A key goal of the Central Authority, as it contemplates how best to run our healthcare system, is to do whatever it can to stifle medical progress. Medical progress usually means introducing new drugs or new medical devices, which are often very expensive in themselves, and worse, which often threaten to improve the survival of some category of patients with chronic disease. So typically, medical progress greatly multiplies the costs of healthcare, and all the Central Authority gets in return is more chronically ill people to contend with. For this reason, suppressing medical progress is a critical aspect of covert healthcare rationing.

It goes without saying that a major tactic in achieving this goal is to demonize the drug companies. If the pharmaceutical industry can be made out to be sufficiently evil, corrupt, greedy, and callous to the needs of the people, then it will become the duty of our leaders to constrain them, and in so doing, to limit their ability to develop and introduce new products. This is easily done by adding daunting new regulations, or by piling on oppressive new taxes, or by legislating “windfall profits” penalties, or by using the threat of the regulatory speed trap to threaten them with massive fines or imprisonment. It is indeed fortunate for the Central Authority that the drug companies are, in fact, not the most fastidious members of the corporate community, and that their actions and methods often suggest many fruitful avenues for demonization.

One such avenue that is particularly fruitful, since it recruits the public squarely into the camp of the prosecutorial horde, is to show how the corrupt pharmaceutical industry feeds at the trough of the American taxpayer.

A few years ago, to specifically document this sort of reprehensible behavior, the New York Times pointed us to the case of Dr. Laszlo Bito and the anti-glaucoma drug Xalatan.

In the early 1980s Dr. Bito, a researcher at Columbia University, made a key discovery about a new class of substances that could potentially treat glaucoma. His research was funded with American tax dollars through the National Institutes of Health.

Subsequently, the pharmaceutical giant Pharmacia purchased the rights to Bito’s discovery for a mere $150,000. Based on Bito’s tax-supported work, eventually Pharmacia released the anti-glaucoma eyedrop preparation Xalatan. Xalatan rapidly became a worldwide best-seller, yielding as much as $500 million in sales per year. For their part in this unalloyed success story, Columbia University has netted over $20 million in licensing fees and royalties, and Bito himself became a millionaire.

Meanwhile American glaucoma sufferers are forced to spend upwards of $50 every six weeks for a tiny vial of the drug, which costs the company only a small fraction of that amount to produce, and whose discovery the glaucoma sufferers paid for with their own tax dollars. And, as if to guild this already brazen injustice, Pharmacia makes Xalatan available in Canada, France, and most other countries around the world (where taxpayers decidedly did not support the discovery of the drug), for less than half what American patients pay for it.

It seems, the Times points out, that the American taxpayers are the only parties in this little scheme who reap no financial return on their investment. All they got were some expensive eyedrops.

And so, drug-company demonizers would have us conclude, this is a particularly egregious example of how the evil pharmaceutical industry is ripping us off. Not only are the drug companies mercilessly profiteering from sick Americans (which indeed is their openly-admitted business model), but they are also picking the pocket of every American by using our tax dollars to invent new drugs, then selling those drugs back to us at exorbitant prices. This, one could reasonably argue, is at least as sociopathic as anything the tobacco companies ever did. (The tobacco companies, in contrast, at least had the good graces to eventually stop claiming that their products were beneficial to one’s health.)

And (we in the great unwashed are all supposed to agree), if this reprehensible behavior doesn’t give our government the right to control the prices charged by drug companies, one would be hard pressed to say what does.

DrRich certainly doesn’t want to absolve the pharmaceutical industry of all responsibility for drug prices that seem obviously too high, or for the striking disparities we see in the prices they charge for their drugs between the U.S. and other countries. He has read the complex justifications, published by apologists for the pharmaceutical industry, as to why drugs in Canada cost so much less than in the U.S., and why a tablet whose actual manufacturing cost is five cents is sold to our elderly sick for five dollars. DrRich thinks that, despite all the pretty explanations the pharmaceutical industry gives for these “seeming disparities,” drug companies simply do what every other industry does – they charge the highest price the market will bear, for each market in which they participate. If they didn’t do this, they would be abrogating their fiduciary responsibilities to their shareholders.

There is much not to like about high drug prices, or the fact that people in other countries reap the benefits of American research for far lower prices than Americans do. And it is reasonable for us to seek to address these pricing issues. But as we address certain inequities in drug pricing, we should be careful that in doing so we don’t throw the baby out with the bath water. So if we’re going to alter the arrangement we have with the pharmaceutical industry, let’s be clear on how that arrangement works, and why we set it up in the first place to operate as it now does.

Consider once again the glaucoma drug Xalatan, and consider how Dr. Bito’s discovery was actually used by Pharmacia.

Bito did not discover a finished product. Instead he discovered a new concept for reducing intraocular pressure (that is, for treating glaucoma), and demonstrated that it could be effective – but the specific compound he discovered was not marketable. In fact, it was so highly irritating when applied to the eye that it was simply not suitable for human use. (DrRich does not understand why the drug companies are the evil players in this story, when Columbia University so obviously allowed research to proceed in their facilities in which irritating substances were intentionally placed into the eyes of bunnies or other cute animals.) Indeed, Bito’s new compound was so impressively unusable that, before Pharmacia bought the rights, his discovery had been offered to and rejected by a host of other drug companies as being completely infeasible.

