Initial Good News on Meeting Mandated MLR Requirements

From Bloomberg News:

Health plans led by WellPoint Inc. and UnitedHealth Group Inc. can subtract taxes and include as costs “activities that improve health care quality” to meet mandates in the U.S. health-care overhaul on how much they spend on medical care, a draft report says.

The health-care law signed by President Barack Obama in March requires some health insurers to spend at least 80 percent of premium revenue on customers’ medical care. A preliminary review by state regulators asked to help implement the mandate found that most companies can meet it, said an April 24 memo from the National Association of Insurance Commissioners.

The determination, if true, means the overhaul may not squeeze insurer profits as much as some investors feared, said Joshua Raskin, a Barclays Capital analyst in New York, in a note to clients today. Insurer shares have fallen 12 percent since the U.S. House approved the law March 21, as measured by the Standard & Poor’s 500 Managed-Health Index.

How the mandate is written “will be one of the most important events of the year for the managed-care stocks,” said Raskin. “Several of the comments in the report point to the potential for a definition that is not as harmful to the managed-care industry as currently expected.”

The health law will mandate insurers spend at least 85 percent of their premium revenue on medical care for large group plans, and at least 80 percent of revenue for small-group and individual plans. It requires the federal government to develop a standard definition of what constitutes medical care, a determination now left to insurers

Early Take

The memo, written by Rick Diamond, an actuary with the Maine Bureau of Insurance, is an early take on the new rule and will likely change before it is offered to federal regulators to be turned into a final regulation, said Jeremy Wilkinson, an association spokesman, in a telephone interview today.

“It’s a draft document,” he said. “I think you’ll find a lot of people going in and editing it.”

The state group has until June 1 to deliver its final recommendations.

WellPoint, the largest U.S. insurer by enrollment, fell 64 cents, or 1.1 percent, to $55.92 in composite New York Stock Exchange trading at 4 p.m. UnitedHealth, the second biggest, dropped 5 cents to $29.80. WellPoint is based in Indianapolis. UnitedHealth is in Minnetonka, Minnesota.

Since the House passed the overhaul, WellPoint shares have fallen 13 percent and UnitedHealth has dropped 11 percent.

Diamond’s memo said insurance companies will be able to meet the standards for large- and small-group policies under either of two different ways that regulators could decide to calculate medical spending and administrative costs.

Government Taxes

Meeting the standard will be easier because the law appears to allow health plans to subtract state and federal taxes they pay from premiums and to include as costs activities that improve health care quality, as defined by the association, Diamond wrote.

State insurance commissioners are writing recommendations for the medical-spending rules before handing them over to the federal Health and Human Services Department to complete.

Overall, UnitedHealth spent 82.3 percent of revenue from premiums to pay customers’ medical expenses last year, while WellPoint spent 82.6 percent, according to company filings.

Feds Move to Regulate Premium Hikes

As I mentioned in my previous posts, there is concern that the new market of customers created by health care reform will not be very profitable. To compensate for this, it is thought that insurers may start to unnecessarily increase the price of premiums in the next few years. From the NY Times:

Fearing that health insurance premiums may shoot up in the next few years, Senate Democrats laid a foundation on Tuesday for federal regulation of rates, four weeks after President Obama signed a law intended to rein in soaring health costs.

After a hearing on the issue, the chairman of the Senate health committee, Tom Harkin, Democrat of Iowa, said he intended to move this year on legislation that would “provide an important check on unjustified premiums.”

Mr. Harkin praised a bill introduced by Senator Dianne Feinstein, Democrat of California, that would give the secretary of health and human services the power to review premiums and block “any rate increase found to be unreasonable.” Under the bill, the federal government could regulate rates in states where state officials did not have “sufficient authority and capability” to do so.

The White House offered a similar proposal in the weeks leading up to approval of the health care legislation last month. But it was omitted from the final measure, in part for procedural reasons.

