Are Doctors Getting Rich Off Medicare Reimbursements?

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One of Barack Obama’s campaign promises in the 2008 election was that his administration would be the most transparent in U.S. history. The intended result was an open government. “Openness will strengthen our democracy and promote efficiency and effectiveness in Government,” according to a White House memorandum devoted to the issue of transparency.

The Obama administration has still garnered criticism from conservative opponents that his presidency has been anything but transparent. In late 2009, just months before the Affordable Care Act was signed into law, John Boehner, then the House minority leader, told constituents that top liberal lawmakers were about to “hammer out a final government takeover of health care bill behind closed doors with President Obama.”

The debate over the transparency of the Obama administration — which has undoubtedly been complicated by the passage of the healthcare reform — is by no means over. But at the same time, it is impossible to ignore that certain steps taken by the president have shined a light on the inner workings of the American healthcare system. Without a White House directive, how the Medicare system reimburses doctors and other service providers would be completely hidden from the public.

In fact, data released Wednesday by the Centers for Medicare and Medicaid Services provided the first look at Medicare payments to physicians in more than three decades. Specifically, the CMS figures “include information for the 100 most common inpatient services, 30 common outpatient services, and all physician and other supplier procedures and services performed on 11 or more Medicare beneficiaries.”

This wellspring of information, covering more than 880,000 providers and $77 billion in payments, revealed that Medicare paid almost 4,000 doctors and medical professionals more than $1 million apiece in 2012, the most recently available year. Of those doctors and medical professionals, seven received more than $10 million. Even those doctors who were reimbursed just $1 million collected 13 times the $77,000 average paid by the program, which is the country’s largest medical insurer. The government’s figures do not include what doctors billed private insurance firms.

Even more indicative of the scale and concentration of Medicare payments is the fact that six of the 15 highest-paid Medicare doctors were ophthalmologists, one of whom was paid $21 million in 2012. That man was Florida-based eye specialist Salomon E. Melgen, who billed mostly for Lucentis, a medication used to treat macular degeneration and manufactured by a company that pays liberal rebates to prescribers, The New York Times reported several years ago.

As an alternative to Lucentis, the cheaper drug Avastin, which many ophthalmologists consider an appropriate equivalent, could have been prescribed, decreasing his Medicare bill for the shots from $11.8 million to less than $500,000. The publication has learned that both the Federal Bureau of Investigation and federal prosecutors are looking into a possible case of Medicare fraud, as well as Melgen’s his close relationship with New Jersey Sen. Robert Menendez, to whom the millionaire surgeon has made generous campaign donations.

Also among the highest billers were a New Jersey pathologist who collected $12.6 million for performing tissue exams and other tests, and a Michigan vascular surgeon who received $10.1 million. Overall, ophthalmologists, oncologists, and pathologists were the most common medical specialties in Medicare’s top-billing medical professionals.

“As part of the Obama administration’s work to make our health care system more affordable and accountable, data are being released that summarize the utilization and payments for procedures and services provided to Medicare fee-for service beneficiaries by specific inpatient and outpatient hospitals, physicians, and other suppliers,” said CMS, describing its data release.

Affordability and accountability may be distant administration goals, but for now, the picture painted by the Medicare payment data is of a system creating a small fortune for a number of doctors in the United States. At least, in some cases — often, the high billing totals simply reflect a physician who is an efficient doctor, has a large number of Medicare patients, or performs specialized procedures that require costly overhead. In that last case, a large portion of the Medicare reimbursement is redirected to pharmaceutical companies or the makers of medical devices. It is also important to remember that the data represent what a doctor receives in payment but does not show what is earned in profit after expenses are subtracted.

Still, the details of nationwide physician billing practices that emerged from the government’s data suggested that further accountability is needed, as well as checks to ensure Medicare payments are on par with actual costs. The high 2012 billing numbers may indicate that some Medicare payments are too costly for the amount of labor involved, or that unreasonable incentives prompt doctors to overuse certain procedures.

For example, Medicare pays a doctor more for using or prescribing a more expensive drug because the fee is based on the drug’s price. While the size of those systemic problems cannot be ascertained from this data, Medicare officials did say that they hoped the data would expose fraud, inform consumers, and lead to improvements in care. Because of the size of the Medicare program and the significant role it plays in the American healthcare system, the billing data have the ability to explain, at least to a small degree, why medical bills have risen for decades in the United States.

Fraudulent billing has already been identified by government inspectors in several instances. Three of the top 10 collectors of Medicare payments have drawn scrutiny from the federal government, one of whom is awaiting trial on federal fraud charges. In addition, a December report from the Department of Health and Human Services showed that of 303 physicians who were paid more than $3 million by Medicare in a single year, 13 were responsible for overpayments, amounting to $34 million.

Worried that the information would cause the American public to make generalized conclusions about individual doctors’ Medicare billing practices, the American Medical Association and other physician groups lobbied CMS to withhold the information. “We believe that the broad data dump today by CMS has significant short-comings regarding the accuracy and value of the medical services rendered by physicians. Releasing the data without context will likely lead to inaccuracies, misinterpretations, false conclusions and other unintended consequences,” AMA President Ardis Dee Hoven said in a statement.

Gerald Ho, a rheumatologist interviewed by The Washington Post who received nearly $5.4 million in reimbursements in 2012, expressed concern that the public would misread the data, noting that he dreaded the CMS release.“People are going to see these numbers and people aren’t going to understand,” he said to the publication. “I am not pocketing $5.3 million. To tell you the truth, I know there’s been lot of Medicare fraud, and I understand the government wants to provide a measure of transparency. But when they throw out numbers like this without any context, it’s going to be misconstrued by the public.” Of the total amount reimbursed, Ho said about $5 million covered the cost of generic drugs for rheumatoid arthritis.

Even though some doctors “may feel that their privacy has been compromised” with the release of their billing records, as Dartmouth economist Jonathan S. Skinner told the Post, the data are essential; “earlier reporting has shown, there are people who are operating in the gray area of health care who are causing Medicare to spend enormous amounts on health care that may be harmful to their patients,” he said.

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