Patients’ costs skyrocket; specialists’ incomes soar

Dermatologists climb the medical-pay ladder.

NEW YORK TIMES NEWS SERVICEJanuary 21, 2014 

HEALTH SPECIALISTS COSTS 1

Dr. Brett Coldiron removes potentially cancerous skin cells from a patient during Mohs surgery at his private practice in Cincinnati, Jan. 13, 2014. Specialty doctors are receiving big returns from minor procedures, raising patients' costs due to lucrative treatments that often involve several doctors from highly compensated specialties. (Luke Sharrett/The New York Times)

LUKE SHARRETT — NYT

CONWAY, Ark. — Kim Little had not thought much about the tiny white spot on the side of her cheek until a physician’s assistant at her dermatologist’s office warned that it might be cancerous. He took a biopsy, returning 15 minutes later to confirm the diagnosis and schedule her for an outpatient procedure at the Arkansas Skin Cancer Center in Little Rock, 30 miles away.

That was the prelude to a daylong medical odyssey several weeks later, through different private offices on the manicured campus at the Baptist Health Medical Center that involved a dermatologist, an anesthesiologist and an ophthalmologist who practices plastic surgery. It generated bills of more than $25,000.

“I felt like I was a hostage,” said Little, a professor of history at the University of Central Arkansas, who had been told that she would need just a couple of stitches. “I didn’t have any clue how much they were going to bill. I had no idea it would be so much.”

Little’s seemingly minor medical problem — she had the least dangerous form of skin cancer — racked up big bills because it involved three doctors from specialties that are among the highest compensated in medicine, and it was done on the grounds of a hospital.

MINOR PROCEDURES LUCRATIVE

It does not matter if the procedure is big or small, or learned in a decade of training or a weeklong course. In fact, minor procedures typically offer the best return on investment: A cardiac surgeon can perform only a couple of bypass operations a day, but other specialists can perform a dozen procedures in that time span.

That math explains why the incomes of dermatologists, gastroenterologists and oncologists rose 50 percent or more between 1995 and 2012, even when adjusted for inflation, while those for primary care physicians rose only 10 percent and lag far behind, because insurers pay far less for traditional doctoring tasks such as listening for a heart murmur or prescribing the right antibiotic.

By 2012, dermatologists — whose incomes were more or less on par with internists in 1985 — had become the fourth-highest earners in American medicine in some surveys, bringing in an average of $471,555, according to the Medical Group Management Association, which tracks doctors’ income, though their workload is one of the lightest.

“The high earning in many fields relates mostly to how well they’ve managed to monetize treatment — if you freeze off 18 lesions and bill separately for surgery for each, it can be very lucrative,” said Dr. Steven Schroeder, a professor at the University of California and the chairman of the National Commission on Physician Payment Reform, an initiative funded in part by the Robert Wood Johnson Foundation.

Doctors’ charges — and the incentives they reflect — are a major factor in the nation’s $2.7 trillion medical bill. Payments to doctors in the U.S., who make far more than their counterparts in other developed countries, account for 20 percent of American health care expenses, second only to hospital costs.

Specialists earn an average of two and often four times as much as primary care physicians in the United States, a differential that far surpasses that in all other developed countries, according to Miriam Laugesen, a professor at Columbia University’s Mailman School of Public Health.

That earnings gap has deleterious effects: Only an estimated 25 percent of new physicians end up in primary care, at the very time that health policy experts say front-line doctors are badly needed, according to Dr. Christine Sinsky, an Iowa internist who studies physician satisfaction. In fact, many pediatricians and general doctors in private practice say they are struggling to survive.

Dr. Brett Coldiron, president-elect of the academy, defended skin doctors as “very cost-efficient” specialists who deal in thousands of diagnoses and called Mohs “a wonderful tool.” He said that his specialty was being unfairly targeted by insurers because of general frustration with medical prices.

“Health care reform is a subsidized buffet and if it’s too expensive, you go to the kitchen and shoot one of the cooks,” he said. “Now they’re shooting dermatologists.”

