The Game Theory Behind Drive-by-Doctoring Practices
This article focused on a few cases of people who were victims of a recent trend in the health care industry, “drive by doctoring.” The cost for healthcare in America is very high because the health care network is structured in such a way that it is impossible for the classic market forces of supply and demand to directly influence the cost of health care. Because health care services are already high to begin with, most patients will seek health insurance providers or government aid to help cover the costs. That move prevents a direct negotiation between physicians and consumers. In an effort to keep premiums low and make health care more affordable, insurance providers will limit the number of physicians available to their customers. The physicians in the health provider network have the advantage of being the consumer’s only choice and there is no incentive for the hospitals and physicians to compete to provide the best care at a lower cost because their profit margins are determined by the amount of services for which they can bill the halth provider. Physicians also have the advantage that health is an invaluable commodity and in emergencies, they have the upper hand in determining the economic conditions necessary to restore health. Government regulations give health insurers limited negotiating power with physicians as providers are required to satisfy a quota of services and physicians available to consumers.
“Drive-by doctoring” refers to the practice of involving out-of-network health employees in medical procedures and then billing for their services. A health insurance provider cannot negotiate effectively with a doctor who is not in its network, and must often pay the full price of the fee charged by that health employee. If the health provider does not comply, it faces much legal retribution. The article gave the example of Mr. Drier who needed urgent spinal surgery to fix a herniated disc. When he received his medical bill he found an additional charge of $117,000 from an assistant surgeon who was not in his provider’s network. The main surgeon who was in the network settled for a $6,200 fee. The large disparity in value for the same service is astounding. Although there are many more complex interests and forces at play, game theory can be used to simplify the situation to a two player game with two strategies. Because classic market forces do not directly influence the health care system, the two players are health insurance companies and health employees. The goal of health providers will be to lower the cost of premiums for their customers, and to do so they will employ the strategy of cutting down reimbursements for many medical services. The alternate strategy is not to reduce payments to surgeons. Medical employees on their part will resort to “drive-by doctoring” to make up the losses and their alternate strategy will be to abstain from billing for out-of-network providers.
| Drive by Doctoring | Only Network Employees | |
| Cutting Reimbursements | 3,7 | 7,4 |
| Maintain payments | 1,5 | 4,4 |
I,P=Insurance,Physicians
There is a pure Nash Equilibrium because the dominant strategy for physicians is to choose an out of network provider because the profit will be greater in both cases. For insurance companies, there is always an advantage in cutting reimbursements. However to produce a mixed Nash equilibrium that makes the probability of choosing either option equal for both cases depends on other forces. For example, continued out-of-network charges may cause certain health providers to stop negotiating with physicians who resort to that practice and thereby discouraging doctors in their network from using the drive-by strategy. Laws that require hospitals to let the patient and the health insurance provider know ahead of time who is going to be involved in the procedure can also mitigate the drive-by-doctoring practice. In response to excessive fees, health insurance providers may go to court to challenge physician groups. However this option is checked by the difficulty to determine the true value of the assistant’s service. An insurance representative was not present in the operation room to verify the value of the out of network physician’s expertise or to decide if the procedure was truly an emergency. In order to protect their clients, many insurance companies opt to pay the full price of the drive-by-doctoring fee therefore encouraging the practice. Additionally, no laws require a hospital that joins an insurance network to provide only in-network services. This would affect the probability of insurance providers choosing to maintain current payments for services, in order to prevent further out-of-network losses.
http://www.nytimes.com/2014/09/21/us/drive-by-doctoring-surprise-medical-bills.html