Fewer Rules Mean Bigger Profits, Not Better Healthcare

Eased rules on kickbacks from Big Pharma to docs will cost you money

By Terry H. Schwadron, DCReport New York Editor

Today’s governmental head-scratcher is from the Department of Health and Human Services. For reasons not quite clear, the regulation-cutting Trump administration has asked doctors, hospitals and pharmaceutical companies for advice on loosening laws that prohibit kickbacks on drug sales.

An article inside The New York Times outlined a quiet campaign under way to bring in exactly those forces who have participated in payments intended to influence care for people on Medicare or Medicaid seemingly to make it easier to do so.

As overall policy goes, it’s not earthshaking but seems an important indicator about direction. Deregulation is not the solution for every problem, as seems this administration’s strategy.

The stated goal is to invite health professionals into a discussion to save costs while improving care “has touched off a lobbying frenzy,” the Times reported. 

“Health care providers of all types are urging officials to waive or roll back the requirements of federal fraud and abuse laws so they can join forces and coordinate care, sharing cost reductions and profits in ways that would not otherwise be allowed.”

This is about protecting payments to doctors and hospitals from Big Pharma to help sell their goods at full retail value.

Coordinating sounds good, but this is about protecting payments to doctors and hospitals from Big Pharma to help sell their goods at full retail value by prescribing their use by patients who depend on doctors to understanding one medicine from the next.

In the last few weeks, we’ve been reading about highly placed doctors at Sloan Kettering Hospital in New York, for example, who have been involved in the development of particular drugs that they then prescribed to patients. The hospital and the doctors were forced to resign or to distance themselves from the pharmaceutical connection.

The practices represent issues of ethics that can cross over into legal charges of fraud.

Why the federal government – believers to a fault in the marketplace creating its own rules – thinks that eliminating regulations in this area is helpful prompts some upside-down thinking.

The logic apparently is this: Federal laws prevent insurers from rewarding Medicare patients who lose weight or take medicines as prescribed. And they create legal risks for any arrangement in which a hospital pays a bonus to doctors for cutting costs or achieving clinical goals.

With more than 100 million Americans using Medicare or Medicaid, cutting such costs can add up to eventual governmental savings.

But preventing improper influence over choices of doctors, hospitals and prescription drugs is a wider ethical issue. Federal laws make it a crime to offer or pay any “remuneration” in return for the referral of Medicare or Medicaid patients, and they limit doctors’ ability to refer patients to medical businesses in which the doctors have a financial interest, a practice known as self-referral.

Even the government itself must find this idea complicated since the Justice Department and other law enforcement agencies area regularly crack down on reports of health care fraud, exposing schemes to cheat government health programs.

The Times quoted Philadelphia lawyer James Pepper, who suggested that “The administration is inviting companies in the health care industry to write a ‘get out of jail free card’ for themselves, which they can use if they are investigated or prosecuted.”

Others suggested that, as in other industries, over-regulation gets in the way of cost-cutting on hospital costs or other health care areas.

The Times noted that hospitals often say they want to reward doctors who meet certain goals for improving the health of patients, reducing the length of hospital stays and preventing readmissions. 

But federal courts have held that the anti-kickback statute can be violated if even one purpose of the remuneration is to induce referrals or generate business for the hospital.

The premise of the kickback and self-referral laws is that health care providers should make medical decisions based on the needs of patients, not on the financial interests of doctors or other providers.

The Trump administration is calling its effort a “regulatory sprint to coordinated care.”

Health care providers can be fined if they offer financial incentives to Medicare or Medicaid patients to use their services or products. 

Drug companies have been found to violate the law when they give kickbacks to pharmacies in return for recommending their drugs to patients. Hospitals can also be fined if they make payments to a doctor “as an inducement to reduce or limit services” provided to a Medicare or Medicaid beneficiary.

A health care provider who violates the anti-kickback or self-referral law may face business-crippling fines under the False Claims Act and can be excluded from Medicare and Medicaid. 

Federal law generally prevents insurers and health care providers from offering free or discounted goods and services to Medicare and Medicaid patients if the gifts are likely to influence a patient’s choice of a particular provider. 

Hospital executives say the law creates potential problems when they want to offer social services, free meals, transportation vouchers or housing assistance to patients in the community.

As noted, the line between patient assistance and marketing tactics is sometimes vague.

But I find it somewhat of an abdication of governmental authority to turn, whether intended or not, to lobbyists to ask them for recommendations on regulations to rein in the excesses of their clients.