Who’s Steering the Ship?
How hospitals, insurers, and health systems manipulate patients into expensive care while claiming to have their best interests at heart.
Google the words "patient" and "steering" together and you'll get a nearly endless stream of results. No surprise there; the healthcare industry calls it "steerage" as if patients were cattle being herded down a chute or were third class passengers on a cruise ship in the 1920s.
I hate that term. We don't want others to “steer” us to buy groceries or choose a restaurant. So, while we might ask a friend for recommendations, our freedom of choice is something we cherish as Americans. Steering is yet another obnoxious healthcare term that reveals how the industry thinks about patients. The system is upside down. It’s time to flip it and put patients back on top.
"Steering" implies taking away choices and personal empowerment. It's both condescending and revealing.
But the practice itself, whether we call it steering or something else, has become one of healthcare's most insidious practices and one of its most profitable strategies. Both patients and the employers who help pay for their healthcare are suffering the consequences.
Several years ago, I had a minor issue that my doctor and I thought should be looked at by a neurologist. She made the referral; I made the appointment. When I saw my doctor a year later for my routine physical, I asked, “Why did you refer me to that neurologist?” Her simple and blunt answer: “Oh, because she is the only neurologist in the group.” Then, a brief pause—I’m sure she was noticing the displeasure on my face. She then asked, “Why, was she not good? I was afraid of that.”
That’s it. Keep it within the practice group, keep it in the network, keep it in the system. None of those criteria involve “what’s best for my patient.”
So, who's really controlling patients' healthcare decisions? And more importantly, are they directing patients to what’s right for them or toward what’s best for payers and providers.
When most people hear about this practice, they imagine it's about guiding patients toward lower-cost care. That's the story the industry wants them to believe. Insurance carriers say they're guiding patients to more "cost-effective" imaging centers. Hospital networks say they're keeping patients "in the system" for better "care coordination." Everyone claims to have patients' best interests at heart.
But do they? In any other industry, we’d be skeptical of such claims. Marketing is about influencing customer decisions. A car salesman wants customers to buy the most expensive car they can afford, plus that extended warranty. Nobody believes car salesmen are guided by ethics. But, as long as the salesman is honest, we accept that they'll sell us whatever they can. “Buyer beware,” the saying goes. So we do our best to be aware.
But medicine shouldn't work this way. Healthcare shouldn't be about selling patients something; it should be about helping them achieve and maintain their health. These are fundamentally different goals.
Follow the money and you'll find the truth
Hospitals have been on a buying spree since the Affordable Care Act became law. They've purchased primary care practices at an unprecedented rate, turning independent doctors into hospital employees. As health systems continue this consolidation and the line between insurance carrier, provider network, and health system becomes increasingly blurred, we're seeing a healthcare system where nobody is looking out for patients or the employers funding their care.
Here's what that looks like in practice. Doctors routinely send patients for MRIs that cost $1,600 at their hospital. The same scan would cost $600 at an independent imaging center down the street. Physicians refer patients to specialists in their hospital network who charge triple what an independent doctor charges.
When hospitals own the doctor's practice and compensation is tied to referrals and system revenue, decisions get clouded by business imperatives, instead of prioritizing patient care. While the doctors I know all want to do the right thing, the pressures, they say, are immense. Such pressures are among the leading causes of physician burnout.
What's it worth when a health system buys a primary care practice? An extra $350 per patient per year in medical costs, according to a study published in JAMA Health Forum. When primary care physicians became "aligned" with health systems, specialist visits jumped 22.6% per patient. When patients need care, they get funneled to services within that same health system at much higher rates: 29% more specialist visits, 14% more emergency room visits, and 22% more hospitalizations stay in-house1.
The study found no improvement in patient outcomes, just higher bills. The same research group found in another study that vertical integration leads to price increases of 12% for primary care and 6% for specialists2.
Such steerage and referrals are made every day, and most patients have no idea of what they are experiencing. It’s hard to understand the system, even for those working inside it. Most patients are just along for the ride.
The battlefield nobody's talking about
All of this is part of a larger cost battlefield that isn't getting enough attention. Government would have us characterize it as waste, fraud, and abuse; and there's certainly plenty of that going on. But true manipulation, in a marketing and sales kind of way, is more subtle.
Consider a patient who needs a hysterectomy. The doctor wants to schedule it at their hospital, while the insurance company imposes strict "medical necessity" guidelines through preauthorization, while a patient navigation service might try to help the patient find a lower cost place to have the hysterectomy done in the first place.
Yet what are all these parties battling over? The answer is money. The health system wants to make more, the insurance company wants to pay out less, and the navigation service is generally beholden to someone, but not the patient. The navigation service might be embedded in the insurance carrier, or the third-party administrator that processes claims on behalf of the employer who pays for the insurance, but they are not the patient’s true, trusted partners.
Patients get caught in this tug-of-war, stuck wondering who’s truly on their side. Each party blames the others – the payer (insurance carrier), provider (the doctor or hospital) and the navigation service. While they’re busy pointing fingers at each other, who’s putting the patient first?
The solution is independent medical partners
It's time to look at the American healthcare system through a different lens. We need independent medical partners.
