As part of a continuing series on health care spending, last week I looked at what share of our health care dollars goes to pay for physician’s fees and clinical services. As the pie chart below shows, 22 percent of the $2.1 trillion that we spent  on  health care last year went directly to doctors. That’s up from 19.4 percent in 1960.

Most of the jump came in the 1960s and 1970s—though physician incomes continued to grow in the 1980s, rising 30 percent from 1984 to 1989, or about twice as fast as the average increase for other full-time workers.

I promised that this week I would publish a Part II to last week’s post and look at how much doctors are paid in other countries, how hard they work compared to doctors in the U.S., and how patients are faring as physicians’ incomes continue to outstrip both inflation and wages nationwide.  Finally, I said I would discuss whether we are spending too much on physicians services—and how we might change the way we pay them.

But first, let me very quickly re-cap the background to this story. In recent years, doctors’ fees have come under pressure. In the 1990s, managed care companies set out to pare costs by questioning virtually every bill that doctors sent them and in recent years Medicare has been trying to keep a lid on spending by refusing to raise most doctors’ fees.  Many private insurers have been following Medicare’s lead. Meanwhile, the cost of running a practice has been climbing, making it hard for some doctors (particularly primary care physicians) to stay afloat financially.

Nevertheless, by increasing the number of patients they see and the number of procedures they perform, many doctors have been able to boost their incomes.  More entrepreneurial doctors also have been making investments in surgical centers—creating a second income stream.  Thus, the overall amount that we spend on physicians’ services continues to rise: up 6.2 percent in 2000, up 8.3 percent in 2003, up 7.3 percent in 2004, up 7.4 percent in 2005, and gaining another 5.9 percent in 2006.

But not all physicians are prospering. The charts I ran last week show pediatricians, family doctors and others who practice what some call “cognitive medicine” (talking to and listening to the patient ) making as little as $115,000 a year while specialists who perform the most aggressive procedures haul home $800,000.

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As a nation, we are spending well over two trillion a year on health care. What exactly are we paying for? In a December 6 post, I asked how much of that $2 trillion goes to private insurers in order to cover “administration”– which includes advertising, marketing, underwriting, lobbying, multi-million dollar executive salaries, and profits for  shareholders.

As the pie chart below shows, it turns out that in 2006, after taking in premiums and  paying out reimbursements,  private insurers  kept  close to $95 billion—or about 4.5 percent of the $2.1 trillion we spent on care—to fund everything from advertising to CEO bonuses.  Meanwhile, private insurers paid roughly one-third of the nation’s health care bills.  (By contrast, the government picked up nearly half of  the $2.1 trillion tab through programs like Medicare, Medicaid, SCHIP while spending only $525 billion —or about 2.5 percent of the $2.1 trillion—on administration.)

Ninety five billion dollars represents the difference between what private insurers received in premiums and what they paid out in reimbursements, and it’s a big number. But as I commented in my December post, even if we eliminated the private insurance industry’s role in our health care system, the $95 billion saved would be wiped out by just one year of health care inflation.

Inflation: that is the elephant in the middle of the room. In 2006, total spending on health care climbed by 6.7 percent, or $132 billion, to $2.1 trillion. In 2007, economists expect an even bigger jump.The pie just keeps on growing, year after year, far faster than the average workers’ wages: up 8.6 percent in 2003, up 6.9 percent in 2004, up 6.5 percent in 2005, up 6.7 percent in 2006…And there’s no end in sight.

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Okay, not really—but still, unsettling news from yesterday’s NEJM. According to a report from professors at Oregon Health and Science University, Kent State University, and Harvard, negative studies of anti-depressant publications are much less likely to be published in research journals than positive ones.

The authors compared 74 FDA studies for 12 antidepressant agents, which involved a total of 12,564 patients, to those published in medical journals—the goal being to see which studies made it from the insider circuit to the printed page, and how those that did make the jump were altered for publication.

They found that among the FDA-registered studies, “studies viewed by the FDA as having negative or questionable results were . .  . either not published (22 studies) or published in a way that . . . conveyed a positive outcome (11 studies).” In other words, bad news didn’t make it to the journals—or it was spun to sounds like good news.

Indeed, according to the study, if a reader were to judge the medications solely based on the published studies, they would think that “94 percent of the trials conducted were positive.” But in fact, “the FDA analysis showed that 51 percent were positive.”

Obviously, medical journals are publishing research that over-sells the effectiveness of anti-depressants. But why? The answer is exactly what you think: a big, fat conflict of interest. Medical journals have a lot to gain by giving designer drugs the benefit of the doubt—even if it’s undeserved.

