The Cost of Defensive Medicine on 3 Hospital Medicine Services

By Michael B. Rothberg, MD, MPH; Joshua Class, BS; Tara F. Bishop, MD, MPH; Jennifer Friderici, MS; Reva Kleppel, MPH, MSW; Peter K. Lindenauer, MD, MSS
JAMA Internal Medicine, September 15, 2014

The overuse of tests and procedures because of fear of malpractice litigation, known as defensive medicine, is estimated to cost $46 billion annually in the United States, but these costs have been measured only indirectly. We estimated the cost of defensive medicine on 3 hospital medicine services in a health system by having physicians assess the defensiveness of their own orders. We hypothesized that physicians who were concerned about being targeted by litigation would practice more defensively and have higher overall costs.

Discussion

In this study of hospital medicine services at 3 institutions in a health system, 28% of orders and 13% of costs were judged to be at least partially defensive, but only 2.9% of costs were completely defensive. Most costs were due to potentially unnecessary hospitalization. Defensive medicine practices varied substantially, but physicians who wrote the most defensive orders spent less than those who wrote fewer such orders, highlighting the disconnect between physician beliefs about defensive medicine and their contribution to costs.

In 2008, Massachusetts internists reported that 27% of computed tomographic scans, 16% of laboratory tests, and 14% of hospital admissions were ordered owing to concerns about liability. We allowed our physicians to offer a graded response, which revealed that defensiveness is not absolute. Compared with the previous study, our respondents reported higher percentages of defensive medicine but lower percentages of completely defensive medicine (2% of radiology, 6% of laboratory testing, and 2% of hospital days).

In conclusion, although a large portion of hospital orders had some defensive component, our study found that few orders were completely defensive and that physicians’ attitudes about defensive medicine did not correlate with cost. Our findings suggest that only a small portion of medical costs might be reduced by tort reform.

http://archinte.jamanetwork.com/article.aspx?articleid=1904758

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The cost of defensive medicine

By Aaron Carroll
AcademyHealth Blog, September 15, 2014

I was so pleased to see a new study published in the journal JAMA Internal Medicine, “The Cost of Defensive Medicine on 3 Hospital Medicine Services“.

As the researchers note, past studies have found that “27% of computed tomographic scans, 16% of laboratory tests, and 14% of hospital admissions were ordered owing to concerns about liability.” But such studies would include any level of defensiveness in the orders at all. We can realistically expect, however, that only completely defensive orders would be eliminated by tort reform. After all, if there are other reasons to order tests above our fears of being sued if we don’t, those reasons will still exist even after comprehensive malpractice reform became law.

If we assume that overall health care spending is about $2.7 trillion, then 2.9% of that would be about $78 billion. That’s not chump change, mind you, but it’s still a very small component of overall health care spending. Given that there’s little evidence that tort reform would lead to a significant reduction in this already small percentage of spending, there seems little reason to pursue it as a means to dramatically reduce health care spending in the United States.

From response by Uwe Reinhardt:

It is also ironic that the very folks who constantly bring up the refrain that “one size does not fit all” in health policy (and that in the land of McDonalds!) always clamor for a one-size-fits-all solution to malpractice: an upper limit on payments for pain and suffering.

http://blog.academyhealth.org/the-cost-of-defensive-medicine/

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Comment:

By Don McCanne, MD

At forums discussing the high costs of health care and what can be done about it, inevitably the subject of malpractice comes up. People hold very strong views on the topic. Such discussions generate much heat, often blaming frivolous lawsuits, excessive defensive medicine, outrageous jury awards, and attorney greed, but we need to step back and see if we can generate a little more light and a little less heat.

We do need medical liability reform, but not for the reasons often given. The system simply does not work well for achieving its primary goal: compensating individuals who are victims of medical injury. Most individuals who experience medical injury are never compensated; the majority do not even file lawsuits. When lawsuits are filed, much of the costs are consumed by legal processes, including paying the fees for plaintiff and defense attorneys.

The reform that we do need, assuming that we agree that individuals should be compensated for medical injuries, is to end the emotionally painful, expensive tort process and replace it with a process of alternate dispute resolution – a process not unlike workers compensation wherein the injuries are acknowledged and appropriate compensation is made.