So when Pharmacia finally agreed to pay for the rights to Bito’s patent, they took on an expensive risk that, some estimated, had less than a 5% chance of achieving success. Pharmacia assumed the difficult task of developing a brand new synthetic molecule that would have all the benefits described by Bito, but at the same time would not have the prohibitive side effects. There was no assurance at all that such a molecule could ever be developed, and the cost of searching for one would dwarf the cost of purchasing Dr. Bito’s compound in the first place.

If such a thing turned out to be feasible, then the company then would have to conduct painstaking and extraordinarily expensive human research trials, and if successful, would then have to shepherd their new compound through a time-consuming and costly regulatory gauntlet – which explains why the vast majority of promising new drugs fail to ever gain FDA approval. That their efforts were ultimately successful does not diminish the fact that, when Pharmacia agreed to invest the time, money and opportunity cost to develop Dr. Bito’s discovery, the company was committing itself to an expensive and extremely risky proposition, with no assurance of making a profit or even recouping their losses. It was, in fact, a very long shot.

The folks occupying Wall Street ought to remind themselves that the cool products they are using each day (such as the iPhones they use to organize their flash demonstrations) all came about because the profit motive – and only the profit motive – encouraged some entrepreneur to risk his/her time, treasure, and sacred honor on some new idea. And for each risk-taker who becomes a millionare or billionare, thousands of others achieve only modest success – or fail altogether. (That’s why it’s called “risk.”) But the lure of big profits drives the whole system, and accounts for American progress.

Bito’s (tax supported) idea was a promising one, but the challenge of developing that idea into a product that was useful to patients and that could be brought to market was very expensive and highly risky. Pharmacia took on that risk (all of which was borne by its shareholders, and not by taxpayers) only after difficult, internal corporate soul-searching. If not for the prospect of making enormous profits if this risk worked out, the company (like several other drug companies did in this particular instance) certainly would have walked away.

Before 1980, it is likely none of this would have happened. The Bayh-Dole Act of 1980 was passed expressly to encourage the further development of federally financed, university-based basic research. Until then, a large proportion of basic university research was never “translated” into useful medical products. Such translation of basic research was recognized by Congress to benefit society not only by advancing the practice of medicine, but also by stimulating the overall economy. So industry was actively encouraged to take on the risk of developing promising ideas that came out of federally-funded research. And the profit that greeted successful enterprises was designed to be the one thing that would lure industry into taking that risk.

So when the Times “discovers” a company “profiteering” from work done with tax dollars, it should not be a revelation, nor should it be an unmistakable sign that the company is inherently evil or dishonest. Nor does the company’s activity in this regard give us a justification to arbitrarily restrict its profits. Rather, that’s simply the deal we taxpayers (through our elected officials) have made with the drug industry. We made this deal because we felt it would benefit American society, the American economy, American patients, and quite probably, us as individuals. Of course, if we want to change that deal now, it is within our rights to do so.

Without Bayh-Dole, perhaps patients with glaucoma would still be getting surgical therapy and wearing those coke-bottle eyeglass lenses instead of just using eyedrops. And if we wish to allow the Central Authority to put the brakes on such medical advances (ostensibly to prevent unseemly profiteering, but actually to stifle medical progress), we certainly can. It’s how covert rationing works.

But we shouldn’t vilify the drug companies for taking us up on the deal we offered them, back when we were thinking more clearly.

In a recent post, DrRich described the Regulatory Speed Trap, and alleged that our leaders (long before the Obama administration came along) have learned to use it to intimidate and control selected citizens and institutions when it is to their advantage to do so.

The Regulatory Speed Trap, readers will recall, involves the sudden and arbitrary “reinterpretation” of various confusing, ambiguous, or impracticable regulations which have been on the books for some time, and for which affected citizens and institutions (out of sheer necessity) have established de facto interpretations so that they can continue to function. By their longstanding acquiescence with these de facto interpretations, the Central Authority has at least tacitly endorsed them, and thus commerce is permitted to continue. Until, that is, the time arrives when it behooves the Central Authority to suddenly reinterpret those tangled regulations, and convert selected law-abiding citizens into criminals. By the selective enforcement of ambiguous laws, of course, the goals of Social Justice can be advanced.

As a public service, as a warning to academic medical centers, and as a heads-up to the Central Authority (which DrRich has found in personal encounters to be very scary, and to which he would very much like to endear himself against any future encounters) he will now describe a very serviceable but potentially forgotten Regulatory Speed Trap which was laid more than 15 years ago, and which is ripe for springing.

During the decade of the 1990s, DrRich was chairman of the Institutional Review Board (IRB) in a major teaching hospital. The IRB is the committee that reviews all proposed human research projects in the institution, and assures that the research meets ethical and legal standards as set forth by the Office of Human Research Protections (OHRP) of the HHS, and that the rights and welfare of the human research subjects are protected. The IRB has the duty and the authority to prevent or shut down any research project which is not meeting expected standards. The IRB, unlike any other committee within a hospital, reports directly to the Feds, in order to limit any local influence that may be brought to bear over its decisions by hospital administration, well-endowed researchers, or any other local big wigs.

