Medicare, Coding - Medicare Code Phobia: Physician Innovation Obstacle

Medicare’s code controls and phobias block many physician innovations. As Joseph Antos, an American Enterprise Institute economist and an inside-the-Beltway health care expert, asserts, “Medicare is the Sheriff of the System. You better heed the Man with the Badge.” Health plans are Medicare’s deputies, who usually meekly following payment codes set by the Sheriff.



Third parties – Medicare and health plans – set codes for 7 of 8 health care dollars. This third party intervention stops cold many physician innovations. Physicians can’t innovate on the basis of price, can’t bill individually for their services without codes, can’t bundle or set fees for episodes of care, can’t collaborate with hospitals, and often can’t introduce new procedures or types of service due to lack of payment. This set of circumstances would be unthinkable in private industry. It relies on innovation to survive and thrive.



There are other obstacles as well. As Regina Herzlinger has observed, “Medical treatment has made astonishing advances over the years. But the delivery of that treatment are often inefficient, ineffective, and consumer unfriendly.” Often one can’t be paid for innovations that save the system money; and unreasonable regulations to prevent fraud may cripple the private sector. As a result, effective technologies often remain still borne, and threatened competitors whose oxen may be gored by an innovation have the political clout to block new approaches.



Take the case of telemedicine. In a book on medical innovation, I have a chapter on benefits of audiovisual devices at homebound patients’ besides. The chapter includes a case study by Randall Moore, MD, CEO of American Telecare and Erin Denholm of Centura of Health. These two CEOs explain how bedside devices, under patients’ control, dramatically reduce hospital and ER admissions, educate patients, and subdue many complications. Yet American Telecare has a difficult time marketing their proven product beyond demonstration projects due to lack of any set means of payment.



What’s the problem? The problem is Medicare code phobia – fear telemedicine will open a coding can or worms Medicare can’t control. This is true even though a series of Medicare projects, for which Medicare has spent $60 million, using devices and computers in patients homes, have demonstrated improved outcomes and money savings for patients with diabetes, congestive heart failure, and chronic obstructive lung disease.


Medicare fears physicians and other providers will bury the system with fee-for-service charges . Medicare is biding time until it comes up codes that will pay doctors a set fee for total care management. Meanwhile Medicare is conducting its projects and restricting telemedicine codes for which it will pay. Medicare further rslows telemedicine progress by paying only for patients in demonstration projects, insisting a health professional be present when communication is established, frightening doctors with threats of anti-kickback laws, and demanding providers present evidence telemedicine is just as effective as “hands-on” treatment when no one has enough experience with telemedicine to compile that evidence.



Dr. Richard Bakalar, MD, CMO of IBM's health care and life science division and immediate past president of the American Telemedicine Association, maintains. ”One advantage of telehealth is that is allows physicians to stay closer – to retain control and retain relationships with their patients.” But the Sheriff and his deputies remain skeptical they can control physicians, so doctors remain prisoners to Medicare coding fears and whims.



Telemedicine is a technological tiger. How does Medicare bell the tiger, i.e., pay vendors and care overseers inside or outside its coding system without breaking the bank? One suggestion is a set code for the patient’s medical home – be it a hospital, home health agency, or personal physician.



1. Innovation-Driven Care: 34 Key Concepts for Innovation (Jones and Bartlett, 2007).



2. Regina Herzlinger, “Why Innovation is So Hard, Harvard Business Review, May, 2006.



3. David Glenndinning, “Medicare and Telehealth, Slow Connection, American Medical News, September 3, 2007