Five things I learned from the Medicare doctor payments

April 10, 2014
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I expected to be like a kid in a candy shop this week when the federal Medicare program released, for the first time in nearly 40 years, data on what it pays to physicians, nurse practitioners, medical labs, surgery centers and ambulance services.

As all my readers know, I’m more than a little interested in what doctors and health systems are paid for their services.

But when I opened the databases, it was like biting into a piece of black licorice.

All that data—for 880,000 clinicians nationally—yielded precious few insights of any value. Perhaps that will change over time, as I and many others around the country try to make sense of it all.

But in the short term it was nearly impenetrable.

The Wall Street Journal constructed the handiest tool for looking at the numbers, which you can find here. But read some of the disclaimers the publication noted about the data, and then ask yourself if we can derive many meaningful insights from it. 

Still, I did manage to glean several lessons from the numbers.

1.    Medical labs, ambulance services and eye care are BIG businesses. As you can see below, seven of the 10 entities in Indianapolis that received the most money from Medicare in 2012 were clinical labs or ambulance companies. Among the top 20 recipients of Medicare payments, nine are opthamologists or surgery centers that perform cataract surgeries and other eye-related procedures.

1. AIT LABS, Clinical Laboratory: $13.8 million

2. MID AMERICA CLINICAL LABORATORIES LLC, Clinical Laboratory: $7.5 million

3. RURAL-METRO OF INDIANA LP, Ambulance Service: $7.2 million

4. DR. ANNE GREIST, Hematology/Oncology: $5.5 million

5. CARE AMBULANCE SERVICE LLC, Ambulance Service: $4.2 million

6. STRAND DIAGNOSTICS LLC, Clinical Laboratory: $4.1 million

7. DR. NIRAJ GUPTA, Hematology/Oncology: $3.4 million

8. AMERIPATH INDIANAPOLIS PC, Clinical Laboratory: $3.0 million

9. BELTWAY SURGERY CENTERS LLC, Eye Surgery Center: $3.0 million

10. AMBULANCE MANAGEMENT SERVICES LTD, Ambulance Service: $2.8 million

11. SURGERY CENTER OF ESI PC, Eye Surgery Center: $2.6 million

12. DR. STEPHEN SCHULTZ, Medical Oncology: $2.5 million

13. DR. RAJ MATURI, Ophthalmology: $2.1 million

14. DR. PAUL WALTON, Ophthalmology: $1.9 million

15. DR. THOMAS CIULLA, Ophthalmology: $1.7 million

16. EAST CAMPUS SURGERY CENTER LLC, Eye Surgery Center: $1.7 million

17. SURGICAL CARE CENTER INC., Eye Surgery Center: $1.7 million

18. ACTION AMBULANCE, Ambulance Service: $1.6 million

19. DR. RODNEY BUCHER, Ophthalmology: $1.6 million

20. I CARE CENTER, Eye Surgery Center: $1.6 million

2.    Much of the money that Medicare pays to physicians actually goes to pharma companies, like Eli Lilly and Co. Out of the 100 highest-paid entities in Indianapolis, 38 of them are in one of three specialties—hematology/oncology, opthamology or rheumatology—in which a huge chunk of their revenue goes for drugs injected into patients. For the two Indianapolis physicians in the top 10 above, Dr. Anne Griest recorded 99 percent of her practice’s Medicare revenue for the injection of drugs, and Dr. Niraj Gupta recorded 89 percent of his practice for drug injections. Hematologists/oncologists do make profits on those drugs, but the margins on cancer drugs have decreased from more than 25 percent a decade ago to about 20 percent in 2010, and likely even less now. So most of those Medicare dollars to those specialists aren't staying with the physicians.

3.    It’s important to remember these revenues are going to physician PRACTICES, not to individual physicians. In addition to covering the cost of supplies, these payments also have to cover the cost of the office space and, most significantly, the office staff. Consider that in Indiana, there are 12,280 physicians working in Indiana, but employment at physicians’ offices totals 48,700, according to the Bureau of Labor Statistics. That means each office-based physician has, on average, three additional people working to support him or her.

4.    Health care finance is even more complicated than I thought. I already knew that the Current Procedure Terminology, or CPT codes, which form the basis of the Medicare reimbursement data just released, were nearly indecipherable. But these data do not allow independent observers to definitively attach revenue figures to individual clinicians, let alone do more sophisticated things like adjusting those payments for the level of a patient's sickness. One of my most astute readers pointed out that Medicare can and is attributing patients and their spending levels to specific clinicians now via some of its accountable care contracts. But that approach will need to become the norm before Medicare--and the public at large--will have a chance of managing health care spending. The famous business maxim is, “You can't manage what you can't measure." Well, for decades Medicare hasn't really been able to measure what it was spending. And private health insurers, who relied on the same coding system to make payments, weren't able to measure what they were spending either. Not at the level where change could occur. So is it any wonder health care spending has been out of control?

