One of my partners told me today of an aggressive move by a hospital (where he does some surgery) to “buy” his practice.  Valuing his independence and understanding what this purchase would really mean, he continues to reject their advances.  Typically, hospitals buy a doctor, put him on salary, get him to sign a very wordy, complicated contract and monitor his every move.  Payment of overhead, including malpractice insurance is usually part of the deal.  If certain performance criteria aren’t met or if this physician refers patients “outside of the hospital network” the lack of performance criteria kick in and the contracted salary amount is reduced, usually significantly, sometimes half the original amount.  If the doctor wants to tell the hospital to “shove it, I’m out of here,” he finds out that he must buy an expensive malpractice policy to seal the opening at the tail of the policy, for an unaffordable amount.  He is stuck.  Screwed.  And then there are the “no-compete” clauses.

I know of very few physicians that would sell out again.  Almost without exception they would undo the sale if they could and go back to being their own boss, working for their patients rather than the hospital hatchet man.  This buy out works beautifully for one group of docs, however:  the old guys.  At the end of their career, an old doctor takes the money, sheds the overhead and, well, he basically goes to the beach.  The hospital cuts his pay the next year and, well, he basically quits.  He was going to quit anyway.  ”Shove it, I’m out of here,” works now.  

Austrian economists have a phrase that describes the influence of time, or rather, the perceived lack of time, on economic actors and their actions.  Hans Hoppe’s wonderful book, “Democracy, The God That Failed,” contains the explanation of this concept with which I am most familiar.  Simply, time is finite, like almost everything else.  As we perceive that with age, we have less time remaining, our value for the remaining time changes (usually increases) and more “short sighted” or “short term” decisions are likely to be made.  Older people (many times with a higher time preference than when they were young and more long-sighted) are more likely to buy a dream car/house/RV/watch/bracelet, you name it.  Those with a high time preference tend to be spenders, those with a low time preference tend to be savers, folks with more of a stomach for delayed gratification.  Hoppe relates this behavior to crime and other variables in one of the most brilliant books I’ve ever read.  

Back to the old doctor and to the point.  This old doctor’s high time preference inclines him to leave all of the younger doctors holding the bag.  His sell-out strengthens the position in the marketplace of giant, corporate hospitals.  He knows this is a disaster for medical practice, in general, and for his younger peers, in particular.  He doesn’t care, or cares not enough due to his altered perception of time’s meaning/value.  

Older partners in businesses tend to follow this concept, as economic actors, as well.  As a partnership ages, for instance, the older partners are moved to sell out, cash out, leaving the younger partners holding the bag.  This same concept applies to health care, as well, now that I think about it.  What other explanation could you give for the older Medicare beneficiary who says, “..don’t touch my Medicare!”  knowing full well that this disastrous Ponzi scheme will bankrupt his children and grandchildren unless it is radically changed, if not abolished.  The altered concept of time jades their actions, as no right-minded grandparent I know would purposely harm his progeny.

My apologies to any Austrian economists that read this, as my explanation is grossly simplified and perhaps even inaccurate in some way.  It is with significant trepidation that I took this topic on, as the likelihood of paraphrasing Dr. Hoppe accurately and without error is very close to nil.  Let me know what you think.

G. Keith Smith, M.D.