OP-ED

It’s Raining Cataracts, Hallelujah

flying cadeuciiCMS released new data, shrouded thus far in needless secrecy: how much it pays individual physicians.

Unlike the Shroud of Turin, no one will question its authenticity. But authenticity doesn’t guarantee the data won’t intrigue, confuse, anger, perplex, confound and burn a few innocents at the stakes. That is before we conclude that more research is needed, or more colloquially stated, we still don’t have a clue.

Medicare bounty hunters, the modern day witch finders, are licking their lips for their share of the looted spoils. Academic researchers will be dissecting both wings of the bell-shaped curve of variation in payment to set the next battle between good and evil. But all eyes (pun intended) are upon Florida; specifically one particular provider.

The provider, an ophthalmologist, (you can look up the name) billed CMS for $21 million.

CMS paid ophthalmologists $ 5.6 billion. That’s more than the GDP of Burundi. CMS paid over a billion dollars for treatment of macular degeneration with Lucentis (Genentech).

Take a deep breath now. The treatment of one organ in over 65 year old American citizens is equal to the GDP of one African nation. Gini would have turned beetroot with embarrassment.

Diabolical? Scandalous? Shocking? Surprising?

None of the above, actually. If you think about it.

As we age, and age we do thanks to our lives being constantly “saved” by prevention, regulation and cures, arteries harden, brain atrophies and bones thin. And eyesight falters. Lens fog. Macula degenerates, reducing central vision making it difficult to read.

As we age, we consume more medical services. Yes, take that as an economic truism. And no, I’m not applying for membership of the Death Panel.

Here’s the thing. It’s nice to be able to see when you’re 75. It’s also nice to see when 85, and damn essential when 90.

Otherwise you might trip over the walking stick, fracture the neck of the femur, develop a clot in the deep veins, then a clot in the pulmonary arteries, then a raging pneumonia in ICU, followed by septic shock and a cardiac arrest. Then perhaps you may rest in peace. But not before a few interns have fractured half a dozen ribs during a well-intentioned but hopelessly misguided cardiopulmonary resuscitation that family members lobbied for to assuage their guilt for never visiting you in your nursing home.

So you see having vision is not just ontologically nice but economically smart.

Here’s another thing. Whereas you die only once from a massive myocardial infarction from a calcified coronary artery, you can live for a pretty long time with macular degeneration. So long as you don’t trip over your walking stick. This means you are reminded of your handicap every day, most painfully when your great grandson hits his first home run which you can hardly hear and barely see.

This also means that the $$$$ spent on eyes will barely move the dial of average life expectancy. I’m just preparing you for that inevitable powerpoint from a miserable health economist that will state “we spend more than Burundi’s GDP on eyes and we have nothing to show for it”. Please don’t gasp with that intrigue of Archimedes. Eureka: you’re smarter than that.

Nevertheless, questions should be asked and avenues should be pursued.

Here are a few.

1)     Why are we using the $2000 Lucentis not the $50 Avastin to treat macular degeneration?

Perverse provider incentives, you say. Sorry this trite accusation of towering banality is not going to cut it anymore.

Avastin is off-label for macular degeneration. Why? What regulatory barriers exist that make Avastin off-label? What’s the rationale for these barriers? Who created these barriers? Why? Can they not be reversed? Or are regulations like entropy, irreversible?

2)     Why has CMS not demanded substantial discounts from manufacturer of Lucentis?

Rather than bullying physicians might CMS not stand up to big pharma and be a man, I mean a monopsony? Perhaps CMS might ask, actually demand, that Genentech reveal its marginal costs of producing Lucentis. Chuck in a few extra dollars for research and development and use their economy of scale and sales from all that advertising for a fair and rational graded annual reduction in price.

Your cousins across the pond, the NHS, act as a monopsony. And the former administrator of CMS, Donald Berwick, did say he admired the NHS. So perhaps imitation might be in order. Imitation is the best form of flattery.

3)     Must everyone see an ophthalmologist?

CMS spends nearly $700 million on eye exams. This is a fertile area for proliferation of mid-level providers. Where are they? Every time I need an eye test I see an MD. Why? Actually I know why, it’s covered in my insurance at no marginal cost, so a better question is, why not?

Why aren’t primary care physicians doing basic eye examinations? Might we consider reducing some of their clinically irrelevant form-filling and complying and directing their time to clinical relevance such as this? Just a thought.

4)     Don’t demonize monopolists. Analyze their practice.

This is going to be difficult, I know, since demonization is so much more fun than analysis.

Rather than send the Medicare fraud squad to the offices of the high billers send a team comprising a management consultant from McKinsey, an academic researcher and a journalist.

Find out the fixed costs and marginal costs. See how the marginal costs are related to the procedural volume. Decide whether it is worthwhile encouraging monopolies for procedures that nearly everyone is going to need. Then reduce the reimbursement for the procedure by an amount that is reflective of a reduction of marginal costs owing to the monopolistic nature of the practice.

