How Government Killed the Medical Profession

This article appeared in the May 2013 Issue of Reason.

by Jeffrey Singer

I am a general surgeon with more than three decades in private clinical practice. And I am fed up. Since the late 1970s, I have witnessed remarkable technological revolutions in medicine, from CT scans to robot-assisted surgery. But I have also watched as medicine slowly evolved into the domain of technicians, bookkeepers, and clerks.

Government interventions over the past four decades have yielded a cascade of perverse incentives, bureaucratic diktats, and economic pressures that together are forcing doctors to sacrifice their independent professional medical judgment, and their integrity. The consequence is clear: Many doctors from my generation are exiting the field. Others are seeing their private practices threatened with bankruptcy, or are giving up their autonomy for the life of a shift-working hospital employee. Governments and hospital administrators hold all the power, while doctors—and worse still, patients—hold none.

The Coding Revolution

At first, the decay was subtle. In the 1980s, Medicare imposed price controls upon physicians who treated anyone over 65. Any provider wishing to get compensated was required to use International Statistical Classification of Diseases (ICD) and Current Procedural Terminology (CPT) codes to describe the service when submitting a bill. The designers of these systems believed that standardized classifications would lead to more accurate adjudication of Medicare claims.

What it actually did was force doctors to wedge their patients and their services into predetermined, ill-fitting categories. This approach resembled the command-and-control models used in the Soviet bloc and the People’s Republic of China, models that were already failing spectacularly by the end of the 1980s.

Before long, these codes were attached to a fee schedule based upon the amount of time a medical professional had to devote to each patient, a concept perilously close to another Marxist relic: the labor theory of value. Named the Resource-Based Relative Value System (RBRVS), each procedure code was assigned a specific value, by a panel of experts, based supposedly upon the amount of time and labor it required. It didn’t matter if an operation was being performed by a renowned surgical expert—perhaps the inventor of the procedure—or by a doctor just out of residency doing the operation for the first time. They both got paid the same.

Hospitals’ reimbursements for their Medicare-patient treatments were based on another coding system: the Diagnosis Related Group (DRG). Each diagnostic code is assigned a specific monetary value, and the hospital is paid based on one or a combination of diagnostic codes used to describe the reason for a patient’s hospitalization. If, say, the diagnosis is pneumonia, then the hospital is given a flat amount for that diagnosis, regardless of the amount of equipment, staffing, and days used to treat a particular patient.

As a result, the hospital is incentivized to attach as many adjunct diagnostic codes as possible to try to increase the Medicare payday. It is common for hospital coders to contact the attending physicians and try to coax them into adding a few more diagnoses into the hospital record.

Medicare has used these two price-setting systems (RBRVS for doctors, DRG for hospitals) to maintain its price control system for more than 20 years. Doctors and their advocacy associations cooperated, trading their professional latitude for the lure of maintaining monopoly control of the ICD and CPT codes that determine their payday. The goal of setting their own prices has proved elusive, though—every year the industry’s biggest trade group, the American Medical Association, squabbles with various medical specialty associations and the Centers for Medicare and Medicaid Services (CMS) over fees.

As goes Medicare, so goes the private insurance industry. Insurers, starting in the late 1980s, began the practice of using the Medicare fee schedule to serve as the basis for negotiation of compensation with the doctors and hospitals on their preferred provider lists. An insurance company might offer a hospital 130 percent of Medicare’s reimbursement for a specific procedure code, for instance.

The coding system was supposed to improve the accuracy of adjudicating claims submitted by doctors and hospitals to Medicare, and later to non-Medicare insurance companies. Instead, it gave doctors and hospitals an incentive to find ways of describing procedures and services with the cluster of codes that would yield the biggest payment. Sometimes this required the assistance of consulting firms. A cottage industry of fee-maximizing advisors and seminars bloomed.

I recall more than one occasion when I discovered at such a seminar that I was “undercoding” for procedures I routinely perform; a small tweak meant a bigger check for me. That fact encouraged me to keep one eye on the codes at all times, leaving less attention for my patients. Today, most doctors in private practice employ coding specialists, a relatively new occupation, to oversee their billing departments.

Another goal of the coding system was to provide Medicare, regulatory agencies, research organizations, and insurance companies with a standardized method of collecting epidemiological data—the information medical professionals use to track ailments across different regions and populations. However, the developers of the coding system did not anticipate the unintended consequence of linking the laudable goal of epidemiologic data mining with a system of financial reward.

This coding system leads inevitably to distortions in epidemiological data. Because doctors are required to come up with a diagnostic code on each bill submitted in order to get paid, they pick the code that comes closest to describing the patient’s problem while yielding maximum remuneration. The same process plays out when it comes to submitting procedure codes on bills. As a result, the accuracy of the data collected since the advent of compensation coding is suspect.

