A nonprofit hospital system agreed to pay $70 million after allegedly paying physicians millions of dollars in kickbacks for patient referrals; a similar kickback scheme resulted in indictments of a hospital administrator and physicians. Ethical implications include the following:
- Financial incentive for referrals violates the patient/physician relationship.
- Decreasing reimbursement is likely a contributing factor.
- Patients want to know if physicians have a financial incentive for referrals, but are unlikely to ask.
The nonprofit hospital system Broward Health in Florida recently agreed to pay $70 million to settle allegations that it engaged in “improper financial relationships” under laws prohibiting kickbacks for patient referrals.1
In a separate incident, federal prosecutors indicted a hospital administrator and surgeons in a kickback scheme netting nearly $600 million in fraudulent claims for spinal surgeries at Pacific Hospital in California.2 Some patients lived hundreds of miles away from the hospital, and closer to other qualified medical facilities, and were not informed that medical professionals had been offered kickbacks to refer the surgeries to the hospital.
“You can’t pay someone to refer patients — it’s illegal. There is no one in medicine that doesn’t know that a kickback for a referral is not allowed,” says Charles D. Rosen, MD, professor of the department of orthopaedic surgery at University of California, Irvine, School of Medicine, and president of the Monarch Beach, CA-based Association for Medical Ethics.
‘Very Dubious Ethically’
Paul T. Menzel, PhD, professor of philosophy emeritus at Pacific Lutheran University in Tacoma, WA, wasn’t surprised the incidents occurred — “only by their volume, and how brazen they were.”
While the well-publicized incidents were particularly egregious, it’s possible that many other physicians and hospitals, as yet undetected, are engaging in similar practices. “It’s likely that lesser, more disguised versions happen whenever something like this occurs, where we can understand the strong financial incentives behind it,” says Menzel.
Menzel says that regardless of whether a hospital actually put physicians on payroll, or whether it only had a contractual agreement with them in a network, “it is very dubious ethically. The reason is fundamental and clear.”
This is because the hospital has created a financial incentive to physicians that is not based on what is the best care for the patient. “Incentives for referrals is one of the worst violations of the fundamental patient/physician relationship,” says Menzel.
Declining revenue for hospitals and physicians is likely a contributing factor to the recent kickback incidents. “Reimbursement has been reduced significantly, and continues to be,” says Rosen. “Hospitals are struggling to make revenue. Doctors that want to ignore the law are resorting to this.”
In Rosen’s view, a disproportionate amount of money in medicine goes to medical device makers and pharmaceutical companies, as opposed to physicians. “For example, for a total hip replacement, the device rep makes almost as much as the surgeon putting them in,” he says.
Menzel says, “We’ve got a number of forces coming together in how healthcare is paid for. Competing insurers, and even Medicare, are trying to hold down costs. They don’t want to pay providers any more than they have to.”
The use of physician networks is becoming more prevalent. “The increasing size of integrative delivery organizations and additional mergers may push the emphasis on networks,” adds Menzel.
Physicians may insist they will only do what’s best for patients, regardless of payment for referrals. “But if they’re getting paid for referrals to a hospital or specialist, can we really believe that the incentive won’t warp their decision-making?” asks Menzel.
Rosen doesn’t think it’s realistic to expect patients to ask physicians if they have a financial incentive to refer them to a specialist, or for surgery. He points out that few patients ask physicians if they have a financial incentive to prescribe a particular medication.
Menzel says that before the kickback incidents were widely reported, most patients probably never even considered their physician might get some type of incentive for a referral. “Even now, not all that many think of it,” says Menzel. “If you ask them whether they would like to know, of course they say yes. But without asking them, few think of it.”
A 2008 survey showed that most (64%) Americans believe it’s important to know their physician’s ties to pharmaceutical companies. However, most (55%) said they would be unlikely to directly ask their physicians about it.3
The Physician Payments Sunshine Act requires that financial relationships between physicians and industry be made public. “My hope is that the public is more aware now, and will want to check,” says Rosen. “Ninety percent of doctors want to do the right thing, but you have 5 or 10% that have sold their souls to industry. They’re going to promote what they’re paid to promote.”
Rosen thinks that while it’s unlikely patients will directly ask their doctors, they will seek out available information. “Our website has a doctor search function where you can pull up all payments listed for past 10 years for any physician,” he says. (For more information, visit: www.ethicaldoctor.org.)
Menzel says ethically conscious hospital administrators with a strong “moral compass” are sorely needed. “Hospital administrators have financial obligations, but they have moral obligations, too,” he says.
If hospitals feel competitive pressure to participate in unethical practices, a joint approach might be called for. “Maybe what they should do is go to all hospital networks in the area and say, ‘We won’t make these bargains,’” says Menzel. “Get an agreement that levels the playing field and relieves them of the temptation.”
Hospital administrators might otherwise turn to kickbacks in order to get a leg up on the competition, or simply survive. On the other hand, if these trials yield convictions, hospital CEOs are likely to stand up and take notice — thus, the practice may decrease. “But if the penalties to those found guilty are just to pay back no more than what they gained, there will still be temptation,” says Menzel.
The bottom line is that patients should not have to depend on the threat of fines and convictions to ensure physicians put their best interests first, says Menzel. “We expect our physicians and hospitals not to be in these conflicts,” he says. “If they want patients to trust them, they can’t be in these kinds of relationships.”
- Kaiser Health News. Whistleblower Doctor Warns About Hospitals Hiring Physicians. October 7, 2015. http://bit.ly/1Ly6HDV.
- United States Attorney’s Office, Central District of California. 3 New Defendants, including Chiropractor, Plead Guilty in Scheme involving nearly $600 Million in Fraudulent Claims by SoCal Hospitals. June 3, 2016. http://bit.ly/1t3sjjD.
- Disclosure of industry payments to physicians. The Pew Charitable Trusts. Washington, DC. (June 16, 2008). http://bit.ly/2ede99Y.
- Paul T. Menzel, PhD, Professor of Philosophy Emeritus, Pacific Lutheran University, Tacoma, WA. Email: [email protected].
- Charles D. Rosen, MD, Professor, Department of Orthopaedic Surgery, University of California, Irvine, School of Medicine, Orange, CA. Phone: (714) 456-1699.
Email: [email protected].