If the Feds decide that an institution’s IRB is not assuring compliance with all the rules, regulations, guidelines, &c., in all their particulars, then they can arbitrarily and indefinitely terminate all human research in that institution, until such time that sufficient corrections, and sufficient penance, can be made – a process that is typically measured in years. This kind of research “death penalty” – which can ruin an academic institution – has been dealt out more than once.  The prospect is a dreadful one to any academic medical center.

It was, in fact, in his capacity as IRB chair that DrRich first became reasonably adept at reading and interpreting the kinds of obtuse regulations and guidelines commonly promulgated by our government. The official documents under which an IRB must operate are many, lengthy, and often difficult to interpret with absolute surety. Yet, in order for the IRB to function, these regulations and guidelines must be resolved into concrete meanings, which, under scrutiny, would most likely prove acceptable to the Feds. (A difficult task to be sure, but still, not markedly different from the task faced by anyone who wishes to conduct an activity for which the government has devised regulations.)

In any case, readers will understand why it was with some dismay that, in 1994, DrRich received this letter from the OHRP, announcing a new policy regarding diversity in human research.

Now to be sure, such a new policy was needed, since up to that time medical research evaluating new therapies was overwhelmingly performed on adult white males. However, this distribution of the benefits (and risks) of research was not in place because of prejudice against (or in favor of) women or non-whites. Rather, it was there for good and practical reasons. Ever since the thalidomide fiasco, it was verboten to enroll women who might become pregnant (i.e., any woman of childbearing age) in most kinds of clinical research. And African-Americans were understandably and appropriately distrustful of medical researchers ever since the Tuskegee study, and as a group they assiduously avoided participating in clinical research. So the exclusion of these groups was made, for the most part, either out of the desire to protect certain classes of individuals (such as unborn babies), or out of the desire of certain groups of individuals to protect themselves.

Still, DrRich was very sympathetic to efforts to find ways of safely extending research on new products to excluded groups. Otherwise, how could we learn if new medical products were safe and effective in everybody? So he read the letter from the OHRP with interest.

And he was immediately dismayed. While the government’s new policy of diversity in clinical research was advanced for the best of intentions,  the substance of the policy was impracticable past the point of absurdity.

The new policy on diversity in clinical research, in its essentials, stipulated:

1) All minorities and all genders MUST be included in all clinical research studies.
2) Sufficient numbers of subjects MUST be enrolled to allow valid outcome statistics to be performed for each category of participant.
3) Cost is NOT allowed as an acceptable reason not to enroll the stipulated groups in sufficient numbers.

The letter and its supporting documents defined six racial and ethnic categories that must be included: Hispanic or Latino, American Indian or Alaska Native, Asian, Native Hawaiian or Other Pacific Islander, Black or African American, or White.

The letter and its supporting documents defined the three genders that must be included as: Male, Female, Indeterminate or Transgender.

Because each defined subgroup must be included in each study in sufficient numbers to allow for valid outcome statistics to be computed, the new directive seemed to require each research trial to expand its size by 18-fold (to account for six racial/ethic categories, and three genders). So a study which would normally require the randomization of 1,000 patients to achieve statistical surety would now need to enroll 18,000 patients. Notably, the recruiting effort that would be needed to comply with this new policy would be far more than merely 18 times more difficult. For it is one thing to find an “extra” 17,000 people who are willing to risk their health for the sake of medical science, but quite another to find these altruists in just the right distribution, including, for instance, 1,000 indeterminately-sexed Pacific Islanders.

But no matter. The new policy explicitly stipulated that the expense of such a recruiting effort was not a permissible excuse for failing to enroll the proper distribution of subjects.

After carefully examining the letterhead of this document to make sure it did not come from The Onion, DrRich made some well-placed, but gentle and appropriately circumspect, inquiries in an attempt to determine whether he was reading it correctly. How seriously must one take this astounding new federal policy on diversity in research? He quickly learned he needed to stop asking questions. His sources revealed to him that several of the authorities in question actually considered their new directive to be a bit mild – a little too watered-down.

For instance, limiting the number of racial and ethnic categories to only six had been a major concession to practicality. Some of the interest groups that had been instrumental in constructing this new policy apparently had argued, for instance, that each of the 337 federally-recognized American Indian tribes ought to be called out as distinct groups. And the authors had thoughtfully compressed the number of genders to only three (when clearly there are at least four). So the people responsible for this new policy had already carefully considered the issue of practicality, and had mercifully compromised in order to render this policy as reasonable as the principles of research diversity would allow.

So yes, the Central Authority was deadly serious.

As it happened, at this very time DrRich was lodged in the teeth of another Regulatory Speed Trap (which he has described elsewhere), so he took this new OHRP policy very seriously. He knew that while it could not be complied with in all its detail, it also could not be ignored. So he called a special meeting of the IRB to discuss how to respond to the new policy.

A long meeting was held in which this new policy was introduced to the membership, and the members’ reactions were permitted to move through the necessary stages of mirth, horror, disbelief, resignation, and finally, resolution. When sober discussion was finally possible, the members unanimously agreed that encouraging the enrollment of women and minorities in clinical research was an important and laudable goal. We also agreed that if researchers were made to comply with the letter of this new policy, all clinical research in the U.S. would come to an immediate halt. And for this reason, we concluded, it must be true that the policy actually desired by the OHRP must be different from what appeared to be the letter of this policy.

