Will hospitals that overpay physicians by employing them in the interest of increasing their downstream revenue ever learn?
The recent settlement by the Department of Justice (DOJ) with Wheeling Hospital in West Virginia for $50 million makes me think these employment arrangements are continuing. There have been numerous other settlements over the years with Beaumont Hospital in Michigan being fined $85 million, Kalispell Regional Healthcare in Montana being fined $24 million, Broward Health in Florida being fined $70 million, and Adventist Health in Florida being fined $119 million just to name a few.
So why do the hospitals keep making these deals and getting into trouble? Of course when in doubt just follow the money. Hospitals continue to profit by these employed arrangements. But so do physicians.
You know the arrangements as well as I do. A hospital decides they are not making enough money so they hire physicians paying well above the 90th percentile. All the physicians have to do is refer all their patients “in-house” and are financially incentivized to hit certain benchmarks.
To my knowledge, none of the physicians who are paid excessively above fair market value have been included in these DOJ civil actions. Shouldn’t physicians receive part of the blame for these arrangements? Should they be named in these civil suits so that they can be deposed as to their involvement in these illegal schemes? Why is it that the overpaid physicians are not even mentioned in the public disclosure of these suits? Doesn’t it take two to tango in this “bribery” arrangement?
As physicians we are constantly being reminded not to violate the “Stark Law” and related statutes. When Pete Stark designed these laws, he was directly pointing at independent physicians who were making increased profits by self-referral to their own facilities. Being hired by a hospital that shares their profits with an employed physician is skirting that law in the most unscrupulous manner. The doctor – patient relationship is broken when a physician is incentivized to make referrals to those who are paying them. The patient should have the option of having tests and procedures performed by those with the best quality and value.
It is time that the DOJ starts holding the physicians responsible for their financial arrangements. Just to mention a few of these arrangements, at Wheeling Hospital, two radiation oncologists and one ob/gyn were paid $1.2 million yearly, a cardiologist received $780,000 but only worked three-quarters of the year, and especially egregious, a pain doctor was paid $1.5 million yearly. Arrangements with reimbursement above and beyond the 99th percentile were the norm.
I know you can say that a physician should get whatever they can in a free market system. Unfortunately we physicians are not dealing with a free market system. In American healthcare, 40% of the healthcare dollar is paid by the government through various programs such as Medicare, Medicaid, and marketplace plans. Mechanisms are in place so this money is spent wisely and cannot be given based on incentives and in salaries way beyond fair market value.
Now of course I am not talking about academic hospital employed physicians. These are the ones who were our mentors spending their time teaching medical students and residents, doing research and often being vastly underpaid for what they do. I’m talking about the physicians that are often hired going from hospital to hospital looking for sweetheart employment deals. Or the naïve, newly graduated physicians looking for a quick way to pay off their student debt and following their “agents” advice to get rich quickly.
It happens every month in our town: an incoming doctor will interview with a group of physicians but instead will be hired by the hospital who pays them up to 50% more. I hear from colleagues that this practice goes on all over that country. The doctors who take those deals certainly understand what is going on. Should they not be included in the lawsuit?
To quote Tom Ealey, a professor of business administration at Alma College, “You can pay doctors what you want but you can’t finance it by pimping Medicare and Medicaid.” The basic rule is the salary for a physician has to have some relationship to reality.
If physicians were charged in these civil suits, they would become more vigilant in signing new contracts. Physician recruiters would be forced to tell these physicians that the unbelievable deal they are getting may come with some strings attached. Physician contract attorneys would also have to become more conservative in recommending a deal that may lead to a future lawsuit. Any physician with access to a cell phone can see what the going rate is in their state or region for their services. Various medical publications have this information available from yearly surveys.
Nearly half of all physicians in the country are now employed by hospitals. This is largely fed by downstream revenue and inequitable governmental reimbursement from lack of a site neutral payment policy. Employed physicians cost the healthcare system significantly more than non-employed physicians. About 70% of the increase in healthcare costs in the last 10 years comes from hospitals. Hospitals know that a surgeon or proceduralist will often bring them more than $3 million in downstream revenue. A family physician will bring the hospital $2 million. Since the implementation of the Affordable Care Act, with most patients having some form of insurance, the “profits” of the hospitals have gone through the roof. But that’s a discussion for another day.
If hospitals want to just keep doing these employed arrangements and pay the fines when they are found out, DOJ civil suits will continue to flourish. Many hospitals get away with it and even those who settle have made money on the deals.
Hospitals can afford the lawyers and consultants to perpetrate this process and certainly have enough money to just pay the fines. Whistleblowers will continue to blow their whistles. However if the DOJ really wants to stop it, they would do well to look at the involved physicians. Physicians hate being involved with attorneys. It may just take a few physicians being charged in these schemes to send a message to be more careful.
Robert Hagen, MD, is recently retired from Lafayette Orthopaedic Clinic in Indiana. He’s an adjunct professor at Indiana University, a past president and board member of the Indiana Orthopaedic Society, and a past member of the Board of Councilors for the American Academy of Orthopaedic Surgeons.
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