In my full-time clinical practice days, other practitioners often referred patients to me for accidental findings on x-rays, ultrasounds, or MRI exams. Sometimes a patient would have had a CT scan of her abdomen that revealed an asymptomatic tumor inside her adrenal gland. More often, an ultrasound of the carotid arteries or an MRI of the spine uncovered a mass within the thyroid gland. This phenomenon is so common that these discoveries have a name: “incidentalomas.” Never accuse doctors of not being wordsmiths.
For thyroid incidentalomas, I would usually drag a portable ultrasound machine into the patient’s room and get a quick look at the lesion with my own eyes. Through reasonably straightforward criteria, the patient and I could choose whether or not to biopsy, to repeat an ultrasound in a year or two, or to forget we ever saw the lesion. I never charged extra for these informal bedside exams. I considered this particular use of the ultrasound machine akin to a 21st-century stethoscope. I wouldn’t charge a patient an additional fee for listening to her heart or lungs, so it didn’t seem proper to charge them for this use of ultrasound. That wasn’t charity on my part; this philosophy is becoming so prevalent as to have guidelines crop up around it.
But sometimes, I saw features in a thyroid nodule or a lymph node that made me think the lesion should be biopsied, usually by me. And I was paid well for these procedures (technically, the University of Kansas was well-paid since I was salaried. I made the same amount of money whether I did the procedure or not). A thyroid biopsy, which takes maybe ten minutes, pays about the same amount as caring for a diabetic patient for a year (thank the RUC). The revenue from diagnostic studies comes not only from the professional fee, which pays the doctor for her interpretation and consulting regarding the study but also from a “facility fee” meant to cover technical costs surrounding the maintenance and use of special equipment. A physician who owns the equipment needed to perform labs or imaging can profit by collecting both of these fees. So the incentive for me or any other doctor to do imaging or procedures in our own practices–so-called “physician self-referral”–is considerable.
Stark laws arose a few decades ago to discourage physician self-referral and kickbacks from referrals to other physicians, but they made specific exceptions to allow “necessary testing” in physician offices. Once upon a time, the American Medical Association Code of Ethics prohibited doctors from owning imaging or lab equipment. The AMA said doctors should not have a financial interest in testing. But that rule eventually changed, and now, the AMA is much softer on physician-owned testing, insisting only that doctors make diagnostic and treatment decisions without taking financial issues into account. The trouble is, from a financial standpoint, that philosophy probably doesn’t work.
Doctors are human, and physician-owned imaging and lab centers unequivocally appear to drive up the cost of care by increasing the likelihood of getting additional procedures without improving outcomes. In a tiny sample of the literature on this topic, a group of researchers has shown that MRI scans of the neck, lower back, knee, and shoulder, when performed in physician-owned machines, are much more likely to be normal, indicating overuse by the physicians who own the machines and bill for their use. Multiple studies show that physician-owned hospitals are associated with an increase in spending without a corresponding increase in quality, a phenomenon that leaks into the outpatient setting as well. For example, physicians, particularly those treating immune or malignant diseases, routinely sell drugs to their patients at a small markup. Some physicians make more of their income from such practices than they do by seeing patients. Their incentive is naturally toward using more expensive drugs, whether they consciously intend to or not.
This is the part of the post where I propose a brilliant policy strategy. Except I’m not sure there is one, apart from the transparency rules we’ve discussed at length on this blog. Physician-owned testing, after all, does come with some benefits. Patients can often get the test performed on the same day and in the same location. Since doctors are so powerful, there’s likely not a movement afoot to take their radiology machines away.
But by using more direct contracting with physicians, we could limit the incentive for doctors to overuse certain diagnostic and therapeutic procedures. If I had been paid a flat monthly rate to take care of the endocrine needs of Corporation X in my example in the intro, I would have simply done the necessary procedures on patients without even thinking of the cost to the employer or the patient or thinking of my potential income. The few hundred bucks I might have made from a couple of thyroid biopsies would have been folded into my fee for caring for the entire population.
If you have past experience with direct physician contracting (or with frustrating up-charges from doctors self-referring), please let us know. We would love to better understand the experiences of our members around this issue.
As the Medical Director of the Kansas Business Group on Health, I’m sometimes asked to weigh in on hot topics that might affect employers or employees. This is a reprint of a blog post from KBGH.