We therefore composed a formal response to this policy, which we placed into the minutes of the meeting, for posterity, and for the benefit of whichever future government agents might burst through the doors with automatic weapons, in order to conduct unspecified investigations. That response went something like this:

Medical research aimed at reducing mortality and limiting pain and suffering is a great boon to mankind, and as long as it is conducted ethically it should be encouraged in every way. Diversity in research is also an important good, and to the extent it is practicable, individuals from all races and genders should be offered an opportunity to participate in clinical research. In deciding which of these laudable goals takes precedence, we note that while research can continue despite imperfect diversity, it will not continue if perfect diversity is an absolute requirement – in which case, one ends up with no research, and no diversity. Such a result, we hold, cannot possibly be the aim of the OHRP.  It therefore seems apparent to the committee that the intent of the diversity policy recently handed down by the OHRP must necessarily be to optimize diversity to the fullest extent practicable, and not to stifle research altogether in service to impossible diversity goals. We therefore interpret this new policy to indicate that all practical efforts must be made to recruit research subjects from all racial and ethnic groups, and from whichever genders we can find, and we will hold researchers in this institution to that policy.

And that’s just what we did.

Our formal interpretation of the OHRP’s diversity policy, it must be admitted, did not follow what certainly appears to be the letter of the policy. But it does work toward the stated intent of the policy, and it has the not-inconsiderable advantages of: a) being actually feasible to implement, and b) allowing medical research to continue. In general, DrRich has found that regulators are somewhat more inclined to look upon your behavior as being relatively benign, if you are able to demonstrate that you have taken their regulations seriously (no matter how absurd they might be) instead of simply disregarding them. Accordingly, our IRB created a record demonstrating that we explicitly acknowledged the new policy, we made a good-faith effort to interpret it in light of universally-recognized truths, and then we acted in accordance with that reasonable interpretation.

DrRich does not know how all the other IRBs in the U.S. responded to this new diversity policy. However, since no institution has stopped doing research on its account, and since no institution has launched massive programs to seek out the tens of thousands of transgender Alaskan Natives that would be required in order to conduct medical research under such a policy, one can only conclude that all those other IRBs also decided not to follow the new diversity policy to the letter. DrRich does not know how many of them took the trouble to make a formal record of their interpretation of that policy, and of their rationale justifying their subsequent behavior. In any case, by the studied inaction of the Central Authority, those interpretations have been allowed to stand for well over a decade, and medical research has proceeded accordingly.

DrRich left the practice of medicine – and the wonderful world of IRBs – at the turn of the millennium. He has no idea how big a deal the issue of “diversity in research” is these days. But to the best of his knowledge the OHRP policy has never been rescinded. Indeed, DrRich finds it extremely unlikely that, at any time during that interval, it would have been politically feasible for any government agency, under any Administration, to soften this or any existing formal policy on diversity.

Most likely, after 17 years, this Regulatory Speed Trap is still set, and waiting to be sprung.

As it happens, the Central Authority today is desperately looking for ways to stifle medical progress, since medical advances are among the chief drivers of increased medical spending. The 1994 diversity policy, whose clear-cut plain-English language is being so universally ignored by medical researchers in every American institution, would seem to offer a fine opportunity for shutting down some of that research.

This Regulatory Speed Trap is not only set and baited, but is swarming with potential victims. Fair warning.

A couple of weeks ago, a swarm of Federal agents from the Fish and Wildlife Service, armed with automatic weapons, suddenly raided the Gibson Guitar Company and confiscated raw materials and finished guitars, apparently because Gibson allegedly violated the Lacey Act in their importation of exotic wood.  Spokespersons from Gibson insist that they purchased the wood legally, that the sale was approved by Indian authorities, and that they have the paperwork to prove it.

To DrRich, the interesting aspects of this episode are: a} The Jobs! Jobs! Jobs! Obama administration is happy to raid and disable a business – a manufacturing business at that – that has been hiring Americans, in order to enforce murky, difficult-to-interpret laws which require Americans to comply with even more difficult-to-interpret and even murkier laws in foreign lands. b) The administration is willing to enforce such laws in such a way as to induce maximum intimidation. And c), they are willing to do so selectively. (Several guitar companies, which have not been raided, also import the same wood from the same sources.)

DrRich stipulates that neither he – nor anyone else – knows all the facts of this case, and that perhaps Gibson really is guilty of imperfect compliance with the Lacey Act.  However, from what is known publicly, even if this were true, this episode would appear to be a case of selective enforcement. DrRich does not know whether the Administration would pick on Gibson because its CEO is a well-known Republican, or to teach a lesson to the people of Tennessee because at least one of their Senators has been seen consorting with the Tea Party, or because Gibson is non-unionized, or for some other reason.

The current version of the Lacey Act was arguably promulgated for good reasons, aimed as it was, ostensibly at least, at protecting rare species. But full compliance with the Lacey Act requires companies to document they are in full compliance with changeable, obscure and opaque laws in foreign lands, and in a fundmental sense is impracticable. America has many laws, rules, regulations, and guidelines that are just like this – for which it is, for all practical purposes, impossible to be in full compliance.

