Reimbursement’s Impact on Medical Practice

For anyone who thinks that medical practice isn’t driven in part by economics, an article in the current New England Journal of Medicine should help change that perspective.  The research examined the effect of Medicare reimbursement changes on the use of androgen-deprivation therapy for prostate cancer.  (NEJM Article) This form of treatment was problematic because it appeared to often be used on patients who were not likely to benefit.  This is an office-administered drug which, like many cancer compounds, created substantial profits to the physicians ordering it.

Medicare found itself paying almost one billion dollars for this therapy in 2003, and its use for marginal patients had increased eight times in the previous decade.  Where there was uncertain benefit, non-academic based urologists used the drug 60% more often than did those at academic medical centers, who were usually salaried.  In 2004 and 2005, CMS reduced reimbursement by around 50%.  The researchers looked at whether this change caused a change in use, especially in the cases of unlikely benefit.

The authors found no drop in appropriate use of the therapy, but a rapid decrease of almost 50% in the inappropriate use of the drug.  There was also an increase in use of alternatives such as surgery, an alternative drug which had higher reimbursement and use of hospital outpatient treatment as opposed to physician office administration.   The researchers conclude that high reimbursements almost certainly caused a substantial use of the drug in cases where it should not have been used.  The power of financial incentives to change physician behavior is clear, and at the same time, it appears that physicians will continue to deliver even less-highly reimbursed care when it is appropriate.