Commentary: Money And Medicine: Physician, Disentangle Thyself

Even if the investigation into possible fraud at Columbia/HCA, the nation's largest for-profit hospital chain, never leads to a trial or a conviction, it has already accomplished something important: It has drawn public attention to a problem that has been festering in the U.S. health-care industry for the past five years. Among other issues, the probe is focusing on the various financial arrangements that the company uses to recruit doctors--deals that include giving physicians a stake in the hospitals where they refer patients. That practice, though not necessarily illegal, sets up a massive conflict of interest: Can doctors strive to provide the best possible care while at the same time attempting to maximize profits for the hospital?

It's not a brand new issue. Doctors have had stakes in hospitals, clinics, and other facilities for years. But, as health care continues its restructuring into a mostly for-profit system, hospital operators have grown more aggressive in cutting deals to get top doctors. The name of the game is to bring in the physicians who can bring in the business. But once the doctors are owners, they have every incentive to cut costs by sometimes denying care or to boost the bottom line by sometimes prescribing a more costly course of treatment.

Figuring out a way to reward doctors appropriately in the new system--while ensuring quality patient care--is the "most important topic to be addressed in health-care management over the next five years," says Peter S. Stamos, a New York City health-care consultant. In the meantime, there is a foundation on which immediate reform measures can be built. In 1972, Congress passed an antikickback law prohibiting inducements to physicians to make referrals for Medicare business. In 1989 and 1993, lawmakers followed up with the so-called Stark laws, which essentially barred doctors from referring patients to certain medical facilities in which the physicians have a financial interest. As a result, in many cases, a doctor can no longer own a testing facility and ship patients there.

The first step is for prosecutors to enforce existing laws. Then, lawmakers should extend the laws' reach. Under current statutes, doctors can own up to 40% of a hospital as long as no more than 40% of hospital revenues come from their referrals.

Here's a better idea: Ban doctor investments in hospitals altogether. Employee ownership is fine for many businesses. But doctors and hospitals are "not selling a product like shoes," says Dr. Arnold S. Relman, editor-in-chief emeritus of the New England Journal of Medicine. "We deal with the vital personal interests of how people live and die." For-profit hospitals don't need doctors' capital. And the efficiencies physician ownership encourages are vastly outweighed by the potential for harm to patients.

NEW LAWS. The Columbia probe also raises broader questions about physician compensation. As the nation moves deeper into for-profit medicine, physicians are seeing more of their practices tied to financial incentives. One example: capitation deals, in which insurers pay physicians fixed annual fees to cover each patient's treatment. Critics say such schemes encourage doctors to withhold care. Now, several states are considering proposals to regulate capitation.

Certainly, hospitals and doctors both must operate more efficiently. But the health-care world must strike a balance that preserves high-quality care. That way, doctors can refer to the Hippocratic Oath, rather than their investment portfolios, for inspiration.

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