A sentence in "Doctors and Money" (Cover Story, Oct. 24) said "doctors' average annual earnings for the 1978-88 decade declined 4.9 percent." This should have read "declined 4.9 percent in real dollars, adjusted for inflation." (Published 10/31/89)

Doctors make too much money. Or do they? We ask them to undergo more than a decade of training at great expense or modest salaries, to master vast knowledge, to make no mistakes and to deal with us tenderly during our diseases and dyings. Should we then begrudge them the incomes earned by thousands of lawyers and business executives? More and more doctors are, in fact, thinking of themselves as business people. And some are doing very well at it. This year the average physician will clear more than $150,000, though many will earn far less. The top 25 percent of self-employed doctors will average nearly $200,000. There also are some specialists earning from $300,000 to $500,000. A few physicians make more than $1 million. In a growing commercialism in medicine, some doctors, other doctors say, think more about the bottom line than they do about their patients. Even the most conscientious doctors are increasingly forced to consider the bottom line. Dubious medical commercialisms -- such as piling on charges for questionable procedures and tests, misleading advertising for patients, demanding evidence of insurance coverage before agreeing to treat a patient -- have become accepted practices for some doctors. Other commercialisms are more indirect. Some health maintenance organizations that offer care for a flat monthly fee pressure their doctors to avoid high-cost treatments whenever possible. The pressure is often applied in the form of "incentives" -- cash bonuses or cash penalties. These pressures can create a serious conflict of interest when a doctor considers whether to hospitalize a patient or refer one to a specialist at high cost. This, of course, may eliminate many needless and even harmful procedures. But the practice can also cheat patients when the pressure on doctors is too great. The Physician-Entrepreneur A movement toward physicians as entrepreneurs began in earnest in the 1970s, when federal and state planning agencies, trying to control costs, limited purchase of new equipment by hospitals. Thanks to lobbying from physician groups, "free-standing" facilities were generally not limited by government restrictions. Many doctors hastened to invest in million-dollar CAT scanners, and later MRI (magnetic resonance imaging) machines to test patients in their own clinics. The movement was accelerated by laws and regulations that prohibited hospitals and medical equipment manufacturers from giving kickbacks to doctors who referred patients to the hospital or used the manufacturer's product. For example, some companies paid some heart surgeons for each of their pacemakers installed. In response, many entrepreneurs, lawyers and money-minded doctors quickly realized that by making the doctor an investor or "limited partner" or participant in a "joint venture," there need be no kickback, just a dividend. Many physicians argue that some medical entrepreneurism is good for patients. Mark Leavitt, a Portland, Ore., internist, joined some M.D.-partners in starting a blood-testing laboratory in his building. He pointed out that his patients enjoyed the convenience and he enjoyed a 20 percent increase in income. "For most people practicing primary care, it really is not possible to make a living doing office visits alone," he said. "Today, you have to subsidize your ability to be a Dr. Welby." At the same time, entrepreneurs are eager to recruit physicians. Philips Medical Systems, maker of MRI machines, ran an ad telling doctors "you can now lease" a Philips system "for a monthly cost {that} translates into a break-even point of three patients per day." In New York, an MRI scan costs a doctor an average $240 to perform, but Medicare patients are charged $575, others $850, resulting, claims Rep. Fortney (Pete) Stark (D-Calif.), who is Capitol Hill's No. 1 foe of medical commercialism, in "truly staggering profits." In letters sent to doctors to enlist them as investors -- all those here are from the files of the House subcommittee Stark heads: A Nashville imaging center listed among its "venture strengths" "97 percent ownership by using physicians," "97 percent distribution of profits" to the physician-partners and "incentives for radiologists {as partners} to build volume." CP Rehab Corp West of Newport Beach, Calif., seeking to build an imaging center, offered "the right group of neurologists, neurosurgeons, internists, orthopedists, family practitioners and others" ownership shares "without any capital cost whatsoever." It solicited doctors, saying "you can increase your income significantly by merely referring your radiology studies to your own facility