Examining the Idea of Patient Refunds


They may be the six most repeated words in business: Satisfaction guaranteed or your money back.

If the toaster doesn't toast, the dress looks awful or the new car is a lemon, most Americans don't hesitate to stomp back to the store and demand a refund.

We even seek reprisals if we're dissatisfied with such subjective experiences as restaurant meals and Broadway shows.

But would you demand your money back if your health care didn't measure up to what you wanted or expected?

In what some in the medical establishment see as one of the most distasteful repercussions of medicine's transformation into a bona fide business, some health care professionals are beginning to support the idea of the money-back guarantee.

The concept, some critics charge, strikes at the heart of the traditional doctor-patient relationship, which is based on the patient's trust that the doctor will do his or her best and the rest is left to fate. Proponents of the money-back fee structures, however, question the sacred concept that the doctor gets paid no matter what happens.

The controversy of contingency fees in medicine began last year when one of the nation's top infertility clinics, Pacific Fertility Medical Center, began offering some patients a partial refund if they didn't get pregnant. That controversial program has spread to at least five infertility clinics nationwide.

Some urology clinics are offering refunds to men who undergo vasectomy reversals if the surgeries aren't successful, including one doctor's office in Houston that advertises its refund offer on a billboard.

Kaiser Permanente's Northern California Region is offering a refund of up to $25 of the co-payment if members aren't satisfied with their doctor's visit.

And Blue Shield of Northern California, several years ago, dipped a cautious toe into this puddle by offering, in a few cases, to pay for a patient's treatment with an experimental therapy that was not approved for insurance reimbursement provided that the treatment was successful. Blue Shield no longer offers that option, and a representative says the company now views contingency fees based on outcome as "a bad idea."

But refund offers, or payment made contingent on the outcome, should have a role--albeit a limited one--in medicine, argues Dr. Geoffrey Sher, who pioneered the refund program at Pacific Fertility Center, where he is executive director.

"Outcome-based pricing makes in vitro fertilization more accessible to more people [who don't have insurance]," Sher says. "The vast majority of people don't have access to IVF because they can't afford it."

Fees contingent on outcome are particularly suited to the infertility field, he says, because it is obvious whether the treatment is successful.

"I am against outcome-based contingency fees in medicine where you cannot guarantee outcome," Sher says. "But there is no field in medicine where the outcome is so clear-cut as ours. The end point is so measurable. You're pregnant or you're not. I'm not saying this belongs in every field of medicine."

Instead of suffering, the doctor-patient relationship should be enhanced by risk-sharing fee structures, he suggests.

"Nobody would argue that perception of caring is as important as the quality of care. But don't you feel better if you get all the TLC and yet are assured that you are coming to a place where it's cost-effective? It's like getting a warranty on a product you buy."


Such fee structures do not necessarily violate Federal Trade Commission standards on truth in advertising, says Michael Katz of the FTC, which has kept a close eye on the largely unregulated infertility field.

"Our interest is whether the advertising is truthful and accurate, or does it misrepresent facts? We will not get involved in an issue about whether something is ethical," he says.

Critics, however, view the trend as over-the-top commercialism.

The American Medical Assn. in June reiterated its objection to contingency fees because of the growing popularity of the concept in the infertility field. The AMA statement explained that a doctor's fee should be based on the "value" of the service, not the outcome.

"Doctors do the very best they can, and what happens after that is beyond their control," says Dr. Robert M. Tenery Jr., a Dallas ophthalmologist and member of the AMA's council on ethics and judicial affairs.

Contingency-fee plans "change medicine from a bond between the doctor and patient to some sort of business transaction. That is not what we want the relationship to be," he says.


Other observers say the concept makes them uncomfortable.

"I hope this doesn't spread," says Dr. Drew Altman, president of the Kaiser Family Foundation, a nonprofit national health care philanthropy based in Menlo Park, Calif. "I mean, what are we going to do next, offer consumers a set of free steak knives or pots and pans for their business? Medical professionals cannot guarantee outcomes if they are dealing honestly with all comers. I'm very much afraid of this. It seems to me the kind of thing that can bring with it all kinds of perverse incentives."

