A Cure for Doctors' Bills

The medical profession sees the writing on the wall.


Uncounted numbers of men and women in the United States are suffering from the present chaos in medical service. And not only the layman faces difficulties and problems; physicians—all but the most successful few—suffer from the same causes. Let it be understood at the start that no complaint is here brought against medical science or those that practise medicine. The medical profession deserves a tribute of respect, not only for scientific discovery, but for its application to the relief of human misery.

It is not the science of medicine from which we suffer, but rather a seriously faulty organization of medical service. Our complaint is against the system, or the lack of it, by which we are served with medical care. The organization of medicine is as far in the rear of progress as its technique is in the van.

Let us put the case in personal terms. The story is simple and easily told; it can be repeated by the hundred in every community. No doubt, if the intimate facts about all his patients were known, every doctor would find more than one example of it in his own practice. Let us assume that a typical victim speaks his mind openly:­

‘I am insured against almost every contingency of modern life except the one most likely to occur. As a matter of fact that crisis has already occurred, twice, and I am no better equipped to meet it again than I was before it first happened. I lie awake at night pondering how to get out of the trouble I have already stumbled into, and I worry even more about the trouble that may be lurking just around the corner.

‘I find peace of mind in knowing that if someone runs into my car and tears a fender off I can stand the expense. My insurance company will pay the bill. The same thing is true of fire. If my house burns down I am guaranteed the funds with which to rebuild. If I should come to die I should have the satisfaction of knowing that my life insurance policies will at least keep the family from the poorhouse.

‘But if I or any member of my family should have another serious illness I doubt if I could ever be rid of the debts with which my life would be burdened. I cannot understand why society has not devised some method by which I and millions like me may be assured in advance that we can meet the costs of illness. After all, I am more likely to be sick than to suffer by fire or be robbed or lose my life. Why can I not be protected where protection is most likely to be needed?

‘I should not speak with such feeling were I not faced with doctors’ bills amounting to $3000 which I must meet out of a yearly salary of $9000, almost all of which is needed to meet the ordinary running expenses of the family. One of my children had a mastoid operation recently after a long spell of scarlet fever, and as a result of the strain my wife developed an ulcer of the stomach which required much nursing and hospital care. Before that there had been no major illness in the family for ten years. Most of my savings had been used to pay for our house. And now, in less than a year, what little money I had accumulated is gone and I am seriously in debt.

‘Where can I find financial protection against future illness? I have taken out sickness insurance for myself, but at best that only affords partial protection. Policies are not issued to children, and for women they require almost prohibitive premiums. Even the policy I now hold guarantees only one half of my salary during incapacitation.

‘One thing I am sure of: This question must be answered by someone. Too many people are asking it to be denied for long. If the doctors fail to find an answer themselves, someone else—or the government—will.’

Vary the income figures anywhere between $5000 and $25,000, change the doctor’s charges in somewhat corresponding ratio from $500 to $5000, and shuffle the names of the diseases or accidents from which the complainant suffers, and you have the history of thousands of families of moderate means. I know I speak for a large majority of them when I say that we should much prefer that the doctors themselves undertake the solution of the problem. We doubt our own ability to do it, and most of us share the American prejudice against state socialism in any form—including state medicine. But in spite of these reservations, we, as parties of the second part to every doctor’s treatment, claim the privilege of offering our advice.


Some of us who have observed recent developments of organization both within and without the medical profession are impressed with the possibility of piecing together into a unified programme of medical service methods which have been used with conspicuous success in several fields of. modern life. The three essentials of such a programme are (1) group practice, (2) periodic medical examinations, and (3) the insurance principle of dividing the risks into charges that are fixed and regularly paid. We suggest what might be called ‘medical guilds’ as a possible combination of these three in a workable whole.

‘Group practice,’ as it is called, has recently made impressive progress. Especially in the Middle West, groups of doctors have combined to offer more or less complete medical service, and many of these groups have achieved conspicuous success, both therapeutic and financial.

