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November 30, 2011

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Self-Referral Increases Medical Costs

Posted: 30 Nov 2011 12:42 AM PST

This isn't a surprise -- we've known about this problem for a long time -- the question is why we haven't done something about it:

Self-referral leads to more negative exams for patients, EurekAlert: Physicians who have a financial interest in imaging equipment are more likely to refer their patients for potentially unnecessary imaging exams...
"Self-referral," whereby a non-radiologist physician orders imaging exams and directs patients to imaging services in which that physician has a financial interest, is a concerning trend in medicine and a significant driver of healthcare costs. "Self-referred medical imaging has been shown to be an important contributor to escalating medical costs," said Ben E. Paxton, M.D., radiology resident at Duke University Medical Center in Durham, N.C. ...
Between 2000 and 2005, ownership or leasing of MRI equipment by non-radiologists grew by 254 percent, compared to 83 percent among radiologists. The U.S. Government Accountability Office (GAO) reported that the proportion of non-radiologists billing for in-office imaging more than doubled from 2000 to 2006. During that same time period, private office imaging utilization rates by non-radiologists who control patient referral grew by 71 percent.
For the study, the researchers set out to determine if utilization of lumbar spine MRI differs, depending on the financial interest of the physician ordering the exam. They reviewed 500 consecutive diagnostic lumbar spine MRI exams ordered by two orthopedic physician groups serving the same community. The first group had financial interest in the MRI equipment used (FI group), and the second had no financial interest in the equipment (NFI group). ...
"Orthopedic surgeons with financial interest in the equipment had a much higher rate of negative lumbar spine MRIs," Dr. Paxton said. "In addition, they were much more likely to order MRI exams on younger patients. This suggests that there is a different clinical threshold for ordering MRI exams in the setting of financial incentivization."
Dr. Paxton added that increased imaging utilization due to self-referral may not yield medically useful information and may place the patient at risk for potential adverse consequences.
"It is important for patients to be aware of the problem of self-referral and to understand the conflict of interest that exists when their doctor orders an imaging exam and then collects money on that imaging exam," he said.

Links for 2011-11-30

Posted: 30 Nov 2011 12:06 AM PST

More Europessimism

Posted: 29 Nov 2011 03:42 PM PST

One more from Tim Duy:

More Europessimism, by Tim Duy: I hate to beat a dead horse, but the situation in Europe is dire, and two issues crossing my desk this afternoon only add to my angst. First, Karl Smith at Modeled Behavior sees that the ECB is losing all control of monetary policy:

Based on entirely different indicators this looks to be the point where the ECB's control over Eurozone monetary policy began to come unmoored.

At the crux of the problem seems to be the inability to arbitrage away differences in funding costs between institutions and countries because of malfunctioning in the European Repo market.

This malfunctioning appears to be down right mechanical with trades regularly not settling on time, collateral not being delivered, awkward interventions by local regulatory agencies and a host of other deep, deep problems.

Very, very scary - remember that the ECB is the last great hope. But it can't be effective if the European banking system collapses, which looks more likely each day. A signal that the related rush to cash is severe is that the ECB is no longer able to fully sterilize its asset purchases. Stories at the Wall Street Journal and the Financial Times. Recognize the risk that even when the ECB switches to quantitative easing, the resulting cash just sits unused in bank reserves. Sound familiar? Europe has liquidity trap written all over it.

A second point comes from Edward Harrison, who spots a story which claims France and Germany are looking to impose a strict zero (!) percent budget deficit target by 2016. Harrison's take:

Note that an adjustment to balanced budgets throughout the euro zone requires either an exactly equivalent offset in private sector savings down or in the export sector up . So implicitly, Germany and France are calling for a massive private sector dissaving or a large reduction in the external value of the euro area currency. I see this as a pipe dream. It tells you that bad things are definitely going to happen in Euroland.

This is my fear - that Germany and France continue to press ahead with the "austerity first" plan, with the ECB cheering them along. Unequivocally, this is not going to work. It hasn't worked yet, and there is zero reason to believe that it will in the future. All Europe is doing is setting itself up for greater speculative attacks as each new turn toward austerity pushes the deficit targets further out of reach.

We are setting the stage for a massive counter-example to the US reaction to its financial crisis. The US allowed the fiscal deficit to swell while force-feeding capital to the banking sector (not enough, but that is another story). Europe is pushing for massive fiscal austerity and, to prevent additional fiscal borrowing, pretending that the banks can survive via "liability management exercises." If you think the US would have been better off shrinking the deficit while letting the banking system collapse, it is time for you to go long on Europe.

