PPACA and the Growing Shortage of Pediatric Subspecialists

Over the course of this year, a spate of articles and op eds have highlighted a growing shortage of pediatric subspecialists.  Earlier his month, Amy Mansue, CEO of Children’s Specialized Hospital here in New Jersey, addressed the problem in a very interesting post on the National Association of Children’s Hospitals’ With All Our Might blog.  Ms. Mansue describes a recent visit to Capitol Hill during which she discussed the implementation of the Patient Protection and Affordable Care Act, explaining to the staffers that:

[t]he differences between strategies to address the needs of the newly insured children versus strategies to address the needs of adults couldn’t be more different.  Start with the basic fact that there is a critical shortage of specialists in pediatrics, where the biggest issue facing adults is how to access primary care. There can be a utilization of physician extenders in the short run until more primary care physicians are trained; there is no similar ‘quick fix’ in pediatrics.

Pediatric neurologists and developmental-behavioral pediatricians are in especially short supply.  A survey of children’s hospitals conducted by the National Association of Children’s Hospitals and Related Institutions in December 2009 revealed average wait times of 9 weeks for an appointment with a pediatric neurologist and 13 weeks for an appointment with a developmental-behavioral pediatrician.  An earlier study published in Pediatrics found that, in addition to enduring long waits, parents and children also travel long distances to see these specialists–on average 73 miles to see a subspecialist in neurodevelopmental disabilities and 44 miles to see a developmental pediatrician.

This is concerning for a host of reasons, including the importance of early, appropriate intervention to the future success of children with developmental delays.  As I discussed previously here and here, the “right” medical diagnosis can be key to accessing needed services, as can a thorough written evaluation and a doctor willing to advocate on a child’s behalf.  This is true whether a family is fighting for publicly-provided disability benefits or special education services or to get a private insurance plan to pay for medically necessary therapies.

What explains the subspecialist shortage?  As Ms. Mansue puts it, “it is all about math.  There is no incentive to go through an additional decade of training to get paid less than what a pediatric nurse practitioner is now demanding in my home state of New Jersey.”  Congress has tried to change the equation.  PPACA provides for loan forgiveness of up to $35,000 per year for up to three years for pediatric subspecialists who “work for a provider serving in a [Health Professional Shortage Area] or medically underserved area, or among a medically underserved population that has a shortage of the specified pediatric specialty and a sufficient pediatric population, as determined by [HHS], to support the specified pediatric specialty.”  But funding for this measure has not yet been appropriated.  The federal government has also attacked the problem through its Children’s Hospitals Graduate Medical Education Payment Program, which provides funding for specialty training for pediatricians.  According to a recent New York Times op ed, however, this program’s funding is also uncertain, suggesting that an end to the shortage of pediatric subspecialists may not be in sight.

Recommended Reading, “Regulating Conflicts of Interest in Research: The Paper Tiger Needs Real Teeth”

Jesse Goldner’s Regulating Conflicts of Interest in Research:  The Paper Tiger Needs Real Teeth, 53 St. Louis U. L.J. 1211 (2009), is a must-read for anyone who has anything to do with oversight of researchers’ conflicts of interest.  The article reflects an insider’s understanding of academic physicians’ perspectives on this still-contentious topic, provides a terrific survey of the literature, and proposes regulatory fixes by the feds that HHS will hopefully seriously consider.  The article’s timing is perfect, given that HHS is receiving comments until August 19, 2010 on proposed changes to its conflict of interest regulations.  See http://grants.nih.gov/grants/policy/coi/. Even in the short time since the publication of Goldner’s article, HHS OIG has issued yet another report on conflicts of interest management, entitled “How Grantees Manage Financial Conflicts of Interest in Research Funded by the National Institutes of Health,” (Nov. 2009), available at http://oig.hhs.gov/oei/reports/oei-03-07-00700.pdf.  Based upon an in-depth audit of 41 grantee institutions that reported conflicts in FY 2006, the OIG found that equity interests represent the most pervasive form of financial conflict of interest. The most popular tool employed by entities managing conflicts is disclosure to publications or at academic presentations; entities only rarely required the reduction or elimination of conflicts.  As important, and unsurprising based upon AAMC surveys, is the unreliability of the conflict reporting mechanisms used by most academic institutions.

The OIG report emphasizes the need for increased oversight of conflicts of interest.  Academic medical centers have had plenty of time and forewarning to address the issue but, as demonstrated by a vignette described by Goldner about his own efforts to accomplish this through the IRB which he chaired, faculty resistance is significant.  Consequently, Goldner is exactly right in calling upon HHS to issue aggressive regulations that accomplish the necessary reforms.  He would require the establishment of conflict of interest committees at every research institution, comprised primarily of independent members, to which faculty would report all financial relationships that create conflicts of interest. Resolution of such conflicts would be a condition precedent to proceeding with proposed research, and violations would result in significant penalties, including debarment from research.

As shall be discussed in a forthcoming Seton Hall White Paper entitled The Limits of Disclosure as a Response to Conflicts of Interest in Clinical Research, I do not have confidence in benefits accruing from requiring disclosure of conflicts to research participants in consent forms, although research participants do have a right to know of such conflicts.  This is a minor quibble.  Goldner’s article is a great contribution to the literature. 

Possible Repeal of Massachusetts Ban: A Gift to Prescribers, Patients or Industry?

Next month marks the second anniversary of the enactment of the Massachusetts Pharmaceutical and Medical Device Manufacturer Code of Conduct, a law requiring pharmaceutical and medical device manufacturing companies to designate a compliance officer and implement a compliance program reflecting the commonwealth’s regulations on meals, CME sponsorship, use of non-patient identified prescriber data, gifts and other payments, etc.  The law, which went into effect on July 1, 2009, builds upon the Pharmaceutical Research and Manufacturers of America’s revised Code  on Interactions with Healthcare Professionals (”PhRMA Code“) and the Advanced Medical Technology Association’s revised Code of Ethics on Interactions with Healthcare Professionals (”AdvaMed Code“), two voluntary codes intended to eliminate any influence — perceived or otherwise — of the industry over healthcare professionals with respect to gifts, entertainment, recreation, educational programs, professional meetings, scholarships, and the like.