Such laws and regulations are very useful to the government, because it allows them to declare, at a time of their choosing, almost anyone who is functioning under those laws to be criminals. If Americans understand that the only thing standing between them and a raid by Federal agents armed with automatic weapons is the pleasure of the Central Authority, then smart Americans will do whatever they can to curry that pleasure.

DrRich calls it the Regulatory Speed Trap. The Regulatory Speed Trap can be recognized by its typical 5-step pattern;

1) Over a long period of time, regulators will promulgate a confusing array of disparate, vague, poorly worded, obscure and mutually incompatible rules, regulations and guidelines.
2) Individuals or companies which need to provide their products or services despite such hard-to-interpret regulations, will necessarily render their own interpretations (usually with the assitance of attorneys, consultants, and the regulators themselves), and will act according to those interpretations.
3) By their apparent concurrence with, or at least by their failure to object to, such interpretations of the rules, the regulators over time allow de facto standards of behavior to become established.
4) When it becomes to their advantage, the regulators will reinterpret the ambiguous regulations in such a way that the formerly tolerated de facto standards suddenly become grievous violations.
5) Regulators aggressively, but selectively, prosecute newly felonious providers of products or services.

Basic to the Regulatory Speed Trap is an underlying set of complicated and contradictory rules and regulations. In most instances, such as with the Medicare regulations that have evolved over the past several decades, the complexity and self-contradictions grow almost organically over time, and are not planned in any way.  In other instances – such as with the Lacey Act – some new regulations that cannot be complied with are created de novo. And in yet other circumstances – such as the Obamacare legislation or the Dodd-Frank legislation – an entire, massive, tangled web of impossible regulations is painstakingly created out of whole cloth. (This is likely why it is taking so long to render each of these new laws into their hundreds of thousands of pages of regulations.)

It is a rule of nature that bureaucracies evolve away from clarity and toward maximum complexity. But the resultant regulatory morass does not necessarily have to produce fatal paralysis. Societies have thrived for long periods of time despite such bureaucratic complexity. (The Byzantine Empire for instance, whose very name came to symbolize the bureaucratic tangle, lasted for a thousand years.) These societies have thrived, however, only because bureaucrats have allowed de facto interpretations and standards of behavior to develop under their watchful eyes. This sort of benign oversight permits societal commerce to continue to function within some reasonable bounds.

But the modus operendi of our Progressive leaders – in their perpetual attempt to establish the perfect society – is to control “everything” from the top down. And what they have discovered, to their unending delight, is that in a mature bureaucracy – one that has found a way to function despite a tangle of vague and contradictory regulations – is that Everyone Is Always Guilty Of Something.

And if everyone is always guilty of something, then the judicious use of the Regulatory Speed Trap, which is to say, the selective enforcement of inherently ambiguous regulations, becomes a useful tool for achieving Social Justice. By such selective enforcement they can punish their enemies (the enemies of the Progressive Program), reward their friends, and press their own agenda as they see fit.

This, DrRich submits, is what we see happening today to the Gibson Guitar Company, and for that matter, to Boeing.

Less obvious to the average citizen, but very obvious to individuals and organizations working within it, is that the same thing holds for the American healthcare system. Even before all the Obamacare regulations are published, the morass of already-existing rules, regulations and “guidelines” means that, at any given time, the Central Authority can suddenly construe some rule in such a way that virtually any worker or any institution dealing with the healthcare system becomes a criminal. The Central Authority has already exercised its awesome and arbitrary power to do so, in selected and circumscribed cases, and to good effect. Today, healthcare workers and institutions – and especially the medical profession – know that staying on the good side of the Feds is Job One.

Which means that doing what’s best for your patient can be no higher than Job Two*. It is not only “ethical” to act for the good of the collective instead of the individual patient, it is also the only way to optimize your chances of staying on the right side of the law – whichever law, that is, the Feds choose to reinterpret at any given time.

____
*For doctors, doing what’s best for patients is actually Job Three. The top priority is maintaining your professional viability (by keeping the Feds happy); the second priority is protecting your turf against encroaching physicians from other specialties; and the third priority is the patients. This order of priorities does not mean that doctors are evil; if they ignore the first two priorities, they will not be able to do anything at all for their patients.
____

Most doctors are very smart and can adjust to these or any other rules of engagement. It is the patients who are well and truly screwed by the Regulatory Speed Trap.

Since the late 1990s, American physicians have labored under a set of tortuous documentation requirements imposed upon them by our government. The E&M guidelines (for “evaluation and management”), apply to the documentation that physicians are now obligated to provide in support of their Medicare billing. The E&M guidelines, first instituted in 1995 and revised in 1997, were part of the Clintons’ great fraud reduction initiative. Ostensibly, the strict documentation requirements reduce the opportunity for fraudulent billing.

While doctors initially railed against the E&M guidelines, they now suffer them in relative silence. The E&M guidelines have become, in fact, just one more hurdle which doctors must navigate as they pick their way through the vast obstacle course that now defines the practice of American medicine. Indeed, younger doctors accept the odious documentation requirements as a matter of course, knowing nothing better, just as children born into the direst third-world slums accept their abject poverty without notable complaint.