What about some of the issues that generate so much heat?

Frivolous lawsuits are not a problem. An attorney will not accept a case in which a medical injury has not occurred. The attorney will not invest time and the expenses of an investigation if there is no possibility for an award. It may be that the medical injury might have occurred because of factors not related to medical error, but that is the point of discovery and of the followup trial, if necessary. These are not frivolous actions.

What about the costs of defensive medicine – ordering tests or procedures that are totally unnecessary but ordered only to provide defense in the event of a future lawsuit. The study by Michael Rothberg and his colleagues really helps us understand better the extent of this problem. Most tests and procedures ordered that were thought to provide some insulation against potential lawsuits were actually tests that were medically indicated and would assist in providing the best care for the patient. That is, most medicine that has been labeled as defensive medicine is simply appropriate health care. Considering this, very little could be saved by clamping down on defensive medicine.

This study supposedly does show that almost 3 percent of care was completely defensive, not an insignificant amount. But think about this. What test would a physician ever order that had a 100 percent chance that the result would provide absolutely no benefit in management of the patient? If such a test were omitted then there is no possibility of a lawsuit for having failed to obtain that test. Low yield tests may be considered to be defensive, but as long as there is a real possibility that the results could change the patient’s outcome favorably, then clinical judgement should be used to determine if the test should be ordered. If the test cannot possibly change the outcome – a no yield test – then that test should not be ordered. But that has to be a very rare occurrence, far less than the 3 percent reported in this study.

What about excessive jury awards, which are coupled with attorney “greed”? Awards that compensate for specific losses such as medical bills and loss of income are not excessive; they are simply compensating losses. General damages, often considered pain and suffering awards, along with punitive damages, are where juries may be particularly generous with rewards. However, even there judges tend to reduce the awards to levels that most people would consider appropriate.

The award for general damages – non-economic damages – has received much attention, especially from conservatives, since placing a cap on such awards seems to be a simple way of limiting “outrageous” awards. Indirectly it would also limit payments to “greedy” attorneys since their fees usually come out of this portion of the award. It has been suggested that general damages should be limited to $250,000 as in California, though California now has a ballot measure to increase the cap to $1,000,000 and index it for inflation. The problem is that this does nothing to correct the fundamental structural deficiencies in our system of compensating for medical injury – a system that fails most individuals experiencing medical injury. Instead of fine tuning our system, we should be replacing it with a system that works.

One more very important point. Why does the United States have such a great problem with medical malpractice lawsuits when most other nations that have universal systems and much lower health care costs have much less of a problem? Think about that. In other nations everyone receives health care. They do not have intrusive intermediaries who tell you where you can go or what care you can have. They do not expose you to financial hardship simply because you have a medical need. Our dysfunctional system breeds animosity which is a setup for litigation. Their systems are egalitarian – health care is a given. Why would they want to sue their doctor?

Under a single payer national health program physicians are free to obtain the most appropriate care for their patients. An egalitarian, high-performance health care system would do more than anything else to reduce the scourge of medical malpractice lawsuits.

After Surgery, Surprise $117,000 Medical Bill From Doctor He Didn’t Know

By Elisabeth Rosenthal
The New York Times, September 20, 2014

Before his three-hour neck surgery for herniated disks in December, Peter Drier, 37, signed a pile of consent forms. A bank technology manager who had researched his insurance coverage, Mr. Drier was prepared when the bills started arriving: $56,000 from Lenox Hill Hospital in Manhattan, $4,300 from the anesthesiologist and even $133,000 from his orthopedist, who he knew would accept a fraction of that fee.

He was blindsided, though, by a bill of about $117,000 from an “assistant surgeon,” a Queens-based neurosurgeon whom Mr. Drier did not recall meeting.

In Mr. Drier’s case, the primary surgeon, Dr. Nathaniel L. Tindel, had said he would accept a negotiated fee determined through Mr. Drier’s insurance company, which ended up being about $6,200. (Mr. Drier had to pay $3,000 of that to meet his deductible.) But the assistant, Dr. Harrison T. Mu, was out of network and sent the $117,000 bill.

