There is an interesting article at Forbes describing that the housing boom is not the only bubble that may need to burst. Scans per thousand insured people went from 85 to 234 in the U.S. between 1999 and 2007. Author David Whelan describes what happened to one radiologist in Connecticut after Medicare and HMOs cut scan reimbursement rates this year:
Radiologist David Gruen used to spend millions of dollars to replace his General Electric MRI and CT scanners every three years. It was money well spent because the machines were always busy. But a year ago Medicare cut the price it pays for imaging, so Gruen gets paid 15% to 50% less for each order, depending on the type of scan. Health insurers got wise, too, and started imposing a 48-hour review on imaging orders. The doctor hired clerks to battle the HMOs, but his office volume was flat last year, down from 10% growth in prior years. Gruen was forced to take a 20% salary cut. Now his Norwalk, Conn. practice is holding off on buying new machines and stretching the old machines’ life span to five years. “We really do face a crisis,” he says.
In additional, General Electric’s (disclaimer: my former employer) medical division has seen declining profits for the first time in years.
Are Medicare and HMO cuts to imaging hurting patients? The New England Journal of Medicine thinks not. There are side-effects to these scans including increased levels of radiation exposure, especially dangerous for kids. As with any test, there is the probability of a false positive (i.e., that patient does not have the disease, but the test claims they do). “A study from the National Institutes of Health found that 17% of patients getting tested for cancer had at least one false positive chest X ray over a four-year period, and 8% of women had at least one false positive ultrasound for ovarian cancer.” These figures lend some more evidence that Americans may be Overtreated (see my post on Shannon Brownlee’s book of the same name).
Forbes also finds that “a doctor who owns his own machine is four times as likely to order a scan as a doctor who doesn’t.” Financial incentives do make a difference (for more information on how physician financial incentive affect surgery rates, see my working paper “Operating on Commission“).