The Massachusetts law is more restrictive, however, than its PhRMA and AdvaMed counterparts.  It prohibits companies from sponsoring continuing medical education programs that do not meet Accreditation Council for Continuing Medical Education guidelines.  The PhRMA and AdvaMed Codes do not.  It prohibits any company employee from providing meals outside of a hospital or office setting.  The PhRMA Code only restricts sales representatives and their immediate supervisors to a hospital or office setting.  The AdvaMed Code does not impose any restrictions on the location of meals.

Furthermore, starting on July 1, 2010, the law requires companies to annually certify their compliance with commonwealth regulations and, among other things, to disclose any gifts or payments valued over $50 and given to anyone who can prescribe, purchase, or dispense drugs or devices.  Effectively, it’s a ban on all gifts to prescribers (and in so doing goes a step further than the PhRMA and AdvaMed Codes which make an exception for educational gifts).  Companies must also submit $2,000, payable to the commonwealth’s Department of Public Health, with each annual disclosure report.  Violations can result in penalties up to $5,000 per occurrence.  The first round of disclosures were due 16 days ago and covered activities for the July 1, 2009 to December 31, 2009 period.  Next year companies will be expected to report on their activities for the January 1, 2010 to December 31, 2010 period.  Or will they?

The Massachusetts House recently passed an economic development bill that repeals the disclosure requirement/gift ban (the bill also establishes a sales tax holiday and consolidates commonwealth economic agencies).  The Senate version of the bill does not include the repeal.  It’s a wait-and-see as to how the two chambers will work out the final bill through their conference committee.

Opponents of the gift ban claim it has adversely affected pharmaceutical clinical research as well as the restaurant and convention industries.  Almost two years ago, PhRMA Senior Vice President Ken Johnson expressed his disappointment over the law, saying:

[it is] very likely damaging for medical partnerships, clinical research and patients in Massachusetts….

Public disclosure of a pharmaceutical company’s arrangements with principal investigators of its clinical trials also could reveal sensitive, proprietary business information to a company’s competitors.  This could erode the independent decision-making of companies trying to bring science from research facilities to patient care setting….

The disclosure requirements subjects all of the physicians, academic institutions and hospitals involved in such trials to publicity in a form that may be difficult to understand and likely will generate unwanted and unnecessary public scrutiny.  This could make Massachusetts an unattractive place for academic scientists to live and work — and for pharmaceutical research companies to do business.  Such a policy clearly is not in the best interest of public health — and it flies in the face of the ongoing efforts to further cultivate the life sciences industry within Massachusetts.

Indeed, the Wall Street Journal and Boston Herald report that some medical groups either have threatened to take their annual meetings elsewhere or have actually done so in protest of the law.

Supporters of the law say otherwise.  Health Care For All, a Massachusetts-based advocacy organization, views banning gifts as a step in the right direction.  According to the organization:

[t]he pharmaceutical industry gives gifts to promote their drugs and make a higher profit.  Under the guise of promoting welfare for all, the industry maximizes their own revenue….

Experts living within the guidelines of the gift ban find that it is not interfering with their work or professional relationships according to Dr. David Coleman, Boston University School of Medicine.

‘The Massachusetts Gift Ban legislation is an important step in the process of reducing both biases in therapeutic decision-making and healthcare costs.  The Ban has not adversely impacted the important relationships of our physician-faculty with the pharmaceutical and device industries….’

Health Care For All also maintains there is no connection between the decrease in restaurant revenues and the law as:

[t]he Massachusetts Prescription Reform Coalition has researched the decrease in restaurant profits, and found sales are down across the country — including in states without a gift ban.   According to the trade paper, Restaurants & Institutions, sales at the nation’s top 100 independent restaurants were down 10% in 2009….

Massachusetts Senators, who recognize the value of the gift ban legislation, also see that these lost profits mirror similar recession-caused losses in the restaurant industry across the country.

Georgia Maheras, Private Market Policy Manager at the Massachusetts Prescription Reform Coalition, considers the current House bill to be a “significant step backward” in the fight to curb medical costs.

Massachusetts is not alone in attempting to reform pharmaceutical and medical device marketing practices.  Neighboring Vermont has a similar, and in fact more stringent, law which even allows the Attorney General’s office to track free samples given to physicians (though a reporter for the Times Argus, a Vermont newspaper, worries how a repeal in Massachusetts might have a ripple effect).  California, the District of Columbia, Maine, Minnesota, Nevada, and West Virginia also have some form of a marketing code.  The federal government’s Patient Protection & Affordable Care Act includes the Physician Payment Sunshine Provision (”Provision”) requiring disclosure of payments made to physicians and teaching hospitals by manufacturers of products covered under Medicaid, Medicare, and SCHIP (click here to read a summary).

So who has it right?  It would seem as though PhRMA and AdvaMed opened the door for state and federal government to codify modified versions of these industry codes.  From a compliance perspective, it must be quite inefficient — and headache inducing — to wade through state marketing disclosure laws that lack uniformity.  Starting January 1, 2012, the Provision will preempt state disclosure laws except for where the state requires additional information.  Maybe this will help, maybe it will add to the headache, or maybe this particular episode will no longer matter.   For now, though, from a patient perspective, a repeal of the Massachusetts disclosure requirement/gift ban, or that of any other state, would feel more like a gift to the industry and prescribers than a service to the “best interest of public health.”

The Center for Health & Pharmacy Law & Policy here at Seton Hall Law has issued two white papers addressing these issues: Conflicts of Interest in Clinical Trial Recruitment & Enrollment: A Call for Increased Oversight,” in which the Center proposes legal and policy changes to address conflicts of interest in the relationships between industry and doctors that can create unwarranted risks to trial participants and to the scientific integrity of research; and Drug and Device Promotion: Charting a Course for Policy Reform,” in which the Center proposes legal and policy changes to address conflicts of interest in the relationship of medicine and industry– including the recommendation “that industry funding for continuing medical education should be phased out, and replaced by an educational process driven by physicians.”

The Center has also recommended “the adoption of federal legislation to ban the use of gifts, meals, and other perks to promote drugs and devices. The states have taken the lead to date–Massachusetts, California, Minnesota, and the District of Columbia have passed laws to limit or ban gifts and meals that are now routine in marketing practices. Concluding that industry self-regulation is not sufficient, the Center calls for national legislation to create uniform practices by industry and physicians. As urged by Professor Boozang, ‘the benefits of drugs and devices should drive promotion and physicians’ decision to prescribe, not a marketing model that depends on gifts and meals.’”