When Mr. Drier complained to his insurer, Anthem Blue Cross Blue Shield, that he should not have to pay the out-of-network assistant surgeon, Anthem agreed it was not his responsibility. Instead, the company cut a check to Dr. Mu for $116,862, the full amount.

For months, Mr. Drier stewed over what to do with the $117,000 check Anthem Blue Cross had sent him to pass on to Dr. Mu, refusing to sign over a payment he considered “outrageous and immoral.”

Mr. Drier tried to negotiate with the surgeons to divvy up the $117,000 payment in a way he believed was more fair; he liked Dr. Tindel and felt he was being underpaid. Mr. Drier’s idea, he wrote in an email, was to settle on “a reasonable fee for both the surgeon and assistant and return the rest of the check to the insurance company/employees” of his company.

But in July, he received a threatening letter from Dr. Mu’s lawyer noting that he had failed to forward the $117,000 check. So he sent it along, with regret.

If the surgery had been for a Medicare patient, the assistant would have been permitted to bill only 16 percent of the primary surgeon’s fee. With current Medicare rates, that would have been about $800, less than 1 percent of what Dr. Mu was paid.

In recent years, unexpected out-of-network charges have become the top complaint to the New York State agency that regulates insurance companies.

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Comment:

By Don McCanne, MD

Although this is an outrageous example of the perversities of private insurers using provider networks to manipulate health care spending, it nevertheless helps us understand why we should reject the private insurers and their patient-unfriendly, investor- or board-pleasing business tools of health care.

Depending on which state regulations, which insurer, and which specific insurance plan, this out-of-network billing for Mr. Drier’s assistant surgeon could have had different outcomes. The worst is that he could have been responsible for the entire $117,000 fee and that it would not have applied to his deductible nor to his maximum out-of-pocket benefit cap. In this case, Mr. Drier did not experience a major financial loss, but those who pay insurance premiums will have to pay more when considering the cumulative effect of all such benefit overpayments.

It just doesn’t seem right when you try to buy the best insurance that you can afford, and the insurers then tell you which physicians and hospitals you can use if you want full coverage. Plus they frequently expose you to high out-of-pocket costs – costs that you would think insurance should cover – when you end up under the care of an out-of-network provider, often through no fault of your own as in this instance with Mr. Drier.

Had the procedure been provided under Medicare, the assistant surgeon’s fee would have been determined automatically, and at a fraction of the billed price. An improved Medicare for all not only would have set the fee at a fair level, it also would not have had network issues to deal with since the entire health care system would be one single “network” (integrated systems such as Kaiser Permanente merely being additional providers of one’s personal choice within the universal health care delivery system).

The full New York Times article by Elisabeth Rosenthal describes many other instances of surprises and misunderstandings that stem from the complexities of various plans and their networks – surprises that would not occur in a well designed, single payer national health program. Under single payer, you get the health care that you need, wherever it’s needed, and it’s simply paid for by our own public insurer.

Survey: Fortune 500 employees can expect to pay more for health insurance

By Peggy Binette
University of South Carolina, September 18, 2014

Employees working for Fortune 500 companies can expect to pay higher employee contributions for their health insurance, according to a survey of chief human resource officers about the impact of the Patient Protection and Affordable Care Act (also known as PPACA or Obamacare) conducted by the Darla Moore School of Business at the University of South Carolina this past May/June.

Patrick Wright, a professor in strategic human resource management, directs the annual the HR@Moore Survey of Chief HR Officers.

Key findings from the survey include:

• 78 percent report a rise in health insurance costs (average of 7.73 percent);
• 73 percent report having moved or will move employees to Consumer Directed Health Plans;
• 71 percent report raising or plans to raise employee contributions to health insurance;
• 30 percent report moving or plans to move pre-65 retirees to ACA health exchanges;
• 27 percent report cutting back health insurance coverage eligibility;
• 24 percent report ensuring that part-time employees work less than 30 hours weekly to avoid penalty;
• 12 percent report increasing or plan to increase part-time workers; and
• 10 percent report limiting or plan to limit the full-time employee hires.