The Mayo brothers’ clinic at Rochester, Minnesota, is perhaps the most widely known of these group-practice units. The two famous surgeons have brought together an association of doctors who together are capable of treating all the major types of illness, and who are provided with ample facilities. Patients at the Mayo Clinic have the services of a wide range of specialists who unite in the treatment of each individual case. Each patient is the patient of the entire clinic, although he may need the services of only two or three of its staff.

According to a recent survey of group practice by C. Rufus Rorem, there are about sixty such groups now operating in the United States, each generally composed of ten to twenty physicians. Most of them are found in states west of the Mississippi, while Minnesota and Texas are credited with more than any other states. The structure and origins of the groups differ, but usually their aim is common: a single service to the patient and a joint income to the participating physicians, with consequent reduction in overhead costs. In a Southern city a well-known surgeon formed a group of associated doctors because he saw the advantage of utilizing specialists in his diagnosis before operating. In a Western city an obstetrician joined forces with a general practitioner, a gynecologist, and a nose and throat specialist, who together pooled their resources. A surgeon and several others were later incorporated in the group and a hospital was built. In another town of 30,000, sixteen doctors with their personal funds and some commercial borrowing put up a building with equipment costing $200,000 and now operate as a unit.

In some cases the associated doctors employ on salary other physicians, not formally members of the group, to supplement the services offered. Income may not be divided equally among the members, but in any case the proportion is naturally determined in advance. Often a business manager is employed to supervise, under the direction of the members, purchasing, bookkeeping and billing, collections, credit investigation, and the maintenance of the physical property. Sometimes the manager is a physician, but usually a layman with outstanding business experience and executive ability.

It is not hard to see why group practice is meeting a definite demand. Thoughtful people in general as well as unlucky patients have been distressed by some of the effects of specialization. It is a too frequent experience for a man in sickness to be sent wearily from one doctor to another for various ills the treatment of which is now highly specialized. We visit the dentist to-day, we went to the nose and throat doctor yesterday, and to-morrow we go to the specialist in gastric disorders. The dentist advises X-rays which must be taken at an office down town, the throat doctor prescribed a complicated spraying apparatus sold by a druggist on the East Side, and the stomach specialist will undoubtedly advise tests at a West Side hospital. In each case, our history and that of our families will be recorded in great detail by each doctor concerned, to be filed by three different systems in three different places—not to mention the records of the family physician who treats us for less specialized ills such as measles and pneumonia.

We have often yearned for the old family doctor who could do the whole job himself; but we know well that division of labor was as necessary in medicine as in the making of shoes or automobiles. We begin to see in well-rounded group-practice units, however, the possibility of a return of the old family doctor in a new and cooperative form. We should like our family doctor to be the general diagnostician and directing head of such a group. We should feel a comfortable sense of security in the knowledge that no matter what ills befell our families we could find expert care through such a multiple extension of this personality and skill, and at a minimum of effort on our part.

It is natural to suppose that the doctors who form these groups find a great advantage in the closeness of professional contacts that is brought about. Certainly consultations must be facilitated, and it must be no small advantage that the records of each case are accessible to all at the push of a button.

But on the economic side the advantages of group practice are even more obvious—for doctor and patient alike. Through the joint ownership of plant, equipment, and clerical forces, great savings are made in operating costs, which can be shared by the patients in reduced fees. Dr. Rorem’s studies show that patients of doctors united in association pay less than 40 per cent of the amount they would have paid to independent practitioners for the same services. When the group owns its X-ray and analytical laboratories, its examination and operating rooms, its hospital facilities and its record files, the expense to each doctor is greatly reduced. At the same time, the efficiency of each of these subsidiary services is increased through direct control by the doctors who use them.


The second item of the medical programme we are proposing is the periodic medical examination. No doctor will deny the value of a thorough physical examination at least once a year for every man and woman. Like fire, many diseases are controllable in direct ratio to the time at which they are discovered. It is astonishing that so many people neglect to give their own bodies the kind of watchful inspection to which they subject their automobiles. It is obvious that the regular physical examination would be made much easier, and the whole cause of preventive medicine advanced, if doctors were associated in groups, each equipped with its comprehensive records and plant.

