Anyone who suggests that “we don’t really know where the waste is” in our healthcare system just hasn’t been reading the news. There is so much over-ripe, low hanging fruit waiting to be plucked that the stench of excess has become difficult to ignore.

Even Bloomberg News, which is a business news website, not a health care reform website, pulled no punches in a December 30 story titled “Doctors Getting Rich with Fusion Surgery Debunked by Studies.”   Here Bloomberg focuses on Twin Cities Spine, a Minneapolis group that performs 3,000 spine surgeries a year at Abbott Northwestern, a hospital that boasts performing more spine procedures than any other medical center in the country. Following the money, Bloomberg reporters Peter Waldman and David Armstrong reveal that in the first nine months of 2010, spine surgeons at Twin Cities received $1.75 million in “royalties and consulting fees” from Medtronic, a medical device company which sells Infuse, a bone-growing material widely used in a type of back surgery called “fusion.”

Nearly half of the back surgeries done by Twin Cities are fusions—surgeries that “weld” painful vertebrae with the help of  metal plates, rods and screws implanted in the patient's back. In recent years the operation has become wildly popular, even though, according to Waldman and Armstrong, “studies have found the procedure to be no better for common back pain than physical therapy–and a lot more dangerous.”  Nevertheless, “fusion surgery has helped spine surgeons become the best paid doctors in the U.S.,” they observe, “with average annual salary of $806,000, more than three times the earnings of a pediatrician, according to the American Medical Group Association, a trade organization for doctor practices.”

Just ten days before the Bloomberg story appeared, the Wall Street Journal ran a piece headlined: “Top Spine Surgeons Reap Royalties, Medicare Bounty,” telling the tale of another group of surgeons at Norton Hospital in Louisville, Kentucky, who also received money from Medtronic—more than $7 million over the same nine months.

“Medtronic insists that it is getting very high value out of these guys, but is notably sketchy on providing any details as to just what is the intellectual property, consulting advice, etc. it has received in exchange for these vast sums,” notes Dr. Howard Brody on his blog, Hooked: Medicine Ethics and Pharma. (Thanks to Health Care Renewal's Roy Poses for calling attention to this blog.)

What is certain is that Medtronic, the largest maker of spinal implants in the country, has good reason to encourage the surgery. As the WSJ points out, “a large portion of the money” that we spend on spinal fusion “flows back to device makers, whose expensive implants eat up most of Medicare's reimbursement for the procedure.” Spinal implants generate fat margins for device makers. “The screws used to drill into bone, known as pedicle screws, sell for $1,000 to $2,000 apiece but cost less than $100 to make. A bone-growth protein used to help vertebrae fuse can sell for more than $5,000 a pack, depending on the size.

"You can easily put $30,000 worth of hardware in a person during a fusion surgery," Charles Rosen, a spine surgeon at the University of California, Irvine School of Medicine told the Journal. Rosen has created a group called the Association for Medical Ethics to combat what it sees as conflicts of interest in spine surgery. (Full disclosure: Rosen appears in my book, Money-Driven Medicine; he is a physician  who is willing to stand up to his peers.)

“Medtronic and the surgeons say the payments are mostly royalties they earned for helping the company design one of its best-selling spine products,” the Journal reports, but “corporate whistleblowers and congressional critics contend that such arrangements—which are common in orthopedic surgery—amount to kickbacks to stoke sales of medical devices. They argue that the overuse of surgical hardware ranging from heart stents to artificial hips is a big factor behind the soaring costs of Medicare.”

                                       The Good News

As we begin a new year, I take these two stories as a sign that, whatever happens on the floor of the House in 2011, health care reform is moving ahead on the ground. Nationwide, a process of education has begun. Granted, the problems that the WSJ and Bloomberg describe are not new. But in recent years, the mainstream media has dug into the story of money-driven medicine, reporting on it more often, and in greater depth, as reporters explain how over-treatment is driving health care inflation. The repetition is crucial: education depends on repeating the same message, and making it clearer over time.