In a well-known 2006 BMJ study, professors from York University and the University of Medicine and Dentistry in New Jersey, analyzed the messy world of “commercial bias in medical journals.” The risk here is self-explanatory: sometimes the business of medicine encroaches on medical research, especially when it comes to prescription drugs.

But despite the ubiquitous for-profit interests circling around medical journals, the BMJ study found that only nine of 30 peer-reviewed general and internal medical journals “had an explicit policy for dealing with editors’ financial conflicts of interest.” The rest pretty much just wing it—a dangerous strategy when their publications are so economically vulnerable.

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You’ve probably heard of retail health clinics (RHCs), “drive-thru” medical centers that offer relatively simple and cheap medical services in stores like CVS and Wal-Mart. They’re all the rage nowadays, with their number doubling over 2007, from 300 to about 600 nationwide. At the end of this year, their numbers are expected to triple, hitting 1,800.

The RHC explosion has caused concern in some circles.  Primary care physicians are particularly worried that the clinics represent a threat to their practice and could disrupt continuity of care. Other concerns come from people like yours truly, who worry that the old formula of profit motive plus market opportunity could lead to a feeding frenzy that would compromise the quality of care.

Retail clinics are so new that these concerns can sometimes seem premature; but judging by one 2007 document that I recently came across, my worries are well founded. Even the people trying to grow the RHC market see these health care problems coming—but they view them as business opportunities.

What people often forget about for-profit initiatives like retail clinics is that they’re bent on growth. They may start small, but they don’t want to stay small. The business plan goes beyond today’s headlines. Investors want projections; they want a roadmap to the future; they want to know that challenges have been accounted for. That means that RHCs aren’t just concerned with the here and now, but also how the market can sustain itself in the future. And according to “Business Intelligence to Achieve the Goals of Retail-based Clinics,” a briefing from the Business Intelligence Network authored by Scott Wanless, the only way to do that is to look well beyond the current RHC formula.

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At Wachter’s World, Bob Wachter, Professor and Associate Chairman of the Department of Medicine at the University of California, San Francisco explains more about how the government’s attempt to stop the use of checklists in ICUs could undercut efforts to improve quality in hospitals nationwide.  He also gives you a chance to write to your Senator or Congressman. Go take a look.

Dr. Scott Gottlieb, a resident fellow at the conservative American Enterprise Institute, published an op-ed in the Wall Street Journal last week that returned to the much-exploited story of Nataline Sarkisyan, the 17-year-old Californian who died before receiving a liver transplant. Gottlieb used the story to make the argument that “the U.S. has the best health care in the world.”

Gottlieb is squaring off against John Edwards, who has been suggesting that if Nataline had lived in a European country she might have lived.  Edwards blames CIGNA, her for-profit insurer, for refusing to cover the procedure. Dr.  Gottlieb, who is a former FDA official, responds with a double-barreled argument: “Americans are more likely than Europeans to get an organ transplant, and more likely to survive it too.”  He sounds confident, and at first glance, his argument seems persuasive.

But a closer look reveals that Gottlieb makes his case by carefully culling the numbers that fit his argument, while omitting those that don’t. Unfortunately, too many people involved in the healthcare debate play fast and loose with the facts. Everyone interested in reform should be on the look-out for those who don’t cite solid evidence for their assertions. If they don’t give you their source, it may be because they don’t want you to look it up—and because they realize that they are cherry-picking the numbers.

Before engaging Gottlieb’s argument, I should acknowledge that, as I have said in an earlier post, I think Edwards has picked a bad case to make his argument for healthcare reform. I am not at all certain that the transplant would have helped this particular patient.  And while Edwards puts all of the blame on CIGNA, Nataline’s insurer, I am bothered by the fact that the hospital asked for a $75,000 down payment on the surgery and then refused to go forward without it. As one physician/blogger from the very same hospital where Nataline was treated asked: “Why didn’t the hospital simply perform the surgery and defer payment from the family or CIGNA [Nataline’s insurer] until later? If it was such a great idea, why didn’t they exhibit the outrage and strength of conviction to go ahead regardless of CIGNA’s assessment?” 

That said, I agree with Edwards and other proponents of health care reform that, in other countries, decisions about whether or not to pay for expensive procedures like transplants are not based on whether the patient has the money or the insurance to pay for the operation. Instead, in other developed countries, such decisions turn on whether the benefits of the treatment outweigh the risks—and whether the procedure is cost-effective.

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Over on CNN.com, I came across one of the most wrong-headed arguments against health care reform that I’ve ever seen in my life. Here’s the gist of it: we can’t reform the health care system until doctors are nicer to their patients. Perhaps unsurprisingly, this gem comes from a TV pundit.