Obviously, the adoption of additional federal standards in this regard will lessen the ability of industry to pit one state against another and make compliance easier. The Physician Payment Sunshine Provision is a step in that direction, the Massachusetts development bill is a step back.

Physician Income Relative to Hospital Revenue by Specialty

Wandering through the pages of Health Law Prof Blog, I found this post from a few months ago which looked at a WSJ Health Blog article which examined net hospital revenue derived per physician and compared such revenue generation among various specialties. The average revenue generation per physician amounted to “about $1.54 million based on 114 U.S. hospitals responding to a survey by physician recruiters Merrit Hawkins…. (Revenue here means net inpatient and outpatient dollars derived from referrals, tests and procedures done in the hospital.)”

We’ve looked at physician compensation in relation to physician shortages here at HRW before, noting that “over the course of ten career years, if calculated at a constant rate without regard to future increases in compensation, the median paid “Family Doctor, Branch” will have earned $1,900,182. During those same static 10 years….If that same Family Doctor were to then consult with someone from the lowest paid of the three categories of Radiologist, Not neural, Non-Interventionist, she would be doing so with someone who had made $4,208,580 during that time–which would be $2,308,398 more than she–or more than twice as much.

But this chart below offers a slightly different perspective, showing relative hospital income to specialty and raises some interesting questions regarding hospital finances and chosen areas of focus in relation to return on investment. A focus on kidneys, for instance, would not, it seems, be favored. The ratio of hospital income to physician salary in Nephrology is 2.91 to 1. For Psychiatry it’s 6.45 to 1. For Hematology/Oncology it’s 4.33 to 1. Additionally, in actual income generated, Psychiatry brings in almost 2x as much as Nephrology; Hematology brings in over 2x as much.

One hears often about shortages in dialysis facilities, but mental health clinics and cancer centers barrage the airwaves with their advertisements. Perhaps it is not a coincidence.

Hospital Annual Revenue per Doctor by Specialty Specialty Avg. Revenue Avg. Salary Neurosurgery $2,815,650 $571,000 Cardiology/Invasive $2,240,366 $475,000 Orthopedic Surgery $2,117,764 $481,000 General Surgery $2,112,492 $321,000 Internal Medicine $1,678,341 $186,000 Family Practice $1,622,832 $173,000 Hematology/Oncology $1,485,627 $335,000 Gastroenterology $1,450,540 $393,000 Urology $1,382,704 $401,000 OB/GYN $1,364,131 $266,000 Cardiology/Non-Invasive $1,319,658 $419,000 Psychiatry $1,290,104 $200,000 Pulmonology $1,204,919 $293,000 Neurology $907,317 $258,000 Pediatrics $856,154 $171,000 Ophthalmology $842,711 $282,000 Nephrology $696,888 $240,000

Reform Rodeo: A Sick Wellpoint; Performance; EHRs; and More

1. Really?: Reuters released an exclusive story about Wellpoint’s recent push to rescind contracts for those suffering from breast cancer.

2. Specialists: The New England Journal of Medicine has a piece on the role of specialists in performance-incentive programs.

3. EeeeekHR: In the New York Times, Pauline Chen describes her experiences as a physician attempting to come to grips with the unforeseen changes that EHR-based health care delivery has introduced into the doctor-patient relationship.

4. Myths of Health Reform: On The Health Care Blog, Maggie Mahar discusses the myths of health reform, including the belief that the reform measure was a hand out to industry.

4. When Skepticism Becomes Quackery: Steven Novella at Science-Based Medicine calls attention to the often hyperbolic demonization of the pharmaceutical industry.

5. That’s Just Your Opinion: Kaiser Health News gathers the latest opinions and editorials about health care, including pieces about children’s health care, RomneyCare, and the nursing shortage.

6. Resources: For those studying PPACA, George Washington University has released, among other things, a thorough provision-by-provision comparison of PPACA and subsequent reconciliation.

Is Medicaid a Right? Are Medicaid Rate Cuts Unconstitutional?

By: Matt McKennan

Seton Hall Law
Class of 2011

Expanding Medicaid Rolls and Limited Access to Care

Medicaid beneficiaries have a difficult time accessing care.  Physicians are not required to participate in the program and due to low reimbursement rates, among other factors, many physicians choose not to join.  The President, federal and state lawmakers, physicians, hospitals, and patients (regardless of their political views) undoubtedly agree that access to care for Medicaid beneficiaries is a growing problem.  Notably, the Patient Protection and Affordable Care Act (ACA) will likely add approximately 16 million beneficiaries to state Medicaid rolls.  According to Senator Lamar Alexander of Tennessee, “it dumps 15 to 18 million low-income Americans into a Medicaid program that none of us would want to be a part of because 50 percent of doctors won’t see new patients. So it’s like giving someone a ticket to a bus line where the buses only run half the time.”

Interestingly, Medicaid’s “Equal Access provision” requires that participating states,

“assure that payments are consistent with efficiency, economy, and quality of care and are sufficient to enlist enough providers so that care and services are available under the plan at least to the extent that such care and services are available to the general population in the geographic area.”

If Sen. Alexander is right — and there is substantial evidence that Medicaid participants face significant obstacles to access – then states are violating federal law, or the federal law is so lax in its enforcement or its mandates that it has become ineffective.  Health reform vests huge responsibility in the hands of the states, and the ability to enforce federal law or the willingness of states to comply will play a crucial role in achieving its goals.

In response to Medicaid’s expansion, states face a number of critical decisions.  Currently, states are contemplating cuts to already low Medicaid rates.  According to the National Association of State Medicaid Directors, “state budget shortfalls in the coming fiscal year . . . will total $140 billion.”  Adding additional pressure, state constitutions generally require that state governments maintain a balanced budget.  As Medicaid expands, states will face even more difficult decisions when balancing budgets and implementing Medicaid consistently with federal guidelines.

How Will the States Respond?  Are Rate Cuts the Final Answer?

