Monday, February 10, 2014

Medical Fees "out of whack"

The phrase "out of whack" is interesting. According to the Urban Dictionary, this means "something that doesn't make sense." Periodically, there are stories in the news that suggest American medical care is out of whack.  

The New York Times reported January 18, 2014 that "Patients' Costs Skyrocket; Specialists' Income Soar." The story follows the tribulations of a patient that had a tiny spot removed from her face at the Arkansas Skin Cancer Center. The removal ended up with billed charges of $25,000, and to some extent was accomplished by forcing the patient to participate. In the words of the patient, she "felt like a hostage."

The Times notes that "Many specialists have become particularly adept at the business of medicine by becoming more entrepreneurial, protecting their turf through aggressive lobbying by their medical societies, and most of all, increasing revenues by offering new procedures — or doing more of lucrative ones."

In this particular instance, a dermatologist removed the tiny spot, then declined to suture the wound. For that the patient had to visit the office of a plastic surgeon across the street. Despite the fact that the patient did not want a plastic surgeon. 

At the plastic surgeon's, she got an IV tube placed, and met the anesthesiologist, was anesthetized and the wound closed. The charges included $1,833 for the removal of the skin lesion, $14,407 for the plastic surgeon, $1,000 for the anesthesiologist, and $8,774 for the hospital. Though she preferred the dermatologist put in a few stitches or that the wound be allowed to close on its own, she received all of this care. She felt she had no choices. Afterward, she spent months negotiating the bills and eventually paid much less. She also declined to return to those physicians for follow-up care. Apparently making your patient feel like a hostage does not build confidence or loyalty.

Use of this removal surgery, called Mohs, has "skyrocketed in the United States," increasing about 400 percent in the last ten years. Hospitals have offered an average of about $600,000 to hire dermatologists to perform these Mohs procedures. The article cites other examples, almost $1,000 to scrape off a mole (no stitches required) and $500 to freeze off a wart. Dermatologists are now the "fourth-highest earners in American medicine." The lowest earners? That would be the primary care physicians that are on the front-line of medical care, managing a vast array of conditions and complaints. 

The Times notes that "specialists earn an average of two and often four times as much as primary care physicians in the United States, a differential that far surpasses that in all other developed countries." They note that "more specialists mean more tests and more expensive care." According to a health economics professor at Georgetown University, there is an inclination to maximize reimbursement and "each patient is like an ATM machine."

There are cost drivers mentioned also. The Times notes that "new doctors graduate with an average of about $150,000 in debt" and that "some specialists face malpractice premiums of over $100,000 a year." These are noteworthy factors. But why are there not more medical schools opening, why is the supply of doctors not increasing to meet the demand or perceived demand?

The reimbursement allowed for various procedures and specialties is tied in some part to the reimbursement that Medicare allows. That valuation is "based on a complex algorithm that is intended to take into account the time and skill required to perform a medical task, with an adjustment made for a specialty’s malpractice rates." 

Is the process out of whack? Medicare has a list of "potentially misvalued," which the Times characterizes as "overused or overpriced." Medicare has put the Mohs procedure at the top of this list. So there is a process in place to identify and perhaps deal with pricing issues. But they note that "750 lobbyists represent groups of health professionals in Washington, pushing back on any effort to limit their incomes." According to the Times, these groups spend about $80 million annually to promote their interests and their incomes. 

Eighty million dollars! Would there be a need for such expenditures if the procedures were appropriate, necessary, justified? Well, there will always be a pressure to reduce costs, and so there is the argument that payers would resist even those that are necessary and justified. Ultimately, the system we have chosen, in which the consumer (patient) is not the payer, creates and facilitates dysfunction and discourages normal market economic effects. In such a system, lobbyists have assumed a major role.

From the descriptions in the article, it seems that the reimbursement system is indeed in need of revision. Whether that is possible with the competition among the vast array of competing interests remains to be seen. With the United State's annual medical bill at $2.7 trillion, the motivation to assure that our expenditures are appropriate and necessary seems obvious from some perspectives. 

In a system driven by lobbyists is any true reform practical, or will we continue with a process of ever shifting regulation, with armies of consultants paid to teach doctors an hospitals how to correspondingly shift their practices to maximize reimbursement within the confines of each new iteration of regulations? 

What if consumers (patients) had more of a say in what care they consumed? Can supply and demand ever become relevant to American medical care?


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