Lakeside Medical Musings

The Cancer of Fee for Service

The treatment of cancer is a  particularly sensitive topic in any fee-for-service medicine discussion.  Nobody wants to think that their cancer doctor’s treatment recommendations are in any way influenced by money, but while no one wants to actually talk about the influence of money on such a dire issue as cancer therapeutics, it is, in fact, a complexity that occurs not infrequently, and it is one that ought to be publicly addressed, no matter how sensitive the topic.

As I have said before in so many of my posts, everyone dies, but most of us are lucky enough to rarely  have to think about this inevitability.  Oncology patients — and their physicians — often think of little else.  With the advances that have been made in cancer treatments over the past decades, patients are  able to know at the time of diagnosis what their chances are for a complete cure or what the percentages are for a five-year survival  rate, and patients often celebrate the anniversary dates of their diagnosis as they live a poignant version of Beat the Clock. Even for patients who are cured and are declared to be cancer-free,  they have been slapped in the face with their own mortality and, for the rest of their lives,  they look at life differently. Not only are these patients medically complicated with treatment plans that are complex and fraught with side effects, but the  incidence of depression and anxiety in patients with a diagnosis of cancer is notably —  and understandably — high.  Most compassionate oncologists ride this emotionally draining journey with their patients,  the ups and down of eagerly awaiting the results of the most recent scan, with much more grace and aplomb than I could ever muster for a patient base of hundreds of patients at any one time.   I have a lot of respect for physicians who choose Oncology for their career as it is emotionally draining, at best,  and I have enjoyed working closely with many of them over the years. I do not air my concerns about fee-for-service medicine in the area of Oncology as a criticism of oncologists, but much of the problem comes from the side effects  of “people being people.” As a result of the payment structure in  American medicine and the high cost of cancer drugs, there is huge potential for fraud and abuse in cancer therapy (see here), but an even greater issue — and important for the general public to understand —  is the subtle way that money often influences cancer treatment choices.  Today’s post will look at some data that confirms the insidiousness of this influence and confirms my strong belief that fee-for-service medicine is not a good thing, either for patients or for our society.

When a patient has cancer and is referred to an oncologist for treatment, there may be many options available to the physician, and oftentimes  the treatment the oncologist chooses can have a significant impact on the physician’s income.  When I, as an internist, prescribe a medication for high blood pressure or diabetes or strep throat,  that prescription is filled by a pharmacy and there is no financial benefit, either directly or indirectly, to me.  If the medication I choose to prescribe costs ten cents a pill or ten dollars a pill, it makes no difference at all to my pocketbook.  Oncology is different, and it is one of the very few areas where the doctor, as prescriber, is often also the dispenser.  In many — but not all —  practices, an oncologist’s income is directly related to the revenue derived from the specific chemotherapy regimen prescribed  — the particular type of chemotherapy as well as the duration of the treatment. In some oncology practices, as much as 60% of the physician’s income comes directly from chemotherapy. The American Society of Clinical Oncology (see article here)  tackles this issue in an interesting article on chemotherapy reimbursement.  While I don’t think many oncologists say to themselves, “I have two choices of chemotherapy to give this patient.  One will make a lot more money for me— so I’m going to choose that one,” it has been demonstrated clearly that the reimbursement levels of chemotherapeutic agents actually does affect both the choice made by the physician as well as patient care. This is not unlike physicians in other specialties who, in the fee-for-service world, financially benefit from an excessive amount of both laboratory and clinical testing.

“Until 2005, oncologists were reimbursed at 95% of average wholesale price for chemotherapeutics; because they were often able to purchase these drugs at significant discounts, profits could be quite large. One example among many was the reimbursement for paclitaxel, which in 2004 was six-fold higher than the actual cost.  “The introduction of the Medicare Prescription Drug, Improvement, and Modernization Act (MMA) was designed to reduce expenditures for costly agents, and in 2005, a payment system was introduced that paid fee-for-service (FFS) practitioners 106% of the national average sales price.” “The hypothesis that physician behavior is impacted by reimbursement in an FFS environment is supported by many studies. For example, Hadley et al. found that use of breast-conserving surgery rather than mastectomy was more frequent in geographic regions in which reimbursement was higher. Others have found that following the MMA, chemotherapy use was increased for drugs that maintained more generous reimbursement.”

This change in treatment clearly was not just related to profit margin but also to changes in actual treatment protocols and recommendations.  But just as clearly, profit margins did have an effect on the chemotherapeutic agents that physicians chose for their patients..

One thing I have found consistently ringing true, in my years of practice in navigating through the constantly changing reimbursement rules, is that doctors and hospital administrators are some pretty smart people.  When Medicare changes a rule, someone finds a loop hole.  A particularly large loop hole is one that affects cancer chemotherapeutic agents in a little-known program called 340B (here is a good article about this rule) which requires drug companies to give hospitals and clinics that care for indigent patients a discount of between 20%  and 50% on the purchase of ALL of the medications that are purchased by the hospital.  The hospitals or clinics receive this discount even when the medications are being used to treat fully-insured or Medicare patients.  This discount is one of the very compelling  arguments that have persuaded over four hundred oncology practices to join hospital systems in the past several years.  The program allows oncologists to purchase chemotherapeutics at a significantly discounted price and then turn around and charge the full price for them to the patient. This little-known rule gave oncologists associated with hospital systems an immediate increase in their income. When you see the dollar amounts associated with chemotherapy drugs, below, you can appreciate the magnitude of this issue and the extent of its impact on the cost of American health care.

