Dr. Don Berwick, who founded the Institute for Health Improvement, is a prominent figure in American healthcare.  He recently wrote an opinion piece in the Journal of the American Medical Association that sounds the alarm about creeping “kleptocapitalist” behaviors in medicine that threatens the quality of medical care in the US.  The litany of financial depredations is impressive.

The Brief

Profiteering afflicts all areas of medicine from administration to practice.  

Drug companies’ behaviors are well known–they raise prices indiscriminately and preserve a monopoly on drugs with legal legerdemain that insures profits beyond normal expiration periods for patents.  Only recently has the government been able to overcome the powerful pharmaceutical industry’s lobby (over $350 million spent in 2022) to begin to cap drug prices that are insupportable for average patients.  Nethertheless, a major hospital in Chicago billed a patient $73,800 for two doses of Lupron, a treatment for prostate cancer.  In the UK, the drug is available for $260 per dose.

Health organizations can be relentless in pursuit of medical debt (see the November 28, 2022 posting on The Medical Beat for more information).  58% of all debt collections are for medical bills.  In Massachusetts, for example, 13% of the adult population owes more $10,000 in medical bills, causing 46% to forgo, or unwisely reduce, medical care.

Hospitals are complicit too.  Consolidations of healthcare systems result in closing of hospitals that don’t produce.  Even not-for-profit systems close hospitals in poor neighborhoods in favor of opening new ones in wealthy suburbs.  

CEO salaries in healthcare are staggering: according to Dr. Berwick, the CEO of Oak Street Health, an organization with a chain of primary care sites, has a salary and benefits package that totals $568 million.  That organization has three of the top ten paid corporate executives in the US (not just healthcare).

Insurers have gotten on the gravy train through, for example, participation in Medicare Advantage (MA), an option for Medicare beneficiaries that was ostensibly designed to provide better care than traditional Medicare.  Almost 50% of seniors now get healthcare under this plan.  This was supposed to save money and provide better managed care, but over the next eight years, MA will cost $600 billion more than traditional Medicare.  The “advantage” is profit for major insurers, not improvement in medical care. 

How do companies manage these greater profits?  The answer lies in behaviors that are on the edge of legality, or frankly illegal.

Here Is How It Works: Upcoding and Unbundling

Upcoding occurs when a healthcare provider (e.g., a physician, hospital, etc.) bills for a service that inflates reality.  For instance, a hospital consultant may legitimately bill for a comprehensive evaluation and treatment of a complex patient (an appropriately well reimbursed activity), but, on follow-up, may continue to bill as though other comprehensive evaluations have taken place when the followup visit may have taken only a few minutes.

Or billing for something that simply did not take place.  A psychiatrist billed Medicare for 30 to 60 minute visits, when he was only doing 10 to 15 minute reviews of medications (he had to reimburse Medicare $400,000 and lost his participation in both Medicare and Medicaid).

Unbundling is the practice of fragmenting a service for which there is normally a comprehensive fee.  A hospital, for instance, may get an inclusive set fee for a cardiac procedure.  This includes blood tests, anesthesia, hospital rehab, etc.  Breaking out each billable element of the process, however, results in a far greater reimbursement.  This is illegal, but very hard to detect.

These practices cost the healthcare system an estimated $11 billion from 2002 to 2011.

The Purpose of Healthcare

Dr. Berwick is one of the most respected physicians in the US.  He has a string of accomplishments few can match, and his well reasoned and insightful commentary deserves attention.  He has essentially called out organized medicine to examine its goals: does healthcare have a mission to improve the health of the population or is it another industry organized solely to prioritize profit?