Dubious benefits versus profits in chemotherapy

At the monthly faculty meeting of our cancer center the other day, we had just finished listening to an invited talk by an ethicist about medical technology and the ethics of end-of-life care, when one of my colleagues happened to mention an article in the New York Times about how a perverse incentive system encourages oncologists to use chemotherapy even in patients for whom it may not benefit or may only provide marginal benefit. It's rare for something in the news to mesh so closely with the topic at hand; so I couldn't resist looking up the article, which appeared Tuesday morning, and was entitled Incentives Limit Any Savings in Treating Cancer. Not surprisingly, this article is being discussed in the medical blogosphere and pounced on by alties and trial lawyers. Let's take a look at what the article actually says:

When Medicare cracked down two years ago on profits that doctors made on drugs they administered to patients in their offices, it ended a windfall worth hundreds of thousands of dollars a year for each physician.

The change, which mainly affected drugs to treat cancer and its side effects, had an immediate effect. In all, cancer doctors billed about $4.4 billion for chemotherapy and anemia medications in 2005, down from $5.6 billion in 2004, with Medicare covering 80 percent of the bills in each year. The difference mostly represented profit that doctors had made on the drugs.

But the change did not reduce overall federal spending on cancer care, which increased slightly. And cancer doctors say the change did nothing to reduce a larger problem in cancer treatment.

Some physicians say that cancer doctors responded to Medicare's change by performing additional treatments that got them the best reimbursements, whether or not the treatments benefited patients. Those doctors also say that Medicare's reimbursement policies are responsible.

"The system doesn't value the time we spend with patients," said Dr. Peter Eisenberg, a cancer doctor in Greenbrae, Calif., and director of the American Society of Clinical Oncology. "The system values procedures."

Although it's very worrisome that some oncologists were apparently gaming the reimbursement system, Dr. Eisenberg is nonetheless correct, and it's not a problem that's limited to just oncology. Medicare reimbursement for non-procedure services is generally crappy and for some services does not even cover the cost of providing the service. There's a reason that primary care doctors and pediatricians are being squeezed and generally earn far less than surgeons and internists in procedure-driven specialties such as gastroenterology or interventional cardiology. Reimbursement for office visits, the bread and butter of any primary care practice, are being continually lowered Unfortunately, office expenses do not obligingly also decrease. Salaries and other expenses continue to rise, and there's only so much that can be cut when reimbursement doesn't just fail to keep up with inflation but is cut in real dollars.That leaves seeing more patients as the only way to keep an office afloat.

It should be remembered that in oncology, the system of reimbursing oncologists for giving chemotherapy in their offices originally came about primarily as a cost-saving measure. Giving chemotherapy in an outpatient setting is, by and large, less expensive than giving it in a hospital setting. Moreover, this change was consistent with the overall trend in medicine away from hospital-based care and towards outpatient care. It is this same trend that has made staying in the hospital after many minor surgeries or being admitted to the hospital the night before surgery for (for example) a bowel prep a thing of the past. As was the case with surgery, the primary driver of this policy was cost containment, not better patient care, although to a lesser extent it was to broaden patient access to chemotherapy in areas where hospitals were few and far between. One has to wonder, however, how anyone could have failed to predict the outcome of a policy like this:

The system under which cancer doctors profit on chemotherapy drugs -- and so-called supportive care medications, like anemia medicine that is given to counter the side effects of chemotherapy -- came into being more than two decades ago. That was when advances in treatment made it possible for patients to receive chemotherapy in doctors' offices instead of hospitals.

Instead of writing prescriptions that patients filled at pharmacies, cancer doctors bought drugs themselves, then administered them to patients and billed Medicare or private insurers for reimbursement.

Today, the drugs range from relatively inexpensive treatments like Taxol, a breast cancer drug that costs about $150 a dose, to a new wave of biotechnology therapies like Avastin, a drug for colon and lung cancer that can cost as much as $8,800 a dose.

Before 2005, Medicare paid a markup of 20 percent to 100 percent on many drugs, and private insurers paid even more. Doctors pocketed the difference, after certain expenses, as profit.