Command and Control

Coding was one of the earliest manifestations of the cancer consuming the medical profession, but the disease is much more broad-based and systemic. The root of the problem is that patients are not payers. Through myriad tax and regulatory policies adopted on the federal and state level, the system rarely sees a direct interaction between a consumer and a provider of a health care good or service. Instead, a third party—either a private insurance company or a government payer, such as Medicare or Medicaid—covers almost all the costs. According to the National Center for Policy Analysis, on average, the consumer pays only 12 percent of the total health care bill directly out of pocket. There is no incentive, through a market system with transparent prices, for either the provider or the consumer to be cost-effective.

As the third party payment system led health care costs to escalate, the people footing the bill have attempted to rein in costs with yet more command-and-control solutions. In the 1990s, private insurance carriers did this through a form of health plan called a health maintenance organization, or HMO. Strict oversight, rationing, and practice protocols were imposed on both physicians and patients. Both groups protested loudly. Eventually, most of these top-down regulations were set aside, and many HMOs were watered down into little more than expensive prepaid health plans.

Then, as the 1990s gave way to the 21st century, demographic reality caught up with Medicare and Medicaid, the two principal drivers of federal health care spending.

Twenty years after the fall of the Iron Curtain, protocols and regimentation were imposed on America’s physicians through a centralized bureaucracy. Using so-called “evidence-based medicine,” algorithms and protocols were based on statistically generalized, rather than individualized, outcomes in large population groups.

While all physicians appreciate the development of general approaches to the work-up and treatment of various illnesses and disorders, we also realize that everyone is an individual—that every protocol or algorithm is based on the average, typical case. We want to be able to use our knowledge, years of experience, and sometimes even our intuition to deal with each patient as a unique person while bearing in mind what the data and research reveal.

Being pressured into following a pre-determined set of protocols inhibits clinical judgment, especially when it comes to atypical problems. Some medical educators are concerned that excessive reliance on these protocols could make students less likely to recognize and deal with complicated clinical presentations that don’t follow standard patterns. It is easy to standardize treatment protocols. But it is difficult to standardize patients.

What began as guidelines eventually grew into requirements. In order for hospitals to maintain their Medicare certification, the Centers for Medicare and Medicaid Services began to require their medical staff to follow these protocols or face financial retribution.

Once again, the medical profession cooperated. The American College of Surgeons helped develop Surgical Care Improvement Project (SCIP) protocols, directing surgeons as to what antibiotics they may use and the day-to-day post-operative decisions they must make. If a surgeon deviates from the guidelines, he is usually required to document in the medical record an acceptable justification for that decision.

These requirements have consequences. On more than one occasion I have seen patients develop dramatic postoperative bruising and bleeding because of protocol-mandated therapies aimed at preventing the development of blood clots in the legs after surgery. Had these therapies been left up to the clinical judgment of the surgeon, many of these patients might not have had the complication.

Operating room and endoscopy suites now must follow protocols developed by the global World Health Organization—an even more remote agency. There are protocols for cardiac catheterization, stenting, and respirator management, just to name a few.

Patients should worry about doctors trying to make symptoms fit into a standardized clinical model and ignoring the vital nuances of their complaints. Even more, they should be alarmed that the protocols being used don’t provide any measurable health benefits. Most were designed and implemented before any objective evidence existed as to their effectiveness.

A large Veterans Administration study released in March 2011 showed that SCIP protocols led to no improvement in surgical-site infection rate. If past is prologue, we should not expect the SCIP protocols to be repealed, just “improved”—or expanded, adding to the already existing glut.

These rules are being bred into the system. Young doctors and medical students are being trained to follow protocol. To them, command and control is normal. But to older physicians who have lived through the decline of medical culture, this only contributes to our angst.

One of my colleagues, a noted pulmonologist with over 30 years’ experience, fears that teaching young physicians to follow guidelines and practice protocols discourages creative medical thinking and may lead to a decrease in diagnostic and therapeutic excellence. He laments that “ ‘evidence-based’ means you are not interested in listening to anyone.” Another colleague, a North Phoenix orthopedist of many years, decries the “cookie-cutter” approach mandated by protocols.

A noted gastroenterologist who has practiced more than 35 years has a more cynical take on things. He believes that the increased regimentation and regularization of medicine is a prelude to the replacement of physicians by nurse practitioners and physician-assistants, and that these people will be even more likely to follow the directives proclaimed by regulatory bureaus. It is true that, in many cases, routine medical problems can be handled more cheaply and efficiently by paraprofessionals. But these practitioners are also limited by depth of knowledge, understanding, and experience. Patients should be able to decide for themselves if they want to be seen by a doctor. It is increasingly rare that patients are given a choice about such things.

