How Physician Payment Scrutiny Leads to Health Care Rationing

Medicare released the most comprehensive ever look at how Medicare dollars are paid out to physicians across the United States.  In the name of transparency, this data drop will “[p]rovide consumers with an ability to compare doctors and treatments in a way they have never had until now.”

Will it really? Let’s look a bit closer at the data release.

According to the Centers for Medicare and Medicaid Services, the payment data release aims to “[m]ake our healthcare system more transparent, affordable, and accountable.”  But just a superficial glance at the data reveals the glaring discrepancy between revenue and profit.  Revenue is what the physician is paid by Medicare, subsequently reduced by the cost of generating this revenue, not what the physician actually earns (his profit).  Amazon, despite huge revenue, is not profitable.

Leading the list is a Florida ophthalmologist, followed by many other colleagues in the same specialty.  Ophthalmology happens to be one of the specialties that cares primarily for an elderly population due to conditions, such as cataract and macular degeneration, mainly affecting the Medicare-aged population.  Not mentioned is how macular degeneration is actually treated and where those Medicare payments go.

This chronic condition is treated by monthly injections of expensive medications into the eye, sometimes for years or indefinitely, as a means of preserving vision.  The two FDA-approved drugs, Lucentis and Eylea, used to treat this disease cost approximately $2,000 per dose.  A retina specialist could perform 100-200 such injections per month, billing Medicare $200,000-$400,000 per month, or up $5 million per year.  This would place such a physician high on the Medicare payment list.

Yet the “profit” on each injection is on the order of 4-5%, with the vast majority of the “Medicare payment” going to the pharmaceutical company.  The “cost” to physicians to provide these injections includes the staff and time necessary to obtain insurance pre-authorization for the treatments, implementation of patient co-pay assistance programs, ordering and inventorying the drug, distribution to various offices, and insurance appeals when the drugs are not reimbursed properly.  Such activities, not involving the practice of medicine, consume most, if not all, of the “profit” from these injections, making these numbers a wash.

And the choice of using these expensive drugs, versus less expensive alternatives, is up to the individual physician’s preference and the availability of Avastin, the less expensive compounded alternative.  The drugs may be equivalent in terms of performance for most patients but not all, and the resulting use of the more expensive alternatives then labels the physician as a “big spender” rather than a pass-through conduit for the pharmaceutical company.

What about physicians who head up large departments where everything is billed under that head physician?  The chairman of the Mayo Clinic pathology department receives high Medicare payments, since all laboratory tests the clinic performs and bills are under his name.  But these high revenues are supporting many physicians and an entire hospital department.

And what about specialties that serve a younger, non-Medicare population?  Orthopedic surgeons, specializing in sports medicine, for example, may be well-compensated – but by commercial insurance companies rather than Medicare, and they won’t show up in any Medicare lists.

Why are physicians suddenly the target of compensation scrutiny?  Brian Williams, anchor of NBC Nightly News, earns $13 million per year for 22 minutes of evening broadcast time.  How many lives has he saved?  How much vision has he restored?

At least the high-paid celebrities in the entertainment, sports, and media world are paid via the free market, by corporations who answer to boards of directors and shareholders.  Physicians, on the other hand, are paid according to a Medicare fee schedule, hardly a free-market mechanism.  Suppose Mr. Williams were paid, under a TV fee schedule, the generous amount of $100/minute for his evening news broadcast.  That would translate to about $500,000/year – what some well-paid physicians actually earn, but a fraction of what NBC pays him.

Consumer and public interest groups argue that this “[i]nformation will help consumers make better decisions.”  How, exactly?  Is the physician receiving more from Medicare busier, more experienced, and with better outcomes?  Or just a greedy doctor trying to feather her nest?  Or is he a competent physician, using the best approved drugs (that happen to be expensive) to best treat his patients?  How will the Medicare payment data help the patient decide which doctor is which?

Perhaps this increased scrutiny is a subtle means of rationing health care.  What conscientious physician, trying to do his best for his patients, wants to see his name in major newspapers, labeled as a high earner at the taxpayers’ expense?  “A harsh spotlight hit top-billing doctors around the country,” notes Politico, with threats of fraud investigation by government agencies.  The prudent physician, already acutely aware of the pain of malpractice litigation and government audits, decides to “practice on the cheap” to stay below the radar screen by keeping his Medicare payments lower than those of his peers.  He can see fewer patients, work fewer days, or use less expensive medications.

The net result is a subtle rationing of health care.  Is that the kind of health care you want to receive?

Brian C Joondeph, M.D., MPS, a Denver-based physician, is an advocate of smaller, more efficient government.  Twitter @retinaldoctor.

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