The Physician as Agent
Why discuss agency? In the days of the general practitioner with his little black bag, there was no need. But in an age of specialization, agency, or responsibility for the patient's welfare, is diffused. In the organized practice of medicine, hospitals in particular, but also in HMOs and other group practices, there are conflicts between the needs of patients and the demands of management. Imperfect agency is assumed in accounting for much oversupply of medical services.
What should the doctor do on behalf of the patient? Is some of the excess supply of services perhaps no more than a response to the excessive demands of patients or their underlying motivations? Is it appropriate? The literature on agency is of limited help. Much of it is concerned with how the principal should reward the agent so as to provide incentives to optimize the agent's behavior. 1 The relation between physicians and customers is different; the principal, or customer, has no say about prices or earnings, only about which primary-care doctor to see and whether or not to follow the M.D.'s recommendations. The customer's only options, if dissatisfied, are to seek another physician or institute a malpractice suit. And the customer often cannot judge, even after the fact, whether or not the M.D. has been a good agent in his behalf; the physician is the customer's main source of information. Nor, in most cases, is there professional consensus on a single standard of care. 2
The burden of being a good agent for the customer falls mainly on the physician and the hospital. But in many cases the principal must also act as his or her own agent, assuming some responsibility for health-preserving or health-restoring behavior. The limits of agency in health services may be drawn by analogy with other kinds of insurance. The premiums on fire insurance for individuals depend on building materials, proximity to a fire hydrant, and the use of sprinkler systems and smoke detectors. Coverage does not apply in the case of arson by the policyholder. Life insurance premi-