Reviving the proposal on Tuesday, Mr. Harkin said: “Rate review authority is needed to protect consumers from insurance companies’ jacking up premiums simply because they can. Protections must be in place to ensure that companies do not take advantage of current market conditions before health reform fundamentally changes the way they do business in 2014.”

“Currently,” Mr. Harkin said, “about 22 states in the individual market and 27 states in the small group market do not require a review of premiums before they go into effect — and perhaps even more. This is a gaping hole in our regulatory system, and it is unacceptable.”

Under the new health care law, starting in 2014, most Americans will be required to have insurance. Insurers will have to offer coverage to all applicants and cannot charge higher premiums because of a person’s medical condition or history.

Michael T. McRaith, director of the Illinois Department of Insurance, told Congress on Tuesday, “There is a distinct possibility that less responsible companies will raise rates to price out people who are sick or might become sick between now and 2014.”

Mr. McRaith said he and the governor of Illinois, Pat Quinn, a Democrat, “unequivocally support state-based insurance regulation,” because local officials understand local markets.

He endorsed Mrs. Feinstein’s bill, saying it would “provide an impetus” for states to regulate premiums if they did not already do so.

Karen M. Ignagni, president of America’s Health Insurance Plans, a trade group for insurers, said Congress should let the new law work before piling on additional requirements.

Congress, she said, has largely ignored the cause of rising premiums: the explosive growth of medical costs and the power of hospitals and other health care providers to dictate prices.

Ms. Ignagni said the law imposed new requirements, taxes and fees on health plans, which could further drive up costs.

Senator Lamar Alexander of Tennessee, the No. 3 Republican in the Senate, said: “Health insurance companies’ profits for one year equal about two days of health care spending in the United States. So even if we were to take away all the profits of the so-called greedy insurance companies, that would still leave 363 days a year when health care costs are expanding at a rate our country cannot afford.”

Grace-Marie Turner, president of the Galen Institute, a research center that advocates free-market health policies, said the Democrats’ proposal was unlikely to succeed in lowering insurance costs.

“Capping premiums without recognizing the forces that are driving up costs would be like tightening the lid on a pressure cooker while the heat is being turned up,” Mrs. Turner said.

Mrs. Feinstein said her bill would close what she described as “an enormous loophole” in the new law. And she said health insurance should be regulated like a public utility.

“Water and power are essential for life,” Mrs. Feinstein said. “So they are heavily regulated, and rate increases must be approved. Health insurance is also vital for life. It too should be strictly regulated so that people can afford this basic need.”

Mr. Harkin interrupted the hearing to note that one of the nation’s largest insurers, UnitedHealth Group, had just reported that its first-quarter earnings had increased 21 percent, to $1.19 billion, surpassing Wall Street expectations.

Some securities analysts say they doubt that insurers can sustain such gains after major provisions of the new law take effect.

Health Insurance Reform Impact on health Insurers Part II

Yesterday's post talked about how

In 2014, insurers will find that many of those new customers will be coming from low-income households. These are families who are not poor enough to qualify for Medicaid, but too poor to purchase insurance without the government subsidies that will become available in 2014.

Today about one-third, or nearly 15 million of the 47 million uninsured live in households earning between $25,000 and $50,000. These are the families who will be receiving good subsidies—and they are likely to sign up for insurance.

But many will need extensive care. According to a 2009 report issued by the Kaiser Family Foundation, 11% of the uninsured are in “fair “or “poor” health, compared to 5% of those with private insurance. About half of all uninsured adults suffer from a chronic condition. About 75% have gone without insurance for more than one year; 55% have not had insurance for more than 3 years. Some haven’t seen a physician during that time. Others have seen doctors, but have not been able to afford the medications physicians prescribed. These patients are likely to need more tests, treatments and surgeries than the average customer.

Keep in mind that, under the new reform law, insurance companies will not be able to charge these new customers more than they charge others in their community. Moreover, insurers will have to offer all patients comprehensive insurance that meets a high bar defining basic benefits. No more “Swiss cheese” policies filled with holes. This is all fair. But it does mean that insurers will be operating in an unfamiliar marketplace, where the rules are designed to benefit patients, not the corporations that sell them coverage.

