The Money Trail
…while we’re on the subject of price fixing. This is a post that I never got around to publishing back when this article first came out
“DePuy Spine has agreed to provide funding to support up to 25 graduate medical education fellowships in spine care during the 2010-2011 academic year through the Orthopaedic Research and Education Foundation (OREF) Clinician Development Program (CDP). The CDP is an independent grant-making system designed to facilitate industry support for orthopaedic education and research while maintaining compliance with best practices and remaining free of donor bias. The program was reviewed and endorsed by U.S. Department of Justice monitors assigned to three device manufacturers by federal mandate. For the 2009-2010 academic year, OREF awarded $3.9 million in fellowship, residency enhancement, and continuing medical education grants”
I am not sure whether I should be encouraged by this development or not. A little background. The Department of Justice recently came down on the orthopedic device manufacturers for essentially paying kickbacks disguised as “consulting arrangements” to surgeons who were heavy users of their products. Five major manufacturers settled the claim and paid hefty fines and disclosed surgeon payments publicly. Amidst it all, industry grant practices were heavily scrutinized and surgeons reputations suffered. The Orthopedic Research and Education Foundation, a very prestigious supplier of grant money to the orthopedic community, began a new initiative in which they created an “independent” distribution system for industry grant money. Essentially, industry still funds fellowships but the money is first going through the OREF brass and then is distributed neatly pressed and smelling nice to orthopedic departments around the country (I shouldn’t talk too loudly, my fellowship was funded in this same fashion). I will leave it up to you to decide whether this distribution mechanism cleanses the money trail enough that our education as surgeons is not unduly biased by the purveyors of finely crafted metal body parts.
All this begs the question: in whose hands do you want the profits of medicine? Some of you will invariably cite this as further evidence that there should be no profits and all surplus should go to governement. Let’s not go there. Let’s assume that the profit motive adds some inherent value to the system as a whole-as hard as this may be for some to accept- and instead look at how the distribution of profit effects the system.
What is profit? Anyone who has taken econ 101 can tell you that it is a corporation’s revenues minus expenses. A business profits when the net percieved value of their product is higher in their customer’s eyes than their aggregate cost of producing and distributing that product. Essentially, because people value different goods differently, opportunities arise for people to trade those goods and exploit the difference in value that one might assign to the goods (time is one of the best examples). When a business profits, invariably some of that profit gets pocketed by the investors and some of it gets set aside as surplus for future research and development. The world being the risky and uncertain place that it is, R and D money is inherently volatile: no one is quite sure whether it will pay off, but everyone knows that if you don’t put it to work you’ll never advance from the status quo and you’ll be left in the dust by the competition. So there is a natural incentive for people, at least people that want to continue to be employed in an endeavor, to reinvest some of their profits in order to improve and stay competitive in the customer’s eyes.
Doctors’ salaries have shrunken in real terms over the last 15 years. Why is this important? I had a conversation with one of my mentors, Dr. John Fenlin one day in clinic a few years ago. Dr. Fenlin is a brilliant shoulder surgeon and a great guy as well. He’s been at this business for a while - 71 years old and still going strong. He said something interesting that I will never forget. He asked me if I wanted to do research in my career. I said yes, I enjoyed it and would like to continue doing research in my practice. Then he said, ” well it used to be much easier to do both. You didn’t have to search for money. We used to just fund it ourselves because there used to be more money left over after you were done.” Now certainly times have changed a little and it’s fair to say that good quality research might be more expensive now than it was in the past. But his point speaks to something else: physicians used to control the flow of dollars into research because they used to have more to spare when all was said and done. Do physicians fund studies whose direct results are more closely correlated with the consumers’ needs? Certainly there are vast swaths of the research world that ask completely unprofitable questions (to industry), whose answers at the same time convey tremendous value to patients. Industry may have less interest in such questions, but patients certainly do. And if not for patient advocates- physicians- who will ask these questions? It is conceivable that as doctor’s salaries continue to decline and less of their own profits are pumped back into research, less of these unprofitable, yet highly valuable questions will be studied.
I would posit that one reason physician funded research has dwindled over the years is that physicians, unlike industry in many cases, have slowly come to embrace a priced fixed system of reimbursement. Since the advent of the CPT coding system, the federal governement has increasingly attained an iron grip over medical service reimbursement. Insurance companies have followed suit by pegging their fee schedules to the governemt’s. It’s a bit like the Chinese yuan being pegged to the dollar. The fees become arbitrary and vast descrepancies develop within a system whose pricing structure around demand and supply becomes decoupled. Where once prices signaled a link between scarcity and availability, they now become essentially meaningless except in the context of politiics.
While I love technology and believe it is responsible for improving our quality of life to a staggering degree throughout mankind, I am concerned that the current price fixed reimbursement system has begun to slowly erode the ethical underpinnings of our profession. Artificial shortages in areas like revision joint replacement have emerged forcing some patients to wait inordinant times or travel long distances to seek care. Whereas billions of industrial surplus dollars continue to chase proportionally tiny incremental implant performance improvements in the name of good “research.”
In the final analysis, an economy’s sole funcion centers around providing the customer with the goods and services that he needs and desires. Price fixing inevitably leads to a dislocation between that which is needed and that which can be profitably taken from the system by the producer, whether the customer fares better or not. So who would you rather have funding your doctors’ training: physician mentors with their surplus profits or industry, with theirs?