The third item has more directly to do with the cost of medical service to the patient. Why the principle of insurance has not long since been generally applied to medical care is a mystery to those laymen who have stopped to consider it. The essence of insurance is cooperative protection through small regular premium payments by a group sufficiently large so that the sum total of contributions is enough to cover the future losses of any one member. Perhaps none of us will ever suffer loss by fire or run down a pedestrian, but we are willing to drop enough money into a common insurance box every year to relieve ourselves of the necessity of meeting such a crisis with a lump-sum payment. Only in this way can we budget life—can we discount the future in terms of our present resources.

Insurance against the expenses of illness is no more difficult of application in principle than insurance against fire or burglary or flood or earthquake. Every form of insurance rests upon future expectancies reduced to a mathematical formula on the basis of past experience. Were accurate records available of the amount of medical care required per person per year by a large enough segment of human experience, it would he possible to calculate the size of the insurance pool necessary to pay for such care in the future.

A straightforward mathematical process would then reduce this amount to the dollars and cents which each individual would have to contribute each year to make up such a sum. As in the case of fire or burglary insurance, this amount would be far less than the individual would have to pay to foot the bill of a sudden illness—would be small enough, indeed, to be easily encompassed in a modest family budget.

Group practice, periodic examinations, and insurance—each is a valuable contribution to the cause of health. A whole, however, is often of greater value than the sum of all its parts. So would an institution be that fused these three elements into a complete service to the public. The medical guild which we propose would combine the efficiencies and economies gained by organizing doctors in well-staffed groups with a cooperative sharing of the costs of illness by patients and with the advantages of regular medical examinations.

Let us set down more in detail the specifications for such a guild. Its owners would be a group of doctors—or of laymen, if the doctors do not see its possibilities. Perhaps a judicious mixture of both would produce the best results; possibly the most fruitful arrangement would be a group composed two thirds of doctors and one third of experienced business executives, with perhaps an economist or two. Or an existing institution might be converted into a guild, a medical centre or school or hospital, a pay clinic, or an already established group-practice organization.

But to be a guild the group would have to offer a representative selection of specialized professional services at fixed annual fees. Whether these services are rendered by the members or owners of the guild, or by a professional staff employed by them, is a relatively unimportant detail. Each guild would, of necessity, have two or more general diagnosticians. These doctors would form the keystone of the arch, for they would be in closest contact with the lay public, and through them cases would be referred to the specialists of the guild as their services were required. Upon the personality and professional standing of the diagnosticians would the success of the guild largely depend.

The rest of the professional staff would comprise at least one specialist in every major field of practice. In some, such as dentistry and oral surgery, the prevalence of defects would probably require two or more. The roster might include, for example, the following: four general diagnosticians, three dentists, two gynecologists, two pediatricians, two oculists, two nose and throat specialists, two psychiatrists, and one specialist each in diseases of the heart, lungs, digestive tract, bones, with possibly other fields represented.

The guild would own or rent a building to house the offices of all the professional staff. In it would be included the necessary auxiliary equipment of X-ray and other laboratories, also a hospital with a complete equipment of operating rooms and offices for the administrative and nursing staff.

The owners of the guild would employ the non-professional force, from the administrative head to the orderlies and cleaning women. Purely business matters—the purchase of supplies, the keeping of accounts and records, the management and care of the building—would be in the hands of an administrator of wide experience. They would be conducted on principles of scientific management and modern business efficiency.

Membership in the guild would be open to the general public on condition that each member agree on behalf of himself and his family to submit to a thorough physical examination at least once in every year. The guild would guarantee to provide medical care and hospital service when necessary for its members and their families for the period covered by the dues—preferably a year. As in the case of insurance premiums, the dues would have to be paid whether services were actually rendered or not, and preferably in advance.

What the dues of such a guild would be and how they might vary is an interesting speculation. Its managers would be faced at the start with several problems. Should a rate be charged for each individual covered by the service or should there be a family rate regardless of the size of the family? Should the rate be graduated according to risks in each individual case or should a flat rate be established no matter what the age and physical condition of the member? But these are all questions of policy and not of principle. Dues would necessarily have to be set at a figure sufficient to pay the costs of operation of the guild, including salaries, and to amortize the loans by which it was financed. And these costs in turn could only be determined by a thorough actuarial study of sickness and by the number of members which the guild could enroll.