In April of 2014, Medicare released a public on-line database for each physician who receives money for treating Medicare patients.  Here is the site that you can use to look up any physician in the United States and see how much money Medicare paid that physician in 2012 and the specific services for which they were paid. Using this site, I entered the specialty of Hematology/Oncology for the state of North Carolina, and this is what I found:

The physician in North Carolina who was paid the most from Medicare was Dr. I-wen Chang who practices with Southeastern Medical Oncology Center in Goldsboro, North Carolina. Please note that there are certain flaws with this Medicare data, one of which is that services rendered by the entire group may be billed under the name of just one doctor.  To keep my data — and thus my discussion —  more valid, I used the Medicare data for the entire group.  Additionally, I would like to clearly state that these physicians have excellent credentials from their on-line CVs, and I don’t see anything that would keep me, personally, from engaging any one of these physicians as my own doctor. (I don’t personally know any of them.) But this group is a perfect illustration for my point about the difficulties with fee-for-service reimbursement for oncology, so I am reproducing, here, the complete data from Medicare for this group.

PHYSICIAN                                         TOTAL MEDICARE PAID         MEDICARE PAID FOR DRUGS
Dr. Chang                                                   $2,462,785.18                                  $1,867,252.06
Dr. KASBARI                                             $2,352,373.55                                  $1,699,650.40
Dr. Atkins                                                   $2,154,319.80                                  $1,483,087.86
Dr. Boyd                                                      $1,567,261.52                                  $1,125,690.42
Dr. Smith                                                    $1,168,187.05                                  $680,544.05
Dr. Jayaram                                               $384,381.10                                     $159,936.43
Dr. Moore                                                   $44,109.90                                       $0
TOTAL                                                         $9,850,170                                        $7,016,161

So what does this actually mean? This revenue is only from Medicare payments, and it does not include payments from Blue Cross or other commercial insurance companies, or payments from individual patients themselves.  My point is that over 70% of the money that was paid to this oncology group was paid just for the drugs administered to patients.  I realize that these drugs are expensive, and the physician group had to pay for them in order to obtain them and administer them to patients, but realize that less than 30% of the Medicare reimbursement was for office visits, visits that require physician interaction, diagnosis, talking to patients.  What flows back to the physicians is the difference between the cost of the medication and the reimbursement from Medicare.  From the group’s website, it appears that they are an independent, physician-owned group.  If they are independent of a hospital or hospital system, then their income typically is dependent on the total revenue they collect, minus the expenses they have in running their business, just like any other business, and their income would be directly affected by the revenue they generate from the drugs their practice administered.  If they are salaried physicians in a practice owned by a hospital, their personal income would not necessarily be affected by the revenue from the drugs administered. This data shows just  how large these sums of money are.  An old joke comes to mind here. A man says to a women, “Would you have sex with me for ten dollars?”  Terribly insulted, the woman replies, “Of course not!’  The man then says, “Would you have sex with me for ten million dollars?” The women smiles and says, “Absolutely!” The man then replies, “So now we know what type of woman you are, and we are only negotiating price.”  Money does matter, here, there, and everywhere, in every possible way.

So let’s look at a few reputable scientific studies about the effect of medication reimbursement on oncology treatments.  There is a very good study from the University of Michigan, (see here,) that concludes:

“We found no evidence that reimbursement incentives affected oncologists’ decisions to administer chemotherapy to metastatic cancer patients. Once a decision to give chemotherapy was taken, however, physicians receiving more-generous Medicare reimbursements used more-costly treatment regimens.”

Another article from the American Society of Clinical Oncology looked at end-of-life administration of chemotherapy. This study (see he­re) concluded that:

“In physician offices, where drugs generate the majority of revenue and prescribing patterns can determine physician income, use of chemotherapy at the end of life fell significantly after reimbursement reductions; no concurrent change occurred in hospital outpatient departments. These results suggest that payment reform may be used to better align appropriate financial incentives with better quality of care.”

The take-away from this study is that how much the doctor was paid for a drug affected how much it was used, if the doctor financially benefited. Do we really want physicians making decisions on which chemotherapy they prescribe based on how much money they make?  I don’t think so.

In the past, a significant percentage of an oncologist’s income resulted from charging patients for the actual physical administration of chemotherapy agents performed by infusion technicians — employed by the oncologists —  and from the facility fees where the infusion occurred — facilities owned by the oncologists.  But both government and commercial reimbursement has been reduced for these services, and there is now a serious concern that physicians will shift — or already have shifted — to more expensive, and more profitable, chemotherapeutic treatments to preserve their income. As I stated earlier, this post is not meant as a condemnation of oncologists.  In earlier posts, I discussed a similar phenomenon with primary care physicians deriving too large a portion of their income from laboratory testing in which they benefit directly from the quantity and types of lab tests they order.  This is a continuing condemnation of fee-for-service medicine, in general.  Under our current model of payment for medical services, tests, drugs, and procedures are given significantly more value than the time required to talk to, examine, and develop treatment plans for our patients. This model values and reimburses for ordering services over thinking, testing over diagnosing, and medicating over talking.  This perverse payment system has encouraged physicians to over-treat, over-test, and under-talk. Remember my post about the legislation that will not allow reimbursement for physicians discussing end-of-life care options with patients and their families?  The fee-for-service model leads to very expensive medical care.  But since it is not in the best interest of the drug companies, medical diagnostic companies, or medical device companies to change our current fee-for-service model to one that values and pays for quality and appropriateness of care, I don’t expect much change any time soon. The very strong lobbies for these groups will certainly continue to hinder any progress that is made.  Until this fundamental change is made, we will not have truly appropriate, affordable medical care available to us.

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