Is Your Doctor On the Take – or On the Make?

Doctors’ Profits Drive Many Treatment Choices

Finance (Photo credit: Tax Credits)

The latest edition of The New England Journal of Medicine (NEJM) reports on a study comparing the use of expensive Intensity-Modulated Radiation Therapy (IMRT) for early-stage prostate cancer by doctors owning their own IMRT equipment with those who don’t.

This practice of physicians buying expensive technologies for their group practices – or investing in free-standing facilities as “limited partners” with a percentage interest in the facilities’ profits – is called “physician self-referral“.

It’s called that because instead of referring their patients to independent diagnostic or treatment facilities from which they receive no financial benefit, they refer to those in which they receive a share of the profits. This gives them a financial incentive to refer more patients than they would otherwise – meaning more than truly need the service, which can prove harmful for many patients.

Despite their lofty protests to the contrary, this process of indirectly referring patients to themselves, or “self-referral”, creates an obvious profit motive and financial conflict-of-interest between these doctors’ income objectives and their patients’ best interests.

Most of the American public is oblivious to this kind of behind-the-scenes chicanery in our healthcare that’s been going on for decades. Back when Congress actually did things, it passed legislation (called the “Stark Bill” after it’s main sponsor, Rep. Pete Stark, D – CAL) to limit the practice of self-referral and the financial conflict-of-interest it creates between these doctors and their patients.

But the Stark Bill, like all legislation, was riddled with loopholes and exceptions needed to get it passed in the horse-trading sausage mill of the legislative process. Allowing doctors to continue to buy high-tech equipment as long as it was limited to their own practices was one such loophole. This made group practice medicine more lucrative by virtue of its ability to tap into the big revenues generated by big ticket medical technologies like IMRT.

On-The-Make Vs. On-The-Take

I chose the term “On the make”, meaning intent on profit, for this post for a reason – to differentiate it from docs “on the take” in outright illegal fraudulent activities like taking kickbacks from diagnostic or other services to which they refer their patients.

I know from my own experience that this practice exists, as more than one doctor approached my former MRI clinics looking for payment for referring patients to us – what law enforcement calls “kickbacks“. These doctors are clearly “on the take” with their blatant attempts to extort suppliers with which they do business – only here the business involves patients’ lives. You might therefore consider this a form of human trafficking – and you wouldn’t be far off, morally speaking.

But doctors who invest in such facilities – as those on the take do not – are merely receiving a return on their investment, as they’d have you believe. They’re not looking for something for nothing, like their fraudulent kickback-seeking colleagues.

There are lawyers who specialize in structuring these shady investments to avoid violating the letter of the law – but the spirit of the law is violated by their very existence.

Self-referring doctors may not receive outright kickbacks for referring more of their patients than they would absent any financial incentive to refer. But their profits – partnership distributions that bolster their personal incomes – are definitely inflated when they increase patient referrals to the facilities and services in which they invest.

“The Patient Becomes Almost Like
An ATM Machine”

There’s plenty of evidence demonstrating that doctors who self-refer are focused primarily on profits and maximize them by increasing their referrals for the services they invest in after they invest. The latest is the report in the latest NEJM in which urologists who invest in their own IMRT equipment essentially tripled their patient referrals of early stage prostate cancer patients – a generally low-risk stage of disease that’s often monitored rather than treated – compared to urologists with no such financial incentive to overtreat patients.

The author of this report – Dr. Jean Mitchell, a professor of public policy at Georgetown University – is quoted in a report in The Boston Globe as saying,

“‘The results are striking…what’s driving this is financial incentives linked to ownership. Their behavior changes dramatically…The patient becomes almost like an ATM machine, with the doctor extracting as much revenue as they can’…

“Urologists who did not own the equipment prescribed IMRT for 15.6% of their patients,…while it soared to 44% among…doctors who started to refer patients to their own radiation treatment facilities (emphasis added).”

Corrupting the Demand for Medical Care

The head of the urologist group practice association was quick to declare all those amped-up referrals are perfectly appropriate –  as if he were a credible and objective source for such bogus assurances. These doctors may not be on the take – committing outright fraud by seeking something for nothing – but they’re most definitely “on the make”.

