Fairly or not, healthcare reform advocates—including President Barack Obama—have made McAllen, TX, Exhibit A for much of what is driving the high cost of healthcare in the United States.
The small Texas border town was targeted for heavy—and disputed—criticism in a June 1 issue of The New Yorker, entitled "The Cost Conundrum", for excessive healthcare costs, owing to what the magazine says are a high number of questionable medical procedures, tests, and other cost drivers.
Obama cited the report in a June 15 speech to the American Medical Association, and told the physicians that McAllen is the product of a healthcare system that incentivizes physicians to perform tests and procedures and "rewards the quantity of care rather than the quality of care; that pushes you, the doctor, to see more and more patients even if you can't spend much time with each, and gives you every incentive to order that extra MRI or EKG, even if it's not necessary. It's a model that has taken the pursuit of medicine from a profession—a calling—to a business."
It is comments like these–suggesting that "medicine" and "business" are mutually exclusive–that make healthcare economist Mark Reiboldt nervous. Reiboldt, a vice president at Coker Capital Advisors, an Atlanta investment banking firm, says the climate in Washington, DC, is making business "extremely disadvantageous for the physician entrepreneur."
"When you look at the whole picture, we are getting close to universal healthcare and single-payer, which is dangerously close to socialized medicine and that type of model you see in the UK and the EU," he says.
Reiboldt says he isn't defending or accusing the physicians of McAllen of any improprieties. But he believes the healthcare reform movement is using an extreme example as a standard for what is wrong, rather than correctly identifying an outlier.
"There are very defined and strict guidelines that prevent or forbid doctors from doing what was happening in Texas to the extent that it is not right, that it is unethical," he says. "You can't base the entire system on these outliers. They are going to take advantage of the system in any system."
"If you use the folks that are the exception to the rule, the folks who are going to break the rules and violate the structure and put that in a framework with the people who want to operate a business efficiently and be able to take advantage of all the revenue opportunities it can legally morally and ethically, I believe the market will have a way of balancing out those negative externalities or the outliers that are taking advantage of the situation," he says.
Rep. Jim Cooper, D-TN, says he's not so sure that McAllen is an outlier. "If the issue is self-referral, then the data are pretty clear that physicians are more likely to self-refer when they own the referral facility," Cooper says, citing McKinsey & Co. 2007 report that estimated that physicians make about $8 billion a year with self-referrals.
"When a doctor owns a facility, miraculously, referrals go up," he says. "It's not in the Hippocratic Oath that you should own the referral facilities. In The New Yorker article about McAllen, TX, the evidence is pretty overwhelming. Hopefully doctors would be so ethical that they would not over-refer, but it seems pretty clear that in aggregate they are over-referring."
Ted Epperly, MD, president of the American Academy of Family Physicians, says he won't tell colleagues how to run their practices. But he says a balance has to be struck between the public good and physicians' right to earn a living. "There is going to be a certain degree of experimentation that is going to on with this as we try to find the right balance," he says.