For the rest of us, enjoy the policy-driven market upturns while they last.

Another European "Solution" Coming?

Posted: 29 Nov 2011 12:15 PM PST

Tim Duy:

Another European "Solution" Coming?, by Tim Duy: Financial market participants continue to digest what is viewed as generally good news coming out of Europe. Importantly, European policymakers appear to be aggressively moving toward what they see as an overarching response to the crisis. Edward Harrison at Credit Writedowns offers a possible three pillar policy path that has emerged in recent days. My summary:

  1. An IMF aid package for Italy and likely Spain, financed by the ECB.
  2. A credible, binding agreement for EU fiscal oversight. In return, the ECB would intervene more aggressively to support sovereign debt.
  3. A path to Eurobonds, assuming point 2 above.

Despite these optimistic signals, there remains room for plenty of disappointment in the days ahead. Notably, Reuters reports that German Chancellor Angela Merkel will not back Eurobonds or additional ECB intervention. This may be just internal posturing, but does speak to the high degree of internal resistance toward greater EU fiscal integration. Moreover, we have seen in the past the internal bickering yields responses that seem bold at first but quickly fail to stabilize the crisis.

And, when assessing the economic impact, what you don't see is as important as what you do see. What I don't see here is:

  1. A path to true fiscal integration, which would imply direct transfers from relatively rich to relatively poor member states.
  2. Similarly, a new path toward internal rebalancing. A commitment to stronger fiscal oversight implies continued pursuit of rebalancing via deflation in troubled economies. Moreover, as Paul Krugman notes, this will be attempted in the context of low inflation, which only exacerbates and extends the pain of adjustment. This path only ensures deeper recession.
  3. A coordinated, continent-wide banking sector recapitalization. Note that Moody's just placed European bank debt under review. Downgrades are almost inevitable at this point.
  4. An open door for stimulative policies to offset the demand contraction currently underway.

These are not small details. My fear is that European leaders think they can avoid these issues by enshrining fiscal austerity which, when combined with ECB intervention, will end the sovereign debt crisis. Confidence fairies will then fly to the rescue and fix the rest of the problems. To be sure, I think getting the sovereign debt crisis under control is critically important, but that alone will not stop the recession from deepening.

For those still expecting a mild European recession, I offer up Bloomberg's chart of the day - shipping rates from China to the US and Europe. The text:

Slumping shipping costs show exports to Europe from China are "falling off a cliff" as the euro- region crisis chokes off consumer spending, according to RS Platou Markets AS, a unit of Norway's biggest shipbroking group.

The CHART OF THE DAY shows how the cost of hauling goods to Europe from China is falling faster than rates for deliveries to the U.S. The price for shipments to Europe is down 39 percent to $511 per twenty-foot box since Aug. 31, according to figures from Clarkson Securities Ltd., a unit of the world's largest shipbroker. That's more than double the 18 percent slide in the cost to the U.S. West Coast, measured in 40-foot units.

Not surprisingly, the appreciation of the renminbi has come to a standstill as Chinese authorities act to support exporters.

Finally, note that Portuguese bond yields are pushing higher in recent days, up 15bp to 13.60% today, above the highs of last July. It looks like market participants expect the next bailout will require some private sector involvement. Unsurprisingly, austerity isn't working. From Market News International:

The deterioration of Europe's debt crisis over the past months is hitting Portugal's banking sector and making it more difficult for the country to execute its fiscal adjustment program, the Bank of Portugal said in its financial stability report published Tuesday.

The central bank noted that in the past six months, the "materialization of risks" to financial stability have intensified "substantially," both internationally and inside Portugal. "This aggravation of economic and financial conditions has resulted in a deterioration of profitability in the Portuguese banking system," it added. "In the short term, this trend towards aggravation of risks is likely to persist."

The bank warned that the situation "is increasing the challenges confronted by the Portuguese economy, as well as by the Portuguese financial system, given that the adjustment of economic imbalances must now be carried out in a much more adverse context, particularly as regards the expected trajectory of external demand."

Bottom Line: European policymakers understand they need faster and bolder action. But the situation has many, many moving pieces. It is increasingly difficult to pull the brakes on this runaway train.

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