Of course, not all of today’s uninsured are poor: 9.7 million live in households earning over $75,000 a year. Why don’t they have insurance? Some suffer from pre-existing conditions that have made it impossible for them to secure insurance. Most likely, they will buy coverage adding to the number of sick patents in their insurers' pool.

Many others in this income bracket are healthy, and haven’t bought insurance because they just don’t think it’s a good value. Under reform rules, most earn too much to receive government subsidies. Unless premiums are significantly lower than they are today, many may well decide to pay the penalty rather than buy insurance.

After all, the penalties for individuals who ignore the mandate are surprisingly low: $95 in 2014, $325 in 2015, $695 (or up to 2.5 percent of income) in 2016. Families will pay half the amount for children, up to a cap of $2,250 per family. After 2016, penalties are indexed to the Consumer Price Index.

In addition, roughly 40% or about 19 million of the 47 million uninsured are 18-to-34-years old. Most in this group are healthy, and just don't believe that they need protection. Under the reform legislation, some under the age of 26 will sign up for their parents’ insurance. But many of these invincible youngsters are likely to shrug, and pay the puny penalty.

As a result, analysts at Fitch, the bond rating agency, observe: “It is not unreasonable to envision that too many new sick customers will overwhelm the individual segment of the market, driving many health plans from it altogether.” In other words, these Fitch analysts are suggesting that a fair number oy insurers may not even try to compete for the new but unprofitable business in the Exchange.

“This could become most acute under a scenario in which healthy, younger individuals decide to pay the penalty as opposed to purchasing coverage,” the Fitch analysts write, “and older individuals let policies lapse during periods when they do not need medical services, and purchase coverage only when they face a pending medical need, such as a surgery or expensive sets of tests or treatments."

This is why I predict that sometime between now and 2014, Congress will lift the penalties, and change the rules to make it impossible for someone to pay a penalty--and then buy insurance when he or she falls ill. The rest of us cannot afford to carry "free riders." Some have suggested that when a person decides not to buy insurance, he should be required to sign a document saying that he will not try to buy insurance for three years, taking the financial risk that he will be in an accident or become sick during that period of time and wind up broke, with medical debt that he will be paying off for years.

We need young, healthy people in the pool or insurance will become unaffordable for everyone.

Make no mistake, there are many unknowns. We don’t yet know whether premiums will be high enough to guarantee that insurers will recover the dollars they spend on new customers. But industry analysts predict that rate increases will be held in check by the new rules on the percentage of premiums’ that insurers must pay out, and by heightened competition for customers, who will have more choice of plans than they currently do in the individual market. Insurers "will be free to price themselves into oblivion if they choose to do so," Sheryl Skolnick, an industry analyst with CRT Capital Group, told the Washington Post.

When all is said and done, it strikes me that the cuts and regs that go into effect in the next four years could easily lead to an industry shake-out. My guess is that some for-profit insurance companies won’t make it to 2014

On Wall Street, analysts vary in how they assess the net effect of reform legislation on insurers, but no one is jubilant. Keep in mind that most Wall Street analysts would prefer to be optimistic. Most companies are in the business of selling stocks. It is not good for business to be bearish.

But everyone on the Street knows that while insurers will have more customers, profit margins are likely to be even lower than they are now. At best, this could prove to be a wash.

Health Care Reform's Impact on Health Insurers Part I

So how will the recently passed Patient Protection Act effect the health insurance industry. As I mentioned in a previous post, Wall Street reacted positively to the passage of the bill as stock prices of major publicly traded carriers rose right after its passage. Many look at the requirement to purchase coverage as a boon to the industry, creating over 30 million new customers. However while it is s true that, beginning in 2014, virtually all Americans will be required to buy insurance, or pay a fine, many will be refugees from a health care system that treated them poorly. Think of the boat as a life raft. These could be very expensive customers.