5.    We have a long, long, LOOOONG way to go on price transparency in health care. Truth be told, I regarded the sealing of Medicare payments to doctors since a 1979 court injunction won by the American Medical Association to be a travesty of good government. I mean, we’re talking about $77 billion in annual government spending that has been hidden from the public at the request of the people receiving that money. That may be the biggest conflict of interest in history. So kudos to the Obama administration (and the lawsuit brought by the Wall Street Journal) for ending that sorry chapter. But the Obama administration is engaging in crazy talk when it says these data will help consumers.

“Currently, consumers have limited information about how physicians and other health care professionals practice medicine,” said Kathleen Sebelius, who is President Obama’s secretary of health and human services. “This data will help fill that gap by offering insight into the Medicare portion of a physician’s practice.”

The reality is that this data release, as monumental as it is, is only the first step. Huge amounts of work remain, not only by IT companies to make this payment information useful for consumers, but perhaps even more by regulators and providers to come up with more common-sensical ways to package and price their services.

“We know we have to do something about this, because it’s a sixth of our economy, the payment schemes don’t work, they’re antiquated, they don’t line up the risks and rewards right. We have to control this,” Ken Weixel, a Deloitte consultant told me this week in a conversation about new payment models in health care.

“This is a fascinating journey. I may be too old to see this full journey play out,” said Weixel, who is only 55.

As I said. We’ve got a long way to go.

  • Just think of what this data will mean for possible False Claims Act cases
    Although I agree the data may not be helpful to individual consumers, it could well be helpful in weeding out provider fraud through the False Claims Act. There have been some huge provider fraud schemes that have been prosecuted, but Congress does not like the idea of adequately funding audit functions. Arming txpayers with this type of data cannot do anything but help.
  • Volume must be included in the equation. And WHY?
    MID AMERICA CLINICAL LABORATORIES LLC received more than others due to the fact their rates are sometimes 75% or more than others. Its called volume of which this article does not mention.
      The above comment should have read 75% or more LOWER than others.
    • Even handed analysis
      My fear has been that the revenue numbers will be construed as personal income to the physicians, which isn't accurate, especially for the high cost/highly paid practitioners. Ophthalmologists and Oncologists have huge overhead costs, especially if they run their own surgery or infusion centers and are not hospital based. Thanks for pointing all this out - I hope people understand the limitations of the data before jumping on the "all doctors are crooks" bandwagon, 'cause it just ain't so.
    • True
      Both AIT and MACL have national contracts. Payment from Medicare for labs are fixed, based on billed CPT code. Their volumes of tests are high, so their payment is high. And again, there is tremendous overhead cost in a clinical lab. Gas chromatography machines, and Masters and PhD prepared technologists are *not* cheap.
    • Acuity and costs
      JK, the data set you reviewed does not allow you to attribute a patient to a doctor or care system or adjust for acuity or summarize costs by physician or care system. However, these tools do exist within CMS are are in use today in the ACO program. In these programs, patients are attributed to a physician, then an "accountable care" entity. Acuity-adjusted historical costs are provided to the ACO and then tracked over time.
      • Good Points & A Step Toward Some Transparency
        JK - You make 5 excellent points. Realistically, it will hard to make quick and sound analyses showing trends, comparable costs, etc. when this type of data has been non-transparent for at least 37 years (1977 decision). But, as you point out, it is a good step forward; at least people are starting to ask more pointed questions that will eventually lead to a better understanding by many consumers.
      • Let's get real
        This is not a lot of money. If you look at what portion of the money you pay to insurers has actually gone to the people that do the healthcare work it's probably less than what you have paid Directv. If you want public servants in healthcare get ready to spend a lot more for public pensions for these people. If you want a price list go to a MinuteClinic. A Mr. Levin 31 year old trader at a hedge fund just made headlines for being paid $120 million last year, that's all stolen from your 401ks and is more than all the money on this list. Smartest kids are going into finance now not medicine. Align the incentives properly. Go after the insurance companies, the criminals billing Medicare for medical supplies that are former drug dealers ($50 billion a year), and the medical supply companies where the reps make more than the surgeons operating. Don't shut down the successful doctors that have done well financially by building a career working and sacrificing through word of mouth.
      • To Dave K
        That's very helpful, Dave. I should have remembered that Medicare does risk-adjust and track patient data at the physician level, and that private insurers are starting to do the same. So population health will change this system over time. I'll change my post to note that fact.
        • Why take the risk?
          Ok so why should a newly minted physician take on the risk of a 60 year old patient with uncontrolled diabetes that has no interest in taking care himself and has 60 years of damage? Because society won't take on the risk? You might feel differently when you are laying in the ICU someday and no doctor wants you as a patient. Your choice of doctors may become extremely limited.
        • Raw data
          I agree, a lot of this data requires further explanation. It is my understand that Mid America labs operates labs within hospitals, and bills directly to Medicare. Not surprising their Medicare receivables is high. Also, as mentioned previously, some oncologists have on-site infusion centers. They, rather than hospital outpatient centers, are being reimbursed for rather expensive chemo drugs.

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