In response to increasing federal demands and local financial pressures, states are pursuing legal action as a successful lawsuit would surely decrease future state obligations under Medicaid.  States are also enacting legislation to oppose the bill and according to the National Conference of State Legislatures, 36 states have legislation to oppose certain reforms.  Others are lobbying Congress for repeal and those interested have already attested “that if any federal health care takeover is passed in 2010, I will support — with my time, money, and vote — only candidates who pledge to support its repeal and replacement with real reforms that lower health care costs without growing government.”

States may eventually decide to drop the program altogether.  After all, Medicaid is voluntary.  States are not obligated to provide medical assistance if they choose not to participate.  According to the Heritage Foundation, states would save over $1 trillion by opting out and “failure to leave Medicaid might be viewed as irresponsible on the part of elected state officials.”   On March 18, Arizona dropped its Children’s Health Insurance Program, foregoing millions in federal aid and leaving 47,000 children without insurance.  Earlier this year, Governor Jim Gibbons of Nevada stated, “[b]ecause it appears Sen. Reid’s plan is no longer viable, this crushing additional cost to the state isn’t forcing us to seriously consider opting out of Medicaid at this time.  However, if Congress wants to pass the buck and shift the fiscal burden of health care reform directly onto the states instead of looking seriously at ways to reduce spending and costs, we will be forced to revisit the issue.”  Like the Reid bill, the ACA also increases state Medicaid obligations.  And even if it increases the federal share, it is still worth asking whether Gov. Jim Gibbons  is once again seriously considering opting out of the program.

Alternatively, States may decide that Medicaid is just not that bad.  They may decide that it might just be a good idea to take advantage of the federal government’s helping hand.  Realistically, it is highly unlikely that states will drop Medicaid.  Dropping a program that provides care to low-income families is morally indefensible, especially without an alternative safety net.  Moreover, dropping Medicaid is fiscally irresponsible as the uninsured would undoubtedly wind up in emergency rooms seeking high-cost care at the private payers’ expense.  However, even if states decide to continue participating in Medicaid, the requirements of Medicaid must be enforced to achieve success.  After all, states administer Medicaid and states set reimbursement rates.  Drastic rate cuts by financially strapped states will undeniably balance budgets, but at the same time cuts will likely limit access to care.  So what happens when states cut Medicaid rates? See here, here, and here.

Is Medicaid a Right?  Are Rate Cuts Unconstitutional?

Thankfully, Medicaid’s “Equal Access provision” requires that states pay reimbursement rates that are sufficient to assure access to care.  Unfortunately, it is not easily enforced and the remedies are limited.  On the one hand, the federal government can withdraw its support from states that fail to live up to the statute’s demands.  On the other hand, providers and beneficiaries can also pursue legal action.  Legal action, however, is not that easy.

Shortly after the Civil War, Congress enacted the Civil Rights Act of 1866, providing equal rights to all “persons within the jurisdiction of the United States.”  In response, many Southern Governors refused to comply, frustrating Congressional intent as the KKK violently opposed the bill and terrorized the South without state intervention.  Congress then enacted 42 U.S.C. § 1983.  It provides a private cause of action against state or local actors that violate federal rights.  At its most basic level, the cause of action reins in rogue states and local actors.  A plaintiff that pursues a Section 1983 claim to enforce Medicaid’s requirements is in essence alleging that a state is violating federal rights by failing to comply with the federal law (Medicaid).

Initially, the Supreme Court adopted this line of reasoning.  In Wilder v. Virginia Hospital Association, the Supreme Court held that Medicaid providers can file suit under Section 1983 when a state fails comply with Medicaid by setting unreasonable and inadequate rates.  Notably, Chief Justice Roberts, as deputy Solicitor General at the time, filed a brief in Wilder arguing that private citizens cannot force states to comply with Medicaid under Section 1983.  After Wilder, courts consistently held that Section 1983 provided a cause of action to enforce state compliance with Medicaid.  Over time, the circuit courts split regarding what the “Equal Access provision” requires.  Some courts held that it requires states to conduct a study before setting rates, while others held that it requires states to achieve results, such as setting rates that actually achieve equal access to care, regardless of a study.

However, in Gonzaga v. Doe, the Supreme Court  limited the availability of a cause of action under Section 1983.  Interestingly, now-Chief Justice Roberts argued before the Court in Gonzaga as well, this time successfully.  Since Gonzaga, circuit courts throughout the country have refusedto allow Medicaid providers and beneficiaries to file suit under Section 1983 to enforce Medicaid’s “Equal Access provision” holding that Medicaid does not confer individual rights.  Compare pre-Gonzaga Orthopaedic Hospital with post-Gonzaga Sanchez.  In effect, Roberts’ argument in Wilder is now law and private citizens can no longer file suit under Section 1983 when states cut rates and limit access to care.

Fortunately, providers and beneficiaries have one more option.  Rather than filing suit under Section 1983, providers and beneficiaries are now successfully pursuing claims under the Supremacy Clause.  Under this theory, a state law that cuts reimbursement rates and decreases access to care conflicts with the “Equal Access provision.”   Therefore, because the state law conflicts with federal law, and federal law is the supreme law of the land, the state law is null (unconstitutional).  Plaintiffs have filed successful actions under the Supremacy Clause in California, resisting attempts to cut Medi-Cal payments for purely budgetary reasons.  A similar suit was filed in Washington last year.  On January 28, the Connecticut Association of Healthcare Facilities also filed suit, pursuing a Supremacy Clause action to enforce the “Equal Access provision.”

Although plaintiffs are experiencing success under the Supremacy Clause, there are a few drawbacks.  Unlike a suit under Section 1983, an action under the Supremacy Clause does not generally result in legal damages or attorney’s fees.  Instead, a plaintiff simply enjoins the unlawful state action.  Moreover, Justice Scalia and Justice Thomas have observed that the Supremacy Clause does not provide a cause of action to enforce Medicaid.  Rather, the Justices note that the only remedy is the withdrawal of federal funds.  Therefore, under the only legal theory available to enforce Medicaid at this time, states generally face no financial responsibility for cutting rates and decreasing access.  Further, the only cause of action to enforce Medicaid may rest on shaky ground.

