Big News — The Real Winner In Healthcare’s Red Tape Might Be The Drug Companies

Looks like the Medicare program is the source of a small fortune for many U.S. doctors. So says a trove of government records that reveal unprecedented details about physician billing practices nationwide.

According to the new data, the government insurance program for older people paid nearly 4,000 physicians in excess of $1 million each in 2012. And those figures do not include what the doctors billed private insurance firms.

This is the first chance that we as the public have had a chance to see the billing practices of individual doctors nationwide. Consumer groups and news outlets have pressured Medicare to release the data for years. Medicare officials said they hope that releasing this data will expose fraud, inform consumers and lead to improvements in care.

The American Medical Association didn’t want this data released, though. They said, the information violates doctor privacy and that the public may misconstrue details about individual doctors.

Misconstrue details? These procedures, as explained below, DO NOT COST MILLIONS OF DOLLARS. In fact, the most interesting revelation from this data is that part of healthcare’s rising cost could stem from drug companies.

Who were the highest billers?
A cardiologist in Ocala, Fla. took in $18.1 million, mainly putting in stents. A New Jersey pathologist received $12.6 million performing tissue exams and some other tests. There was also a Michigan vascular surgeon who raked in $10.1 million in one year.

Some of the highest billing totals may simply reflect a physician who is extremely efficient or who has an unusually large number of Medicare patients.

The highest numbers also may reflect a physician who specializes in procedures that require costly overhead, and in those cases, a large portion of the money may wind up not with the doctor but with pharmaceutical companies or makers of medical devices.

However, government inspectors have previously found in the past that the extremely high billing totals could signal fraudulent doctor behavior.

In fact, three of the top 10 earners already drew federal government scrutiny. One of them is even awaiting trial on federal fraud charges.

The greatest tallies also may signal that the Medicare payments for some procedures are too high for the amount of work involved and that perverse incentives lead doctors to overuse a procedure.

The Medicare program is the nation’s largest medical insurer. By virtue of its breadth, the forthcoming billing data are expected to shed light on an array of questions that have arisen about health-care costs as the nation has confronted decades of rising medical bills.

Overall, the data cover $77 billion in billing involving 880,000 practitioners in 2012.

The AMA has warned that the billing figures reflect what a doctor receives in payment but does not show the actual profit after paying for equipment, support personnel and malpractice insurance. For some procedures, the overhead can reach three-quarters or more of the payment amount.

According to a Washington Post analysis, only 23 of the 4,000 biggest billers personally earned $1 million or more. Many of the highest billers, for example, were in fields with unusually high expenses, and that was likely to limit their personal income.

Gerald Ho is a rheumatologist who runs three offices in the Los Angeles area. He said he’s been “sort of dreading” the release of this Medicare payment data. Ho received nearly $5.4 million in reimbursements in 2012. Of that, he said, probably about $5 million covered the cost of genetically-engineered drugs to treat patients with rheumatoid arthritis. He also has to pay a staff of 40.

This is the start of a pattern here. The exorbitant expense of healthcare flows towards the drug companies.

“People are going to see these numbers and people aren’t going to understand,” he said. “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.”

But consumer and public interest groups argued that the information will help consumers make better decisions.

“This data is important because it will make it possible for consumers to identify physicians that will best meet their needs,” said Robert Krughoff, president of Consumers’ Checkbook. This group began seeking the release of this information in 2005 and eventually sued for it.

For example, now consumers can know which doctors are most experienced in a given operation. Studies show that for several types of surgery, volume does matter: As docs perform more surgeries, patients are less likely to die.

Who was at the top of the list?
According to the data released Wednesday, Salomon Melgen, an ophthalmologist in West Palm Beach, Fla., took in $20 million from Medicare in 2012, topping the list.

Most of Melgen’s take — about $11.8 million of it — came from injecting patients’ eyes with Lucentis, a drug used for macular degeneration, according to the data.

For each shot, Medicare and the patient pay a doctor about $2,000, but the drug is very expensive and the doctor must then pay most of that money to the drug’s manufacturer, Genentech.

What may be most interesting about Melgen’s practice, however, is that he could have used a much cheaper drug than Lucentis — one called Avastin that many ophthalmologists consider an equivalent.

Had he used the cheaper alternative, his bill to Medicare for the shots would have dropped from $11.8 million to less than $500,000.

But physicians have a financial incentive to use more expensive drugs. Medicare pays a doctor more for injecting the more expensive drug — the physician’s fee is based on the drug’s price — and Genentech offered doctors its own incentive to use the expensive drug: The firm gave discounts to those who use high volumes.

And docs keep choosing this more expensive eye drug. That explain why so many of Medicare’s top billers are ophthalmologists.

879 were ophthalmologists were paid at least $1 million by Medicare in 2012. Like Melgen they relied on using the more expensive drug, Lucentis.

Some physicians have suggested that using Lucentis is wasteful because a much cheaper alternative exists.

“There is no advantage of using Lucentis over Avastin — as six randomized clinical trials have shown they’re equivalent,” said Philip Rosenfeld. He is a Miami ophthalmologist pioneering the use of the less-expensive drug.

Physicians worried the data release would mislead the public.

Minh Nguyen, a hematologist-oncologist at Orange Coast Oncology in Newport Beach, Calif., made the list in question. He’s listed as having received more than $9 million in reimbursements, ranking him as number 10 on the list of top billers of Medicare in 2012.

Nyugen explained the high total was because all the chemotherapy drugs for his five-physician practice are billed under his name.

“It looks like I’m getting paid $9 million. . .” he said. “But the majority of the billing goes to pay the drug companies.”

Nguyen said the data could illuminate the challenge experienced by oncologists around the country who are struggling with rising drug costs. Typically, practices have to purchase drugs up front – at a cost of about $25,000 per treatment – and then wait weeks or months for Medicare or insurance companies to reimburse them.

And now does all the red tape make sense? There’s a lot of money in it. Looking at the numbers from this new release reveals something that should be terribly obvious — healthcare in America is far from anything resembling a “free market”. The fact that designer drugs are bringing in billions of profits to drug companies by way of Medicare and insurance companies should worry us all.