The specialists point to an epidemic, noting there are 2 million to 4 million skin cancers diagnosed in the United States each year, with a huge increase in basal cell carcinomas, the type Little had, which usually do not metastasize. (A small fraction of the cancers are melanomas, a far more serious condition.) But, said Dr. Cary Gross, a cancer epidemiologist at Yale University Medical School, “The real question is: Is there a true epidemic or is there an epidemic of biopsies and treatments that are not needed? I think the answer is both.”

PROFITABLE DERMATOLOGY

In America’s for-profit, fee-for-service medical system, dermatology has proved especially profitable because it offers doctors diverse revenue streams — from cosmetic treatments that are fully paid by the patient to medical treatments that are covered by insurance.

Dr. Stephen Asher, a neurologist in Boise, said his 50 to 60 hours a week seeing patients accounts for only about 10 percent of his income. To cover office expenses he relies on revenue from performing a few procedures — Botox injections for eye movement disorders and muscle conduction studies — as well as from an MRI scanner that he co-owns with a group of orthopedists and neurologists.

For medical treatment, many dermatologists have been able to compensate for cutbacks in insurance payments by offering new services and by increasing their patient volume through hiring “physician extenders” — nurse practitioners and physicians’ assistants — to do basic tasks such as biopsies and chemical peels. Whether the physician or the nurse wields the scalpel, the charge is generally the same.

Harris Williams and Co., a consulting firm, estimates the $10.1 billion dermatology market in the United States will grow to more than $13 billion by 2017, in part because of an aging population.

The Affordable Care Act requires 100 percent coverage for preventive dermatology screening sessions for seniors, which will inevitably lead to more biopsies and treatment. With more doctors being trained in Mohs surgery — generally an extra year of training, though it is not required — it has become a go-to treatment.

THE MEDICAL LOBBY

More than 750 lobbyists represent groups of health professionals in Washington, pushing back on any effort to limit their incomes. The biggest spenders on lobbying — $80 million annually by health professionals — closely align with the highest-paid specialties.

Medicare’s valuation of physicians’ services is based on a complex algorithm that is intended to take into account the time and skill required to perform a medical task, with an adjustment made for a specialty’s malpractice rates. Many insurers follow Medicare’s lead, often paying anywhere from 80 percent to 200 percent of the Medicare fee.

But “time and skill” are easier to quantify for procedures than continuing patient management. And, experts say, Medicare has not reduced payments for many procedures that now take far less time than when they were invented, because of improvements in efficiency or technology.

But renegotiating payments involves a highly contentious process that plays out behind closed doors at the American Medical Association’s Relative Value Scale Update Committee, which consists of doctors representing 26 medical disciplines who advise Medicare. In dermatology trade journals, Coldiron, who has served on the committee, describes it like this: “Everybody sits around a table and tries to strip money away from another specialty.” It’s like “26 sharks in a tank with nothing to eat but each other.”

Primary care doctors — who make up only 12 percent of physicians in practice — say they have little clout, with at most five representatives on the panel.

“That committee keeps the perverse incentives in place,” said Brian Crownover, a family physician from Boise.

Indeed, less than two years ago, Coldiron predicted that reimbursement for Mohs surgery could drop 20 percent. But that did not happen. When Medicare placed Mohs on its list of potentially misvalued procedures last summer, it was deluged with protests from dermatologists, and the AMA Update Committee declared Mohs surgery worthwhile.

This year, Medicare reimbursement will drop about 2 percent to about $1,000 for a typical procedure.

Critics say the robust revenues from doing procedures has led to overuse — colonoscopies by gastroenterologists, steroid injections by pain specialists and MRI scans by orthopedists, to name a few. Dr. Thomas Balestreri, a recently retired anesthesiologist from Washington state, said that to increase revenue, some fellow specialists used an ultrasound to guide placement of a nerve block when it was not really needed.

But in some cases dollars from procedures keep practices afloat, because insurers pay so little for time with patients.

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