Saturday, October 06, 2007
Unique Economics
Our health care delivery system includes an economic arrangement that has no counterpart that I can think of. It is this: a medical license gives a doctor the power to prescribe; i.e., “purchase,” services and products from hospitals, pharmacies, and other providers on behalf of patients. Those services and products must then be paid for by the patients (who cannot purchase them directly) or by their insurance companies.
The arrangement is subject to abuses of two major types.
One is the conflict of interest that occurs when the doctor has a financial interest in what is being prescribed. The most obvious example is drugs, which doctors have long been prohibited from selling. The situation has become more complicated in recent times. One example would be orthopedic hospitals that are owned by the orthopedic surgeons who practice in them.
The other takes place when the sellers of a medical service or product attempt to influence physicians to prescribe it. Again, drugs provide an obvious example as pharmaceutical houses offer free meals, expense-paid trips and other inducements designed to induce doctors to prescribe their products.
Hospitals depend on physicians for referrals and in recent times some of them have been found making payments or providing in-kind benefits (e.g., computers) to their doctors that are out of proportion to the value of what was legitimately received in return. That is both illegal and unethical, but given the intimate and complex relationships that exist between doctors and hospitals, there are plenty of marginal cases that are subject to interpretation.
On this past September 3, the Federal Register published a notice by Medicare that it intended to require hospitals to report their financial relationships with their physicians. It stated that the information so provided would help Medicaid administer section 1877 of the Social Security Act, known as “the physician self-referral law.” That law attempts to prevent the conflict of interest described above.
The issue is not a problem for Mayo Clinic, Cleveland Clinic, or Henry Ford Health System, all of which employ their doctors.
If that arrangement became the common one, the issue would go away.
Our health care delivery system includes an economic arrangement that has no counterpart that I can think of. It is this: a medical license gives a doctor the power to prescribe; i.e., “purchase,” services and products from hospitals, pharmacies, and other providers on behalf of patients. Those services and products must then be paid for by the patients (who cannot purchase them directly) or by their insurance companies.
The arrangement is subject to abuses of two major types.
One is the conflict of interest that occurs when the doctor has a financial interest in what is being prescribed. The most obvious example is drugs, which doctors have long been prohibited from selling. The situation has become more complicated in recent times. One example would be orthopedic hospitals that are owned by the orthopedic surgeons who practice in them.
The other takes place when the sellers of a medical service or product attempt to influence physicians to prescribe it. Again, drugs provide an obvious example as pharmaceutical houses offer free meals, expense-paid trips and other inducements designed to induce doctors to prescribe their products.
Hospitals depend on physicians for referrals and in recent times some of them have been found making payments or providing in-kind benefits (e.g., computers) to their doctors that are out of proportion to the value of what was legitimately received in return. That is both illegal and unethical, but given the intimate and complex relationships that exist between doctors and hospitals, there are plenty of marginal cases that are subject to interpretation.
On this past September 3, the Federal Register published a notice by Medicare that it intended to require hospitals to report their financial relationships with their physicians. It stated that the information so provided would help Medicaid administer section 1877 of the Social Security Act, known as “the physician self-referral law.” That law attempts to prevent the conflict of interest described above.
The issue is not a problem for Mayo Clinic, Cleveland Clinic, or Henry Ford Health System, all of which employ their doctors.
If that arrangement became the common one, the issue would go away.
