Dr. Solomon really muddled through his column on “Profit in health care” (June 2013, p. 12), leaving me bewildered as to why he started down this road in the first place.

He begins with the assumption that profit “drives efficiency, innovation and … the lowest possible price” and concludes somehow with the notion that non-profit insurance commands more from your premium dollar.

Along the way, Dr. Solomon takes shots at for-profit health systems, physician supply, SGR, and – always an easy target – Pharma.

What is missing from Dr. Solomon’s “wisdom” is accurate vocabulary and a little Econ 101.

He clearly confuses “profit,” which is a tax treatment, with net “income,” which is what individual physicians (like corporations) work for over their careers.

In addition, he seems not to know that supply and demand is about unit-cost (not aggregate spending) and only works in free markets.

With that, Dr. Solomon implies that SGR is bad, when in fact it does just what pure supply and demand would do, and then he seems to want to imply that reductions in physician supply, which have been associated with lower aggregate costs, are somehow bad because of some sort of crisis that he fails to explain.

Dr. Solomon too tightly links stockholder dividends with reductions in capital investment, and seemingly fails to comprehend executive compensation.

Does Dr. Solomon really want to see all stockholder dividends invested in new plant and equipment?

It is exactly these investments (in new beds, unproven surgical robots, and 1,000+ slice CT scanners) that drive up fixed costs and ultimately prices.

Does Dr. Solomon really think executive pay in the non-profit sector is too high?

Those base salaries are actually a market response to the lack of equity compensation available in for-profits.

Will non-profits do better with lower executive salaries? Does he want them regulated? The last time I checked, hospital presidents made about the same as surgical sub-specialists.

The United States stands at a precipice of unsustainable health care spending.

Congressman [Tom] McClintock (hyperbole notwithstanding) represents an argument that free markets are a better solution to rising health care spending than further regulation and a continued march toward increased government financing of health care.

What is needed in this dialogue is not three columns of musings, but a critical evaluation of the issues at hand. Until then, my money is on the for-profits to innovate and better navigate change (and the reductions in costs) that will inevitably be required to reduce costs in the United States.

Todd Rothenhaus, M.D.
Chief Medical Officer, athenahealth, Inc.

Dr. Solomon responds:

Dr. Rothenhaus offers an interesting perspective, and his title suggests intimate familiarity with for-profit enterprise in health care. But I cannot help finding it remarkable that he appears to defend the SGR, which would seem to place him in a very small minority of U.S. physicians.

Virtually no one on Capitol Hill defends the SGR as a good idea, noting only that fixing it will be quite expensive.

If there is some rational line of argument that revenues are better spent on shareholder dividends than on new plant and equipment, I eagerly await it and would happily sit through another year of college economics in which Dr. Rothenhaus could explain that to me.

Defense of Pharma as the line of business with the largest profit margins in our market economy is unlikely to find many nodding heads among those who struggle to make choices between buying groceries and paying for their prescription drugs.

Finally, I’m still waiting for the explanation of the practical benefits of taking some of the health insurance premium dollar and diverting it to higher administrative costs and shareholder capital gains, instead of having it pay for health care, which is what the folks who poured it into the risk pool rightly expected.