How Money Influences Healthcare Recommendations

Dec 22, 2013

One of the more common sentiments that patients express to me is that they have come to the conclusion that money influences healthcare recommendations. After reflecting on all the years of chronic pain and all the years of failed treatments, many of which were tried multiple times, they have concluded that the business side of healthcare played too much of a role in their own care. They are now disappointed, angry, and jaded about how much they trust healthcare providers.

Sometimes, the sentiment comes when they first accept that their chronic pain is really chronic. They wonder why no one ever sat them down and talked with them about how their pain is actually chronic. What they got instead, they say, were healthcare providers who kept recommending procedure after procedure that were all vain attempts to cure something that they should have acknowledged was a chronic condition. It must have been for the money, they conclude.

Sometimes, the sentiment comes after patients learn how ineffective common surgical and interventional procedures are. They subsequently wonder why, if it’s not for the money, healthcare providers recommend treatments that well-designed studies have shown to be ineffective.

Sometimes, too, they come to wonder about the role of money once they have participated in a chronic pain rehabilitation program. After being on opioid medications for many years, they go through a program and come to learn how to self-manage pain without the medications. Once they get over their initial shock that they really can manage pain without opioids, they begin to wonder, “Why didn’t anyone ever refer me to a program like this before?” Then, they start wondering about the role that money might have played in continuing them on opioids for many years without ever referring them to a program that could have shown them how to live well without the medications.

However the sentiment arises, patients with chronic pain express it fairly often: money influences healthcare recommendations.

So, is it true that money can play a role in the recommendations that healthcare providers make? I think that most healthcare providers would quietly acknowledge that it is true. A number of commentators in the field also acknowledge it (see, e.g., Deyo, Nachemson, & Mirza, 2004; Perret & Rosen, 2011; Weiner & Levi, 2004).

Like most things in life, though, it’s complicated. The question doesn’t lend itself very well to a simple ‘yes or no’ response. Let’s look at some of these complications so that we can appreciate how complicated the issue really is. It’s important to have an accurate understanding and appreciation for the issue, because, after all, it’s not true that all healthcare is bad even if things like the profit-motive sneak into it and influences it. We need healthcare. It’s too simple and likely not good for any of us to get so mad at its imperfections that we become jaded and forego it. We shouldn’t throw the baby out with the bath water, as the old saying goes. Rather, we can acknowledge its imperfections and take them into account in order to make clear-headed decisions about the recommendations that our healthcare providers make. By having a sophisticated understanding and appreciation for how healthcare works, we can make better and more informed decisions about the recommendations that we receive – whether to pursue them or not.

The following is the first of a three-part series on the role of the profit-motive in healthcare, particularly as it relates to the management of chronic pain. This first blog post focuses on how money influences healthcare recommendations. The two following posts will be about 1) what you, as a patient, can do about it, and 2) what healthcare providers can do about it.

Fee-for-service reimbursement influences healthcare recommendations

In countries where healthcare delivery is a for-profit industry, financial incentives can influence recommendations. To see how, we need to provide a quick review of how financial reimbursement works in a for-profit health care industry.

In the U. S., for example, most hospitals, clinics, and individual providers get paid a set amount of money every time they see a patient or perform a procedure or order a test. This system of reimbursement is called ‘fee-for-service.’ Individual providers are commonly akin to independent contractors with their practice being their business and their livelihood dependent on how many patients they see and how many procedures and tests they provide. In addition, administrators of hospitals and clinics track and evaluate providers’ performance based on ‘productivity’ (i.e., how many patients that are seen and how many procedures and tests that are provided).

Notice the subtle value system at work. Healthcare providers make more money when they see more patients and perform more procedures and tests. Their administrators will subsequently see those providers with the highest productivity as most favorable. Administrators promote or lay off healthcare providers in part based on productivity or lack of it. In all these ways, fee-for-service reimbursement creates incentives to provide more rather than less care.

Now, we all know that incentives influence behavior. It’s true in all walks of life and it is similarly true in for-profit healthcare. Fee-for-service incentives influence the type and amount of recommendations that patients receive from their providers, clinics and hospitals. It stands to reason that such influence occurs. Sales people are rarely salaried employees. Rather, they are paid on commission because it influences them to be more productive in the amount of sales they produce – the more they sell, the more they are paid and the more their positions remain safe from being laid off. It’s the same with most healthcare providers – the more patients they see and the more procedures and tests they recommend and convince patients to have, the more they get paid and the more their administrators value their position.