Moreover, between now and 2014, insurers will face some serious financial hits. These new regulations will make our health care system fairer and more affordable. But the rules also suggest that going forward, for-profit health insurance may not be a viable business--unless these companies learn how to keep patients healthy, while insisting on value for health care dollars. Insurers that over-pay drug-makers or hospitals will find that they can no longer turn a profit by simply passing the added expense along in the form of higher premiums.

Consider what will happen in the next three years:

1) This year, Washington sliced funding for private insurers who offer Medicare (a.k.a. Medicare Advantage) by 5%. Next year, payments will be frozen. In 2012, the serious cutting begins. Over ten years, Medicare will slash over-payments to Medicare Advantage insurers by $132 billion.

When the Medicare Advantage bill was passed in 2003, Congress agreed to pay Advantage insurers 12 percent more, per beneficiary, than it would cost Medicare to cover those patients itself . Most agree that this is corporate welfare that our health care system cannot afford.

But recent years, insurers have become increasingly dependent on the windfall payments from Medicare Advantage. As unemployment rises, insurers have been losing customers in the employer-based insurance market, and Advantage has come to represent a larger share of their profits. Humana, for example, has been receiving 60% of its operating income from Medicare Advantage.

Meanwhile, insurers selling plans in the private sector have been scrambling to rachet up premiums fast enough to keep up with the spiraling cost of healthcare. For ten years private insurers’ payouts to doctors, hospitals and patients have been climbing by roughly 8% a year. Rising prices plus volume have driven reimbursements skyward. Each year Americans are taking more medications and undergoing more surgeries and tests. And every year, virtually every product and service in our healthcare system costs more.

This is why, according to Morningstar Investment Research, the health insurance industry showed an average profit margin of just 3.4% in 2009. This means that, in terms of profitability, it ranked 87^th out of 215 US industries.

Given the skimpy profits that the industry has seen in recent years, generous subsidies from Medicare Advantage have remained a “bright spot” for companies such as industry leader UnitedHealth Group.

But under the reform legislation these fat Advantage subsidies will disappear, as they must, and Advantage insurers such as UnitedHealth Group will face tighter regulations. By 2014, insurance companies will be expected to pay out 85% of Advantage premiums for medical care, keeping no more than 15% of premiums to cover overhead and profits. Today, UnitedHealth Group keeps 19%. This is not unusual. The majority of Medicare Advantage plans pocket more than 15% of premiums according to a recent report released by the House Committeon Energy and Commerce.

Good-bye “bright spot.”

Only those insurers that can show that they are providing excellent value for Medicare dollars will continue to receive Medicare payments, and their subsidies will be much lower. Most likely, many insurers will simply give up on the once-lucrative Advantage business.

2) Next year, the new rules regarding pay-outs will apply to private sector plans. Insurers selling in the individual and small group market will be required to spend 80 percent of premium dollars on medical services, while plans in the large group market will be expected to spend 85 percent. Insurers that do not meet these pay-out thresholds will have to provide rebates to policyholders.

3) The new pay-out rules will make premium hikes far less profitable for insurers. Even if an company raises its premiums by 10%--for example, lifting a $14,000 annual premium for a family plan to $15,400--the insurer must pay out 85% of the $1,400 increase, or an additional $1,190 to hospitals doctors and patients , keeping only $210 of the $1,400 to cover overhead and profits.

4) Another new cost for insurers: beginning in 6 months, all new group health plans as well as new plans in the individual market will have to provide coverage for preventive services at no charge. Co-pays and deductibles will not apply to recommended services.

(5) Beginning this year, if you become seriously ill, insures won’t be able to drop your coverage on the grounds that you forgot some detail of your medical history when you applied for insurance. They will be able to rescind your policy only if they can prove fraud, or that you intentionally set out to deceive them. This won’t be easy.

(6) In 2011, insurers will no longer be allowed to cap how much they pay out to an individual over the course of his or her life. If a customer suffers from a serious illness that requires multiple hospitalizations and high-tech treatments over many years, the insurer faces an open-ended bill. Starting in 2014, insurers will no longer be able to limit how much they pay out annually.