In summary, history demonstrates that federal preemption will play a major role in implementing health reform, and these lessons must not be ignored.  The ACA expands Medicaid rolls and relies greatly on state compliance.  States have a limited number of options in response to their increasing responsibilities.  Eventually, constitutional challenges will end and states will likely continue to provide Medicaid assistance.  However, financially strapped states may end up administering a watered down program that denies access to care.  Therefore, to achieve the goals of reform, it is vitally important that states face realistic consequences if they refuse to administer Medicaid in compliance with federal law.  Ultimately, however, if states continue to cut rates, a strict federal standard regarding Medicaid reimbursement may be necessary.

Study Demonstrates Link Between Physician Surgicenter Ownership and Volume of Surgeries

There has long been a concern — reflected in the federal Stark Law and its state law analogues — that a conflict of interest arises when a physician refers patients to an ambulatory surgery center he or she owns.  Prior research established that a doctor’s rate of referrals of patients for surgery and other hospital-based services is positively correlated with an ownership stake in a specialty hospital; now there is similarly concrete, empirical evidence of the deleterious effect of the conflict created when doctors own surgicenters.

In an article in the April issue of Health Affairs, John M. Hollingsworth and his co-authors present the results of a study comparing “the practice patterns of physician-owners of surgicenters, before and after they acquired ownership, to those of physician-nonowners over the same time period.”  Using data from Florida for the years 2003-2005, the authors identified all patients who underwent one of five ambulatory procedures — carpal tunnel release, cataract excision, colonoscopy, knee arthroscopy, and ear tube surgery.  The procedures were chosen because “substantial variation exists … in their use,” making them “susceptible to the influences of financial incentives associated with surgicenter ownership.”  After accounting for differences in the populations served by physician-owners and physician-nonowners, the authors found that “the mean annual caseloads for owners … were at least twofold greater than those for nonowners.”  Even more telling, using earlier data, from 1998-2000, the authors found that, even after accounting for the fact that some of the eventual owners had higher-volume practices before they invested in a surgicenter, for four of the five procedures studied, “acquisition of ownership status kicked owners’ already high volumes even higher.”

In an earlier post, I noted that a 2009 New Jersey law conditions physicians’ ability to refer patients to surgicenters on the following: (1) for patients they refer, they personally perform the surgery; (2) they be paid in proportion to their ownership interests, not the number of patients they refer; (3) they and their physician partners make all healthcare decisions, leaving non-physician partners without a say; and (4) they inform their patients in writing of their ownership interest at the time they make the referral.

The work done by Hollingsworth and his co-authors suggests that while the first and second conditions might eliminate certain especially troubling payment arrangements, a “relationship between surgicenter ownership and surgical volume” can persist even when physician-owners personally perform the surgeries.  Similarly, while the third condition would require that physicians make healthcare decisions, it would do nothing to ensure that those decisions are uninfluenced by conflicts of interest.  The fourth condition — which puts the burden on patients to suss out which referrals are medically necessary and which result from a physician-owner inappropriately lowering his or her threshold for intervention due to a financial conflict of interest — is also unlikely to reduce “physician-induced demand.”  There is no evidence that patients are able to perform such a sifting function.  To the contrary, existing evidence suggests that they are not.

Ultimately, as Hollingsworth and his co-authors suggest, the government may need to “intervene through physician reimbursement.”  “[P]artial capitation or global payment schemes, or both, implemented in the context of proposed delivery system reforms (such as accountable care organizations) may be needed to discourage the over-use that fee-for-service payment rewards.”

Medicaid Cuts: Where’s the Outrage?

If Medicare services or provider rates were cut, or threatened to be cut to balance the budget, the firestorm would be epic.  Republicans would accuse Democrats suggesting such cuts of stealing from the elderly.  Democrats would accuse Republicans suggesting such cuts of trying to abolish Medicare.  AARP would express outrage, and if it didn’t do so loudly enough tea partiers would urge seniors to burn their AARP cards in an incongruous support of a government health care program.  So where’s the outrage when states faced with budget cuts look first to cut Medicare’s sister program, Medicaid?

A front page story in the New York Times on Tuesday describes cuts in Michigan’s Medicaid budget, resulting in the elimination of some services and reductions in provider fees.  As Medicaid fees were already absurdly low in Michigan, as in many states, the predictable response was that the pool of doctors available to Medicaid beneficiaries shrank even further.  Those lucky enough to find a doctor willing to take the low Medicaid reimbursement must be willing to travel long distances, and give up days of work to get necessary care for their sick children.  The Times described one such case:

Medicaid enrollees in Michigan’s midsection have grown accustomed to long journeys for care. This month, Shannon M. Brown of Winn skipped work to drive her 8-year-old son more than two hours for a five-minute consultation with Dr. Mukkamala. Her pediatrician could not find a specialist any closer who would take Medicaid, she said.

Later this month, she will take the predawn drive again so Dr. Mukkamala can remove her son’s tonsils and adenoids. “He’s going to have to sit in the car for three hours after his surgery,” Mrs. Brown said. “I’m not looking forward to that one.”

Those who can’t locate a participating physician either do without or wait for the condition to become emergent, at which time they seek more expensive hospital care.  How can this program be so dysfunctional?   The Kaiser Family Foundation, in a report posted last month, described the countercyclical nature of Medicaid’s finance structure:

During an economic downturn, unemployment rises and puts upward pressure on Medicaid. As individuals lose employer sponsored insurance and incomes decline, Medicaid enrollment and therefore spending increase. At the same time, revenue losses make it more difficult for states to pay their share of Medicaid spending increases. Specifically, a 1 percentage point increase in the national unemployment rate is estimated to result in 1 million more Medicaid and CHIP enrollees and an additional 1.1 million uninsured at the same time as state revenues are projected to fall by 3 to 4%.

So, states need to increase funding for Medicaid just when they are losing tax revenues and are facing pressures in other public service settings.  As KFF describes in the report, the problem this year was lessened somewhat by the addition of federal stimulus funding; the funding was apparently not enough to support the program in Michigan, and in any event will not persist nearly as long as states’ projected budget problems.

This is not a new problem.  It has often been noted that a health care system for poor people is a poor health system.  The reasons are, unfortunately, quite clear.  Medicare serves (mostly) the elderly of all income groups.  This is a politically powerful bloc: its members vote, and enough of them are financially and socially powerful to protect their turf.  Medicaid covers low-income people, including our lowest wage-earners, poor children, and people with permanent disabilities.  They have little social clout, by definition little money, and not much in the way of a lobby.  So, when times get hard, their programs are on the line.

