarily en rolled group of persons, (4) for which services the HMO is reimbursed through a predetermined, fixed, periodic prepayment made by or on behalf of each person or family unit enrolled in the HMO without regard to the amounts of actual services provided. The HMO is responsible for providing most health and medical care services required by enrolled individuals or families. These services are specified in the contract between the HMO and the enrollees. The HMO must employ or contract with health care providers who undertake a continuing re sponsibility to provide services to its enrollees. The prototype HMO is the Kaiser - Permanente system; a prepaid group practice located on the West Coast. However, medical foundations sponsored by groups of physicians are included under the definition. HMOs are of public policy interest because the prototypes appear to have demonstrated the potential for providing high quality medical services for less money than the rest of the medical system. Specifically, rates of hospitalization and surgery are considerably less in HMOs than in the system outside such prepaid groups . . . . ,

Staff Of The Subcommittee On Health And The Environment Of The Committee On Interstate And Foreign Commerce, U.S. House Of Representatives, A Discursive Dic Tionary Of Health Care 68, 69 (1976) (footnote omitted).

53 Stevens, , Physician Supply and National Health Care Goals, 10 Ind.Rel. 119, 138 (1971)Google Scholar.

54 Association News: Resolutions and Position- Papers Adopted by the Governing Council of the American Public Health Association, November 2, 1977, 68 Am. J. Pub. Health 182 (1978) (emphasis added).

55 Navarro, , A Critique of the Present and Proposed Strategies for Redistributing Re sources in the Health Sector and a Discussion of Alternatives, 12 Med. Care 735 (1974)CrossRefGoogle Scholar, and Navarro, , National Health Insurance and the,Strategy for Change, 51 Milbank Mem. Fund Q. 245 (1973)CrossRefGoogle Scholar.

56 In Great Britain, 62% of general practitioners and a substantial proportion of specialists engage in private practice to some degree. Economic Models Limited, The British Health Care System 147 (1976).

57 Rhode Island Dep't Of Health, Preliminary State Health System Plan, at 8-323 (1979).

58 American Medical Association, State Government Manipulation of Residency Train ing and Certificate of Need Limitations on Physician Licensure, State Legislative Memo randum (June 8,1979).

59 Id. at attachment 6, p. 3.

60 Id.

61 Edwards, , The Federal Involvement in Health, 292 New England J. Med. 559, 560 (1975)CrossRefGoogle Scholar.

62 Id. See also Gibson, & Fischer, , National Health Expenditures, Fiscal Year 1977, 41 Soc. Sec. Bull. 3, 3 (1978)Google Scholar.

63 26 A.D.2d l2, 270N.Y.S.2d 167 (1966).

64 Id. at 18, 270 N.Y.S.2d at 171.

65 Id.

66 282 N.C. 542, 193 S.E.2d 729 (1973).

67 Id. at 543, 193 S.E.2d at 730.

68 Id. at 551, 193 S.E.2d at 735.

69 131 N.J. Super. 412, 330 A.2d 370 (1974).

70 Id. at 420, 330 A.2d at 374.

71 445 F.Supp. 532 (E.D.N.C. 1977), aff'd, 98 S. Ct. 1597 (1979).

72 Legal issues clearly are central to proposals for the regulation of physician man power. While detailed legal review demands the attention of attorneys, the authors believe that, with appropriate mechanisms and safeguards, legal challenges can be overcome. In any event, the ultimate arbiters of these complex legal issues are the courts.

73 Such statements occasionally have been made to the authors by hospital adminis trators and by medical staff on an informal basis.

74 The fourteenth amendment generally prohibits the state from treating people who are substantively. the same as if they were different, and thus rendering unfair hardship or undeserved bounty on any selective class of individuals (except in a few very specific and important instances, such as race and sex). Truax v. Corrigan, 257 U.S. 312, 333 (1921).

75 Williamson v. Lee Optical, 348 U.S. 483 (1955).

76 “Capture” of regulatory efforts is said to occur when, contrary to the traditional theory that regulatory bodies exist to protect consumers, they actually serve to protect the interests of those being regulated. For a more complete discussion of regulatory “capture,” see Jordan, , Producer Protection, Prior Market Structure, and the Effects of Government Regulation, 15 J. L. Econ. 151 (1972).CrossRefGoogle Scholar

77 Wescott, , Hunterdon—The Rise and Fall of a Medical Camelot, 300 New England J. Med. 952 (1979)CrossRefGoogle Scholar.

78 Id. at 954.

79 The Hunterdon system collapsed, not because of an inability to determine an appropriate match between the physician supply and specialty composition and the needs of the population, but because its hospital-based specialists became unwilling to limit their practices to the Hunterdon hospital as a condition for hospital privileges. Th e establish ment of private practices in the community by these physicians nullified the attempts to plan for the rational deployment of physicians in the Hunterdon system. Rosenberg, Trouble in a Health Planner's Paradise, Med. Econ., Aug. 7, 1978, at 176-77.

80 Hardin, , The Tragedy of the Commons, 162 Sea. 1243 (1968)Google Scholar. The Tragedy of the Commons considered a class of human problems that in Hardin's view had no technical solution. Hardin considered the implications of these problems through an analogy to the English grazing commons. His conclusion was, “Ruin is the- destination toward which all men rush, each pursuing his own best interest in a society that believes in the freedom of the commons. Freedom in a commons brings ruin to all.” Id. at 1244.

81 Hiatt, , Protecting the Medical Commons: Who is Responsible?, 293 New England J. Med. 235, 235 (1975).CrossRefGoogle Scholar

82 See note 57 supra.

83 Holoweiko, , How States Plan to Regulate Physician Supply, Med. Econ., Apr. 28, 1980, at 79-84.Google Scholar