Make no mistake: patients need this protection. Parents should not have to worry that the insurance covering a child suffering from cancer is going to “run out” if her care costs too much in any one year—or if she survives too long. But while the new rule is welcome, it will make the insurance business riskier: Actuaries will have a hard time guesstimating just how high those bills could mount, especially over 10 or 15 years. This is another reason why reform is far from a sweetheart deal for insurers.

(7) In 2011 it will become more difficult to raise premiums. Given falling Advantage reimbursements, coupled with rising expenses, one might assume that insurers would simply lift premiums to make up the difference. But it won’t be quite that easy. Reform legislation helps states insist that insurance companies submit justification for requested premium increases. Any company with excessive or unjustified premium increases may not be able to participate in the new health insurance exchanges.

Already, some state regulators are getting tougher. In March, the Providence Journal reported that Rhode Island’s state health insurance commissioner slashed proposed premiums increases, keeping rate increases in the single digits, while calling Blue Cross's proposed 14.6-percent hike "just not affordable." And in April the Massachusetts insurance commissioner rejected nearly 9 out of 10 rate increases—ranging from 7% to 34%--that the state’s health insurers had requested for individual and small group plans as I have mentioned in previous posts.

So while there will be many new customers out there for health insurers, the prospect of them being profitable ones is limited.

Future posts will look at other aspects of the bill.

ACOs: It Won't Be Easy

Accountable care organizations are seen by many as a way to reduce health care costs in this country. One pilot ACO operating in the Sacramento area after three months is already projecting an annual savings of over $10M. But as I have said, forming and operating an ACO will take an amazing amount of trust among providers and health insurers. And trust is not the only issue.

Edward G. Murphy, MD, president and CEO of Roanoke-based Carilion Health System, spoke recently at a forum on challenges to the delivery system sponsored by the Washington-based New America Health Policy Program. He offered his views on the five obstacles to forming ACOs.

1) The payment system. "We talk about the sort of the tradition I grew up with—with doctors. Everybody thinks about [television doctor] Marcus Welby—and [that] you're there to care for patients. The reality is: that's not true," Murphy said. "We're driven by the payment system, and the payment system is organized around transactions."

In healthcare, it centers around billing codes. "We get paid for doing stuff to you—and not for taking care of you. There's a lot of things that we'd like to do . . . [but they] don't fit well into billing codes," he said. "And if you can't fit it into a billing code, it's very difficult to justify doing it. We're paid for doing more—whether it's valuable or not."

The "real perverse incentive" is that healthcare providers are penalized for savings. "If we avoid doing something which is unnecessary, that's lost revenue to the system when the expense is still remaining. It's very difficult to get from under that trap," he said.

In addition, the current payment system "is well suited for acute and episodic care, which is the first half of the 20th Century," he added. "The real public health imperative of the 21st Century is complex, chronic diseases, which is longitudinal care management. Episodic transactions do not lend themselves well to effective treatment of medical care of chronic conditions."

2) Organizational structure. "A good bit of advice I received some time ago from someone much more learned than I was that all systems are perfectly aligned to get the results that they get," he said. "Our healthcare delivery system today is perfectly aligned to get the results we get: It's fragmented, it's episodic, and it's designed to maximize the payment system, which is designed around transactions."

Today, healthcare economists argue that "all we have to do is change the financial incentives and then magically, it will be like pixie dust and magically everybody will start doing stuff the next day," he said. "There's no evidence for that."

"As a matter of fact, there's evidence to the contrary. I would argue that the problem of the experiment of the movement to managed care of the 1990s was all about changing the financial system and the financial incentives—without changing the delivery system to take advantage of the new incentives or deliver" what was desired, he said.

3) The culture of medicine. While it's "enveloped" in the previous two items, it still comes down to two things: autonomy and independence, Murphy said.

"Effective management of patients with chronic diseases is all about teamwork and consensus. Avoiding that which is unnecessary is all about teamwork and consensus," he said. "We hate that."