There was a time when editors shied away from stories which suggested that perverse financial incentives play a major role in our health care.  In the early 1990s, Americans were wary of insurers, but they wanted to believe that drug-makers and device-makers “put people before profits”—a slogan that can be traced back to a speech delivered by Merck chairman George W. Merck in 1950.  (For a fascinating portrait of Merck, click here.)

Unfortunately, Merck’s culture (along with corporate culture throughout the Fortune 500) has changed radically since 1950. There was a time when CEOs stayed with a company for decades, and took a long-term view, focusing on gaining market share by making the best possible product at the lowest possible price. But beginning in the 1980s, CEOs came to view their jobs as short-term gigs. Their focus shifted to accumulating bonuses in the form of stock and stock options as quickly as possible while satisfying the short-term expectations of Wall Street analysts and shareholders.)

Nevertheless, in the early 1990s, when we were debating Clintoncare, few patients wanted to hear that drug-makers and device-makers conceal evidence that their products might hurt us. This is one reason why the Harry & Louise television ads funded by the pharmaceutical industry were so successful; viewers still believed that drug makers put their interests first. In recent years, however, newspaper reports of drugs being withdrawn from the market after causing heart attacks, along with stories of device-makers courting surgeons by taking them to strip clubs, have undermined that trust.

Meanwhile medical journals continue to publish research that reveals how medical devices are overused. Earlier this week, the Journal of the American Medical Association (JAMA) reported on a study showing that in 20% of cases where patients  receive ICDs (implantable cardioverter-defibrillators)  the procedure does not meet evidence-based guidelines for their use, and these patients were found to have a significantly higher risk of dying in hospital compared to those who did meet the criteria.

For better or for worse, many Americans have become more skeptical about U.S. health care—in large part because the mainstream press has begun to delve into tales of overtreatment.

Today, most Americans still want to trust their doctors, though as UCSF’s Dr. Bob Wachter pointed out in a recent post on The HealthCare Blog, the danger that patients will lose faith in their physicians is growing. The “view of doctors as ‘knights’ (motivated by virtue) is eroding rapidly,” Wachter warns. “Today’s physicians are increasingly seen as ‘knaves’ (rigidly self-interested players) who “learn new techniques and procedures and order tests and studies for personal gain.” (Also see this JAMA article “Societal Perceptions of Physicians.”)

If we are to have a healthy health care system, it is essential that patients believe that their doctors are professionals who put their patients’ interest ahead of their own self-interest. This is why it is so important that concerned surgeons speak out about the over-use of costly medical technologies—and refuse exorbitant consulting fees which might in any way be seen as “kickbacks.”  (I should add that while perverse financial incentives can spur over-treatment, in many cases, sheer habit, combined with a doctor’s excessive faith in his own judgment can lead him to ignore medical evidence. Surgeons need to be aware of that possibility when recommending a procedure to patients–especially if other surgeons in the same field are warning that risks outweigh potential benefits.)

The fact that the media is making patients aware of an epidemic of over-treatment paves the way for true reform. Over the next few years, Medicare and the Secretary of Health and Human Services will find it much easier to begin to reduce waste if the public understands the cost of unnecessary procedures, when measured not only in dollars, but in terms of human suffering. That’s why it is so important that journalists at outlets such as Bloomberg and the Wall Street Journal are investigating the issue.

In the past, apologists for the status quo dismissed accusations that physicians were receiving kick-backs as yet another example of liberal bias, arguing that left-leaning journalists simply refuse to recognize that financial incentives are needed to spur “innovation.” But, today, what can conservatives say—that Bloomberg just doesn’t understand how capitalism works?

                            The Cost-Wasted HealthCare $$$

The stories that appeared on Bloomberg and in the WSJ in recent weeks illustrate the size of the problem:

• The number of fusions at U.S. hospitals doubled to 413,000 between 2002 and 2008, generating $34 billion in bills, data from the federal Healthcare Cost and Utilization Project show. The number of the surgeries will rise to 453,300 this year, according to Millennium Research Group of Toronto.