Because the profits on different drugs varied enormously, doctors had an incentive to prescribe medications with the highest margins. Medicare requires a 20 percent co-payment by patients on chemotherapy medicines, but before 2005 doctors sometimes forgave those co-payments because their profits were so great.

The decision to administer chemotherapy to patients with advanced cancer who are unlikely to realize much benefit is, as was discussed in the article, more complicated than just greedy doctors taking advantage of the system to profit off their patients (although surely there is an element of that in some cases). As was properly pointed out, there's psychology involved. On the doctor's side, it's the simple problem that recommending no chemotherapy is usually perceived by the physician and the family as an admission of failure, of being forced to admit that the patient's cancer is terminal. It's painful as a physician to admit that there is nothing left you can do to prolong a patient's life, and justifications can often be made for giving chemotherapy even to very advanced cases. On the patient and family side, they understandably want all treatment options to be exhausted before even considering "giving" up and accepting palliative care or hospice, even when what's most ethical would be for their doctors to have a long talk with them about their situation. However, oncologists are paid primarily to administer chemotherapy; oncology office visits, as is the case for primary care office visits, are not well reimbursed and may barely cover costs. Consequently, even if the medical and ethical imperative not to administer chemotherapy is there, the financial incentive to administer chemotherapy as an outpatient under the old system was quite strong, making it, unfortunately, not surprising that some physicians would be seduced by the profit motive, This incentive was not just limited to chemotherapy. It also applied to other injectable drugs that were then often given in physicians' offices, but cancer chemotherapy and supportive drugs were and are the single largest category of drugs that this system supported. Worse, in an accompanying article, it's described how pharmaceutical representatives used this system to sell chemotherapy:

Medicare's decision to reform the way it paid for cancer drugs came after a decade in which oncologists collectively made billions of dollars on the drugs they prescribed. Many doctors say those profits did not affect their prescribing patterns.

But drug makers evidently believed that they did. Industry documents that have emerged in a federal civil lawsuit in Boston show that big pharmaceutical companies sometimes calculated to the penny the profits that doctors could make from their drugs. Sales representatives shared those profit estimates with doctors and their staffs, the documents show.

In one PowerPoint presentation from 2000, a Bristol-Myers Squibb executive told employees that oncologists' biggest concern was "Reimbursement Today, Reimbursement Tomorrow, Reimbursement!"

Dr. Robert Geller, an oncologist who worked in private practice from 1996 to 2005 before leaving to join a biotechnology company, said that cancer doctors knew the profits they could make and in some cases would change treatment regimens or offer unnecessary care to make extra money.

"It's clear that physicians stopped making decisions based on what made scientific or clinical sense in lieu of what made better business sense," Dr. Geller said.

Clearly, what Dr. Geller describes is unethical; physician treatment decisions should be made based on what the physician judges to be best for the patient, not on profit. This is one reason why I like academia; I am (mostly) insulated from such financial considerations in patient care, albeit at the price of a lower income than most private surgeons. In any case, when perverse incentives are built into the system, human self-interest will guarantee that some will find it irresistable to act on them. So what has happened since the reimbursement rules were tightened up in 2005? First, the changes that were made were rather radical. Now drug reimbursement is 6% more than the average price of the drug paid by all doctors. Sounds reasonable, right? Here's the problem:

Doctors who buy large quantities of medicine can still get big rebates from drug companies, so they can continue to make money on prescriptions -- even if it is not at the levels of the past. But those who buy only small quantities get no rebates. And once expenses are calculated, they may actually lose money on certain drugs for Medicare patients.

In other words, the new incentive system favors the large group oncology practices, which have the patient volume to be able to afford to buy their chemotherapy drugs in bulk. Small practices can be S.O.L., and their patients may be forced to be referred to a hospital to receive their chemotherapy, with the attendant difficulties and inconveniences if they happen to live in rural areas without major hospitals.