Engineers will tell you that in engineering, fragmentation and variation are the enemies of quality and efficiency. It's as every bit as true in medicine as it is in engineering but we reject it because we're all about our independence—and we guard it jealously."

It lends itself well to a sports metaphor, Murphy said. "We're all about tennis, and well-practice medicine is baseball. And not only are we all about tennis . . . too many doctors in the profession are John McEnroe."

4) No burning platform. "We're a profession that is highly resistant to change," Murphy said. "The problem is it's still credible for us today...to maintain the status quo. And as long as we think that—it doesn't matter whether we are right or wrong—as long as we believe it, we'll act on that belief."

An example is implementation of the sustainable growth rate formula in Medicare that would lead to in effect a reduction in physician payments for services this year. This is not likely to happen because they "keep fixing it and rolling it over," he said. "Right now, we're looking down the barrel of a 21% reduction for physician fee services. Nobody believes it's going to happen, including me. They're going to fix it."

If they didn't fix it, there'd be imperative for people to think about doing something different. "Fixing it enables the status quo, and they'll fix it as sure as I'm standing here," he said.

"It's difficult to get people to drive changes in how they deliver care day in and day out—because the history they've lived with," he said. "Every time they got up to the precipice of needing to make a change, the government always fixes it and made it OK to stay the way it was."

5) Healthcare insurance company resistance. Murphy, who works with many insurance companies, says "they are all over the map." Some are "highly compatible, sympathetic, and consistent in the direction we are trying to move in." Others are "highly resistant."

"But the reason I need health insurers to work with me—to figure out how to practice medicine differently—is that I need their data," he said. "Even if you've got a very effective, very high quality electronic medical record, which we do, we can only have data on stuff that occurs within our confines."

When patients go elsewhere for healthcare, the insurance companies will know about it because there is a bill attached to it—"but we don't know about it," he said. "And, you can't manage what you don't know. The data have to be real time."

I have spoken to numerous physicians about bundled payments which would be an essential element of any ACO. While many of them have expressed interest, few have said they believe it could work because of coordination issues just for starters. It will be interesting to follow the progress of the CALPERS ACO pilot to how they resolved the obstacles cited by Murphy.

MA Health Insurers Face Fines

Previous posts have discussed the situation between health insurers in Massachusetts and state regulators. The DOI had denied health insurers their requested premium increases and was taken to court by the carriers. A judge ruled against the health insurers and here is the latest on the situation from the Boston Globe:

State regulators yesterday demanded that health insurers submit revised April 1 premium rates for tens of thousands of individuals and small businesses by 3 p.m. tomorrow or face stiff fines.

The fines could run to as much as $5,000 a day per carrier, plus $1,000 for each consumer who is unable to buy coverage, according to a letter sent by Insurance Commissioner Joseph G. Murphy yesterday afternoon to Massachusetts insurers.

“Refusing to offer or issue policies to eligible individuals and eligible small businesses is disruptive to the small group market and a violation of applicable laws and regulations,’’ Murphy wrote.

The letter went out to six companies — Blue Cross and Blue Shield of Massachusetts, Harvard Pilgrim Health Care, Tufts Health Plan, Fallon Community Health Plan, Neighborhood Health Plan, and Health New England — the day after Suffolk Superior Court Judge Stephen E. Neel denied their request for an injunction that would let them implement double-digit rate hikes rejected earlier by insurance regulators.

Neel ruled that insurers should exhaust their administrative appeals within the insurance division before moving forward with court action against the state. Four insurers had filed administrative appeals with the division as of yesterday: Harvard Pilgrim, Blue Cross-Blue Shield, Tufts, and Fallon. The deadline for filing an appeal is tomorrow.

Yesterday’s letter followed mounting frustration by state officials over the insurers’ delay in following an order to update their quotes on the state’s Health Connector website and through other intermediaries that sell the companies’ insurance, using base rates from last year. The insurers had posted new rates, with average base rate increases of 8 to 32 percent, on the Connector site, but were told by regulators to remove them when the rates were denied.