The partners in my practice all believe that protocols and guidelines will accomplish nothing more than giving us more work to do and more rules to comply with. But they implore me to keep my mouth shut—rather than risk angering hospital administrators, insurance company executives, and the other powerful entities that control our fates.

Electronic Records and Financial Burdens

When Congress passed the stimulus, a.k.a. the American Reinvestment and Recovery Act of 2009, it included a requirement that all physicians and hospitals convert to electronic medical records (EMR) by 2014 or face Medicare reimbursement penalties. There has never been a peer-reviewed study clearly demonstrating that requiring all doctors and hospitals to switch to electronic records will decrease error and increase efficiency, but that didn’t stop Washington policymakers from repeating that claim over and over again in advance of the stimulus.

Some institutions, such as Kaiser Permanente Health Systems, the Mayo Clinic, and the Veterans Administration Hospitals, have seen big benefits after going digital voluntarily. But if the same benefits could reasonably be expected to play out universally, government coercion would not be needed.

Instead, Congress made that business decision on behalf of thousands of doctors and hospitals, who must now spend huge sums on the purchase of EMR systems and take staff off other important jobs to task them with entering thousands of old-style paper medical records into the new database. For a period of weeks or months after the new system is in place, doctors must see fewer patients as they adapt to the demands of the technology.

The persistence of price controls has coincided with a steady ratcheting down of fees for doctors. As a result, private insurance payments, which are typically pegged to Medicare payment schedules, have been ratcheting down as well. Meanwhile, Medicare’s regulatory burdens on physician practices continue to increase, adding on compliance costs. Medicare continues to demand that specific coded services be redefined and subdivided into ever-increasing levels of complexity. Harsh penalties are imposed on providers who accidentally use the wrong level code to bill for a service. Sometimes—as in the case of John Natale of Arlington, Illinois, who began a 10-month sentence in November because he miscoded bills on five patients upon whom he repaired complicated abdominal aortic aneurysms—the penalty can even include prison.

For many physicians in private practice, the EMR requirement is the final straw. Doctors are increasingly selling their practices to hospitals, thus becoming hospital employees. This allows them to offload the high costs of regulatory compliance and converting to EMR.

As doctors become shift workers, they work less intensely and watch the clock much more than they did when they were in private practice. Additionally, the doctor-patient relationship is adversely affected as doctors come to increasingly view their customers as the hospitals’ patients rather than their own.

In 2011, The New England Journal of Medicine reported that fully 50 percent of the nation’s doctors had become employees—either of hospitals, corporations, insurance companies, or the government. Just six years earlier, in 2005, more than two-thirds of doctors were in private practice. As economic pressures on the sustainability of private clinical practice continue to mount, we can expect this trend to continue.

Accountable Care Organizations

For the next 19 years, an average of 10,000 Americans will turn 65 every day, increasing the fiscal strain on Medicare. Bureaucrats are trying to deal with this partly by reinstating an old concept under a new name: Accountable Care Organization, or ACO, which harkens back to the infamous HMO system of the early 1990s.

In a nutshell, hospitals, clinics, and health care providers have been given incentives to organize into teams that will get assigned groups of 5,000 or more Medicare patients. They will be expected to follow practice guidelines and protocols approved by Medicare. If they achieve certain benchmarks established by Medicare with respect to cost, length of hospital stay, re-admissions, and other measures, they will get to share a portion of Medicare’s savings. If the reverse happens, there will be economic penalties.

Naturally, private insurance companies are following suit with non-Medicare versions of the ACO, intended primarily for new markets created by ObamaCare. In this model, an ACO is given a lump sum, or bundled payment, by the insurance company. That chunk of money is intended to cover the cost of all the care for a large group of insurance beneficiaries. The private ACOs are expected to follow the same Medicare-approved practice protocols, but all of the financial risks are assumed by the ACOs. If the ACOs keep costs down, the team of providers and hospitals reap the financial reward: surplus from the lump sum payment. If they lose money, the providers and hospitals eat the loss.

In both the Medicare and non-Medicare varieties of the ACO, cost control and compliance with centrally planned practice guidelines are the primary goal.

ACOs are meant to replace a fee-for-service payment model that critics argue encourages providers to perform more services and procedures on patients than they otherwise would do. This assumes that all providers are unethical, motivated only by the desire for money. But the salaried and prepaid models of provider-reimbursement are also subject to unethical behavior in our current system. There is no reward for increased productivity with the salary model. With the prepaid model there is actually an incentive to maximize profit by withholding services.