That brings us to health reform.  The current bills rely heavily on Medicaid to bring coverage to the uninsured.  That is, as the above discussion makes clear, a risky proposition.  In its several forms, current reform bills have promised some increases, often temporary, to the federal share of states’ Medicaid costs.  And in a letter to Congressional leaders following a summit earlier this month, the President acknowledged the precariousness of the network of providers on whom we’ll rely to render that expansion more than a charade:

At the meeting, Senator Grassley raised a concern, shared by many Democrats, that Medicaid reimbursements to doctors are inadequate in many states, and that if Medicaid is expanded to cover more people, we should consider increasing doctor reimbursement. I’m open to exploring ways to address this issue in a fiscally responsible manner.

That would be a good step.  So would increasing the federal share of Medicaid’s costs.  If the current fiscal crisis has shown us anything about our federalist system, it is that the federal government, with its ability to borrow,  is much better at responding to emergencies than are the states, with their obligations to balance budgets annually.  But ultimately, a program for poor people will always have political, and therefore fiscal problems.

For reform to stick, for expansion of coverage to the poor and near-poor to genuinely serve their health needs over time, we have to tend structurally to our funding system.  The achievement of expansion to near-universal coverage would be a statement of solidarity, proclaiming that we’re all in this together.  To make that stick, we have to be in our health care financing system together.  There will be a list of clean-up work and next steps if and when reform passes.  High on that list should be the repair of Medicaid’s shaky fiscal foundation, integrating the interests of Americans across class and income levels.  When they’re considering reductions in access to health care, legislators should be just as cautious about harming kids in Flint as they are about harming elders in Scarsdale.

A Guide to Accountable Care Organizations, and Their Role in the Senate’s Health Reform Bill

The accountable care organization has been a model for health care reform, yet its modest success has been limited to a handful of health care systems across the country. However, the accountable care organization model has recently taken on far greater significance since being introduced as one of Medicare’s pilot programs in the Senate’s health reform bill.

The phrase is attributed to Dr. Elliot Fisher of Dartmouth Medical School.  Dr. Fisher has led the Dartmouth Atlas Project — a project that has, for the last 30 years, painstakingly documented the variation in care across the United States. (Click here for an interactive map of some of the Dartmouth Atlas results). The Dartmouth Atlas has focused on both the quality of health care as well as its cost. More importantly, they have reported on the relationship between the two, and their findings are nothing short of an indictment of our current paradigm.

Specifically, their findings illustrate that there exists wide variations in the cost of care across the country, and profoundly, that the regions that spend more per patient do not necessarily obtain better outcomes. So what to do? Dr. Fisher believes he has found at least part of the answer: the Accountable Care Organization, known as an “ACO”.

What is an ACO, and How Does it Differ from Other Payment Reforms?

In his paper “Creating Accountable Care Organizations: The Extended Hospital Medical Staff,” Dr. Fisher acknowledges that the term ACO “grew out of an exchange between he and Dr. Glenn Hackbarth at a MedPAC meeting in November of 2006″. (Fisher, 2006 n. 7). Dr. Fisher’s purpose in writing the aforementioned paper was to help identify the proper “locus for shared accountability” for a patient’s health care. HMO’s and other health insurers are obvious candidates, but as Dr. Fisher notes, HMOs only comprise a small percentage of the current market, and health plans in general have focused on negotiating favorable prices within relatively open networks of providers. (Fisher, 2006, p. 45).  Read more

Financial Remuneration of Clinical Study Investigators

In November 2009, the Center for Health & Pharmaceutical Law & Policy, in its White Paper, Conflicts of Interest in Clinical Trial Recruitment & Enrollment: A Call for Increased Oversight, explored payments to investigators — and other potential motivators — to conduct research.  A study in this month’s IRB: Ethics & Human Research explores the impact payments may have on researchers to conduct and complete studies.  In Motivated by Money? The Impact of Financial Incentive for the Research Team on Study Recruitment, Sharon Unger and her colleagues examine the effect financial remuneration has on researchers in a neonatal intensive care unit (NICU).

Taking advantage of a “fortuitous set of circumstances” in which two separate clinical trials with nearly identical inclusion criteria were conducted simultaneously in an NICU in Canada, the authors looked at two issues: 1) whether financial remuneration impacted the rate at which the research team approached parents about research participation, and 2) whether financial remuneration impacted the rate at which parents provided consent to participate.

In the first study (Study A), a placebo-controlled trial involving a medication that was the standard of care for treatment of newborns nearing extubation to prevent apnea of prematurity, members of the research team were financially compensated for their time if they were successful in obtaining parental consent (parents were unaware of this arrangement).  In the second study (Study B), which involved two different forms of noninvasive respiratory support following extubation, there was no financial compensation of the research team.  Both studies had the same recruiting team.  Study A was federally funded, multicentered and high-profile, while Study B was a single-center, unfunded trial.

The payments in Study A were per capita, which, while creating a direct incentive to recruit individual enrollees, is usually not problematic as long as the payment is not excessive.  The Center recommends “that the benchmark for compensation for physician services for research should be comparable payment for time and services for treatment. This will compensate physicians fairly for their time and services, and will assure that there are no hidden bonuses or incentives for physicians to recruit patients into research or to refer them to research rather than treatment.”  As noted in the study, finder’s fees are increasingly considered “ethically problematic;” the Center recommends a wholesale bar on finder’s fees because they can create conflicts of interest that can incentivize investigators to recruit and retain individuals who do not meet the study’s inclusion and exclusion criteria.

As the authors noted, and as acknowledged in the Center’s White Paper, potential enrollees are increasingly vulnerable as increasing numbers of individuals seek to participate in research either as a primary means of access to treatment or as a form of income.  The results of this study indicate a much higher likelihood of approach when there was a prospect of financial remuneration.  These results are concerning, and were anticipated by the Center’s White Paper, which noted the potential for poor compliance with inclusion and exclusion criteria and pressure to enter or remain in a clinical trial.

However, surprisingly, the authors found that, despite the much higher likelihood of approach for Study A than Study B, parents were much more likely to actually agree to enroll their newborn in Study B — for which there was no financial remuneration of the research team.  The authors explored various explanations for this result, including that the research team was overly cautious about giving the appearance that their approach for consent was motivated by financial compensation, or that parents chose to withhold consent  due to the research team’s  increased pressure.