Representatives of the health insurers yesterday said they were working to comply with the state directive, but some stopped short of committing to having revised rates ready by tomorrow.

“The state has asked us to comply, and we expect that we will be in compliance,’’ said Jay McQuaide, vice president for Blue Cross-Blue Shield, the state’s largest health insurer.

“We’re doing everything we need to do to get the rates in place as quickly as we can,’’ said Fallon spokeswoman Christine Cassidy.

“Harvard Pilgrim will respond to today’s letter from Division of Insurance by Thursday’s deadline,’’ said spokeswoman Sharon Torgerson. “We plan to begin issuing quotes as soon as possible.’’

As of 5 p.m. yesterday, the Connector had reposted only individual and family rates from one carrier, Health New England, for insurance products covering the small group market. The segment includes about 800,000 people. Connector spokesman Dick Powers said it could take a day or two to post rates after they’re submitted. Health New England serves Western Massachusetts.

Murphy, in his letter, said insurers were required to return a form to his division by tomorrow afternoon outlining how they would offer their new rates. If rates are not submitted by 3 p.m., daily $5,000 fines would begin under one state statute. Under a separate statute, regulators would hold hearings to determine if consumers could buy insurance from their carriers and their broker networks, and fine the insurers $1,000 for every would-be customer turned away.

Regulators yesterday said insurers should have begun updating their rates April 1, when the higher rates were turned down. “We’re reasonable people,’’ Murphy said. “They were put on notice April 1. By Thursday, it will be 15 days. It’s imperative that consumers have accurate information when they make purchasing decisions.’’

Barbara Anthony, undersecretary of the state Office of Consumer Affairs and Business Regulations, said insurers are obligated by law to quote rates to consumers before tomorrow’s deadline — even if they can only offer estimates. “They have to sell insurance,’’ she said.

Study Shows Cardio Docs Practice Defensive Medicine

From the journal Circulation:

Nearly 600 doctors were surveyed for the study to determine how aggressively they treat their patients and whether non-medical issues have influenced their decisions to order invasive heart tests.

Most said they weren't swayed by such things as financial gain or a patient's expectations. But about 24 percent of the doctors said they had recommended the test in the previous year because they were worried about malpractice lawsuits. About 27 percent said they did it because they thought their colleagues would do the test.

Doctors who treated their patients aggressively were more likely to be influenced by malpractice worries or peer pressure than those who weren't as aggressive, the study determined.

The research was done to see whether doctors' attitudes and practices might be contributing to the wide differences in health care use and spending across the country.

"We have known for a long time that where you live has an influence on what kind of health care you get and how much health care you get," said Lee Lucas, lead author of the study and associate director of the Center for Outcomes Research and Evaluation at Maine Medical Center in Portland.

Some of the reasons are known: differences in disease rates, patient preferences and the availability of medical services or hospital beds. And more care isn't necessarily better care, Lucas noted.

For the study, the doctors were asked to recommend tests and treatment for three hypothetical heart patients. Their answers were used to score them on how aggressively they tend to treat patients.

Using Medicare records, the researchers found that doctors with higher scores were more likely to be in the areas with higher spending overall or higher rates for a heart test, although the differences were small.

The doctors were also asked whether other issues had led them to recommend the heart test — called a cardiac catheterization — during which a thin tube is threaded to the heart to check how well it is working and to look for disease.

The researchers suggest that targeting malpractice concerns could help reduce the regional differences.

"We need a way for docs to be less afraid of not ordering a test," said Lucas.

Medical malpractice was part of the health care reform debate, but didn't make it into the recently approved legislation. The new law does include pilot programs for states to explore alternatives to lawsuits.

The results support moving toward more integrated health care, and away from fee-for-service payments, and working on malpractice reforms, said Kenneth Thorpe, a professor of health policy at Emory University in Atlanta.

Lucas said patients can help by not pressuring their doctors to do tests.

"If he says you don't need it, let it go," she said.