But occasionally, physicians of a certain age, dimly remembering how it ought to be, will still complain about these guidelines. One of these is revered fellow blogger DB, who (unlike DrRich) is still in the trenches, and must deal with – and try to teach trainees how to navigate through – this abomination on a daily basis. Accordingly, DB is periodically moved to remind us of what he graciously believes to be the unintended consequences resulting from the E&M guidelines, which is to say, DB seeks to remind us that current medical documentation requirements get in the way of good and efficient patient care.

For some, however, even this sort of mild-mannered, exceedingly polite objection is not to be countenanced. One of DB’s correspondents fired back at him:

“The templates are there to serve as a guide, not a hinderance. If you don’t like your “guide” then work to change it. You shouldn’t look at this “guide” as a form of billing, but rather as a guide in making sure you have covered your bases when seeing the patient. Proper documentation can lead to quality care and positive patient outcomes.”

This, indeed, is the official government position on E&M guidelines. It is so official, in fact, that it moves DrRich to wonder whether Cass Sunstein has actually implemented his well-documented anti-conspiracy strategy, and thus has dispatched armies of government-approved agents to monitor and actively counter “untruths” which are unfriendly to government aims, wherever they are found.

In any case, DrRich is not as polite (or as circumspect) as DB, and so he will say it outright.

The E&M guidelines were established for the specific purpose of controlling the behavior of physicians, to further the goals of covert rationing.

First and foremost, they create a Regulatory Speed Trap of the first order, so that with each and every patient encounter the item that will be foremost in the physician’s mind is not the needs of the patient, but in filling out the complex documentation in such a way as to avoid the appearance of committing a fraud. In practical terms, this means filling out the documentation so as to blend in with the masses, so that one’s records will be passed over by the sharp eyes of the greedy forensic accountants (who are paid by commission for detecting instances of substandard documentation, which are now construed as “fraud”), or even worse, by the sophisticated software now being deployed to detect ever-more nuanced gradations of “outliers.”

A classic post by The Happy Hospitalist describes the mysteries of E&M documentation better than any other attempt DrRich has seen. HH’s description of the documentation hoops through which physicians now must jump is detailed enough that it’s actually difficult to read. Which is the point.

Through their utter opacity and complexity, only partially reflected by the 48 pages of dense prose that comprise them, the E&M rules (for “rules” is what they are) in fact greatly magnify the doctor’s opportunity for making inadvertent documentation errors, and thus of producing a “fraudulent” bill. HH’s post nicely demonstrates how writing a progress note according to the E&M rules requires assembling a complicated set of “elements” from Column A and Column B, as from a Chinese menu, for each of four subject areas of the patient encounter – the history, the physical exam, the assessment, and the plan. Then somehow, one must translate the result (which reads like – and often is – a computer-generated form letter) into the proper, fully-supported billing code.

Even if this mess led to a straightforward means of determining proper billing codes (which it does not), it results in a medical progress note that is virtually undecipherable. This means that when another doctor (or even the same doctor on a different day) tries to read the progress notes to figure out what’s been going on with the patient (which used to be the point of medical progress notes, before they became primarily a vehicle for auditors), they cannot. Compliance with the E&M guidelines can thus actively confound patient care.

When the E&M guidelines were first introduced, they were recognized immediately by doctors as a complete abomination. Indeed, the great hue and cry from angry physicians (and the arrival on the scene of a new Republican administration) caused the Secretary of HHS to appoint a special commission to review the E&M guidelines in 2001. The commission concluded that indeed, the E&M guidelines were entirely counterproductive to patient care, and in June, 2002 voted (20-1) to recommend abandoning them altogether.

But HHS declined to follow the recommendations of its own commission, instead leaving the E&M guidelines in force “temporarily,” and vaguely promising to revise them “soon” in order to make them less dangerous to patient care – knowing full well that the saurian lassitude of the bureaucracy would easily outlast the fleeting indignation of the medical community.

(This simple example ought to teach us how difficult it will be to roll-back any of our new healthcare reforms in the future, even ones that are officially deemed to be harmful.)

Accordingly, not only has HHS failed to take (or, alternately, succeeded in not taking) steps to revise the E&M guidelines, they also have vigorously pressed forward with audits and prosecutions for the federal crime of healthcare fraud, based on physicians’ inadequate compliance with them. And, as the bureaucrats must have predicted, there has not been any substantial noise from doctors about revising these guidelines for several years now.

What’s more, there never will be. Save for the occasional exhortation from an old fossil (sorry, DB), the E&M guidelines have been fully absorbed into modern medical practice. They have become normal.

Accordingly, a multi-million dollar industry has sprung up to help physicians better comply with these coding guidelines. Physicians across the country are spending the time and money allotted for their continuing medical education learning to become better accountants, rather than better physicians.

Which brings DrRich to his last point: It is not actually possible to follow the E&M guidelines to anyone’s satisfaction.

There is, in fact, no “correct” way to code, because correct coding is impossible. This verity was proven a few years ago when a group of specialized government-sanctioned coders took a sample of typical doctor-patient visits, coded them according to their own E&M guidelines – and they all got different answers. (The results of this study were published in the Annals of Emergency Medicine in September, 2002.)

Obviously, then, since there is no “right” way to comply with the coding rules, any doctor toward whom the fickle finger of fate points the Feds is very likely to be found guilty of abuse, if not outright fraud. And what we’ve got here is a well-documented, openly acknowledged, peer-reviewed and published Regulatory Speed Trap.