For many healthcare services, this means embracing fee-for-service medicine. When I was a child, some doctors still made house calls. They got paid a simple fee for stopping by the house. Fee-for-service is often blamed for all that is wrong with healthcare. But that criticism is wrong when applied to simple, mostly transactional interactions with local medical providers and services.
Think of it like local plumbers, electricians, and HVAC repair services. For most home repairs, you want the job done well at a fair price, and you don't need a relationship with the contractor. Healthcare is similar, in a sense. An MRI is a transaction; a lab test is a transaction. Patients don't care where they have these done. They don't need to get to know the technician. They just need the service performed to high quality standards, efficiently, and at a fair price.
When your water heater breaks, you want a plumber who charges a fair price for good work. Anyone who's paid for plumbing, HVAC or electrical services on a so-called "value-based" model (i.e., pay a subscription fee each year) generally comes to regret it. The service level tends to wane after a couple of years, and the contract generally only affords a discount on repairs. Once consumers are beholden to the contractor, they wonder if they're really getting a good price on repairs, or if they're just marking it up to offset the discount.
Fee-based repairs are the only system that works for your home. Why should local medical services be any different? Aren’t we generally talking about repairs to our bodies?
When patients need a partner
Of course, not all healthcare is transactional. Until patients reach that later stage of life that most of us dread, they don't really want or need relationships with local medical systems. That's not to say that relationships are never valuable, but sometimes a short-term relationship will do. For example, if someone has a recurring problem with their knee, it might be beneficial to have a local orthopedist they like and learn to trust. But that orthopedist isn't going to do breast exams or treat their teenagers' acne. The fact that they work for the same health system doesn't add meaningful value for the patient.
What patients would probably like is a steady relationship with a primary care doctor. But that's becoming increasingly difficult. Nearly four of five physicians are now employees of hospitals and corporate entities, with corporate ownership nearly doubling in recent years.3 These doctors, much as they try to put patients first, are under increasing pressure to refer patients to specialists in their system.
Over the past decade, the demise of primary care has accelerated. The ratio of primary care physicians to specialists is now completely inverted, from two-thirds primary care to one-third specialists, to the opposite4. The percentage of doctors practicing primary care now stands at about 25%, less than half what this country needs. Many things primary care doctors used to do, like a full-body skin exam or a breast exam, now consist of recommendations to "see the dermatologist" or "see your OB/GYN” once a year." While those may be good recommendations for some, for many it’s just adding costs and time.
This is the problem with consolidation. It dismantles the very relationships patients need most.
Independent virtual care works best
In a perfect healthcare world, we would all have a primary care doctor we could trust to be there for us in those moments when we needed their care the most. Unfortunately, that world is quickly disappearing. It’s estimated that more than 100 million Americans do not have a primary care provider. And for those that do, the average wait for an appointment is 28 days. That doesn’t do you much good if you are suffering from a massive migraine of if your child develops a fever outside of business hours.
This is why I believe independent virtual care offers the best solution. To succeed, it must be completely independent of local medical systems and insurance companies. It offers 24/7 care from trusted providers to patients and their loved ones.
These advocates can be patients' partners, teachers, coaches, and guides because their paycheck doesn't depend on either maximizing revenue from procedures or minimizing insurance payouts. Independence is key, because it means avoiding all the conflicted incentives that are driving up costs for both patients and employers.
Over the next few years, I think we’re going to hear screams for doctors to once again become more independent, as a law in Oregon passed on May 28th seeks to do. While the Oregon law goes too far and sort of misses the point, the system of severely misaligned incentives is what’s driving such sentiment.
I don’t believe for a second that doctors are the problem. I don’t know doctors who don’t want to do what’s right for their patients. Unfortunately, these days there’s often someone else pulling their strings—and controlling their paychecks.
The simple reality is that if patients don't have someone they can trust, and who is independent and aligned with their best interests, someone else certainly will direct them toward what's best for their own bottom line.
And patients, employers, and taxpayers are going to be left with the tab.
“Utilization, Steering, and Spending in Vertical Relationships Between Physicians and Health Systems,” JAMA Health Forum, September 2023, https://jamanetwork.com/journals/jama-health-forum/fullarticle/2808890.
“Quality-of-Care Outcomes in Vertical Relationships Between Physicians and Health Systems,” JAMA Health Forum, August 2024, https://jamanetwork.com/journals/jama-health-forum/fullarticle/2821687.
"COVID-19's Impact on Acquisitions of Physician Practices and Employment of Physicians: 2019-2023," Physicians Advocacy Institute and Avalere Health, February 2024, https://www.physiciansadvocacyinstitute.org/PAI-Research/PAI-Avalere-Study-on-Physician-Employment-Practice-Ownership-Trends-2019-2023.
“The Shrinking Number of Primary Care Physicians Is Reaching a Tipping Point,” KFF Health News, September 2023, https://kffhealthnews.org/news/article/lack-of-primary-care-tipping-point/#:~:text=The%20percentage%20of%20U.S.%20doctors%20in%20adult,number%20that%20has%20nearly%20doubled%20since%202014.