The pervasive fear of malpractice litigation is pushing many doctors to order more and more diagnostic tests, often unnecessarily, and the trend is jacking up both healthcare costs and testmakers' revenue.
In a study in Health Affairs, researchers point out a practice they call "defensive medicine" in which doctors do all they can to cover their bases out of fear of legal reprisal. That usually means ordering test after test to steer clear of misdiagnosis claims, and the practice tacked $55.6 billion onto U.S. healthcare spending in 2008, accounting for 2.4% of medical costs, according to the study.
The researchers pieced together two sets of data: 1.9 million Medicare claims and a 2008 survey asking physicians about their malpractice concerns. Rectifying the two, patients who saw doctors with high-flying worries about lawsuits were nearly twice as likely to submit Medicare claims for tests than those with similar ailments who visited more level-headed physicians.
And Medicare, the biggest buyer of lab-based diagnostic tests in the U.S., pays top dollar for those tests. According to a June report from the Inspector General, Medicare overpaid for diagnostics by about $910 million in 2011, as private insurers were charged between 18% and 30% less for 20 of the most popular lab tests.
That has so far been music to the ears of testing giants like Quest Diagnostics ($DGX) and LabCorp ($LH), which each get more than 15% of their total revenues from Medicare, and while both companies are counting on a decline in reimbursement to dampen their revenues this year, the Health Affairs study would suggest they can still count on courtroom-wary doctors to send patients their way.
"Physicians have told me that next to the death of their father, going through a malpractice claim was the worst experience of their life," study author and Harvard law and public health professor Michelle Mello told Reuters.