[Eliminating $1.2B in cancer drug profits to doctors] ... doctors responded ... by performing additional treatments that give them best reimbursements

Incentives Limit Any Savings in Treating Cancer | By ALEX BERENSON | Published: June 12, 2007

When Medicare cracked down two years ago on profits that doctors made on drugs they administered to patients in their offices, it ended a windfall worth hundreds of thousands of dollars a year for each physicians.

The change, which mainly affected drugs to treat cancer and its side effects, had an immediate effect. In all, cancer doctors billed about $4.4 billion for chemotherapy and anemia medications in 2005, down from $5.6 billion in 2004, with Medicare covering 80 percent of the bills in each year. The difference mostly represented profit that doctors had made on the drugs.

But the change did not reduce overall federal spending on cancer care, which increased slightly. And cancer doctors say the change did nothing to reduce a larger problem in cancer treatment.

Some physicians say that cancer doctors responded to Medicare’s change by performing additional treatments that got them the best reimbursements, whether or not the treatments benefited patients. Those doctors also say that Medicare’s reimbursement policies are responsible.

“The system doesn’t value the time we spend with patients,” said Dr. Peter Eisenberg, a cancer doctor in Greenbrae, Calif., and director of the American Society of Clinical Oncology. “The system values procedures.” ...
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The ballooning cost of cancer treatment, one of Medicare’s most expensive categories, offers a vivid example of how difficult it may be to rein in the nation’s runaway health care spending without fundamentally changing the way doctors are paid.
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In general, oncologists make money by providing chemotherapy, even when it has little chance of success. Oncologists naturally dislike telling cancer patients that they have exhausted all available treatments. Ending chemotherapy, after all, means acknowledging that a patient’s disease has become terminal. ...
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Because the profits on different drugs varied enormously, doctors had an incentive to prescribe medications with the highest margins. Medicare requires a 20 percent co-payment by patients on chemotherapy medicines, but before 2005 doctors sometimes forgave those co-payments because their profits were so great.
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