With the rise in capitation, full-risk contracting, and value-based care, there has been a tectonic shift in the conflicts of interest physicians and healthcare delivery organizations are exposed to.

In this episode, you'll discover a new source of conflict of interest that could put you squarely in the crosshairs of someone like Luigi Mangione—who, for the very same reason, gunned down an insurance executive in broad daylight in Manhattan. You don’t want to be in his crosshairs.

So let’s talk about this now. Check it out.

Classic Conflicts of Interest in Medicine

Doctors and healthcare organizations have always faced conflicts of interest when making decisions. These conflicts are simple to understand, yet they are so pervasive that you may not notice them until I point them out.

Traditionally, conflicts of interest in medicine have been associated with the financial incentives tied to performing procedures. Physicians who recommend a procedure also stand to benefit financially from performing it.

Take, for example, an orthopedic surgeon diagnosing a patient with bone-on-bone arthritis in their hip. A completely unbiased recommendation would sound something like this:

"You need a total hip replacement, but since I would financially benefit from performing the surgery, I can't in good conscience recommend it myself. Instead, I’ll refer you to a completely unaffiliated surgeon across town."

Of course, that never happens. It sounds absurd because it goes against the standard practice of medicine, where continuity of care is considered a priority. But the financial conflict of interest remains.

Hospitals also engage in self-dealing. They often push procedures to be performed in their inpatient facilities rather than outpatient surgery centers because they can collect the lucrative facility fees.

This is Type 1 conflict of interest—an error of commission—where action is taken with a financial benefit in mind.

A New Conflict: The Shift to Capitation and Full-Risk Contracting

Traditionally, fee-for-service payment models created conflicts by incentivizing doctors to perform more procedures. But now, with the shift toward capitation and full-risk contracting, a new conflict of interest has emerged.

In capitation, healthcare organizations receive a fixed payment per patient at the start of each month, regardless of the care provided. Any money left over at the end of the month is kept as profit.

This creates the opposite incentive—an error of omission—where doctors and healthcare organizations may withhold necessary care to maximize profits.

This puts healthcare providers in the same position as insurance companies, which are notorious for denying claims and delaying payments to boost their bottom line. It’s the same dynamic that drove Luigi Mangione to his breaking point, and it’s why a large portion of the population celebrated his actions.

You don’t want to be on the wrong side of that anger.

The Moral Injury of Value-Based Care

Doctors have an acute sense of hypocrisy. When a hospital’s mission statement claims to provide "the highest quality care," but the financial model incentivizes denying care, that hypocrisy becomes unbearable.

This creates moral injury—when you know the right thing to do for a patient, but the system prevents you from doing it. And now, as healthcare groups move toward full-risk contracts, they will increasingly be held accountable not just for providing care, but for withholding it.

If you're feeling angry or uncomfortable with these contradictions, trust your instincts. Your feelings are spot on.

A Simple Question to Challenge the System

When you recognize this conflict in your own organization, take a breath and ask a simple question:

"Hey, I’m not a big finance guy or anything, but I have a question. Maybe you can help me out. Our mission statement says we’re here to provide the highest quality care, but I notice that we’re doing something different. What’s that all about?"

And then—stay silent. Let leadership explain the conflict.

Final Thoughts

These shifts in healthcare payment models bring new ethical dilemmas for physicians. Be aware. If something smells fishy, it probably is.

Until next time—keep breathing, and have a great rest of your day.