A Legally-Compliant Practice: Necessary but Insufficient for Good Medicine?

By Tim McCormack and Molly Knobler (published on SCCE’s Compliance and Ethics blog)

Front page headlines denouncing “bad medicine” typically only hit when a physician is indicted for fraud or a major provider settles a multi-million dollar case for unnecessary services or defective goods.  But two recent reports indicate that being in compliance with the law may be insufficient for truly “good medicine.”

A recent study by three Stanford researchers, published by the National Bureau of Economic Research, found that: “a hospital’s ownership of an admitting physician’s practice dramatically increases the probability that the physician’s patients will choose the owning hospital.”  In addition, and more importantly, “patients are more likely to choose a high-cost, low-quality hospital when their admitting physician’s practice is owned by that hospital.”

There has been substantial publicity about the Department of Justice’s recent string of settlements with hospitals for violations of the Stark and Anti-Kickback laws in connection with their employment of physicians.  Broadly speaking, these settlements have resolved allegations that the defendant hospitals used monetary perks to induce their employed physicians to increase their referrals to the hospitals.  But absent these financial inducements, it is generally legal for a hospital to require its employed physicians to refer their patients to that hospital.

In light of this new research, the question becomes: should it be?  The answer to this question is far from obvious.  There can be advantages to physician-hospital affiliation, including better coordination of care and increased opportunities for quality-based payment mechanisms.  But if physician employment often leads to the selection of a “high-cost, low-quality hospital,” should someone, whether it be the Department of Justice, CMS, or a professional organization, be keeping better tabs on the downside of permitting this sort of behavior?

A similar situation exists with respect to the off-label use of drugs (i.e., the use of drugs for indications for which the FDA has not approved the drug as safe and effective).  The Department of Justice has recovered billions of dollars through suits under the False Claims Act from pharmaceutical companies for off-label marketing.  But it is generally legal for physicians to prescribe drugs off-label, and, now, due to recent court decisions, for drug companies to truthfully promote off-label uses.

Yet, a recent study published in the Journal of the American Medical Association found that: “[a] patient’s risk of suffering an adverse event . . . is 44% higher when they’re prescribed drugs in ways that diverge from their originally approved use [i.e., when used off-label].”  Modern Healthcare.  Moreover, “[a]bout 80% of the nearly 18,000 off-label prescriptions studied were given despite a lack of strong scientific evidence supporting the non-approved uses.”

Again, there is no easy answer as to whether off-label usage and (truthful) marketing should be permitted.  Proponents argue that off-label usage empowers physicians, relying on their professional medical judgment, to innovate and share their experiences with each other.  But in light of this new research, we must ask, what is the cost of this innovation?

Taken together, these two studies illustrate the weakness of relying on purely legal analysis to determine what the “best” approach is.  Legality may set the outer limits of acceptable conduct, but it should not be the final word in the debate about which strategies, structures, innovations, and outcomes are better or worse for patients and for the health care system as a whole.

Tagged in: Anti-Kickback and Stark,