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James C. Robinson and Jill M. Yegian, Medical Management After Managed Care, Health Affairs Web Exclusive, May 19, 2004 [Abstract] [PDF] [HTML Version][Related Papers] [Reprints & Permissions]

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Important Conflict Of Interest

Matthew M. Carroll   ( 15 December 2008 )

Important Conflict Of Interest 15 December 2008
Matthew M. Carroll, Director, Sales and Marketing OPED, Inc. Send comment to journal: Re: Important Conflict Of Interest m.carroll{at}opedinc.com Matthew M. Carroll	I would like to share a related but distinct inefficiency in the medical device aspect of our health care system. I am hoping to garner interest from individuals in a position to escalate this issue and assist in getting it addressed by Daschle and the Obama administration’s health care reform team. I am referring to the fact that the current system permits doctors and hospitals to profit from the medical devices they prescribe. Add to that the fact that the amount of reimbursement for a given medical device is capped and regulated, and you create an environment with a conflict of interest that leads to the possibility for overprescription and a flight to lower-quality products to increase profit from the practice of billing for medical devices. As an example, take the fracture boot market. Medicare-allowable for a fracture boot (HCPCS code L4360) is approximately $230 (it varies from state to state). There are numerous boots available that range in price to the doctor/hospital from $40 to $175. An expensive boot is as stable as a cast, more comfortable, can be set in plantar flexion, offers two liners for hygiene, etc. The cheap boot provides less stability and tends to fall apart more easily. The doctor can prescribe the $40 boot and generate $190 in profit for his practice, or he can provide the expensive boot and generate only $55 in profit for his practice. The cost to the health care system is identical for the two boots. What differs is the amount of profit to the doctor and the quality of the product the patient receives. The reason there is such a discrepancy in quality is that doctors have not always been permitted to profit from these products. Since they have been allowed to do so, there has been a dramatic shift in prescriptions away from the higher-quality boots in favor of the cheaper boots. The high-quality boots still exist, but their manufacturers are struggling to survive and will soon disappear altogether while the cheap boots dominate the market. The high-quality boots are relegated to use on VIP patients and the doctors themselves. Manufacturers recognize this and then abandon their efforts to innovate in the direction of higher quality and improved efficacy. They opt instead to use their resources to find creative ways to reduce manufacturing costs while still delivering the bare minimum functionality. In fact the erstwhile leader in the market, Aircast, was forced to develop a cheaper version of its high-end fracture boot, the XP, in an attempt to recapture market share. The cheaper version, the FP, has now surpassed the XP in unit sales. Exacerbating this flaw is the fact that HCPCS codes tend to be devoid of performance standards, enabling manufacturers to produce low-quality, low-performing products that still meet HCPCS requirements. The travesty is that Medicare and the insurance companies pay the contracted price for these products, even though the level of quality continues to decrease. Patients are the big loser in this equation, because they accept the lower-quality product, assuming their trusted doctor is basing product decisions on medical merit and appropriateness only. Essentially, the system is rigged to provide worse and worse products for patients and to generate larger and larger margins for doctors and hospitals while costing the overall health care system the same amount. The Obama administration could correct this terrible inefficiency in the system with one simple change: doctors, hospitals, and third-party providers should not be allowed to profit from prescribing products. With the profit motive removed from the equation, doctors and hospitals will be left to choose products based solely on medical merit. The contracted price for devices would would go to the manufacturer, which would do the billing. This way, competing companies would use their energy and resources to create the medically most efficacious product at the lowest acceptable production cost given the fixed reimbursement constraint. This would result in doctors' being able to choose from ever-improving products, as opposed to looking for cheaper and cheaper products. The environment of ever-improving products increases the likelihood of the emergence of products that shorten recovery times and lower complication rates. Simple changes like this are exactly the type of change we need, to increase efficiencies while fostering innovation. I hope this resonates with someone who is as disillusioned with this conflict of interest as I am.