The authors do acknowledge other potential factors — beyond financial remuneration –  that could have affected the study’s results.  For example, parents’ hesitancy to enroll their newborn in a placebo-controlled drug trial could explain the discrepancy between enrollment in the studies.  Likewise, the authors consider that parents may not have been able to differentiate between the two modes of support being investigated in Study B.  In addition, the recruiting team, when presented with the results of the study, did not recall feeling influenced by the financial arrangement of Study A, but did “recall being highly motivated to ensure the success of Study A as it was part of a high-profile, multicentered trial.”

The authors concluded by noting concerns that “there may be a point at which the amount of the financial remuneration or the manner in which it is assigned could negatively impact the ethical conduct of the researcher,” but cautions that these concerns should be balanced with the value of conducting research in patients’ best interests.  This balancing act is considerably important.  As the Center notes,

Research is critical to the advancement of medical treatment and health. It must be structured to produce high quality data that facilitates the assessment of safety and efficacy in the population for whom the treatment will be used. The good of the enterprise requires that the clinical trial system sufficiently balance the costs and benefits to physicians and prospec­tive trial participants to ensure the continued sufficient supply of researchers and subjects. The system must also be imbued with actual and perceived integrity — so that it produces scientifi­cally reliable results, participants are safe, and people trust the system sufficiently to be willing to participate.

Revisiting CONventional Wisdom on State Hospital Licensure

If there is one aspect of contemporary health care regulation that conservatives have decried, it’s “certificate of need laws.” These laws require licensure of new health facilities (and sometimes expansions of facilities) in thirty-seven states. Denounced as relics of socialist central planning, they were a prime target of the Bush-Era Dose of Competition report. But, as David Leonhardt notes, it appears that CON laws are reducing costs without impairing quality in some areas.

First, a bit of background. As health costs rose in the 1960s, many policymakers believed that a surplus of health services was to blame. Policymakers worried that health care costs were rising due to “induced demand:” the more doctors and hospitals there were, the more these actors would try to counteract the normal price-depressing effect of increased competition by finding more wrong with patients, thus “inducing” demand for their services. Although such a strategy could rarely work in a normal market, health care is a credence service—it is very hard for the average consumer to “second guess” his or her provider about the amount or nature of care needed.*

In 1974, Congress passed the National Health Planning and Resources Development Act. The Act required new health care facilities, and additions to existing facilities, to obtain a Certificate of Need (CON) from the appropriate state agency as a prerequisite to receiving federal funds via the Medicare and Medicaid programs. As a result of these laws, those opening new health care entities needed to demonstrate to state commissions that their services are actually needed by the community.

Over time, state boards started addressing concerns beyond “induced demand,” including social goals of equity and fair distribution of health resources. When I emailed a New Jersey policymaker who has worked in this area, he told me that the state would be unlikely to license specialty hospitals that concentrate on the most lucrative cases because they would threaten the ability of safety net hospitals to use revenue from such cases to cross-subsidize uncompensated care. He called such egalitarian concerns “explicit and leading factor[s] of discussion at all levels in CON proceedings.”

Leonhardt is more concerned about the classic CON goal of cost-control, and sees CON laws as a key reason for positive developments in Richmond, Virginia:

Since 1996, the Richmond area has lost more than 600 of its hospital beds, mostly because of state regulations on capacity. . . . Richmond has gotten rid of 15 percent of its hospital beds, and its health care still looks a lot like the rest of the country’s, only cheaper and a bit better. . . .

[Meanwhile, health facilities vastly expanded in South Dakota after it scrapped its CON law in 1988.] In other industries, all that new capacity might have led to a glut, in which workers and equipment sat idle. But health care is different. Doctors and patients tend to believe that more care is better, and patients often don’t pay much extra for any additional care. So new doctors, nurses and equipment generally stay busy.

Dr. John Wennberg of the Dartmouth Medical School refers to this phenomenon as supply-sensitive care. Dr. Marlon Priest, the chief medical officer of Bon Secours, puts it this way: “If you build 100 beds, they’ll get used.” . . . [But] [m]ore care is not always better care. Sometimes, in fact, it’s worse. Just consider the recent research showing that radiation from CT scans will eventually kill thousands of patients a year.

I’m not fully sold on the Dartmouth studies (here’s one critique of them), and I do worry that efforts to fight overtreatment will lead to some “meat ax” rationing that denies care to the poorest (rather than motivating those who don’t need the attention of the health care system to avoid it). But when cost saving initiatives are combined with a commitment to preserve access to necessary care for all, they may be as close to a “Pareto optimal” health policy as we can get.

*(Lawyers have their own version of this “induced demand” problem, encapsulated in the old saw: “When there was one lawyer in town, he had no business; when another moved in, he was swamped with cases.” I suppose laws against barratry offer a loose parallel to CON in the legal profession. Antitrust may stand in the way of legal and medical professionals’ own actions to avoid “induced demand.”)

X-Posted: Concurring Opinions.

Developments in the Law Governing Physician-Owned Ambulatory Surgery Centers in New Jersey

Over the past year, one or the other of my sons has had minor surgery in no less than three of New Jersey’s many ambulatory surgery centers (”ASCs”).  So, I noted with interest the Appellate Division’s recent decision in Garcia v. Health Net in which it affirmed a lower court holding that physicians who make referrals to ASCs in which they have an ownership interest violate the Codey Law, New Jersey’s version of the Stark Law.  The Appellate Division also affirmed the lower court’s decision that, despite the illegal referrals, the physician-owners in the case committed no fraud.  They (along with other physicians-owners across the state) acted in reliance on the New Jersey Board of Medical Examiners’ conclusion that the Codey Law’s exception to the self-referral ban for services provided at the referring physician’s medical office applied to ASCs.

In response to the lower court’s holding and heavy lobbying from physicians, the New Jersey State Legislature enacted revisions to the Codey Law which were signed into law in March 2009.  Physicians are now expressly permitted to refer patients to ASCs in which they have a financial interest if they meet a list of conditions, including that: (1) for patients they refer, they personally perform the surgery; (2) they be paid in proportion to their ownership interests, not the number of patients they refer; (3) they and their physician partners make all healthcare decisions, leaving non-physician partners without a say; and (4) they inform their patients in writing of their ownership interest at the time they make the referral.