Be that as it may, this story does serve a purpose in pointing out the forces in our health care system that work against administering compassionate and evidence-based medicine to cancer patients. Chief among these perverse incentives is a reimbursement system that is hugely weighted towards procedures. For surgeons, it's operations, particularly specialized operations. Bread and butter operations, such as hernias and gallbladders, tend not to be particularly well reimbursed. (Indeed, I've read in General Surgery News and other surgery news outlets that some general surgeons no longer do hernias because Medicare reimbursement does not cover the expense of providing the service. I can also say that reimbursement for breast cancer surgery sucks compared to, for instance, some common orthopedic procedures, such as a carpal tunnel release.) In radiology, it's interventional procedures that are well reimbursed, whereas reading studies is not. Again, a good example of this comes from my own area of interest (breast cancer), specifically, mammography. If you want to know why it's so hard to get a mammogram in a reasonable amount of time in some areas of this country, realize that the reimbursement for a simple screening mammogram is so low that it barely covers the expense of the procedure, if that. Mammographers tend now to use mammograms as a loss-leader, and make their money doing needle biopsies of lesions found on screening mammograms. Couple that with the very high malpractice exposure that mammographers face (failure to diagnose breast cancer is one of the most common causes of malpractice suits) and it's not too surprising that fewer and fewer prospective radiologists are choosing to specialize in mammography, or even to do mammography at all. And, of course, for oncologists, the reimbursement is best for administering chemotherapy, which produces a financial incentive to give more chemotherapy, perhaps not so much in academic settings, where reimbursement is not so strongly tied to seeing patients and doing procedures, but certainly in private practice settings.

I don't pretend to know how to fix this mess, other than to suggest that the manner in which the government sets rates of reimbursement and the insurance companies follow along in an arms race to ratchet down reimbursement to the level of Medicare and Medicaid has produced a system that is an unholy fusion of a de facto single payer system, in which the government sets the rate of reimbursement for most medical services, with that of a capitalist free market system. The problem is, we seem to realize the benefits of neither system, while suffering the worst aspects of each. On the capitalist end, insured patients do not see most of the costs and thus have no incentive not to use all the services they can, while insurance companies are beholden not to patients but rather to the employers who pay for insurance for their workers. Thus, one of the benefits of the free market, choice, is often no choice at all for most patients, and competition tends not to be directed at providing the lowest cost, best quality insurance to patients, but rather just the lowest cost insurance to employers. On the government end, we seem to manage to realize none of the benefits of a single payer system, such as cost containment and universal coverage, leaving over 40 million Americans without health insurance. Instead, we get the worst of both worlds: a system that is profit-driven but not geared to provide what is best for patients, as it might be if patients chose their own insurance, while the government in essence controls the system and decides how much providers will be reimbursed for their services.

It is a weird mutant fusion of a system that persists and strongly resists every effort to change it. Yet, it seems that sometime, perhaps as the Baby Boomers retire, it may well collapse under its own weight. Given that I probably have somewhere between 20 and 25 years left in my career, I fear that I may have a front row seat for the meltdown.


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What an excellent post. One wonders about the possible impacts of a couple of factors that might exaggerate what the statistics appear to show re unethical behavior:

- Selection: As you say, under the new system, "[s]mall practices can be S.O.L." To what extent might the statistics already reflect the passing of such practices, leaving the high-volume prescribers?

- Office staffs: Since office visits aren't as well-paid as procedures, sophisticated staffs will tend to schedule patient-doctor visits to coincide with times when procedures are done, so that although the doctor has spent time with the patient performing evaluations as well as, e.g., administering chemo, the proportion of billings Medicare receives for office visits will be reduced.

It's also very evident that the article has an "angle" when one finds quotes like this: "Medicare requires a 20 percent co-payment by patients on chemotherapy medicines, but before 2005 doctors sometimes forgave those co-payments because their profits were so great." Perhaps the doctors forgave the co-payments because even 20 percent of the cost of some chemotherapy drugs was so high the patients couldn't afford it? (BTW, a patient's inability to afford Medicare's copayment is a legally valid reason for a doctor to waive it, while waiving the copayment because the doctor says "Thanks, I'm rich enough already" is not.)

