In recent years the integration of insurance companies and health service delivery organizations has led to radical change in the health care market. The attempt by these organizations to lower costs of health care by redistributing risk throughout the demand of the market has led to considerable changes for the suppliers in this markets, the physicians.

To understand the dynamics of this affect on physicians, we must, first, understand the specifics of exactly what types of reform have taken place. The emergence of Health Maintenance Organizations, HMO's, has led to a major part of the reform in the health care market. These organizations serve to provide patients(health care consumers) with health care insurance and the service of medical care. In these types of organizations physicians are considered employees of the HMO, and are paid by a borne plan. This is to say that for each patient cared for, a physician receives a fixed quantity of money. This is dramatically different from the traditional fee-for-service (FFS) plan where physicians receive payment based on the amount and difficulty of work performed on a given patient(Folland, 93.). From these statemen

7) www.amcity.com. 1999. Managed-Care Concerns Afflict some Physicians.

Apart from an expected decrease in salaries, HMO's also constrain the way in which their physicians treat their patients. Many primary care physicians that are members of HMO's face disincentives for referring patients to more specialized care(primarily to increase profit of the HMO). Often times physicians have payment withheld for referring patients to hospitals, laboratories, or colleagues who provide excellent service, but who have been excluded from the particular HMO(www.amcity.com, 2.). This, in effect, is freedom loss for a physician that is a member of a particular HMO. It can be theorized that this freedom loss may increase a physician's valuation of leisure time. Referring back to the theory of labor supply, it can be shown that an increase in valuation of leisure time can cause a physician to not participate in the medical field, and choose to spend time on leisurely activities. With an increase in reservation wage, we see a steeper indifference curve. Grap!

, a physician can expect to earn much more in a fee-for-service model than a capitation model offered by current HMO's(Goldstein, 152.). In this case it is clear that reform in health care can lead to a salary decrease for physicians. The flat rate paid to physicians by HMO's have been empirically determined to be far less than a fee-for-service paid to the physician by a patient(Miller, 301.). The ability to lower a price of fee-for-service to a price of managed care is possible only through the HMO's exertion of market power on suppliers (physicians). In an unconstrained world, physicians should be able to logically determine that remaining independent, and charging a fee-for-service is more profitable. But through this exertion of market power, HMO's are able to obtain groups of physicians willing to work for them. This market power is established because patients, by choice, are choosing, more often than not, to be members of HMO's: both because of an expectation of!

Some common words found in the essay are:
Organizations HMO's, HMO's Apart, Participation HMO's, American Physicians, Physician Practice, HMO's Empirically, health care, managed care, wage rate, Bass Publishers, health care market, care market, private practice, representative physician, Physician's Income, Prentice Hall, market power, expected salary, legal suit, Health Care, supply labor, private practice hmo, reform health care, theory labor supply, san francisco jossey,
Approximate Word count = 2005
Approximate Pages = 8 (250 words per page double spaced)