On the other hand, the Legislature acted to all but put a stop to the establishment of new physician-owned ASCs, with the exception of those which are jointly owned by a general hospital.  Development of hospital– and medical school–owned centers may proceed apace.  Fox Rothschild’s Elizabeth Litten notes  that this “resonates more of long-forgotten certificate of need and health planning policy than it does of the original law’s concern with physician profit motives and overutilization.”  Clearly, the Legislature hopes that the new limits will be good for general hospitals’ financial health.  Professor Frank Pasquale has written here and elsewhere about the concern that ASCs and other niche facilities harm general hospitals by “cherry-picking” lucrative patients and “lemon dropping” those that are more costly.

What about patients?  Should we care whether ASCs are physician-owned or not?  Unsurprisingly, the American Medical Association believes that “physician ownership interests in health facilities, products or equipment can benefit patient care.” Peer-reviewed research suggests that physician-ownership makes no difference in health outcomes, however.  And, as Dean Kathleen Boozang states here, there is evidence that “physicians who hold an equity interest in an entity that provides ancillary health care services, such as a clinical laboratory or MRI, more frequently order those services for their patients, referring them, unsurprisingly, to the entity they own,” although there is no evidence that “this higher use equated to over-utilization.”  I would suggest, admittedly based on a small (and potentially unrepresentative) sample, that, if nothing else, physician-owned surgery centers have better amenities than those that are hospital-owned.  Some of these amenities could easily be done without (orchids in the lobby, souvenir teddy bear); others (popsicles and DVDs in the recovery room) are potentially more significant.

Further Calls for Increased Oversight on Medical Research & Physician Conflitcs of Interest

The Center for Health & Pharmaceutical Law & Policy has continued to focus on the implications of research funding in patients’ decisions to participate in clinical research, as well as the effects such funding can have on researcher behavior and research results.  In January 2009, the Center recommended that all financial relationships between industry and physicians be publicly disclosed by industry.  And just this month, the Center released its most recent White Paper, “Conflicts of Interest in Clinical Trial Recruitment & Enrollment: A Call for Increased Oversight.”

Similarly, in a November 17 letter to Francis Collins, 100 researchers, academics, and public policy analysts asked the NIH to “fund studies on medical ethics, conflicts of interest in medicine and research, and prescribing behavior” in order to determine the effects of industry-academic relationships on human health.  The letter implores the director of NIH to focus on “the research gap on the effect of conflicts of interest and commercial influence on medical decisionmaking” and to establish a mechanism for funding relevant research.

One of the primary concerns in the researchers’ letter is an issue also identified in a November OIG report, “How Grantees Manage Financial Conflicts of Interest in Research Funded by the National Institutes of Health,” which found that a majority of academic researchers’ conflicts of interest are unreported.   The report flags the potential for extensive conflicts between faculty members and their government-financed research.  In response, the US Senate Finance Committee recently sent letters to several universities requesting such information.  Just yesterday, Northwestern University’s Feinberg School of Medicine, reacting to national concern about physicians’ and researchers’ financial conflicts of interest, began posting external professional and industry relationships for approximately 2000 faculty members — including service on boards of directors, consulting and related activities, ownership or investment interests, royalties and inventor shares, and additional activities such as lectures and participation in scientific advisory boards and professional societies.

Further research is obviously necessary to determine how financial relationships influence — as the authors of the letter to NIH call it — “the beliefs and behaviors of researchers and clinicians, and the effects of industry-academic relationships on the generation and dissemination of medical knowledge.”  In the meantime, increased oversight of physician-industry relationships by the federal government to evaluate and oversee investigator or institutional conflicts of interest, both for research within and without academic medical centers, is necessary.

“15 Years or 7 to Pay Off Your Debt. . .”

I have been watching the Alex Gibney documentary film version of Maggie Mahar’s book Money-Driven Medicine. It’s fascinating, and I’ll definitely do a few more blog posts on it. For now, I’d like to reflect on a quote from early in the film, from a Dr. Berwick who’s been a keen observer of the US health system. He notes that physicians who are specialists do lots of compensable and specific procedures, and therefore usually earn much more than primary care doctors, leading to an artificial glut of specialists. I’d known this for some time, but Dr. Berwick makes the fact particularly compelling by comparing the concrete choices faced by med students: “15 years or 7 to pay off” their educational debts. It’s no wonder there are so many specialists.

The quote reminded me of Jesse Larner’s recent idealized “health care speech” for President Obama, which would promise a “publicly paid medical education for qualified medical students, researchers, and other health care workers so that the profession is open to all who are bright and dedicated, regardless of financial resources.” Just as our tax code pushes the average citizen toward unnaturally high levels of debt via the mortgage deduction, medical education financing currently is biasing physicians toward unsustainable debt loads that ultimately drain the public weal by fueling an entrepreneurial mindset in a profession founded in the public interest.

The US already has some limited loan forgiveness programs for physicians who work in underserved regions. It is time to expand these subsidies to cover more physicians working in primary care.

More Institutional Health Economics, Please!

Today’s Nobel Prize award for institutional economists Oliver Williamson and Elinor Ostrom is a welcome step toward methodological pluralism in the profession. Both have looked outside markets to understand the organization of economic life. Ostrom is not even an economist–she is a political scientist by profession. As Bob Shiller observes:

This award is part of the merging of the social sciences. Economics has been too isolated and too stuck on the view that markets are efficient and self-regulating. It has derailed our thinking.

According to the NYT, “The Nobel judges, in their description of Mr. Williamson’s and Ms. Ostrom’s achievement, said that ‘economic science’ should extend beyond market theory and into actual behavior, and the two award winners, in their empirical work, had done this.”

There is a great need for more of this type of work in health economics. Joe White’s Markets and Medical Care: The United States, 1993–2005 is one good exemplar of needed work here; he eschews “discussions of how economic theory can be applied to medical care production and delivery” and instead “focuses on ‘the market’ in its actual, not theoretical, form, as it existed in the United States.” White describes case after case where consolidation, not medical need, drove industry structure. He leaves the reader with a clear and convincing image of a space where varying levels of provider and insurer power, not productivity, is the key to understanding changes in the profitability of services. I’ve seen few better brief explanations of rising medical costs than the following: Read more

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