Medicare payments to doctors: the big issue is the underpayment for primary care

The Center for Medicare and Medicaid Services (CMS) just published how much money individual doctors get paid from Medicare. This initial version is without names, but undoubtedly the names will eventually be revealed. Enough information is available for Reed Abelson and Sarah Cohen, who wrote the article for the New York Times on April 9, 2014 �Sliver of Medicare Doctors Get Big Share of Payouts�,   to identify many of the specialties and locations. About � of all Medicare payments, the article tells us, go to about 2% of all doctors. �In 2012, 100 doctors received a total of $610 million, ranging from a Florida ophthalmologist who was paid $21 million by Medicare to dozens of doctors, eye and cancer specialists chief among them, who received more than $4 million each that year.� The largest amount of money was accounted for by office visits, $12B, but this was for 214M visits, with an average reimbursement of $57, in contrast to the Florida ophthalmologist, or to the �Fewer than 1,000 radiation oncologists, for example, received payments totaling $1.1 billion.�

Much of the discussion in the article, and in the comments attached, relates to why so few doctors get so much of the $77B Medicare pays out each year. There are, obviously, concerns about fraud; not only is Medicare seemingly fixated on looking for fraud everywhere but there is good evidence that it has occurred, at least historically. For example a highly paid (by Medicare) Florida ophthalmologist is apparently linked to a previous Medicare fraud scandal in which there was some implication of New Jersey Senator Robert Menendez. �The Office of Inspector General for the Department of Health and Human Services, which serves as a federal watchdog on fraud and abuse for the agency, released a report in December recommending greater scrutiny of those physicians who were Medicare�s highest billers.� I would have to say that this is a much wiser, fairer, and probably more productive strategy than simply trying to find largely unintentional errors in coding for outpatient visits, or checking each hospital admission to see if it could have been an �observation�, which is reimbursed less because it is considered outpatient status, as is done by Medicare�s Recovery Audit Contractors (RACs, or as I have called them, bounty hunters). Also, as I have previously discussed, these efforts are harmful to the patient in a direct financial way; as an �outpatient�, a Medicare recipient in the hospital has much higher out-of-pocket costs than if they are admitted as an inpatient. This is, of course, why CMS wishes to limit some stays, but if a person medically needs to be in the hospital, Medicare should pay for a hospitalization, and not play these games that not only financially penalize the hospital and doctors but more importantly the patient.

The other big area discussed is whether, if not exactly fraud, there is substantial difference in practice (e.g., getting CTs before each procedure, using more expensive drugs, etc.) that some specialists who are highly reimbursed by Medicare are doing more of than others. In addition, the question is �are they doing more procedures� or doing procedures with less strict indications? It is worth looking at; there is no guarantee that, even if some doctors are doing more procedures, having looser criteria for them, using more expensive drugs and tests, that this is not the better way to practice, but there is no guarantee that it is the better way to practice. If some doctors are outliers in their specialty, and their practice characteristics �happen� to end up making them a LOT more money than others, then this is certainly a reasonable basis on which to look more closely at how they are practicing, and what is the evidence basis of appropriate practice.

A third issue is that many of the recipients of the most money from Medicare, particularly oncologists (cancer doctors) and ophthalmologists are using very expensive drugs, which they have to buy first and which Medicare reimburses them for. Thus, this skews their reimbursement upward even though the money (or most of it) does not go to the doctor, but rather to the pharmaceutical company. The article refers to a drug called ranibizumab, injected into the eye by ophthalmologists monthly for age-related macular degeneration. It is very expensive, as are many drugs which are made through recombinant DNA (a lot end in �-ab�) used by oncologists, neurologists, rheumatologists, and gastroenterologists as well. One comment notes that he as a physician only makes 3% on the drug. While it can be argued that this is a significant markup (for example, making $3000 on a $100,000 drug), and that this doesn�t include the doctor�s fee for administering it (substantial), it is unfair to count the full cost of the drug as income for the doctor. Of course, it is income for someone (the pharmaceutical company) which suggests there needs to be substantial investigation into pricing of these drugs. And, of course, if a physician is found to be using a lot of a drug where he (or she) makes a 3% markup rather than prescribing an equally effective drug (if there is one) where there is no markup profit, this would be a bad thing.

However, the most important thing revealed by this data, I believe, is the enormously skewed reimbursement by specialty. It is an excellent window into the incredible differences in reimbursement for different specialties, with the ophthalmologists, radiation oncologists, etc. making huge incomes while primary care doctors (and nurse practitioners) are making $57 for an office visit. This is major. The fact that Medicare pays so fantastically much more for procedures (and, as a note, it is likely that all of the doctors, including the 202 family doctors in the highest-paid 2%, are getting it for doing a lot of procedures) leads to private insurers paying similarly more. And makes these specialties very attractive to medical students because they are lucrative (and often, though not in the case of many surgical specialties, involve fewer hours of work). Which leads to fewer primary care doctors, and a dramatic shortage in this country.

Medicare could change this. It could dramatically, not a little bit, change the reimbursement for cognitive visits to be closer to the payment for these procedures. If it did, so would private insurers. If the income of primary care doctors was 70% of that of specialists (instead of say, 30%) data from Altarum researchers and from Canada suggest that the influence of income on specialty choice would largely disappear. More students would enter primary care, and in time we would begin to see a physician workforce that would be closer to what this country needs, about 50% doctors actually practicing primary care.

