There is little to no incentive in the healthcare industry to hold down costs. Worse yet, the rewards for performing unnecessary surgeries is huge, while the risks of doing them are essentially nonexistent. Here are a couple of articles that show what I mean.



Prostate Cancer Radiation Therapy Rises as Doctors Profit



Bloomberg reports Prostate Cancer Radiation Therapy Rises as Doctors Profit.

Urologists who buy their own equipment to provide expensive radiation treatment are more likely to use it to treat prostate cancer even when the benefit for patients is unclear, research shows.



Prostate cancer is the most common tumor diagnosed in the U.S., where an estimated 238,590 men were told they had the disease this year. While only about 12 percent, or 29,270 men, will die from it this year, all will have to decide how, and whether, they want to treat the cancer.



A study published in the New England Journal of Medicine suggests that profits urologists make from referring patients to their own radiation facilities play an outsized role in the treatment decisions. One third of men whose doctors own radiation equipment get the therapy at a cost of about $35,000 per treatment course. The same doctors prescribed the therapy for just 13 percent of their patients before they had their own equipment and could profit directly.



“The results are striking,” said Jean Mitchell, the author of the report and a professor of public policy at Georgetown University in Washington, D.C. “It does appear that what’s driving this is financial incentives linked to ownership. Their behavior changes dramatically.”



Claims Data



Using claims data from the U.S. government’s Medicare insurance program for the elderly, Mitchell found that urologists who didn’t own the equipment prescribed IMRT for 15.6 percent of their patients in 2010, compared with 14.3 percent five years earlier. Its use among the NCCN doctors stayed constant at about 8 percent, while it soared to 44 percent among a matched-group of doctors who started to refer patients to their own radiation treatment facilities.



Self-Referral



“It’s crazy the way the system is set up,” Mitchell said in a telephone interview. “The patients are going to do what their physician tells them to do. The patient becomes almost like an ATM machine, with the doctor extracting as much revenue as they can.”



Ethical Practices



Physicians in general aren’t allowed to refer their patients for treatment in facilities that they also own, because of the financial conflict of interest. However, radiation, as well as in-office ancillary services, such as doing blood work and x-rays, are exempted under U.S. law.



The analysis found that doctors who owned the IMRT therapy were treating men ages 80 and older just as aggressively as younger men with early stage prostate cancer. Since the cancer is generally slow-growing, and radiation can carry immediate side effects, including erection problems and urinary symptoms, the older patients may experience only the harms and no benefits.



The study bolsters similar findings with other forms of self-referral. In fact, some urologists have incorporated pathology labs into their practices, boosting the number of biopsies they perform, Mitchell said. Research has found similar results in other areas, including advanced imaging and surgery at physician-owned specialty hospitals.

By some measures, Federico C. Vinas was a star surgeon. He performed three or four surgeries on a typical weekday at the Daytona Beach, Fla., hospital that employed him, and a review showed him to be nearly five times as busy as other neurosurgeons. The hospital paid him hundreds of thousands in incentive pay. In all, he earned as much as $1.9 million a year.



Yet given his productivity, some hospital auditors wondered: Was all of the surgery really necessary?



To answer that question, the hospital in early 2010 paid for an independent review of cases in which Vinas and two other neurosurgeons had performed a common procedure known as a spinal fusion. The review was conducted by board-certified neurosurgeons working for AllMed, a company accredited to audit health-care businesses.



Of 10 spinal fusions by Vinas that were selected, nine were deemed not medically necessary, according to a summary of the report.



More than 465,000 spinal fusions were performed in the United States in 2011, according to government data, and some experts say that a portion of them — perhaps as many as half — were performed without good reason.



The rate of spinal fusion surgery has risen sixfold in the United States over the past 20 years, according to federal figures, and the expensive procedure, which involves the joining of two or more vertebrae, has become even more common than hip replacement.



Washington Post analysis of 125,000 patient records also shows that roughly half the tremendous rise in spinal fusions in Florida has been on patients with diagnoses that experts and professional societies say should not routinely be treated with spinal fusion.



