Doctors are generally now thought to be as economically motivated as the rest of us; their treatment decisions are often influenced by the financial consequences to themselves, the institutions they may work for and to some extent, their patients. Medicare and other third-party payers have continually attempted to tune their reimbursement policies to affect physician treatment behavior; sometimes with unexpected results. A study published in Health Affairs looked at the impact of a change in how Medicare reimbursed physicians for chemotherapy medication. (Health Affairs Article)
Prior to the change in 2005, physicians were paid for drugs they administered on an outpatient basis by a method that created significant margin opportunities. At the same time, the payment for the actual administration was viewed as being low by most physicians. CMS changed the formula for reimbursement to greatly reduce the profit on the drugs but raised the administration fee. Certain drugs which had been relatively more profitable became less profitable and others more profitable on a comparable basis. The researchers examined patterns of chemotherapy treatment for lung cancer patients before and after the change.
On the positive side, slightly more patients began chemotherapy within a month of diagnosis. This may be due to the higher administration payment to doctors or to lower coinsurance for beneficiaries. The mix of drugs ordered shifted away from the drugs that had been more profitable to those that were now the most profitable under the new payment formula. Unfortunately for CMS, the more profitable drugs were also more expensive. The researchers did not examine whether the shifting use of various agents affected outcomes. But the study reinforces the effect that reimbursement policy can have on provider behavior.