87 percent of chief HR officers reported taking or planning to take last least one action to reduce costs. And, most of those actions are being shouldered by employees.

The most common strategy is moving employees into Consumer Directed Health Plans. CDHPs provide employees with a set amount of money for regular (not catastrophic) healthcare that they manage, which shifts responsibility from employer to worker. Firms also are defraying the rising cost of health insurance to employees by raising the premiums they pay for their health insurance and limiting dependent coverage.

PPACA requires employers to provide health insurance to employees who work 30 hours or more weekly. While small businesses are more likely to hire part-time workers, Wright says, larger firms are enforcing the cap to avoid increased costs.

One CHRO told Wright “When we put the limit at 30 hours, we frequently had people that worked 32-34 hours, and if enough of them did so, it would put us at legal risk for fines. Therefore we now limit workers to 27 hours to ensure that we minimize the number that might exceed 30 hours.”

The recent U.S. jobs report in June reported an increase of 799,000 part-time jobs compared to an increase of 288,000 full-time jobs, which may reflect the employment strategies being reported in the HR@Moore survey.

Wright says what continues to be unclear is whether the quality of employee healthcare has improved or suffered as a result of Obamacare.

http://www.sc.edu/uofsc/newsreleases/2014/09_mooreschool_hr_chro_survey_ppaca.php#.VBx3sUur_-B

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Comment

By Don McCanne, M.D.

This academic survey of human resource officers at Fortune 500 companies shows that they plan to address rising costs of their health benefit programs by increasing the financial burden on their employees. Check the key findings from the survey listed above. Each one is bad news for the employees.

The most important reason given for choosing the model of reform that became the Affordable Care Act (ACA) was that the majority of Americans were receiving their health care coverage through their employment, and that these plans provided the best coverage available. The best of the best were the plans offered by the very large employers – the Fortune 500 companies.

So what is their response? As if there were not enough problems already with excess deductibles, narrower provider networks, tiering of health care services and drugs, limiting dependent coverage, and other innovations that impair access and reduce costs, in the face of ever more increasing costs the employers are now raising employee contributions to the plans, shifting to consumer directed plans that place a greater financial burden on the employees, reducing eligibility for their employees, shifting retirees out of their plans, reducing hours for part-time employees in order to avoid ACA penalties, and limiting full-time employee hires while increasing part-time workers. And this is the best of the best!

The diagnosis is obvious. ACA was the wrong model for reform. We need a single payer national health program. Delaying that change will only cause the deficiencies to get worse, especially when we leave the private insurers in charge. It’s too bad that the Fortune 500 executives don’t have a little more empathy for their employees. After all, it’s their employees who have been responsible for the increases in productivity – the gains of which the executives are scooping off the top.

If empathy doesn’t cut it, the executives need to be reminded of Nick Hanauer’s “The Pitchforks Are Coming … For Us Plutocrats”:

http://www.politico.com/magazine/story/2014/06/the-pitchforks-are-coming-for-us-plutocrats-108014_full.html

F.T.C. Wary of Mergers by Hospitals

By Robert Pear
The New York Times, September 17, 2014

As hospitals merge and buy up physician practices, creating new behemoths, one federal agency is raising a lonely but powerful voice, suggesting that consumers may be victimized by the trend toward consolidation.

Hospitals often say they acquire other hospitals and physician groups so they can coordinate care, in keeping with the goals of the Affordable Care Act. But the agency, the Federal Trade Commission, says that mergers tend to reduce competition, and that doctors and hospitals can usually achieve the benefits of coordinated care without a full merger.

The commission is using a 100-year-old law, the Clayton Antitrust Act of 1914, to challenge some of the mergers and acquisitions, and it has had remarkable success in recent cases.

“Hospitals that face less competition charge substantially higher prices,” said Martin S. Gaynor, director of the F.T.C.’s bureau of economics, adding that the price increases could be “as high as 40 percent to 50 percent.”

Doctors and hospitals say they must collaborate to survive and thrive under the Affordable Care Act.