In 2009, a former compliance official at the hospital filed a whistleblower lawsuit alleging illegal financial incentives for doctors. The court filings make available an array of documents — e-mails, testimony, audits. These and other sources allow a fuller depiction of the financial rewards and relationships that depended on treatment decisions. They also show how hospital administrators responded when suspicions arose that a doctor, who was generating millions in profits, may have been performing unnecessary surgery.



Vinas and his colleagues in neurosurgery earned as much as thousands of dollars extra — above their base salaries — for each procedure after a certain threshold. The vast majority of Vinas’s earnings came from such incentive pay, according to legal filings.



According to government estimates, each neurosurgeon at Halifax Health was generating more than $2 million a year in hospital profits. The hospital charged fusion patients an average of about $80,000, according to Florida records on Halifax Health analyzed by The Post, ranking the procedure as one of the more expensive.



Baklid-Kunz detected Vinas’s rapid pace of work in an audit and asked for further review of his surgeries, documents show.



But she was discouraged from investigating further, she said.



“Hospital administrators didn’t want to touch Dr. Vinas,” she said in an interview.



Instead, they referred to Vinas and the hospital’s two other neurosurgeons as “our high rollers,” she said, and told her that rather than cracking down on their billing that “we need to make them happy.”



Medicare In the Spotlight



Medicare, the nation’s health-care system for people older than 65, is at the center of the debate.



The agency estimated the amount of money spent improperly on spinal fusions was more than $200 million in 2011, for example, and most of that was because the treatment was deemed unnecessary, often because a more conservative course hadn’t been tried, officials said.



How could this happen?



The answer, in part, is that the Medicare system is not designed to discourage doctors from performing it, according to past and present Medicare officials.



At a very practical level, the bureaucracy offers little incentive to weed out unnecessary treatment: Medicare hires contractors to issue payments to doctors, and those contractors are paid based not on how many claims they reject but on how many they approve .

A constant battle is underway between insurance companies that do not want to pay any claims, even legitimate ones, and doctors and hospitals incentivised to rip off patients, insurers, and taxpayers with unnecessary surgeries and Medicare fraud. Insurance companies demand massive amounts of paperwork out of rational fear of fraud and unnecessary treatments. Doctors perform for-profit (as opposed to for-patient) procedures that guarantee more explanations and more paperwork. Doctors and hospitals have direct personal contact with patients, but insurance companies don't. In cases where doctors put patients at huge risk with needless procedures and surgeries, it's easy for hospitals and doctors to point their finger at insurance companies. On the other hand, many sincere, honest doctors have difficulty getting patients the care they should have because insurers believe they are getting ripped off by unnecessary procedures, even when they aren't. Doctors make needless tests out of fear of being sued for not doing them. The vast majority of healthcare costs occur in final last year or so of someone's life. Politicians who want to do something sensible about this issue get accused of "rationing healthcare". Doctors not only have a financial incentive to prolong life needlessly, they also worry about not prolonging life out of fear of being sued by family members unless there is a living will, and perhaps even if there is a living will.

Thereports Spinal fusions serve as case study for debate over when certain surgeries are necessary above emphasis mineMedicare pays contractors based on how many claims they approve. Good grief!Very expensive prostate radiation therapy is conveniently exempt from self-referral laws.Although physicians in general aren’t allowed to refer their patients for treatment in facilities that they also own (with the exception of radiation therapies), the problem of incentives is universal, across the board.Physicians paid on an incentive model, like spinal fusion star surgeon Federico C. Vinas, have every financial incentive to perform needless operations.Every step of the way, the US medical system is greased to perpetuate fraud against taxpayers, against patients, against insurers.It would have been nice if Obamacare fixed some of the above problems. Unfortunately, Obamacare did not fix any of them.Fraud, ridiculous amounts of paperwork, and incentives to do the wrong thing were everywhere you looked before Obamacare. The same problems exist now.Worse yet, Obamacare added to the mess by over-charging millennials and their kids, and undercharging smokers and others with unhealthy lifestyles. Except for those below certain wage thresholds, insurance costs are likely to increase.Mike "Mish" Shedlockhttp://globaleconomicanalysis.blogspot.com