Maybe Medicare/Medicaid can actually purchase and supply drugs and other consumables to the doctors for Medicare Medicaid patients. Then the feds pay for the procedure rather than reimbursements. This way the government can cut out middlemen supply companies reducing the cost to some extent. The doctors keep a small stock of basic chemo supplies in the office. Once the supply is used up the feds re-supply. The feds give the drug companies a tax break for allowing bulk buys at low cost. As long as the whole system doesn't stagnate (unfortunately this is a serious possibility) and most of those involved are relatively honest we all win. I know there are a whole slew of possible bottle necks.

We also don't know if the actually administered the chemo. If you are caught administering chemo (or falsely admit to doing so) when there is little evidence you have a malpractice suite your insurance goes up, you have a black mark on your record. If you on the other hand break the rules with regards to the feds you get to go to prison. While what I'm about to suggest they may have done is highly illegal I don't see it as medically unethical.
A doctor in a failing clinic in a rural area. If she/he leaves the locals are without any healthcare. If they stays they can't make ends meet and once the office closes the locals will be without health care. So while illegal he/she does:
Buy chemotherapy drugs, inject patients (those without renal problems) with saline solution, dumps chemo drugs into medical waste container, gets reimbursed for chemo drugs, keep clinic open.
I have no problem with my takes pay for this kind of set up. The clinic stays open, the drug companies keep lower end employees working making the stuff, the medical waste companies keep working. The feds get to report that they have implemented a system that on paper saves money. Everyone is happy. However there will be doctors who will do this to pay for a second boat, an Italian sports car etc.
They are all doctors; they however are not all saints.
Dishonest sure, I'll admit whole heartedly to that. I won't feel guilty about it until you actually show me one honest career politician.

Hey, I just figured out a great way to save money. Taking the Medicare reimbursment philosophy a little farther.

Only pay police when they arrest someone (or kill them resisting arrest). Only pay the military when they kill "bad guys" or bomb the places where "bad guys" are, only pay prosecutors when they get a conviction, only pay the coast guard when they sink enemy vessels, only pay teachers when their students do well on tests, only pay politicians when we are satified with what they are doing.

Do you think low reimbursements for mammograms are driving all the studies that seem to be in the news about the superiority of breast MRIs?

I recall posts bemoaning that while MRIs might catch more cancer it wasn't necessarily going to improve make much difference because they were likely ones nobody would die from anyway.

I wonder whether this is a push to get the standard for screening pushed to something that is more lucrative to do.

only pay teachers when their students do well on tests, only pay politicians when we are satified with what they are doing.

I'm can't tell if you want those last two or not.

Minor typo: reimbursement doesn't just fail to keep up with inflation but is cut in real dollars. I think you mean nominal dollars.

Medicine and profits: an unwholesome alliance


The cognitive dissonance of conflicted care


This issue first came to light in testimony at a Medicare Executive Committee meeting in Baltimore, Maryland in December 1999. There was a gastroenterologist in attendance who complained that Medicare had cut his reimbursement for colonoscopies from $400 to $108 and how all the doctors in his large, multi-specialty internal medicine group were hurting, save for two medical oncologists, whom he said were making a killing running their in-office retail pharmacies.

While the Harvard/Michigan study documented what happen before the new Medicare law, a survey by Dr. Neil Love, "Patterns of Care," showed results that the Medicare reforms still were not working. It was still an impossible conflict of interest.

The government wasn't reducing payment for cancer care under the new Medicare bill. They were simply reducing overpayment for chemotherapy drugs, and paying cancer specialists the same as other physicians. The government can't afford to overpay for drugs, in an era where ALL these new drugs are being introduced, which are fantastically expensive.

Although the new Medicare bill tried to curtail the Chemotherapy Concession, private insurers still go along with it. What needs to be done is to remove the profit incentive from the choice of drug treatments. Medical oncologists should be taken out of the retail pharmacy business and let them be doctors again.

By gpawelski (not verified) on 17 Jun 2007 #permalink