which has cost you nothing." Jerry B. Silver, then senior vice president, said last week, "This has worked out extremely well for the patients, reduced costs for them and given doctors better access." National Physical Therapy Management Inc. of Houston wrote orthopedic surgeons: "If you would like to know how you can provide {the finest care} for your patients that need physical therapy and receive an additional 30 to 50 thousand dollars a year that you have been sending to your competition, read on." Some home health care companies, which provide treatments such as expensive intravenous drug therapy for cancer patients, enlist physicians as limited partners. "The physicians send their patients to the center," said Barron's Weekly. "The company pays the physicians a healthy dividend." Some businesses clearly exhort their M.D.-investors to pass along their patients. Mammography Plus in California's San Fernando Valley said in a "Dear Partner" letter: "A review of {our first} quarterly statistics shows that 20 percent of the limited partners have ordered five or less mammograms . . . One physician has referred 115 patients . . . A fine example for all of us to follow!" A "Confidential Private Placement Memorandum" seeking M.D.-investors for a Palmdale, Calif., hospital said, "a prospective investor must commit to maintaining a monthly point count of at least 18," with points to be given for serving on medical staff committees or leadership, for attending seminars, for "public relations" and for admissions, "2 points per patient, up to a maximum of 12 points in any month." As it happened, the point system was never implemented. "We tried to get {the doctors} committed" to an interest in the hospital, but the system "wasn't workable from an administrative standpoint," said John Ray, vice president of AME Management, which operates the hospital. In addition, between 5 and 10 percent of all private practitioners are now selling medicine to their patients instead of writing prescriptions. The figure in the District of Columbia is 8.5 percent, according to a 1987 survey, and an additional 7 percent said they were planning to do so. Drug packagers make it easy by providing pre-packaged, pre-labeled containers. Doctors who do this defend the practice, contending that they control medications more closely with added convenience, and sometimes savings, to patients. The AMA opposes it except where patients' needs can't be met by local pharmacists. An Ethical Gray Zone AMA officials have said that there are "clearly abusive and exploitive" M.D.-ownerships and investments "by a few offending individuals" that need attention. But AMA executive vice president James Sammons asserts that with a few exceptions, doctors involve themselves either because the service wouldn't exist if they didn't finance it or because they can give patients better service by taking part in management. Many facilities are undoubtedly well managed by physicians who closely watch them. Robert McAfee, a Maine surgeon and AMA trustee, said, "In my state, if we didn't have physician ownership, most of the mammography units and CAT scanners wouldn't be there." To Arnold Relman, physician-editor of the New England Journal of Medicine, organ of the Massachusetts Medical Society and a journal that he and his predecessors have made the voice of conscience of American medicine, the argument that M.D.-ownership is needed to finance facilities is more often than not a "myth" and a "scam." "Referring physicians rarely if ever have any direct professional or managerial responsibility," he said, and doctors "should be paid only for services they personally provide or supervise, not for goods or services which they may prescribe but are provided by others. "Whatever the arrangement," Relman said, for a doctor "to make money by a financial investment in the facility to which he sends his patients {is} unethical. It's a form of kickback." The Institute of Medicine of the National Academy of Sciences has flatly stated: "It should be regarded as unethical and unacceptable for physicians to have ownership interests in health care facilities to which they make referrals, or to receive payments for making referrals." The AMA House of Delegates, however, sees the situation differently. In its view: Physicians are ethically free to become lawful owners or shareholders but "may not exploit the patient in any way, as by inappropriate or unnecessary utilization." Investment income should not depend on number of referrals. Doctors must disclose any ownership interests to patients, and patients must remain free to go elsewhere. There is little evidence that these strictures are widely enforced. Critics like Relman say that when a doctor tells a patient, "I have an ownership share in this facility, where I can assure you of good care," the average patient accepts