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Wednesday, October 20, 2010

Health care reform without HR3962

The WSJ published a piece by Avery Johnson entitled: "In Treating Cancer, Insurer Tries New Way to Pay Docs" in today's paper.

While many of the comments focus on the elements of the piece suggesting that doctors may push chemotherapy because of a financial incentive, I think the most interesting observations can be summarized in the following statements:
The program, which the insurer plans to announce Wednesday, attempts to address potential overuse of expensive cancer drugs by eliminating any incentive for doctors to choose a drug based on profit. As a result, oncologists will be reimbursed at cost for whatever drugs they prescribe and receive a separate payment covering their services..... Many cancer drugs are infused by doctors in their offices, and historically doctors have purchased the drugs and billed insurers for their cost, plus a profit margin of around 15%, says Lee Newcomer, UnitedHealth's vice president of oncology......UnitedHealth estimates that drugs account for 65% of an oncologist's income.
65% of all oncologists income estimated as coming from infusion of drugs. I am not sure where these numbers come from but if they are true, they raise all sorts of issues. First, any activity which eliminates 65% of income from a particular segment of a health care providers is likely to have some nasty consequences. I don't know what they might be but there will likely be some major casualties, both in terms of individual physicians and institutional. I would venture to guess that the major investments that health care concerns made to develop large and capital intensive cancer centers could look bad as their planned profit centers become cost centers.

If 65% of oncologist incomes comes from mark ups on drugs, it highlights the madness associated with the role of physicians in patient care and defining where physicians actually bring value to patients. Gaming the margins on drugs has allowed oncology to delivery cutting edge care and reward oncologists for the role they play. Everyone has recognized that the fee structure associated with the cognitive and management work in oncology (and medicine in general) is not adequate. Many sub specialty have avoided taking on the battle of pricing their truly valuable cognitive services appropriately as long as they have they have their own proprietary technical billing gimmick which they can milk.

Oncology and Rheumatology have their infusion centers. GI has colonscopy, ENT has sinus surgery, Dermatology has Mohs surgery, Cardiology had stent placement, and Allergy has skin tests and allergy shots. Ophthalmology had cataracts but their fate should serve as a lesson for others who bet the ranch on becoming dependent on a few narrow cash cows.  The question is are these lucrative elements of practice the things which really bring value to patients? Not likely. In my estimation docs are paid poorly for doing the really difficult things which make the big difference in patients with chronic disease burdens. For that reason there are few physicians who want to to take on the long term responsibility for care of people with chronic diseases. Everyone in medicine knows this.

However, as the cash cows get identified and picked off by either Medicare or private insurers, the landscape will change. Some specialists will simply take refuge in the world of aesthetics. It is not proprietary and is open to basically anyone who can take a weekend course, has reasonable people skills, and is OK with their hands. Not everyone can do facial reconstructions but most anyone can inject Botox and fillers. It may even be a big market which can accommodate many physicians. However, the availability of practitioners who can inject Botox into your wrinkles won't soften the blow much when you can't find anyone to treat your breast cancer, mutilating arthritis, or inflammatory bowel disease. My guess is that as the payers pick off the the selected cash cows, calling their margins too large, there will be little inclination to make anyone whole by trying to appropriately value the cognitive work which is essential in effectively deploying all of our technological medical marvels. The squeeze will be on.

 It may work out just fine. Those of us whose primary tool for practice is our brain may find that we can operate in a very low overhead environment. Others may elect to operate outside of the third party payment scheme, or at least one operated by the state. Many may do both. We will finally be able to see how cognitive medical services are valued by the public when the only way they will be available is if they are paid for by the end users and priced by market forces.  That is where real health care reform will happen.


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