The High Cost of Care Is Criminal

Dr. Gilbert Welch is a professor of medicine at Dartmouth who wrote “Overdiagnosed: Making People Sick in the Pursuit of Health,” a book we like a lot. As we noted in our blog “Overtested, Overtreated, Overcharged,” before he went to medical school, Welch majored in economics. He’s the perfect person to analyze the byzantine nature of the U.S. health-care system.

And so he does in a recent commentary published in the New York Times. Getting right to the point, he notes in the lead: “Recent revelations should lead those of us involved in America’s health-care system to ask a hard question about our business: At what point does it become a crime?”

His interest isn’t in the clearly illegal financial manipulation of programs like Medicare, such as when you fake patients and bill for their nontreatment. He’s talking about how the system prices medical care, which he deems a “violation of an ethical standard, of the very ‘calling’ of medicine.”

Rising prices, Welch contends, benefit providers to the degree that hospitals, practitioners, pharmaceutical and device manufacturers and even universities are more robbers than medical providers.

He refers to the story in The Times earlier this month, “American Way of Birth, Costliest in the World,” and Steven Brill’s Time magazine story a couple of months ago, “Bitter Pill: Why Medical Bills Are Killing Us,” as examples of horrifically overpriced care for patients not covered by Medicare, which sets fee strict limits for services, or by private insurers, which also negotiate lower rates because they feed so many patients to their networks.

But poor and uninsured patients get the biggest, most criminal, if you want to use that word, bills. And that practice is bad for everybody.

Welch shows us how:

Consider another recent shift in health care: Hospitals have been aggressively buying up physician practices. This could be desirable, a way to get doctors to use the same medical record so that your primary care practitioner knows what your cardiologist did.

But that may not be the primary motivation for these consolidations. For years Medicare has paid hospitals more than independent physician practices for outpatient care, even when they are providing the same things. The extra payment is called the facility fee, and is meant to compensate hospitals for their public service – taking on the sickest patients and providing the most complex care.

But now hospitals are buying up independent practices, moving nothing, yet calling them part of the hospital, and receiving the higher rate.

Here’s how that shakes out: After Duke University’s health system bought a bunch of local cardiology practices, the number of echocardiograms it performed “in the hospital” increased by 68% in one year. That bumped even the Medicare payment from $200 to $471.

In Colorado, Boulder Community Hospital bought a doctor’s practice. One of his patients reported that the cardiac stress test he paid his then-independent doctor cost $2,000, but after he became part of the hospital, the same test cost $8,000.

Volume is another element of criminal gouging. Welch uses the example of colonoscopies. It’s recommended that most people need a colonoscopy once every 10 years. “But a study published in 2011 in The Archives of Internal Medicine,” Welch writes, “found that 46% of Medicare beneficiaries with a normal colonoscopy nevertheless had a repeat exam in fewer than seven years. For some gastroenterologists, it seems, the primary finding from your colonoscopy is that you need another one.”

Another element of criminally expensive care is capacity. We’ve blogged before that when practitioners and facilities invest in expensive, new technology they are unwholesomely eager to use it (here and here). Welch discusses proton beam facilities, radiation technology that treats children with brain and spinal tumors.

There are about 140 such patients in the Washington, D.C.-Baltimore area, Welch says. One facility exists, and two more are being built within 40 miles of each other.

“Three facilities have the capacity to serve well over 10 times that [many patients]. It’s hard to imagine,” Welch writes, “that some of the roughly 8,000 men in the area destined to develop prostate cancer next year won’t receive proton beam therapy, despite the fact that there’s no good evidence that it’s any better than standard radiation for their condition.”

Profits at one facility, he says, are expected to reach $16 million a year by 2019.

“The word ‘crime’ is awfully strong,” says Welch. “Many prefer to call all this a problem of perverse incentives: good people, working in a bad system.”

If they’re so good, we have to ask, why don’t they see this and fix it?

Welch says that we have been too passive about this pay model, that we assume it’s out of our control. “Medical care in America could use a dose of moral outrage. It would be best for all if it was self-administered.”

Here’s what Welch would do:

  • ensure that everyone has access to the same set of prices, like the Medicare fee schedule;
  • end the “fee for service” approach that pays doctors and hospitals more for every procedure they do, leading to overtreating patients-instead, have a flat fee.

“But the incentives will never be perfect,” Welch concludes. “Ultimately, society needs individuals to be guided by ethical standards. And in medical care, those standards are getting pretty darn low.”

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