Every good story needs a villain. In the story of America’s health care system, that villain has long been the insurance companies and the executives who run them. They deny claims, impose burdensome prior authorization requirements, restrict access to care, and routinely insert themselves between patients and the physicians treating them. When Americans receive an inexplicable medical bill or are told that a treatment their doctor recommended will not be covered, the villain seems obvious. But what if there is another villain in this story — one hiding in plain sight?
Much of the debate over American health care centers on who should pay the bill. Far less attention is paid to those generating the bill in the first place. Much of America’s health care spending originates from physicians, of whom I am one, making decisions about what tests to order, which specialists to consult, which procedures to pursue, and whether a patient should be sent to the ER or admitted to the hospital. With that authority comes a responsibility not only to first and foremost care for our patients, but also to steward health care resources wisely. Yet somewhere along the way, American medicine cultivated a culture in which doing more became synonymous with doing better. Another test is reassurance; another consultation is thoroughness; another admission is caution. With taxpayer-funded government programs financing a substantial share of American health care, patients have less financial incentive to question costly tests and procedures ordered by their doctors. When patients are insulated from the true cost of medical care, the motivation to scrutinize its necessity becomes significantly diluted.
Ask the doctors themselves. In a 2014 national survey, nearly three-quarters of physicians called unnecessary tests and procedures a serious problem, while 72 percent said the average physician orders an unnecessary test or procedure at least once a week. In another 2017 survey of more than 2,000 physicians, doctors estimated that roughly one-fifth of all medical care was unnecessary — including nearly one in four tests and more than one in ten procedures. Even more troubling, nearly 71 percent believed that physicians were more likely to perform unnecessary procedures when they stood to profit from them.
Overhospitalization
This overutilization is often the byproduct of a phenomenon I am intimately familiar with: overhospitalization. Hospitalization creates the perception of greater medical severity, giving physicians a justification to order more tests and procedures under the assumption that insurers will cover them. As an internal medicine physician who primarily treats patients in the hospital, I have seen firsthand how frequently patients are sent to the ER and admitted for non-emergency conditions that could be managed by thoughtful outpatient clinicians.
Don’t just take my word for it. A 2016 survey of roughly 700 patients found that more than half of those sampled who called their primary care physician’s office for a medical issue were directed to the ER without their primary care physician ever being consulted. A 2018 comparative cohort study found that one in five patients admitted into the hospital could in retrospect have been discharged from the ER and managed with proper medical guidance and outpatient follow-up. The financial consequences of overhospitalization are substantial. In 2022 alone, inpatient hospital care cost an estimated $550 billion nationwide, according to federal data — and that figure doesn’t even include the fees doctors bill separately for their services.
Upcoding
The cost of physical resources utilized for hospitalization is one thing. What physicians bill for their labor is entirely another. This introduces the insidious trend of upcoding, in which physicians exaggerate the severity of a condition or the complexity of care in their documentation to justify higher reimbursement. This, too, I have seen. A bed-seeking homeless patient will be admitted for “COPD exacerbation” (chronic obstructive pulmonary disease) based on little more than a minor cough. A simple urinary tract infection that could have been treated with oral antibiotics will be labeled “sepsis.” A patient with elevated blood pressure but no evidence of acute organ damage will be documented as “hypertensive emergency.” These practices are hardly confined to my own observations — some of the most egregious examples have attracted the attention of federal investigators.
In 2017, one of the nation’s largest hospitalist companies, IPC Healthcare, agreed to a $60 million settlement after the Department of Justice alleged that it systematically encouraged its physicians to bill for more complex and expensive care than they actually provided. In 2018, Prime Healthcare agreed to pay $65 million to settle allegations that 14 of its hospitals admitted patients who needed only outpatient care and billed Medicare for diagnoses more serious than the patients actually had. These are only the cases that attracted federal scrutiny. The broader problem is far more systemic. A federal investigation found that 42 percent of Medicare claims were incorrectly coded, contributing to $6.7 billion in improper payments. Another federal audit estimated that hospitals received $1 billion in Medicare overpayments over just two years by billing for documented “severe malnutrition” diagnoses that objective data in the patients’ medical records did not support.
Not all of this overutilization stems from greed or incompetence, though neither should be dismissed as contributing factors. Much of it is due to a hyperlitigious medical landscape that subjects physicians to the constant threat of malpractice litigation. The consequences of missing a diagnosis can be devastating, while the consequences of ordering an unnecessary test or admitting a patient who could have gone home are comparatively negligible. This imbalance has fostered the rise of defensive medicine, in which physicians order additional tests, request unnecessary consultations, and hospitalize patients to protect themselves from liability. In a national survey, 91 percent of physicians surveyed agreed that doctors order unnecessary tests and procedures to protect themselves from lawsuits. Another study examining the decisions of internal medicine physicians who care for hospitalized patients found that more than one in four medical orders were at least partly motivated by defensive medicine.
Physician Complacency and Incompetence
Defensive medicine, however, has also become a convenient excuse for something far less defensible: physician complacency and incompetence. Too many physicians have become unwilling or unable to exercise the clinical judgment our profession demands. It is more expedient to simply order another test than to take a thorough history; less risky to request another consultation than to formulate a treatment plan independently; safer to send a patient to the hospital than to send them home. Easier to order than to think. Easier to defer than to decide. Easier to consume resources than to take responsibility.
Reversing this culture of complacency must begin within the medical profession itself. Graduate medical education programs must do more to instill in their residents the discipline of responsible health care resource stewardship. Crucially, that accountability must continue beyond training, when diminished oversight can allow complacency to take root. Physicians who persistently engage in medically unjustified overutilization in comparison to their peers, while accounting for patient complexity, should face tangible consequences, including reductions in performance-based compensation. If physicians can be financially rewarded for providing more care, isn’t it only fair that we also be held financially accountable for providing care that was never necessary in the first place?
Medicare for All may change who pays for American health care, but it will not change how physicians practice medicine. Until we confront the culture of overutilization and restore the primacy of clinical judgment over convenience and financial incentives, we cannot expect a different payer to produce a more effective and fiscally responsible health-care system. Before asking the American taxpayer to shoulder the enormous financial burden of universal health care, we must first hold accountable those entrusted with spending their money.
