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How Do Financial Incentives Influence Doctors’ Judgments?

Dermatologist examines mole on young man's back

A recent article in The New York Times highlighted the high costs associated with some types of subspecialty medical care, in particular dermatological procedures like Mohs surgery. Indeed, the patient profiled in the piece went for a minor procedure which, including facilities fees and questionable referrals to an anesthesiologist and plastic surgeon, generated billing that topped an unconscionable $25,000.

This piece led to the predictable Letters to the Editor defending physicians’ (mostly dermatologists’) practices. Typical of these: “dermatologists keep treatment costs low by diagnosing, treating and curing the vast majority of lesions in an office setting…. The work of dermatologists is mostly cost-effective.” Underscoring the importance of their work, the president of the American Academy of Dermatology wrote, “More than 3.5 million new cases of non-melanoma skin cancer in the United States are projected each year, and an estimated 3,070 deaths from these cancers occurred in the United States in 2013.” The National Cancer Institute puts the estimate at fewer than 1,000 deaths per year.

Financial Incentives and Well-Meaning Doctors
For me, the deeper significance of the Times article lies in the way in which financial incentives can influence the judgment of well-motivated, well-meaning physicians. This is especially true because even evidence-informed clinical decision-making requires clinicians to make inferences and apply judgment. When the evidence to support a specific course of action is not clear-cut (arguably, the norm rather than the exception), a physician’s judgment may be influenced by such things as clinical experience (often useful, but also often misleading, such as extrapolating from the last patient’s experience to the next). Given the challenging nature of decision-making, don’t we physicians have a professional obligation to consider the impact of financial reimbursement as a potential conflict of interest when we offer treatments to our patients?

As a physician, I don’t doubt for one minute that the majority of physicians deeply believe that their recommendations are driven solely by their patients’ best interests. Some will talk about other drivers, such as defensive medical practice and demanding (and non-price-conscious) patients, both of which tend to increase the use of tests and procedures and treatments. But when the decision isn’t black or white (and it usually isn’t), we should recognize that what we, even as physicians, believe to be the best course of action might be influenced by its impact on our pocketbooks.

This is human nature, and it is well known that financial incentives influence behavior—even in medicine. For instance, it has been demonstrated that fee-for-service models (the prevailing healthcare reimbursement model in the U.S.) drive up costs compared with “accountable care” models.

My Mohs Journey with Skin Cancer
Let me share a personal anecdote. Over a year ago, I was having stitches removed after Mohs surgery for a basal cell carcinoma on my scalp, a type of “non-melanoma” skin cancer that occurs commonly but rarely leads to death. The pleasant, well-meaning young dermatologist caring for me—who, I strongly believe, had my best interests in mind—suggested a full skin examination. 

The doctor biopsied a mole on my chest and one on my arm; despite my protestations that I had had those marks my whole life, he felt they looked suspicious. When the biopsy came back as “compound melanocytic nevus,” he emailed me to say “You should keep up periodic skin full exams every 3 months at this time.” Every three months! Of course I ignored that—indeed, it’s been 15 months, and I haven’t gone back—but even though this frequency of checks/biopsies would have generated quite a lot of (unnecessary) billing, I truly feel that my doctor believed he was making a recommendation in my best interest. (Let me note for readers who might find the word “melanocytic” scary, since it sounds a lot like “melanoma”: a melanocytic nevus is a mole, or beauty mark.)

While I don’t think that my doctor’s recommendation was overtly driven by the desire to bill, I strongly believe that the financial incentive (as well as other incentives) had an influence on it. Even if he did not directly stand to gain from this (he might have been on salary, rather than rewarded with incentives), he was trained in a subspecialty whose belief in the value of such procedures is self-serving, and self-justifying. That doesn’t mean it’s necessarily wrong—just that there’s a potential conflict of interest there that ought to be considered.

Specialists Highlight “Questionable” Activities
It is well recognized that the use of unnecessary tests, procedures, and treatments contributes significantly to our nation’s disproportionately large healthcare expenses. One positive step: an initiative called “Choosing Wisely” has asked medical specialty societies each to provide a list of five questionable activities in that specialty. More than 50 societies have joined the campaign, including the American Academy of Dermatologywhose items range from guidance on topical antibiotic use to best practices on when to perform Mohs surgery.

Physicians and other health professionals can rightly take pride in their membership in a profession that primarily seeks to contribute to the good of humanity. But we should also recognize that we, too, are human, and when our recommendations have financial implications, we should ask ourselves: How might this influence our decision-making?

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