No, It’s Not “Free”

And that’s why there are so many rules

Imagine going to a spine surgeon’s clinic for back pain. The surgeon decides you do not need an operation, but a brace might help. Someone fits you for one, explains how to wear it, and sends you home. Maybe you feel a little bit better. Maybe it does nothing. “Oh well,” you shrug. “It’s free. Someone else is paying for it.”

For many people, that somebody is the American taxpayer, through Medicare or Medicaid. You never have to decide whether the brace is worth its price. You may not even know the price. The surgeon owns the company supplying it, and the company makes money on the sale.

It turns out that nearly everyone leaves this clinic with a brace.

This is a hypothetical, but it’s not unheard of. The surgeon recommends a product, the patient accepts it, and someone else pays. Even if a brace is a reasonable option, we don’t know what value people put on that option, because the patient never sees a price. “It might help” becomes a much easier sales pitch when the customer does not have to consider the bill.

The supplier gets paid for providing the brace. The payment does not automatically rise or fall with how much the patient values it or whether it ends up in a trash can a week later.

Nothing here requires assuming that every doctor is dishonest or that every brace is useless. A system can encourage too much spending even when individual decisions are defensible.

That is why, now, a back brace comes with regulations.

One response to this conflict is to regulate the relationship between the doctor and the supplier. The federal physician self-referral law, commonly called Stark, generally prohibits Medicare referrals for specified services to an entity with which the physician has a financial relationship. The underlying concern is understandable: if there is no insurance company to deny a claim, a physician cannot give himself an unchecked source of referrals for financial benefit.

The actual law is considerably more complicated than “doctors cannot own the business.” Determining which arrangements qualify is part of the work. A colleague once told me he asked five lawyers whether a proposed business venture complied with Stark. He got seven different opinions. Once rules are made, lawyers get to make money interpreting those rules.

Restricting self-referral for doctors completely misses the same behavior from hospitals. Large systems will restrict employed doctors from referring to outside imaging centers, labs, or physical therapy. If a doctor owns those ancillary services, it’s illegal. If a large hospital corporation owns them, it’s suddenly acceptable.

Doctors are targeted, and sometimes they aren’t even part of the problem.

An August white paper from the HHS Office of Inspector General describes three ingredients of Medicare equipment fraud: a supplier able to bill the program, a physician order, and a beneficiary identification number. A physician’s information can be used without the physician even knowing it.

Traditional Medicare already has minimal medical review and prior authorization for selected equipment. A prescription from a doctor does not guarantee payment for a brace. But it comes pretty close.

A cash transaction, on the other hand, puts the payment decision back on the patient. The patient can ask how much the brace costs, what benefit to expect, whether a less expensive version would work, or whether it is worth trying at all. Furthermore, if a doctor is selling useless braces, patients will eventually catch on and stop going to that doctor. Referrals will dry up.

This is the only way we can know the value of a brace.

A private insurer requires authorization and will claw back payments for unindicated services. It can negotiate payment and specify which devices it will cover under which circumstances. But when the insurance policy covers the brace, it only gets paid for when it makes sense for the insurance company. They have to approve enough braces so beneficiaries don’t get too angry. Or, if they see an ROI on approving braces because it decreases surgical spending, they may approve it. But they’re not paying for it out of charity.

I know colleagues whose practices accept only cash and private insurance. In those practices, a patient may get an MRI and a brace the same day, see prices in advance, and arrange a procedure within days or a week. That experience contrasts with the fragmented process familiar to many patients: an order, an uncertain price, several scheduling calls, and unpredictable bureaucracy-induced wait times.

Integration can create a financial conflict. It can also make care more convenient. A rule that tries to prevent the first can make the second more complicated.

Physicians understandably want more decisions to remain in the exam room. Patients understandably want coverage that lets them accept needed care without worrying about their bank balance. Both are understandable. Neither makes the cost of the recommendation disappear.

For routine, affordable equipment that patients can reasonably compare, transparent prices and more direct purchasing deserve a larger role. Expensive devices and patients who need financial help require coverage and support. Where a third party pays, we should judge its controls by the fraud they prevent, the work they impose, and the necessary care they delay.

Physicians cannot reasonably demand that someone else pay every bill while also demanding that the payer exercise no judgment over the bill. Payers cannot reasonably pretend that exercising that judgment costs nothing.

We can give patients more control over routine purchases or accept that whoever finances those purchases will want to check the bill. We cannot expect an unlimited stream of reimbursable braces with nobody responsible for asking whether they are worth buying.