Kickbacks and price-boosting by manufacturers of heart pacemakers, as well as thousands of unnecessary operations to implant the devices, may be costing the Medicare system as much as $200 million a year, according to an investigation by the Health and Human Services Department.
More than 130,000 pacemakers were implanted in people in this country last year, and 80 percent of those procedures were paid for by Medicare. The HHS investigation found that the Medicare system was being charged more than the catalogue price for various makes and models of pacemakers, and uncovered kickback schemes that pay doctors up to $200 each time they agree to implant a company's pacemaker.
In addition, HHS found, companies commonly give doctors such gifts as car leases, ski vacations, outings to Las Vegas, and the option to buy stock in the profitable pacemaker companies at discounted prices.
Secretary Richard S. Schweiker, on the basis of the HHS findings and those of several other investigations, has established a task force to recommend action against abuses in the use and sale of pacemakers.
The inspector general's office at HHS found, for example, that the price charged to Medicare for the devices was more than 17 percent higher for the same makes and models listed in the federal supply catalog and sold to other government agencies.
In one hospital in Tennessee, the overcharge was $804 above the catalog price of $2,753. Knocking out this price inflation alone would save $64 million a year, Schweiker said.
In an interview yesterday, Schweiker said that HHS has turned evidence of "improper sales practices" over to the FBI and could not discuss specific details of the investigation.
But an HHS official said investigators found that some doctors get $50 to $200 "rebates" for each pacemaker of the company brand that he implants, often on an escalating schedule that raises the payment as the number of implants goes up, with an additional bonus if a quota is met by the end of the year.
Some doctors implant many pacemakers per week -- some as high as 50 a week -- so the "rebates" could amount to large sums of money.
Investigators also found that some doctors and pacemaker companies had formed "silent partnerships," or doctors were paid for "consulting" jobs that involved little work. HHS investigators were told by a former pacemaker company official: "Anything two intelligent people can work out is being done."
Questions have been raised in the past about the number of pacemaker implants being done in this country. The number of implants doubled in the last seven years in the United States, where the rate of implants is more than three times higher than the average rate in other developed countries.
The pacemakers are two-ounce devices implanted on the chest, with small wires patched to the heart muscle, that emit electrical pulses to set the heart rate at a steady, smooth pace.
Five percent of those who have pacemakers installed would die if they were not in place. The rest have various irregularities of heartbeat, some serious and some not very serious, that can be overridden by an electronic pacemaker.
Schweiker referred yesterday to what he called a "very impressive" report, released earlier this year by the Public Citizen Health Research Group, that found nearly a quarter of all the pacemaker implants in Maryland hospitals in a recent two-year period were unnecessary and 13 percent more were of questionable medical value.
The group estimated that 25,000 or more pacemakers are implanted needlessly every year. By the group's estimates, cutting back on unnecessary implants alone could save Medicare $210 million annually.
The HHS inspector general's report to Schweiker added that there is a connection between "the overly aggressive promotion efforts by pacemaker representatives" and the number of pacemakers implanted. About 1,500 doctors in the United States regularly implant pacemakers, according to HHS, and the five companies that control 97 percent of the American market keep a sales force that has one salesman for every three of these doctors. With large commissions, many salesmen earn more than $100,000 a year.
The Senate Special Committee on Aging, which also has been investigating allegations of abuses in the pacemaker business, will examine the results of the HHS report at a hearing Friday.
Schweiker said HHS might seek to lower the limit that Medicare will pay for pacemakers, to pay the amount in advance to hospitals so there is no inflation in the cost.
The secretary said that the pacemaker abuses were brought on by the payment system itself.
"I have been advocating a system of prospective reimbursement for our whole Medicare system," Schweiker said, referring to a system in which fixed payments for devices and treatments would be set by Medicare and paid to hospitals beforehand.
"I strongly believe that this is the ultimate answer to a lot of our problems. I suspect that what you find in this area of pacemakers is true in other areas too," he said. "The third-party payment system is conducive to this kind of abuse and waste."