The tragedy, or absurdity, of high billing providers in US healthcare, is that their economies of scale are neither realized nor appropriated for the benefit of payers. It’s like the industrial Cheesecake factory charging the prices of a quaint village café in the French Riviera. Or having your cheesecake and eating it.

5)     Consider vouchers.

Yes, I know you are cringing with the “V” word with visions of Paul Ryan throwing grand ma off the Medicare Advantage cliff. But steady on your sanctimonious high horse for a moment and hear me out.

Why would I care about using the $2000 Lucentis over the $50 Avantis for macular degeneration?

Why would I bother seeing a mid-level provider over an ophthalmologist?

Why would the high billing provider cut its rates owing to reduction of marginal costs of doing the procedure?

Hell, I don’t even know Lucentis costs 40 times Avastin. Responsible citizenry, you say. Stop being naïve.

Give me a voucher for the health of my eyes and then watch how I make the providers dance to my tunes. So long as I can use what’s left over for gambling in Vegas, or whatever else catches my fancy.

To paraphrase Kevin Spacey from Usual Suspects “the greatest trick capitalism every pulled was to convince the world that competition between insurers is capitalism”.

It’s not. Competition between insurers is competitive managerialism and competitive cherry picking. This will not reduce the healthcare costs.

Medicare Advantage is no advantage if the providers are not competing. Providers won’t compete if they do not deal directly with the person with the purse.

Indeed, prices for lasik eye surgery have fallen, arguably as a result of competition. The market doesn’t work in all areas of healthcare but this is one area it can work.

The release of payment to providers marks a potentially new epoch for analysis of healthcare costs. Let’s call it Analysis 2.0. Policy wonks are urged to move away from the in-box thinking of perverse provider incentives to out of box thinking of absurd payer infrastructure. CMS is a great starting point to gauge this absurdity.

Saurabh Jha, MD (@RogueRad) is an Assistant Professor of Radiology at the University of Pennsylvania. His scholarly interests include the value of imaging and dealing with uncertainty in clinical decision making. Jha views most problems in medicine as problems of imperfect information. He trained in the UK and migrated to USA for more predictable weather and a larger yard.

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michael kors handbags palletsShane IrvingAurthurDr. PullenJoel Hassman, MD Recent comment authors
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Tom Leith
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Tom Leith

Maybe something less dramatic and more concerted than “go on strike” Dr. Hassman. Maybe revive the notion of “ethical medicine” and refuse to prescribe anything advertised direct to patients. Maybe 1) settle on some range of “standard of care” and then 2) designate certain docs to be expert witnesses in med-mal cases and refuse to refer to any doc that testifies without the designation. This begins to require some discipline and mutual accountability. Of course, the lawyers will try to bring in docs from out of state where you can’t hurt them — so you’ll have to come up with… Read more »

Shane Irving
Guest

Nice article. It’s interesting how quickly some point at the result (the spend) vs. looking at the causes (regulations/ lobbyists etc). Data without understanding is still just data…. not information.

Dr. Pullen
Guest

Just wait until the new oral drugs at $1000./ pill for Hepatitis C get approved to see health care costs zoom.

Tom Leith
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Tom Leith

Well Dr. Hassman, if not the AMA or the APA, through what social body shall physicians stand up to the whores and responsibly self monitor and discipline poor choice and acts? This is a serious question. Do you prefer state medical boards to private associations of professionals? I have been begging doctors for more than a decade to reassert control of medicine; to be, in a word, professional. There should be something ontological about saying “I am a physician” or “I am an engineer” or “I am a lawyer” or “I am an accountant” or “I am a carpenter”, for… Read more »

Joel Hassman, MD
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Joel Hassman, MD

Isn’t that an oxymoron at least these days: professional association. How un-professional are many of these organizations that claim to be looking out for their members. But, you are correct to a degree, we have to unite as a sizeable collective and refute the intrusions that continue to degrade and disrupt the healthcare process. That said, how many of our colleagues will relinquish the blatant pursuit of profit? Health care as it was, and still should be intended, does not operate under business rules and regulations inherently. And yet, aren’t the AMA and APA the poster children of flagrant and… Read more »

Joel Hassman, MD
Guest
Joel Hassman, MD

Gee, allegedly now the “cat is out of the bag” based on Medicare numbers alone? People can’t see the lifestyle and attitude alone of those who make obscene amounts of money just in practicing health care as an income source?? CMS releasing payments is not a villain, no, it is the pervasive attitude of the profession just being the cowards to not stand up to the whores we call “colleagues” who just further demean the profession. Physicians are so stupid, we just cluelessly and pervasively allow others to control the profession and do nothing to responsibly self monitor and discipline… Read more »

MedicalQuack
Guest

I called it a year ago after Dow Jones sued to get the data, not much here for consumers, just a media show as right now all of them are competing desperately for clicks to increase their ad exposure as they all need money. Nobody could have predicted how fast this would take over but it has so look forward to more data news and some of it written by bots as they are cheaper to hire, sadly. Here’s the prediction if you want to call it that, just what I said really. http://ducknetweb.blogspot.com/2013/06/judge-rules-medicare-data-on-doctors.html Press can’t get it and if… Read more »

Peter1
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Peter1

“then watch how I make the providers dance to my tunes”

Yes, you’ll do a much better job than the insurance corporations. Doctors are cringing in their boots. Just what planet do you inhabit in that altered universe?