The talking head in question this time is the lamentable Glenn Beck, CNN’s go-to ‘irreverent conservative’ voice. In an online Op-Ed, Beck details his miserable experience with doctors after getting surgery and works very hard to turn his displeasure into an argument against health care reform—with little success.

Long story short, Beck had surgery on his butt, things went horribly awry, and he was seriously medicated in order to dull the pain. The combination of drugs Beck received “took [him] to an incredibly dark place…Every time I closed my eyes…I would see horrific, unimaginable images of death and after two and a half days…I was literally suicidal. It felt like there was no hope…”

Beck’s despair went more or less ignored by doctors, who he says "treated [me] more like a number than a patient. At times, staff members literally turned their back on my cries of pain and pleas for help. In one case a nurse even stood by tapping his fingers as if he was bored while my tiny wife struggled to lift me off a waiting room couch."

This is unsettling stuff that I wouldn’t wish even on Glenn Beck. Predictably, but not unjustly, Beck uses his experience as a launching pad to assert the importance of compassion and bedside manner in medical professionals. Here here! But then Beck really, really jumps the tracks:

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Health Wonk Review is up here. This compendium of some of the best health care posts of the past two weeks is well worth reading. 

This week, Bob Laszewski of Health Care Policy and Marketplace Review  is our host, and he is highlighting pieces that examine some of the candidates’ health care plans (Joe Padua on John McCain, Jason Shafrin on all of the Democrats, and Anthony Wright comparing candidates on both sides of the aisle) as well as California’s effort at health reform (Brian Klepper is skeptical). He also calls attention to Roy Poses’ expose of yet another greedy CFO on Health Care Renewal.  But I’m not going to try to list everything here. Check out Health Care Policy and Marketplace Review yourself—I suspect you’ll wind up putting it on your “favorites” list.

Earlier this week the Happy Hospitalist, an internist who works full-time in a hospital,  published a behind-the scenes look at the “turf wars” that doctors fight when it comes to performing certain very lucrative procedures.  Colonoscopies, for example, pay nicely, and doctors vie to do them. Bone marrow biopsies, on the other hand, belong to the group of procedures he labels the “red headed step children” of hospital care:  they’re relatively time-consuming and just don’t pay very well. As a result, the (usually) Happy Hospitalist explains, he often has a very tough time finding a specialist willing to perform one of these procedures for a patient.

Let me preface his story by pointing out that Medicare’s fee-for-service payment schedule—which has become the basis for most private insurers’ payments as well—is set and updated by a proprietary, and rather secretive advisory committee, the RVS Update Committee (or RUC).

I’ll tell you more about the RUC in the post below (“Who Decides How Much To Pay Specialists?”)  But first, read the Happy Hospitalist’s story. (Note, throughout the piece, I have inserted definitions of medical terms, in brackets.)

From: The Happy Hospitalist
TUESDAY, JANUARY 8, 2008 
“Red Headed Step Children”

“In the world of procedures, all procedures are not created equal. And when that happens, the turf wars begin. I can assure you, in just about every hospital in this country, behind the scenes politics go hand in hand about who has the right the perform what. The battles usually ensue in those procedures that are economically worth while to the doctor or group of doctors

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If you’ve read the post above about specialists vying to do lucrative procedures like colonoscopies– while avoiding equally time-consuming procedures that just don’t pay as well–you might have wondered: who sets and updates the fees for each procedure?

The answer: a Medicare advisory committee called the RVS Update Committee (or RUC).  The RUC flies under the radar. It’s quite secretive and many people have never heard of it. Yet it is enormously powerful. It sets the prices for Medicare’s fee-for-service payment schedule, a price-list that has become the basis for most private insurers’ payments as well.

Who is on the RUC? It’s dominated by specialists. So, it should come as no surprise that a specialist’s time is deemed to be worth far more than an internist’s or a family doctor’s time.  An article in the June 2007 Annals of Internal Medicine provides a quick example.

In 2005, the Medicare fee for a typical 25- to 30-minute office visit to a primary care physician in Chicago was $89.64 for a patient with a complex medical condition (Current Procedural Terminology [CPT] code 99214). By contrast, Medicare’s fee for a gastroenterologist in the outpatient department of a Chicago hospital performing a colonoscopy (CPT code 45378)–which also takes about 30 minutes—was $226.63.  And if the specialist performed the procedure in his own office, where he pays for equipment and nursing time, he could charge Medicare $422.90 for his thirty minutes.  (Of course the primary care physician also has to pay for staff and equipment, though the equipment may not be as expensive.) 

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