the doctor's guidance, and the practice "inevitably encourages unnecessary duplication and over-utilization . . . and thereby adds significantly to the cost of health care." Studies have indeed found that there is a greater use of services when doctors are owners in the facility that provides the services. Some examples: Nationwide, doctor-owners order 45 percent more tests for Medicare patients than do all physicians. In Michigan, doctor-owners billing Blue Cross-Blue Shield ordered twice as many tests at double the usual fees. In Maryland, doctor-owners ordered twice as many tests as doctors in general with this exception -- those who own imaging centers used slightly fewer services but their charges per patient visit were almost twice as high. Money, of course, has always posed an ethical dilemma for doctors. Any time a physician treated a patient, there could be a profit. Before World War II, physicians earned two to three times the national average salary. Then came postwar prosperity, followed in the mid-'60s by Medicare and Medicaid, which started paying doctors for the care of many patients they previously had treated for free. Doctors began earning five to six times the national average. Starting in the '70s, federal and local governments and health insurers seriously began "controlling" doctors' fees. Some physicians have indeed seen incomes suffer. They have had to treat some patients -- especially low-fee Medicaid patients and, sometimes, Medicare patients -- at a loss. But, Princeton economist Uwe Reinhardt said, others have been "actually laughing, when you don't see them." That's because during these years of controls, Medicare payments to doctors skyrocketed -- from $8 billion in 1980 to $22 billion in 1987. "In spite of our best efforts to control Medicare physicians' spending, it continues to rise at unprecedented rates," about 16 percent yearly (though the rate of increase seems to be slowing), Secretary of Health and Human Services Louis Sullivan said. Marketing Medicine In one effort to get around government limits on fees, doctors have reached for more business through marketing. Advertising by any means was once an anathema to doctors, and to many still is. But marketing -- seeking new patients through advertising, newsletters, publicity releases and, of course, word-of-mouth by pleasing current patients -- has become a hot topic in doctors' publications. By AMA report, one doctor in seven was in a practice that advertised in 1987. Among family doctors and specialists other than surgeons, the figure was one in five. First among critics of all such commercialisms has been the New England Journal's Relman. "Health care is becoming a business" swamped by "a tide of commercialism," Relman has repeatedly charged. And, he complains, "the doctor is in fact becoming a business {executive}, pure and simple . . . If we allow medicine to devolve into a commercial transaction, the consumer of medical services will then become a victim . . . Will {medicine} continue on the course to increased entrepreneurism and competition, reducing physicians to vendors?" For some time, Relman was almost a lone voice. Recently, more colleagues have joined him. Robert Petersdorf, president of the Association of American Medical Colleges, this year saw the growth of a "sleaze factor" in both medicine and medical research. Surgeon Edmund Pellegrino, head of Georgetown University's Institute of Ethics, said this year, "My feeling is that the public will become sufficiently disturbed about health care profiteering so that measures will have to be taken to restrain the commercialization . . . . I am not calling for monastic medicine, but the moral issue is out of balance at the moment, and we must right it." "There is no doubt that our image has slipped," S. Spence Meighan, a Portland, Ore., medical consultant, told the Maryland medical society. "We are not seen as busy practitioners, rather we are seen as greedy, arrogant doctors who are in a hurry." That description does a disservice to many caring physicians who charge reasonable fees. But the fact of ever-rising health costs -- even while millions remain without access to care -- is forcing Congress, state legislatures, insurers and corporations to try to pare all medical expenses. Inevitably, the ways doctors increase their fees, which account for a fifth of all spending on health care, are coming under scrutiny. A Rand Corp. team studied four common procedures -- bypass operations, upper gastrointestinal tract endoscopy (exploration by tube), coronary angiography (dye injection to reveal blocked arteries) and carotid endarterectomies -- and found "significant overuse of every procedure we studied." Caesarean sections are still being done in one delivery in four, twice the optimal 12 percent suggested by experts, according to the Public Citizen Health