I guess you also make you’re local mechanic dance and that restaurant when you’re looking at the menue.

Saurabh Jha
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Saurabh Jha

Take a look at the substantial discounts for meds and labs in Direct Pay Medicine.

Payers have done jack with regards to prices, and probably can do jack.

As for the mechanic, well if insurance was going to cover why would I give a damn that his rates might be x 40 times that of the man down the street? But it doesn’t cover so neither is there a price discrepancy of such a scale (market would not allow) nor would I have put up with it.

Peter1
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Peter1

Most mechanics charge by the flat rate books – usually about 30% more than actual hours spent on the repair. If you ever look at a mechanic’s pay sheet you’ll see they work 40 hours but get paid for many more. Dealerships are notorious for this plus their hourly rate is higher. Next time you’re taking in your vehicle for service try to negotiate. See how far you get. Their world may not command 1/2 million dollar salaries but hey, getting a lower price is fair game in this economy. I don’t doubt the discounts for direct pay cash, but… Read more »

Aurthur
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Aurthur

Dan Quayle just called. He wants his “e’ back.

Tom Leith
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Tom Leith

Give me a voucher for the health of my eyes and then watch how I make the providers dance to my tunes. So long as I can use what’s left over for gambling in Vegas, or whatever else catches my fancy. I read something a decade or more ago about an idea like this. What you have in a case like this basically is old-fashioned indemnity insurance. You get a pot of money upon diagnosis. Spend it howsoever you like. Maybe you give some to your PCP to recommend a couple of good, surgeons. Maybe you buy reinsurance in case… Read more »

Saurabh Jha
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Saurabh Jha

It depends on price elasticity and ability to price gouge.

Asymmetric information is not equally asymmetric in all healthcare services.

allan
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allan

Excellent article. Lucentis demonstrates how over insurance and over regulation causes the prices of certain pharmaceuticals to remain high. If the off label use of Avastin was permitted and there was no insurance for either drug the price of Lucentis would have dramatically fallen. Lucentis, I presume, met the criteria of on-label use but does that mean one drug is better than another? No. I wish that new competing drugs had to use as a control at least one of the older gold standard drugs so a true comparison could be made. That would improve the quality of physician prescriptions… Read more »

Perry
Guest
Perry

What is the point of releasing this information without some sort of explanation?
“Hey look at all these greedy doctors, why would you want to increase their reimbursement?”
Or
“Wow, look at all this money we’re spending, we just can’t seem to get a handle on this.”
Or
“Gee we know there is a lot of fraud and abuse out there, look at all this money flying out, we can’t control it.”
And the government should handle a single-payer system?

John Ballard
Guest

What do you think Medicare, Medicaid, the VA, community clinics and active duty medical service corps are? All are single payer, no?

Last I checked, all are getting meds, devices and whatever else they need at more-or-less competitive prices (give or take a Congressional bribe or two — earmarks, you know). It’s a far cry from the feeding frenzy of the marketplace where millions are spent for marketing, sales commissions, performance bonuses, corporate takeovers and executive compensation packages — and (I almost forgot) shareholder profits.

John Ballard
Guest

Oops! My bad. Medicare should not be on that list. It IS single-payer, of course, but it ISN’T getting the best prices (as this post illustrates). Medicaid, VA and the rest get more reasonable prices, but thanks to Congressional oversight (thank you, Part D) and those earmarks I mentioned, Medicare doesn’t do as well. Some of us have hope that ACA will change that for the better.

Peter1
Guest
Peter1

“2) Why has CMS not demanded substantial discounts from manufacturer of Lucentis?” Because it was made illegal by politicians. Why can the VA negotiate for drugs but not CMS? Because it’s political and it’s money – you know, the free speech currency of Washington. I have one bull horn but you have 100 bullhorns – somehow you drowning out me is free speech. “Your cousins across the pond, the NHS, act as a monopsony. And the former administrator of CMS, Donald Berwick, did say he admired the NHS. So perhaps imitation might be in order. Imitation is the best form… Read more »

John Ballard
Guest

None other than Alain Enthoven himself speaks heresy in the WSJ: These are also not “vouchers” in which “seniors would, in effect, be handed a coupon and told to go find private coverage,” as columnist Paul Krugman recently wrote in the New York Times. Under the Ryan plan, seniors would receive a menu of participating contractors to choose from. And because Medicare Administrative Contractors, the firms that pay Medicare claims, are already private, this is not exactly “privatizing Medicare” either. The Ryan plan isn’t perfect. It proposes that after 2021 the premium-support payments be indexed to the consumer price index,… Read more »