There are actual studies that demonstrate the influence of incentives on productivity in healthcare. For example, Hickson, Altmeier, and Perrin (1987) compared salaried physicians to fee-for-service physicians. Both groups involved the same type of physician and saw the same types of patients. The fee-for-service physicians saw more patients than the salaried physicians.

Likewise, Strope, et al. (2009) studied a recent trend for providers to build their own ambulatory surgery centers and subsequently change the site where they perform procedures, from the hospital or clinic, to the ambulatory surgery center that they own. The advantage of performing procedures at an ambulatory care center that the provider owns is that the provider will make more money. Specifically, they get to bill at a higher rate than in the clinic, even if it is for the same procedure, and they get to keep the money that ordinarily would have gone to the hospital for the use of the hospital facilities. So, what did Strope, et al., find in their study of this recent trend? Once providers could bill at higher rates of reimbursement and subsequently collect more money, the rate of procedures significantly increased, including the most profitable procedures. It’s hard to argue, in such circumstances, that need for such procedures dramatically changed once providers came to own the surgery centers.

Similarly, providers who own their own imaging devices (e.g., X-ray, CT or MRI scans) are upwards of eight times more likely to order scans than those who don’t own their own imaging devices, even when the latter providers are from the same specialty and are seeing the same type of patients with the same types of health problems (Kouri, Parsons, and Alpert, 2002). Again, it’s hard to argue that those providers who own their own imaging devices have somehow tapped into an unmet need of patients (see, for example, Fisher & Welch, 1999).

Rather, it stands to reason that such incentives lead to healthcare providers seeing more patients and providing more recommendations to undergo procedures and tests. As such, incentives to make more money can influence what and what doesn’t get recommended.

The concern is that money influences healthcare recommendations in such a way that it leads to unnecessary and/or ineffective care. As seen above, healthcare providers who own their own facilities or equipment have dramatically higher rates of procedures and tests than the same type of healthcare providers who don’t own their own facilities or equipment. Are the dramatically higher numbers of procedures and tests necessary? If they are unnecessary, they likely do not add value to the diagnosis or treatment of the condition of the particular patient. In other words, under these circumstances, they are ineffective for the particular need of the patient.

The pressure of a fee-for-service system of healthcare can similarly lead to unnecessary and therefore ineffective treatments and tests in the management of chronic pain. It’s common to see patients who have a history of obtaining multiple series of the same surgical or interventional procedures at different clinics, even though the first series turned out to be ineffective for their particular pain condition. Why did the subsequent providers think that repeating the same series of interventional procedures or re-doing the spine surgery was a good idea when previously the procedures were ineffective?

How money influences clinical decision-making

To be fair, there are likely many factors at work that go into a decision to make a recommendation for a particular treatment and not just the fact that the provider will personally profit from delivering the treatment.

Imagine, for example, that you are the provider in the following scenario. You have a patient who has chronic pain and is in some degree of distress about it. You’ve learned that the patient has already had a series of interventional procedures, say, and they were not helpful in reducing pain. However, you are an interventional pain provider and interventional procedures are what you do. The patient is there, at your clinic, and wants you to do something. Might you not reason to yourself, ‘well, there’s a chance that it might work, even if it’s unlikely to work, and the patient wants me to try something; rather than sending the patient away without doing anything and making him or her dissatisfied, let’s give it a try.’ We could call this type of clinical decision-making the ‘we might as well give it a try’ decision

At first blush, it doesn’t seem like the fact that you will personally profit from the procedure has anything to do with the decision. Indeed, the decision seems to be able to stand on its own, as it were. The patient is in pain and is upset about it. The patient wants you to do something. It just so happens that what you do is something that has already been tried and failed in the past. However, there’s still a chance that it might now work. If it works, the patient will be happy. If it doesn’t work, you can say that at least you tried. If you don’t do anything and send the patient away, they’ll likely be more upset than they are now. So, you ‘might as well give it a try.’ The argument seems to stand on its own without needing to reference the fact that you will personally profit from the procedure. This last statement might be true at least until we change the scenario a little by changing the reimbursement system.