Each of these models has its pros and cons. In a true market-based system, where competition rewards positive results, the consumer would be free to choose among the various competing compensation arrangements.

With increasing numbers of health care providers becoming salaried employees of hospitals, that’s not likely. Instead, we’ll see greater bureaucratization. Hospitals might be able to get ACOs to work better than their ancestor HMOs, because hospital administrators will have more control over their medical staff. If doctors don’t follow the protocols and guidelines, and desired outcomes are not reached, hospitals can replace the “problem” doctors.

Doctors Going Galt? 

Once free to be creative and innovative in their own practices, doctors are becoming more like assembly-line workers, constrained by rules and regulations aimed to systemize their craft. It’s no surprise that retirement is starting to look more attractive. The advent of the Affordable Care Act of 2010, which put the medical profession’s already bad trajectory on steroids, has for many doctors become the straw that broke the camel’s back.

A June 2012 survey of 36,000 doctors in active clinical practice by the Doctors and Patients Medical Association found 90 percent of doctors believe the medical system is “on the wrong track” and 83 percent are thinking about quitting. Another 85 percent said “the medical profession is in a tailspin.” 65 percent say that “government involvement is most to blame for current problems.” In addition, 2 out of 3 physicians surveyed in private clinical practice stated they were “just squeaking by or in the red financially.”

A separate survey of 2,218 physicians, conducted online by the national health care recruiter Jackson Healthcare, found that 34 percent of physicians plan to leave the field over the next decade. What’s more, 16 percent said they would retire or move to part-time in 2012. “Of those physicians who said they plan to retire or leave medicine this year,” the study noted, “56% cited economic factors and 51% cited health reform as among the major factors. Of those physicians who said they are strongly considering leaving medicine in 2012, 55% or 97 physicians, were under age 55.”

Interestingly, these surveys were completed two years after a pre-ObamaCare survey reported in The New England Journal of Medicine found 46.3 percent of primary care physicians stated passage of the new health law would “either force them out of medicine or make them want to leave medicine.”

It has certainly affected my plans. Starting in 2012, I cut back on my general surgery practice. As co-founder of my private group surgical practice in 1986, I reached an arrangement with my partners freeing me from taking night calls, weekend calls, or emergency daytime calls. I now work 40 hours per week, down from 60 or 70. While I had originally planned to practice at least another 12 to 14 years, I am now heading for an exit—and a career change—in the next four years. I didn’t sign up for the kind of medical profession that awaits me a few years from now.

Many of my generational peers in medicine have made similar arrangements, taken early retirement, or quit practice and gone to work for hospitals or as consultants to insurance companies. Some of my colleagues who practice primary care are starting cash-only “concierge” medical practices, in which they accept no Medicare, Medicaid, or any private insurance.

As old-school independent-thinking doctors leave, they are replaced by protocol-followers. Medicine in just one generation is transforming from a craft to just another rote occupation.

Medicine in the Future

In the not-too-distant future, a small but healthy market will arise for cash-only, personalized, private care. For those who can afford it, there will always be competitive, market-driven clinics, hospitals, surgicenters, and other arrangements—including “medical tourism,” whereby health care packages are offered at competitive rates in overseas medical centers. Similar healthy markets already exist in areas such as Lasik eye surgery and cosmetic procedures. The medical profession will survive and even thrive in these small private niches.

In other words, we’re about to experience the two-tiered system that already exists in most parts of the world that provide “universal coverage.” Those who have the financial means will still be able to get prompt, courteous, personalized, state-of-the-art health care from providers who consider themselves professionals. But the majority can expect long lines, mediocre and impersonal care from shift-working providers, subtle but definite rationing, and slowly deteriorating outcomes.

We already see this in Canada, where cash-only clinics are beginning to spring up, and the United Kingdom, where a small but healthy private system exists side-by-side with the National Health Service, providing high-end, fee-for-service, private health care, with little or no waiting.

Ayn Rand’s philosophical novel Atlas Shrugged describes a dystopian near-future America. One of its characters is Dr. Thomas Hendricks, a prominent and innovative neurosurgeon who one day just disappears. He could no longer be a part of a medical system that denied him autonomy and dignity. Dr. Hendricks’ warning deserves repeating:

Let them discover the kind of doctors that their system will now produce. Let them discover, in their operating rooms and hospital wards, that it is not safe to place their lives in the hands of a man whose life they have throttled. It is not safe, if he is the sort of man who resents it—and still less safe, if he is the sort who doesn’t.

Jeffrey Singer practices general surgery in Phoenix, Arizona, writes for Arizona Medicine, the journal of the Arizona Medical Association, is an adjunct scholar at the Cato Institute, and is treasurer of the U.S. Health Freedom Coalition.