Nevertheless, Altman doesn't rule out its application in certain settings.

"On the edges there might be some instances where this might work," he says. "The problem is when you get into the complex areas of medicine there is great uncertainty and lot of gray area. Financial incentives just don't work very well."

Sher, who has become an outspoken advocate for the concept, agrees that contingency fees can work only when the outcome of the medical service or treatment is measurable or clear-cut.

Pacific Fertility Medical Center, which has offices in Los Angeles, San Francisco and elsewhere in California, uses an accounting firm to keep statistics on its success rates. The program is economically feasible because it is limited to couples who meet certain medical criteria that give them a realistic chance of success. (About 85% of those who apply qualify, Sher says.) In addition, everyone who signs up for it pays fees that are higher than standard fees, which typically total $7,500.

"This is not a guarantee of a baby. It is an indemnification against failure," Sher says. "The woman who gets pregnant the first time pays a little more. But I've never yet found a woman who complained about that. If you don't get pregnant, you can still adopt. You haven't lost the farm. What is wrong, ethically, when there is a sharing of risk and an informed adult makes a decision based upon actuarial data?"

Nevertheless, Sher admits, the clinic couldn't afford to offer the program if its success rates weren't among the highest in the industry.

"The message we are sending people is very simple: We are so confident we can deliver, we can share the risk with you," he says.

The message wrapped within Kaiser Permanente's Service Guarantee Program is also that of attracting consumers with the pledge to provide the highest quality service.

"We are serious about letting people know we are listening," said Dr. Robert Schultz, physician in chief at the Santa Rosa (Calif.) Medical Center. "We want to keep improving our service to ensure that everyone is satisfied."

Kaiser members can complete a card at the end of their office visit that allows them to demand a refund of their co-pay ($5 to $25) and to explain what they didn't like. The information is used by administrators to improve areas that need attention.


Indeed, if doctors and health insurance administrators are serious about providing quality health care, then they should be amenable to the idea of providing a refund for not meeting expectations, says medical ethicist David Thomasma of Loyola University in Chicago. The concept is particularly warranted in the areas of health care that are typically not covered by insurance, he says.

For example, consumers who are unhappy with the results of cosmetic surgery or who don't lose weight when following a weight loss program according to instructions should get their money back, he says. The program could also apply to areas where the result is clearly measurable. Is the pain gone after the cavity is filled? Is vision better after cataract surgery or radial keratotomy?

"I think we ought to be able to distinguish the types of treatment that are amenable to a refund," says Thomasma, a member of Pacific Fertility Medical Center's ethics board. "Of course, we should be cautious about entrepreneurism in medicine. But there are treatments which are not about disease where the outcome is measurable or achievable. And if you can't meet that, you refund. We should not do a blanket condemnation of risk-sharing or guaranteeing outcomes but be more specific about areas where it would be possible."

The advantage to consumers is that, should the concept become embraced in such fields, the clinics or doctors who are poor performers will not be able to survive and consumers could choose from the cream of the crop, Sher says.

The chance that some practitioners would go out of business is why some doctors organizations might oppose it, he charges. The governing body for the infertility field, the American Society of Reproductive Medicine, is working on a position statement.

"This is a policy that threatens certain doctors from providing services," Sher says. "The reality is that if you can't provide some basic principles of business, you don't survive."

The AMA's Tenery acknowledges that advertising is now widespread and accepted in medicine. But, he says, the fact that human lives are at stake makes medicine different from other kinds of businesses.

"There is no question that, unfortunately, medicine is moving into a marketing approach. We solicit for business. And one of the approaches that is successful in the business world is that if you are not satisfied, you get a money-back guarantee," he says. "I'm afraid this is beginning to spread in medicine. But the problem you get into, that many doctors don't realize, is that if you guarantee the results and you don't get them, you are setting yourself up to be sued."

But Sher says his patients who opt for the refund program are happy: They either have a baby or they get a partial refund of fees that typically edge close to $10,000. He predicts that money-back guarantees in medicine will not fade away as some crazy California experiment.

"I am completely willing to crusade this issue," he says. "I believe it's better for the patients. And I'm not alone. The minute the guard is dropped a little, others will come out of the shadows."

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