The difference is a subtle one, to be sure.

They’re willing to assume some financial risk by investing in these high-tech medical services their group practices own. And that assumption of financial risk theoretically differentiates them from fraudulent kickback schemes – to a degree.

But they’re still able to leverage, or inflate, their return on that investment by how aggressively they refer their own patients to the services with which they’re partners-in-profits. And this is what differentiates them from real risk-taking investors. Here they know they can always ramp up their referrals if the service isn’t as profitable as projected. They effectively control the flow of patients – the demand for the service.

And anytime a supplier of a service – which they are by virtue of their partnership in it (legal distinctions notwithstanding) – also controls the demand for that service, what you have is a corruption of the normal laws of supply and demand.

In this case, that corruption creates a blatant conflict-of-interest between their patients’ best interests – radiation therapy, after all is highly toxic and potentially harmful – and their own financial self-interest.

Tainting the Practice of Medicine

Not every doctor plays along. The ethical ones reject this tainted practice of medicine, seeing in it the seeds of medical profiteering at patient expense. Even many who participate convince themselves they’re not compromising their oath to “First, do no harm” to their patients even though they subject them to unnecessary treatment risks in order to pump up their profits.

It all just underscores the logical contortions we create to justify behavior that’s clearly unethical – and certainly behavior that creates at least the appearance of conflict-of-interest, something those in the business of life-and-death should want to avoid at any and all cost.

These are the contortions those who practice this breed of “physician-entrepreneurship” learn to master. But it’s all based on a lie, because real entrepreneurs assume real financial risks. They don’t control the demand for their services, knowing they can turn on the spigot of patient referrals whenever lagging profits dictate.

There’s no real financial risk when the cards are so stacked in your favor – and so stacked against your patients getting only the care they need and bearing only the risk of treatment injury they absolutely can’t avoid. And no amount of moral rationalizing can justify subjecting them to more than that.

Nor can it obscure the fact that what drives the doctors who choose this path – so divergent from their original purpose in choosing the practice of medicine – is maximizing their profits from treating their patients, even if it means compromising their patients’ health and safety. And that’s as explicit a breach of their fiduciary duty to their patients as one can imagine.

“Move Along, Nothing To See Here”

This is nothing new in American medicine. It’s been going on for decades and has helped the healthcare industry earn its standing as the most corrupt industry in America – something I document in Our Healthcare Sucks.

In it, I differentiate between the outright fraud of doctor kickbacks and federal fraud settlements that are dominated by healthcare companies – at a rate of FOUR times all other industries combined (yes, you read that right) – and the even more pervasive “soft fraud” of self-referral, bogus surgeries, and much of defensive medicine itself (see “Is it Time for Patients to Practice Defensive Medicine?“).

Because these practices are collectively so common – so pervasive in American healthcare – studies like the one in the NEJM are greeted with jaundiced acceptance. We’re so weary of having the dark side of our healthcare pointed out that we’d rather just “move along” and think instead about some brilliant new medical breakthrough under development. It’s so much more uplifting than all that nasty dark-side…reality.

The crucial question is: Are you more likely to be the one-in-a-million who might actually benefit from the next big breakthrough or the one-in-a-handful likely to be harmed by medical overtreatment caused by your doctors’ financial self-interest – a so-much-nicer term than “greed”, isn’t it?

But when academics – not a group prone to overstatement, after all – can legitimately use the patient-as-ATM machine analogy, maybe it’s time we started calling a spade a spade.

And maybe it’s time we started invoking that patient-as-ATM analogy in our heads whenever an expensive medical intervention is recommended to us or a family member. Because that kind of informed skepticism is clearly deserved – and may just save you and your family a lot more than the cost of an unneeded procedure.

John Lynch: John Lynch was founder and CEO of Medical Diagnostics, Inc. - twice named to Business Week's "Best Small Companies" in America. He's since founded MedSmart Members to publish consumer health education publications.
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