Here’s what happens to doctors who are found to commit coding abuse (which is to say, to any doctors who are visited by Federally-sanctioned auditors):

1) A small sample of their patients’ charts is audited.
2) The error rate (with the auditor determining retrospectively what an error is) is calculated for that sample, then that rate is applied by extrapolation to all the Medicare billing the doctor has done for the past 6 years (the statute of limitations).
3) For each violation in coding the doctor is calculated to have committed during those six years, the doctor must pay a) triple the amount of restitution, and b) $11,000.00 (per coding violation).

It is not unusual for audited doctors to be hit with hundreds if not thousands of coding violations over a 6-year period, and the fines will almost always amount to well over 7 figures, if not 8. Even rich doctors usually can’t afford that kind of damage. However – if it’s just abuse the doctor has committed and not fraud – often the Feds may offer a settlement deal in the low 7 figures.

And here’s what happens if the coding violations are judged to be fraudulent (which, unfortunately, often appears a somewhat arbitrary designation):

1-3) All the above.
4) Jail

In summary, DB makes a very legitimate point, and has made this point several times over several years. Namely, the E&M coding rules are highly counterproductive to patient care. They produce medical records that are fundamentally undecipherable regarding actual medical content, even by medical professionals; and they distract physicians, with every patient encounter, into a fraud-avoidance exercise.

Sadly, however, DrRich does not believe that merely pointing out the harm being caused to thousands of patients each and every day by the E&M guidelines will do any good. Believing that it might do some good to call the Feds’ attention to it assumes that the harm is an unintended consequence, or at least, that it would be considered too high a price to pay.

This, DrRich feels obligated to reiterate, is demonstrably not the case. The Feds know that the E&M guidelines are harmful to patient care. Their own commission came to that very conclusion in 2002. The Feds know that failing to comply perfectly with the E&M guidelines in each and every case does not really indicate fraud and/or abuse, but is the necessary outcome when you institute a complex set of rules that not even the government’s own coders can interpret. Reminding the Feds of these facts, in public, may make them angry, but it will not change their position on E&M guidelines.

That the Feds continue to impose the E&M guidelines on physicians, despite the harm that they know this causes, tells us something very important about their underlying motives. When you are in the business of covertly rationing healthcare, controlling the physicians is Job One. And as George Orwell observed for us, when you want to control the behavior of some population, a critical step is to control the mode, the rules, and even the very language of communication.

That physicians continue to comply with such oppressions, despite the harm they know this causes, and (with notable exceptions) without serious complaint, tells us something important about them, too. DrRich would rather not say what that is.

________________________________

Now, read the whole story.

DrRich explains it all in, Fixing American Healthcare – Wonkonians, Gekkonians and the Grand Unification Theory of Healthcare.

Now on Kindle!

A minor dispute – and an extraordinarily (almost disturbingly) polite one – has developed between the only two other electrophysiologists, that DrRich knows of at least, in the blogosphere. DrRich, being the third, ought to weigh in – not because his “vote” would break the tie, but because (as always) DrRich knows best.

Dr. Wes started it all off with a post noting, with some degree of dismay, that “(b)oth the Department of Justice (DOJ) and the Recovery Audit Contractors (RAC) are focusing investigations on Medicare billing for implantable cardiac defibrillator (ICD) surgery.”  Wes, with an appropriate degree of paranoia, concludes,”Consider yourself warned, criminals,” then recalls the halcyon days when the prospect of spending time in court conjured up for physicians nothing worse than malpractice suits.

Dr. John M. counters with a post whose purpose is to “welcome the upcoming policing of cardiac device implants.” John goes on to chronicle several examples he has witnessed of physicians implanting ICDs when, clearly, they should not have. The investigations of ICD implants by the Feds – and their private counterparts, the RACs – John posits, will serve to root out the bad eggs.

To his credit, John allows right off that his post is published “at the risk of exposing my naivete.”

To which DrRich replies, “Indeed.”

When DrRich was young, his grandmother, an immigrant from the Old Country who never shed her rustic habits, and not owning a motor vehicle, kept an illegal henhouse in her garage, buying the silence of her neighbors with eggs. It was from her that DrRich learned that if a rooster is behaving badly – engaging in hen abuse, for instance, or perhaps chasing grandchildren around the yard – one does not deal with it by sending Uncle George’s pit bull into the henhouse to take care of the offender. While the nasty rooster (never one to avoid a confrontation) might well be taken down, so would a lot of innocent bystanders.

John, you are laboring under the charming delusion that the purpose of these new investigations is to carefully review ICD implants and tease out only those unethical and/or poorly-trained device implanters, who are clearly and habitually engaging in untoward medical practices. If this were the case, then you and Wes and all those other honest EPs would have nothing to be concerned about, and the audits would indeed make the world a better place.

But alas, DrRich must tell you otherwise.

First, he urges you to read about his own experience. DrRich is a bit older than you, John, and was around the first time the Feds decided to conduct such an “audit” of ICD implantations. DrRich – like you, as pure as the driven snow – was absolutely certain he had nothing to worry about. But as matters unfolded, the fact that DrRich is not today writing this blog from a federal prison (do they let you do blogs in the penitentiary?) is more a matter of luck than anything else.

