Bloomberg’s David Armstrong has put together an investigation of a simple, effective and dubious new business formula, one which begins with pain in the back. In thousands of patients, this chronic back pain leads to desperation, desperation leads to Internet searches, and Internet searches lead to rosy-sounding ads for laser spine treatments from the fast-growing, high-priced, high-volume clinics that are blossoming around the country.
According to Armstrong, this trend is epitomized by Laser Spine, the six-year-old industry leader with $109 million in sales last year and a monster profit margin of 34.3 percent from 2006 to 2009. It typically charges about $30,000 per procedure, or about half of what any insurer would be willing to pay for a garden-variety laser-free surgery.
Laser Spine and its competitors, part of a boom in outpatient clinics operated by entrepreneurial physicians, sell a high-tech version of procedures that have been around for years — despite a lack of independent research to show that their variations lead to better outcomes. The company commands higher prices than laser-less rivals, driving up the cost of health care. Its number of malpractice claims per 1,000 surgeries is several times the rate for all U.S. outpatient surgery centers, based on insurance industry data.
How do these companies get away with charging high prices for procedures with shaky track records? Through a gap in federal regulation that will be familiar to reporters who have investigated surgical robots and other high-tech procedures.
While the Food and Drug Administration regulates the use of drugs and medical devices, there’s virtually no federal oversight for the effectiveness of surgical techniques.
“This is an issue with surgery generally,” said Robert McDonough, head of clinical policy research and development at Aetna. “Surgeons can introduce new procedures that might be significantly different from established ones with no oversight of the claims they make.”
Drug-makers’ ads — including sponsored links that appear in response to search-engine queries — must disclose their medications’ risks, under FDA rules. Ads for surgical techniques have no similar rules.