Research Group. HHS Secretary Sullivan, an M.D. and former president of Morehouse School of Medicine, Atlanta, said last month, "We are spending perhaps one fourth of our physician dollars on procedures that are not necessary and that do not increase quality." Paying the Price Are we indeed paying doctors too much? An American Medical Association survey indicated that two thirds of Americans think "doctors are too interested in making money." In other surveys, around 80 percent said doctors' fees are too high and favored limiting them. Asked by Prevention magazine whether they thought doctors deserved their "high" incomes, most respondents said yes. Asked, however, how much they thought medical specialists deserved to make, 51 percent said $150,000 a year or more. The $150,000 is about what the average doctor earns, but most specialists earn more. And 44 percent said specialists should earn no more than $100,000. Asked whether they deserve exceptional incomes, doctors, most of them, say an emphatic yes. They speak of the long years of training, the often short practice life and the many pressures of medical practice. They speak of the constant threat of a malpractice suit if they make an error or fail to do something someone later thinks should have been done. And they describe the aggravation today of dealing with government and other insurers who constantly deny or reduce payments and force them to fight to get patients into the hospital. They cite many rising expenses, including malpractice premiums, and say many current Medicare as well as Medicaid payments do not even cover their overhead. Young doctors say they commonly leave medical school $40,000 to $100,000 or more in debt, forcing them to seek maximum earnings. Last year Barton Gershen, a Rockville internist, said: "I've been practicing cardiology for almost 25 years. I'm 55, I work an average 80 hours a week, and I didn't earn $100,000 until I was in my late forties." He spoke of the $200,000 to $1 million incomes of even fifth-rank corporate executives. Frederick Rosenberg, a Washington lawyer, wrote this year: "An initial visit to your doctor at $125 is a bargain compared with $200 to $500 at a large law firm . . . Doctors do not bill the patient every time they return a call or phone in a prescription. Nor do they bill for travel from office to hospital, for lunches or the time they take to research a procedure or read a medical journal." Philip Lee, head of health policy studies at the University of California, San Francisco, who was assistant secretary for health under President Johnson, said: "U.S. physicians are now the most litigated-against, second-guessed and paperwork-laden physicians in western industrialized democracies. Physicians' day-to-day clinical decision-making . . . is increasingly subject to review." As are their fees, with more cuts on the political horizon. That is part of why many doctors today privately take the view, "I have to make it now." However, many doctors deplore this attitude. James Nuckolls, a Virginia internist who heads the American Society of Internal Medicine, said: "Take career choices. Why are so many choosing radiology, ophthalmology and anesthesiology?" -- all high-earning specialties. "You tell me! Its not always the intellectual challenge." One doctor wrote to Medical Economics, a widely read doctors' magazine: "When our 'invasive' colleagues -- those who specialize in highly overpriced procedures -- wallow in the trough year after year, they make the rest of us look like pigs too." Another doctor wrote: "Putting one's income first {is what} many specialists do . . . . I've seen this disturbing phenomenon repeatedly, specialists who are far more interested in their own bottom lines than in their patients' well being." And from a surgeon: "If a surgeon can do several coronary bypasses in a day, or a cataract operation in an hour, there ought to be a proportionate decrease in these fees . . . In my 34 years of practice, I have seen such out-and-out greed that it makes me wonder if we don't deserve our reputations for being mercenary." Only a minority of physicians fit so harsh a description, but the preoccupation with money is raising the ire of an increasing number of doctors. As Burton Lee, a member of President Reagan's AIDS commission and now President Bush's personal physician, wrote in the Mt. Sinai Journal of Medicine this year: "When I was talking in Albany recently, a young doctor got up and started whining about the fact that he was in debt, and he had to make more money. He thought it was a terrible abuse that he had to take care of AIDS patients. " 'Goddamn it,' I said, 'there are two big mistakes here. The first one is that you decided to go to medical school. The second even bigger one is that you were let into medical school.' " Next week: Reforming the ways doctors are paid.