But Deborah L. Feinstein, director of the bureau of competition at the Federal Trade Commission, said the health care law did not repeal the antitrust laws.

Often, Ms. Feinstein said, when hospitals and doctors join forces, their goal is not just to control costs or improve care, but to “get increased leverage” in negotiations with health insurance companies and employers.

“They say they need better rates so they will have more money to invest in their facilities,” Ms. Feinstein said. “When you strip that down, it’s basically just saying, ‘We want a price increase.’ Even if the price increase is motivated by a desire to invest more in the business, that’s problematic. That incentive to invest may not be there if you don’t have competition as a spur to innovation — if you’re not worried about losing business to the hospital down the street.”

The F.T.C. has long argued that mergers can cause higher prices by reducing competition among hospitals in the same market. New research suggests that another dynamic, rarely considered by antitrust officials, can also lead to significant price increases.

The research shows that hospitals gain bargaining power when they are acquired and become part of a big hospital system that has no other presence in the local market.

“Acquisitions of hospitals by large national chains such as Hospital Corporation of America, Ascension Health or Tenet Healthcare may not increase hospital concentration in the affected local markets, but could nevertheless generate higher prices,” said Matthew S. Lewis, an associate professor of economics at Clemson University.

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Comment:

By Don McCanne, MD

Integrating health care delivery services with the goal of improving the quality and price efficiency of health care services for the community at large is an admirable goal of the Affordable Care Act (ACA). The merger mania taking place is being marketed as a means of achieving that integration. Yet the monkey wrench in the model is the supposed dependency on market competition instead of government oversight as a means of providing higher quality at a lower cost.

Yet merging health care services with the claim that quality improves as costs go down is proving to be a fraud. For the last century we have had to enforce antitrust laws and regulations simply because market consolidation results in oligopolistic control and higher prices instead. We are now seeing this throughout our health care system as providers recognize the business opportunities of greater clout in rate negotiations made possible by anti-competitive consolidation. The FTC has challenged less than one percent of these deals, indicating the conflict within our government of supporting implementation of ACA as opposed to protecting the public from unfair antitrust activities.

The flaw is to be found in the ACA model of reform. Excessive power has been granted to private insurance intermediaries that negotiate in the private sector with the providers. The tool they cite repeatedly is competition. Yet not only do we have the seminal work of Nobel laureate Kenneth Arrow, we also have decades of experience that confirms that this fiction of a market has brought us an outrageously expensive system with only mediocre outcomes on average.

All other wealthy nations cover everyone at an average cost of half of what we spend per person. Their success is based on the role of relatively rigorous government regulation or direct management. Even if the FTC stepped up its antitrust functions, our private insurers would continue to use a wide variety of business practices that advance their own interests at our cost. The vested interests in the privately owned sectors of the health care delivery system would also continue to position themselves favorably.

If we had a single payer national health program with a not-for-profit health care delivery system, our stewards would be left with the task of trying to get the system to work best for the benefit of patients – all patients. Would that be so terrible?

Is All “Skin in the Game” Fair Game? The Problem With “Non-Preferred” Generics

By Gerry Oster, PhD, and A. Mark Fendrick, MD
AJMC.com, September 17, 2014

The new blockbuster drug sofosbuvir (Sovaldi) is offering hope to many patients with hepatitis C, but treatment is expensive and many insurers are demanding that patients shoulder a large portion of the cost. The demand that patients pay a larger share of their drug costs, however, is not limited to expensive new medicines. In fact, many patients are now facing substantially higher co-pays for various generic drugs that their insurers have designated “non-preferred,” often including those recommended as first-line treatment in evidence-based guidelines for hypertension, diabetes, epilepsy, schizophrenia, migraine headache, osteoporosis, Parkinson’s disease, and human immunodeficiency virus (HIV). We are concerned about this relatively recent development.