This new “audit” is much more intimidating than the one DrRich endured. That one was done by the relatively benign Office of the Inspector General (part of HHS). This one is being done by the Justice Department. So if they finger you, you are by definition, as Wes suggests, a criminal.

DrRich has talked about the Regulatory Speed Trap many times. Regulations inevitably become obtuse by evolution if not by design, so that, if you are practicing medicine, it is likely that somewhere – in the hundreds of thousands of pages of indecipherable and self-contradictory Medicare regulations – you are guilty of failing to comply with a regulation somewhere or other, and thus are guilty of healthcare fraud – which is a federal crime. The only thing that likely separates you from a convicted (or, more likely, self-confessed as part of a plea bargain) criminal is that the Feds haven’t decided to “audit” you yet.

The Feds know this, of course. The fact that they know it is documented in a recent GAO report entitled “Improvements Needed in Provider Communications and Contracting Procedures.” The GAO report notes that the bulletins which Medicare carriers are required to send doctors periodically (to make sure they understand the regulations) are filled with dense, lengthy and poorly organized prose sufficient to make them unreadable. Even if they were readable, the GAO continues, these bulletins would do doctors little good since they routinely announce new regulatory policies well after the implementation date, when doctors will already have been guilty of violating such policies (and thus committing fraud). Finally, the GAO finds that when confused doctors contact the Medicare call centers for clarification on the regulations, they get the correct answer only 15% of the time. (Even the IRS does substantially better than that.) And the Medicare websites, required under the regulations to clarify everything for the providers, universally lack “logical organization and navigational tools,” and as a consequence are nearly unusable.

So even when a doctor prospectively asks for instruction on how to comply with Medicare regulations (so as to avoid committing healthcare fraud and incurring huge fines and jail time), nobody is able to give him/her a straight answer. For, while it’s easy to look at a provider’s actions retrospectively (as the auditors are about to do), and find something in the dense regulations that makes those actions imperfect, it’s not so easy to tell providers ahead of time how to navigate those regulations in pristine fashion. As the GAO report reveals, nobody knows how to do that.

Now, DrRich is not calling the DOJ evil. The Feds are not being evil when they set out to conduct audits of physicians’ compliance with uninterpretable regulations; indeed, from their way of looking at it they are being humane.

They are only doing what they have to do, which is find a way – any way – to reduce healthcare costs. In this instance they do not really want to label hundreds or thousands of electrophysiologists as criminals, and ruin their careers and their reputations and their lives. They just want to ruin a few, and make sure the other ones know about it. This limited-bloodshed approach will accomplish their goal, which is, to make all the other electrophysiologists think twice (or thrice) before using ICDs again, in anyone, ever.

But in this instance it gets even worse. With this audit, in addition to dealing with the relatively-restrained Feds, electrophysiologists will also be dealing with the slavering RACs.

The RACs are a fun tidbit brought to us by the Medicare Prescription Drug Act of 2003. Under the RAC initiative, private contractors are to be sent out to perform audits of billing already done by insurers, health plans and physicians. The objective is to find “overbillings,” which the providers will have to repay along with penalties. Further, the act explicitly allows for prosecutions to be brought for “fraud and abuse,” even if the providers have repaid any overbillings.

The purpose of the Recovery Audit Contractors is, well, recovery. During the 3-year pilot of the RAC initiative, which took place in only 3 states, over $300 million were recovered. This wonderful success is the reason RACs are being turned loose elsewhere.

The RACs are paid by commission. Essentially they are bounty hunters, and they get to keep 20% of whatever they collect. According to the Associated Press, hospitals and providers are just a tad worried that these contractors, being so generously incented, will prove a little overzealous in their enthusiasm to find fraud. But worried auditees should not look for sympathy from the public. “A little zealotry is what we’re looking for on the part of the taxpayers,” said Leslie Paige, spokeswoman for Citizens Against Government Waste. “We think it’s about time.” Indeed – everybody can get behind fighting fraud, which is what makes the fraud gambit such a powerful tool for covert rationing.

DrRich surmises that it is good to be a RAC, and thinks you should consider buying stock in these companies, if you can. These outfits are about to harvest the vast bounty of obfuscation that Medicare has been carefully cultivating in its regulations for over 40 years, and has been carefully fashioning as fraud-traps for a somewhat shorter period of time. The RACs see the vast herds of physicians (violators one and all) placidly grazing all across the fruited plains, just waiting to be harvested. Their chief problem will be in pacing themselves; showing some restraint so they don’t use up their resources all at once.

And so, in addition to the dogged, officious, unsympathetic countenances of the lawyers employed by the DOJ, electrophysiologists this time around can also look forward to seeing the leering faces of the RACs’ commission-drunk forensic accountants. Electrophysiologists will experience the worst excesses of both worlds – the excesses of the state, and the excesses of unfettered for-profit outfits.

John M. can welcome this if he wants, and DrRich will wish him the very best good luck. DrRich, though, is still a little shell-shocked 15 years after his own encounter with federal audits of medical practices, and is very glad he’s only a spectator, and not a participant, this time around.

________________________________

Now, read the whole story.

DrRich explains it all in, Fixing American Healthcare – Wonkonians, Gekkonians and the Grand Unification Theory of Healthcare.

Now on Kindle!