Defensive medicine adds billions to annual U.S. healthcare costs

Physicians estimate the cost of defensive medicine to be between 26 and 34 percent of total annual healthcare costs, according to a new report by Jackson Healthcare. At an estimated $2.5 trillion in annual spending, this means $650-$850 billion is spent each year on medical orders intended to avoid lawsuits rather than treat patients.

In its report, “A Costly Defense: Physicians Sound Off on the High Price of Defensive Medicine,” Jackson Healthcare, a healthcare solutions company, summarizes physician opinions on defensive medicine collected between October 2009 and May 2011 and concludes that the fear of being sued drives physicians to order tests and treatments as added insurance, which inflates healthcare spending.

[Also: Defensive medicine may cost the industry billions]

According to the publication, no physician respondents in the United Kingdom, New Zealand, Canada or Sweden reported practicing defensive medicine. Likewise, physicians working under contract with the federal government reported practicing significantly less defensive medicine than their private sector peers.

“Through our ongoing research, it’s become apparent that U.S. physicians are the only physicians in the world personally financially liable for their medical decisions,” said Richard L. Jackson, chairman and CEO of Jackson Healthcare. “Physicians throughout the world enjoy protections and a patient compensation system that free them to focus on what’s best for their patients. U.S. physicians’ medical decisions are influenced by an ever-present threat of litigation.”

“Unfortunately, there is little agreement on how much defensive medicine is actually costing us,” added Jackson. “However, the reality is that it is generating significant costs and waste with ripple effects beyond the economic impact. For example, patients are being under- and over-treated with medically unnecessary tests and procedures. Plus, the physician/patient relationship has been breached as physicians are forced to protect themselves against any third party attacks against their treatment decisions.”

Key report findings include:

• Physician compensation accounts for only about eight percent of total U.S. healthcare costs.
• About six percent of physicians’ total compensation comes from medical orders such as prescriptions, imaging, lab tests, admissions and surgery fees.
• Many physicians reported practicing “rule-out medicine” rather than “diagnostic medicine” out of fear that they will miss a diagnosis and be sued.
• 76 percent of physicians reported that defensive medicine decreases patients’ access to healthcare.
•  53 percent reported delaying adoption of new medical techniques, procedures and treatments due to fear of lawsuits.
• 75 percent of physicians believe defensive medicine will adversely impact the physician shortage.

Some argue that if U.S. physicians were protected from personal financial liability, they would continue to order medically unnecessary tests because they profit from them.

Jackson said his organization’s research found all the tests and treatments from which physicians could profit from account for only 6.3 percent of their total compensation. “So the belief that physicians order tests and treatments for profit appears to be a myth,” concluded Jackson.

Physicians reporting they practiced defensive medicine estimated the following breakdown of orders that were medically unnecessary and defensive in nature:

• 35 percent of diagnostic tests
• 29 percent of laboratory tests
• 19 percent of hospitalizations
• 14 percent of prescriptions
•  8 percent of surgeries

A report published by The American Academy of Orthopeadic Surgeons in 2010 confirms Jackson Healthcare’s claim that defensive medicine adds tremendous cost to the healthcare system. In the report, “The Cost of Defensive Medicine,” the AAOS stated, “In recent studies, more than 90 percent of physicians reported practicing positive defensive medicine in the past 12 months; unnecessary imaging tests accounted for 43 percent of these actions. More than 92 percent of surgeons reported ordering unnecessary tests to protect themselves.”

“If we can reduce the incidence of unnecessary tests and procedures ordered by healthcare providers to prevent malpractice lawsuits, we can lower healthcare costs. I believe the way we can do this is by eliminating both the personal financial liability of physicians and the litigation process,” said Jackson.