Suppose, for instance, that, rather than a fee-for-service system where you profit directly from delivering the care, you work within a capitated system of reimbursement where the profit lies in providing the least and most effective care possible. In a capitated system, providers are not given a fee each time they see a patient or perform a procedure. Instead, they are given a set amount of money for the entire care of a patient for a certain time frame, such as a year. The set amount of money will cover all the care that the patient needs for the given time frame. The incentive in a capitated system is to keep people healthy and out of the doctor’s office so that they don’t use up the set amount of money with frequent visits, procedures, and tests. It also incentivizes providing the care that’s most likely to be effective, and minimizing any ineffective or unnecessary care – again, for the same reason, so that the patients don’t use up the set amount of money that was previously given for their care over the year. Capitated systems of reimbursement are not very common these days, though they were the heart of the HMO system back in the 1970-80’s in America.

Nonetheless, suppose that, as the interventional provider in our scenario, you are now working under such a system of reimbursement. Under this system, would you be as inclined to come to the same decision to repeat a series of interventions that had previously failed– the ‘we might as well give it a try’ decision. Providing the interventional procedures are going to hurt, rather than help, your bottom line. You are still charged to care for the patient who is in pain and distress, but would you use up the set amount of money that you were given by performing procedures that have already been done and were ineffective? Might it not be the case that you would reason against it now? In this scenario, the fact that the series of interventions has already been tried and failed seems to take on greater importance. You would weigh the previously failed treatment more heavily in your decision-making process. In your clinical decision-making process, you might reason, ‘well, why repeat a failed treatment?’

At first blush, it seems like a perfectly reasonable decision. If your car wouldn’t start and you had already paid one mechanic to fix it and the repair didn’t work, you wouldn’t take it to another mechanic and pay for the exact same repair. Rather, you’d want to pursue a different approach. Similarly, as the interventional provider, your decision to refrain from pursuing the same procedure that previously had not worked seems sound.

But, let’s step back for a second, and take stock of our two different, albeit reasonable, decisions.

It’s the same patient with the same condition, but you’ve come to two contradictory treatment recommendations. The only difference that accounts for the different treatment recommendations is how you will get reimbursed. Notice how subtly money influences your decision-making.

It’s an uncomfortable fact that the system of reimbursement in healthcare can influence clinical decision-making.

In the posts to follow, we’ll review what you, the patient, can do to minimize the role that money has in the recommendations that you receive and decide to pursue. Then, we’ll review what us healthcare providers can do to reduce the role that money has on our recommendations.

References

Deyo, R. A., Nachemson, N., & Mirza, S. K. (2004). Spinal-fusion surgery: The case for restraint. New England Journal of Medicine, 350, 722-726.

Fisher, E. S. & Welch, H. G. (1999). Avoiding the unintended consequences of growth in medical care: How might more be worse? Journal of the American Medical Association, 281(5), 446-453.

Hickson, G. B., Altmeier, W. A., & Perrin, J. M. (1987) Physicians reimbursement by salary or fee-for-service: Effect on physician practice behavior in a randomized prospective study. Pediatrics, 80(3), 344-350.

Kouri, B. E., Parsons, R. G, & Alpert, H. R. (2002). Physician self-referral for diagnostic imaging: Review of the empiric literature. American Journal of Roentgenology, 179(4), 843-850.

Perret, D. & Rosen, C. (2011). A physician driven solution – The association for medical ethics, the physician payment sunshine act, and ethical challenges in pain management. Pain Medicine, 12, 1361-1375.

Strope, S. A., Daignault, S., Hollingsworth, J. M., Ze. Z., Wei, J. T., & Hollenbeck, B. T. (2009) Physician ownership of ambulatory surgery centers and practice patterns for urological surgery: Evidence from the state of Florida. Medical Care, 47(4), 403-410.

Weiner, B, K. & Levi, B. H. (2004). The profit motive and surgery. Spine, 29, 2588-2591.

Author: Murray J. McAllister, PsyD

Date of Last Modification: 12-22-2013

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