It is fine if CMS and the OIG look at these highest billing doctors to make sure that they are not committing overt fraud. It is also fine to look at them and see if they are using criteria for procedures that are not supported by current evidence, or doing too many other tests, or taking kickbacks. It is also a good idea to look at the cost of drugs, especially the portion going to the drug company, as well as the markup for physicians, and to re-present the data excluding that portion of the money the doctor does not get (goes to the pharmaceutical company) from their income.

But the most important result of this report should be to be shocked at the way Medicare enables the continued practice of reimbursing for procedures at such high levels, and to kickstart a complete revision of the Medicare fee schedule to bring reimbursement for different specialties into better balance.

That would be a great outcome!

Health care systems should not be run for profit, but rather for people's health

I wrote in a recent blog (�How can a health care system lead not to ruin but to, actually, health?�, December 28, 2013) that our health care system ��is a parallel to our financial services industry: private enterprise is given a license to make money from everyone, and the government finances it. The only difference is that for financial services, the government steps in to bail them out only after they have already stolen all our money, while in health services the profit margin is built in from the start.� A recent article in the New York Times, �Hospital chain said to scheme to inflate bills�, by Julie Creswell and Reed Abelson (January 24, 2014) takes this a bit farther.

Discussing the Department of Justice�s decision to join several whistleblower (�qui tam�) lawsuits against the for-profit hospital chain HMA (not to be confused with the nation�s largest, HCA) for aggressive policies that seek to maximize profits by �encouraging� (at threat of termination) doctors to over-admit patients, they quote Sheryl R. Skolnick from CRT Capital, who wrote �Investors seem to think that D.O.J. investigations, qui tam suits and allegations of serious Medicare fraud are simply a cost of doing business.� That�s right. Illegal activity has a price � fines � but the fines are small enough that they do not discourage the illegal activity. The authors write �Many settlements run only into the tens of millions of dollars. That�s a corporate slap on the wrist for companies whose stocks typically soar when executives push the profit envelope. Only if the penalty is at least $500 million, Ms. Skolnick said, are corporations likely to find the cost a deterrent.� Or, of course, if the heads of these corporations are sent to prison, but in another parallel with the financial services industry, this is not happening. Not to Lloyd Blankfein of Goldman Sachs or other financial titans (such as CEO Jamie Dimon of JPMorgan, featured in the same issue of the Times, �JPMorgan, fined billions, approves raise for its chief�!), or to Rick Scott, former head of Columbia/HCA when it was fined $1.7 billion in 2003 for massive Medicare fraud). Scott, of course, is now the Governor of Florida.

It is difficult to imagine the hubris and arrogance of the �masters of the universe� who run the financial services industry, or the large hospital corporations. At least, it is for me, and possibly for other people who believe that the health care system should be first, second, third, and last about benefiting people�s health. It does not seem to be for the C-suite executives of even moderate-sized hospitals, who often come from accounting and finance backgrounds. The argument is that if there is �no margin� there is �no mission�, and that in the competitive environment of health care it is necessary to have good business managers to make it possible for a hospital � or hospital system � to even survive, not to mention to prosper.

Good management is important. Good management means the ability to run an organization efficiently, to create effective systems and effective working relationships, to enhance quality and limit unnecessary costs. It is absolutely necessary to build a system that is about benefiting the health of people. This includes financial knowledge and financial management ability. But increasing profit, increasing market share, taking �desirable� customers away from �competitors� has no such place; the health system has no business in being organized in such a way that these things are even possible.

This statement is so completely at odds with the way the health system is currently structured that it bears repeating. There should be no financial incentive for competition in health care. There should not be more services available than a community needs because every hospital wants to provide it and take �customers� from their competitors. If, for example, a community is large enough that it needs one MRI scanner, there should be only one (or 2, or 3, or whatever the medical need is). In the current structure, however, the hospital with that one would have a competitive advantage over other hospitals in the community, so everyone needs one. The same is true for any profitable service: cancer treatment, heart procedures, neurosurgical procedures, etc. Profitable �product lines� are, thus, in oversupply, and this means that they are overused, often with risk to the recipients, and certainly the cost to everyone is increased. Conversely, necessary services that are not profitable, such as burn and trauma care, are rarely in oversupply, frequently relegated to the community�s public hospital, and sometimes not available at all.

A community should have all the health care resources its people need, but should not duplicate � and triplicate � services so each can compete. It is bad in terms of the overall cost, and the oversupply of profitable services, and it is arguably worse in that all these hospitals are competing to get the same patients � those who are well-insured with �high profit� diseases, and to not care for others � uninsured, poor, and those needing services that are not well reimbursed.

This is craziness. Health care is not luxury condominiums, or expensive watches. It is something that every single person should get all of that they need, and no one should get what they do not need. There should be competition between hospitals to be excellent, and measures of excellence should include comprehensiveness, quality, cost-effectiveness, and caring for everyone equitably (not equally, but based upon their health care needs). And, if there are to be financial rewards, they should come for doing this well. There must be no services that are particularly �high-profit�, nor patients whose economic status makes them �undesirable�.

We have a long way to go. Various strategies have been tried in the past, from certificate of need (CON) programs that decided whether a community needed a new pieceof capital equipment in the 1970s and 1980s, to disproportionate share funding for hospital caring for higher percentages of uninsured people and quality improvement organizations more recently. But all of these efforts have been gamed, because there was no comprehensive plan in place to ensure that no patient, and no disease, was more or less profitable than another. We need to have a system in which each person with a health care problem is provided the care that they need. No gold cards. No profitable conditions. Not hard to understand.

The time for this to happen is now.