It is obvious that a certain amount of flexibility of operation should be allowed. For example, the lay members should have a free choice of physicians. If they should want to call in some doctor outside the guild staff or go to some other hospital they should obviously be free to do so—at their own expense. Some flexibility might also be allowed to the professional staff in serving patients other than members provided, of course, that such outside practice did not interfere with their obligations to the guild.


While it is impossible to state just what the annual dues would be, it is certain that they would be very much lower than doctors’ bills for any serious illness under present conditions. Four factors would operate to this end.

First, each member would, in effect, be paying his doctors’ bills by the installment plan. Instead of being presented with a bill of $1500 in one year, he would pay, let us say, $150 a year for ten years.

Second, it would cost less for each doctor to operate as part of a medical guild than if he were practising as an individual, because of the division of the overhead. By the same token, it would cost less for the whole or any part of the guild to function than it would for all the doctors or any portion of them were they practising separately. Hence the guild could charge less for its services.

Third, the periodical medical examinations should effect a marked reduction in the amount of illness of those who would belong to the guild. It is a fair guess that the hours of medical service for guild members would be from 10 to 20 per cent less than for non-members who do not submit themselves to regular examination. In such diseases as tuberculosis and cancer, especially, the cost of cure is reduced by early discovery and treatment.

Fourth, the medical profession would be placed under new and powerful motives to keep people well. Each member of the guild would pay his dues whether in good health or bad, and the guild doctor’s income would remain the same. The better the member’s health, therefore, the greater the doctor’s income per hour of service rendered.

It is amazing that in a profession in which the interests of the practitioner and the public seem, superficially at least, exactly opposite, so little suspicion exists that the doctor acts for his own interest rather than the patient’s. Disease is the doctor’s means of livelihood, yet he is always laboring to put it out of existence. This would remain true if the medical profession were organized in guilds, but the doctors would also feel new motives to encourage and practise preventive medicine, and would be in a better position to promote it.

It is to be presumed that the guild doctor, recognizing the advantage of good health among his patients, will exert himself to promote a positive health programme among them. He would naturally be more interested than the private practitioner in the correction of dangerous ways of living before they lead to actual ill health. Many preventive measures beside regular examinations would be included in the programme of a medical guild: vaccination against smallpox, immunization against diphtheria and other diseases, as well as instruction about diet, exercise, ventilation, and sanitation in the home. In other words, the guild doctor would carry on a well-organized offensive against disease and ill health rather than find himself always on the defense after their attack is well under way.

It is not at all beyond reason to suppose that the annual dues of a member of a well-run medical guild would be less than 10 per cent of the cost of any major illness in the present medical chaos. Recent studies by the Metropolitan Life Insurance Company show that families of workingmen spend on an average $140 a year for medical care. A six months’ study of 8000 families, including 17,000 individuals, showed that while 6 per cent reported no expenditure, a large share of the outlay fell on a small proportion of the families. Two thirds of the total was spent by one fifth of the families. One per cent spent $1000 or more for the year covered.

In applying this sample of human experience to the problem of guild rates, two reservations should be noted. First, the people concerned were wage workers, not salaried and professional folk, and hence probably demanded less in the way of comfort and attention than would middle-class members of a guild. Also, they probably did not call in the doctor at all unless it was absolutely necessary.

The figure of $140, therefore, is probably lower than the annual premium which would be required to meet the needs of the salaried and professional class.

But, even assuming that the average cost of medical care to the middle-class family is as high as $200 a year, a guild could probably guarantee complete medical and hospital services for $150 for each family or from $30 to $50 for each person.

There is every reason to believe that the general public would see the advantages of such an organization as the proposed medical guild. Who would not prefer to spend even $150 each year rather than to be faced suddenly with a bill of $1500 to $3000 for a major illness in his family? Who would not prefer to be regularly examined and advised by his doctor as part of a general service for a limited annual fee rather than to be treated only when sickness occurs and at unpredictable expense?


As a layman, I have stressed the advantages of the medical guild to the public. But consider now the advantages to the doctors themselves.