• According to the Journal's analysis of Medicare claims, the procedure went from costing Medicare $343 million in 1997 to $2.24 billion in 2008. Adjusted for inflation, that's nearly a 400% increase

• The medical evidence shows that, in a great many cases, fusion is no more effective than other, less risky treatments (including physical therapy), is daunting

— “British and Norwegian researchers found fusion no better than physical therapy for disc-related pain in three studies, totaling 473 patients, published in the journals Spine, Pain and the British Medical Journal between 2003 and 2006.

–“Rates of complications from surgery in three of the European studies  including bleeding, blood clots, and infections — were as high as 18 percent. None reported complications from physical therapy. The four studies are cited in journals as the only head-to-head, randomized comparisons between the two treatments.

–“Evidence that fusion is better than a simpler procedure called decompression for stenosis is ‘lacking,’ a study in the Journal of the American Medical Association found earlier this year.  As Naomi explained in this HealthBeat post, “stenosis” occurs when “age and degeneration of the vertebrae and associated ligaments causes the spinal canal to narrow, putting pressure on nerves that then leads to serious back and leg pain and numbness. Over the last two decades, a surgical technique that alleviates this pressure on the nerves—called lumbar decompression—has improved so much that many older adults who undergo it have relatively good outcomes,” she reported. The average hospital costs for simple decompression surgery is $23,724. . . ” 

She goes on to point out that simple decompression surgery is far less expensive than fusion because “there are no profits to be made from implants, devices or proprietary biological materials. In the complex surgeries, charges for implants alone can exceed $50,000. With Medicare footing the bill, doctors get paid more for the complex procedure, hospitals get paid more and medical device companies eagerly watch their profits grow.”

Nevertheless,  “the JAMA study found that increasingly, doctors are using far more complex procedures that involve spinal fusion and the use of expensive—and still experimental—bone grafts and implants to treat stenosis in their older patients. In a small minority of cases the severity of spinal degeneration and other anatomical problems makes it necessary to use such invasive procedures. But the researchers in the JAMA paper found that 50% of the new complex fusion operations were performed on people who did not have these problems.”

The study also found that fast-growing complex fusions—those joining more than three vertebrae—carried a 5.6 percent risk of life threatening complications, more than double the 2.3 percent rate for decompression, which usually involves cutting away damaged discs or bone pressing on spinal nerves.

Why are doctors doing so many fusions? Eugene Carragee, director of the Orthopaedic Spine Center at Stanford University School of Medicine chalks the problem up to “conflicting economic incentives": 
“[S]imple decompression operations rarely have well-funded advertising campaigns or well orchestrated promotions at professional meetings,” he notes. Moreover, "surgeon reimbursement for a simple decompression for spinal stenosis is approximately US $600 to $800, whereas the reimbursement for a complex fusion may be 10-fold greater.”

This sounds to me like an area where the Secretary of Health and Human Services might use the new authority that the Affordable Care Act gives her to “lower fees for overvalued services” while “lifting fees for undervalued services.”  Even if she hiked Medicare reimbursement for decompression by 20%–and lowered compensation for fusions by 20%–or more– Medicare would see substantial net savings.

In part 2 of this post, I’ll discuss the cost of fusion measured in terms of human suffering, what spine surgeons themselves say about the procedure, what other surgeons have disclosed about how much device-makers are paying them, and how the Affordable Care Act calls for device-makers to disclose payments to physicians by 2013. Such transparency could have a chilling effect on unnecessary procedures—not only spine surgery, but hip and knee replacements. I’ll also include the Wall Street Journal’s list of the 20 hospitals that collected the most money from Medicare for spinal fusions from 2004 to 2008, along with the percentage of their parents who underwent the surgery because their discs were aging, despite the consensus (backed up by medical evidence) that this is normally not a situation which calls for fusion.