For many years, most insurers had formularies that consisted of only 3 tiers: Tier 1 was for generic drugs (lowest co-pay), Tier 2 was for branded drugs that were designated “preferred” (higher co- pay), and Tier 3 was for “nonpreferred” branded drugs (highest co-pay). Generic drugs were automatically placed in Tier 1, thereby ensuring that patients had access to medically appropriate therapies at the lowest possible cost. In these 3-tier plans, all generic drugs were de facto “preferred.” Now, however, a number of insurers have split their all-generics tier into a bottom tier consisting of “preferred” generics, and a second tier consisting of “non-preferred” generics, paralleling the similar split that one typically finds with branded products. Co-pays for generic drugs in the “non-preferred” tier are characteristically much higher than those for drugs in the first tier.

To better understand coverage policies in plans with 2 tiers for generic drugs, we identified several such offerings, including both commercial plans and those under the Medicare Part D program, via an informal search of the Internet. For 6 such plans, we examined coverage policies for 10 widely used drugs—all generically available—that are recommended as first-line treatment in current evidence-based guidelines.

While 2 of the plans provide access on a “preferred” basis to all of the medicines we considered, 1 or more of the drugs are “non-preferred” in all of the remaining plans. Metformin, for example, is a “non-preferred” drug in 1 plan, despite being a first-line treatment for type 2 diabetes mellitus. Two plans have no “preferred” generic anticonvulsant drugs; 3 plans have no “preferred” generic antipsychotic medicines; levodopa is designated a “non-preferred” agent in 3 plans; 4 plans have no “preferred” generic triptans (for migraine headache); and all generic antiretrovirals are Tier 2 agents in 4 plans. When there are no “preferred” generics from which clinicians and patients with particular diseases can choose, it may be argued that the diseases themselves effectively are “non-preferred.”

It is sometimes argued that patients should have “skin in the game” to motivate them to become more prudent consumers. One must ask, however, what sort of consumer behavior is encouraged when all generic medicines for particular diseases are “non-preferred” and subject to higher co-pays. The answer is informed, we believe, by a 2007 JAMA study of cost sharing by researchers at RAND, which was based on a review of 132 published studies. The authors report that “(i)ncreased cost sharing is associated with lower rates of drug treatment, worse adherence among existing users, and more frequent discontinuation of therapy” and that “for certain conditions, the evidence clearly indicates that more cost sharing is associated with increased use of other medical services, such as hospitalizations and emergency department visits.

When insurers designate clinically important generic medicines “nonpreferred” and there are no therapeutically equivalent “preferred” alternatives from which to choose, it cannot be argued that patients are thereby motivated to become more prudent consumers. The existence of clinically sound therapeutic choices is a precondition for any meaningful effort intended to make patients put “skin in the game.” Without choice, such policies are simply punitive and run counter to established principles of formulary design and management.

http://www.ajmc.com/publications/issue/2014/2014-vol20-n9/Is-All-Skin-in-the-Game-Fair-Game-The-Problem-With-Non-Preferred-Generics

Charles Ornstein of ProPublica provides an excellent discussion of this in today’s New York Times: http://www.nytimes.com/2014/09/18/upshot/how-insurers-are-finding-ways-to-shift-costs-to-the-sick.html

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Comment:

By Don McCanne, MD

Why are the insurers establishing tiers of generic drugs with different levels of cost sharing? Cost sharing does shift some of the responsibility of paying for care from the insurer to the patient, but this goes far beyond that.

Establishing tiers of drugs with different levels of cost sharing originally was to encourage patients to select generic drugs which were much less expensive for the insurer to cover. Unfortunately, with our let-the-market-work policies, drugs are being priced in the stratosphere. Even generics have seen skyrocketing price increases. You might think that this is why the private insurers have decided to place generics in tiers, but you would be missing their nefarious strategy.

What we are seeing is the placement of generic drugs used to treat serious chronic diseases into the non-preferred tier which then exposes the patient to greater cost sharing. The shopping behavior that the insurer is encouraging is to have patients with chronic disorders leave their plans and enroll in their competitors’ plans instead. Thus the tier of non-preferred generic drugs has been established to chase away patients who have “non-preferred” chronic diseases – non-preferred by the insurer, that is.

This really does demonstrate how much more evil the private insurers have become. They will continue to find new ways to swindle us. What is insane is that we continue to tolerate them when we know that there is a far better solution – a single payer national health program. Why is the nation not outraged?