What is their greatest source of financial anxiety? I wager that nine out of ten will say: ‘Uncertainty of income.’ Not to know in advance how many patients he will have next year is undoubtedly the doctor’s nightmare. What is the least agreeable part of their dealings with their patients? I wager most of them will reply: ‘Adjusting my fees to my guess at the size of their incomes.’ Charging ‘what the traffic will bear’ has long since become both immoral and foolish in the world of commerce and trade, yet the practice survives in medicine to plague both doctors and patients.

Imagine a grocer who charged his wealthy customers two dollars a box for a breakfast food, gave it away to the poor, and asked anywhere from fifty cents to one dollar of his white-collar customers according to his estimate of what they might be earning at the time. The rich customer would feel imposed upon; the poor would dislike being objects of charity—especially if their receiving a free box of cereal gave the grocer a right to expose their family finances to students of economics; and the middle class would always be in a state of dissatisfaction either bent upon deceiving the grocer or suspecting that they were being mulcted. The tact that a more intimate and professional relationship exists between doctor and patient does not excuse the continuance of the present unethical and irritating system of fees.

The medical-guild plan offers the practical possibility of bringing the ‘fixed price’ principle into medicine. While some people will always have to be given medical care, as they are given food and lodging, by charity and public institutions, all but those on the poverty line could afford to pay dues to a medical guild—especially if the dues were graded in accordance with the degree of extra comforts provided to its members. The guild doctor would never have to concern himself with the income of his patients.

Nor would the guild doctor ever have to worry about the amount of his own income next year. It would be fixed and guaranteed in advance—by the dues already in the treasury. Probably the question of staff compensation could best be solved by a fixed-minimum-income plan, perhaps providing also for a division of profits should any accrue. It goes almost without saying that the cost of operation should include payment of an income that is adequate and substantially in advance of prevailing levels in private practice. The economies of operation should allow this—and still permit lower charges to the public.

Another advantage to the doctor might be noted, even though it is comparatively unimportant: more effective office administration. The doctor who practises as an individual has always the bother of running his own books, of billing and collecting, or of hiring someone to do his paper work and then keeping constant check on the purely clerical aspect of his business. He is also bothered with case records and their proper filing. In a medical guild all these matters would be done for him, and by people probably far better qualified than he.

Finally, it becomes increasingly apparent as the months go by that the guild plan would have an advantage for the medical profession as a whole. Never has there been such acute public dissatisfaction with the organization of medical service. The high costs of medical care are not only the subject of countless articles in the public prints, but are even being discussed in the inner circles of the profession. The whole problem is under a five-year survey by the Committee on the Costs of Medical Care headed by the Secretary of the Interior, Dr. Wilbur, and composed of doctors, economists, and publicists.

The medical profession itself has now seen the writing on the wall. Something must be done. In Europe the drift is toward state medicine. In this country, too, there is a definite set of opinion in that direction. At the annual meeting of the American Medical Association held in Detroit in June, the retiring president of the association told the house of delegates that socialization of medicine, along lines now suggested in England, was inevitable, unless the American physicians themselves established medical centres to enable the poor and the ‘white-collar classes’ to cope with the mounting cost of living.

‘Medicine,’ he said, ‘is being besieged on every side by forces that are constantly growing stronger and stronger, and unless some defensive effort is made to break the siege, the profession must eventually capitulate, become socialized, and become employees of the State.’

Most American doctors look upon any such solution with dismay. The medical journals are full of protestations against the threatened loss of the doctor’s professional independence. State medicine is their special bête noire. Industrial medicine is another. This danger was discussed at the annual meeting of the New Jersey Medical Society, also held in June, and the assembled physicians were called upon to resist absorption by the ‘industrial machine.’ The New York Medical Week, official organ of the New York County Medical Society, echoes the same fears and pleads for ‘independence.’ ‘The hireling of a corporation retains his place only at the pleasure and secondarily to the financial interests of his employers.’

The final argument for the medical guild is professional independence. The medical guild avoids control of the profession by either the State or the ‘industrial machine.’ It makes possible a desirable reduction in the cost of medical care to the public—and under more efficient management than the State, at least, is likely to offer. And to the doctors it offers the ultimate advantage of continued control of their own destiny and the destiny of their profession.