It's perfectly legal for doctors to charge huge amounts for surgery, but should it be allowed?

Australia’s Chief Medical Officer Brendan Murphy will investigate how to better protect patients from doctors charging “really unjustifiable, excessive fees” of up to A$10,000 or more for medical procedures.

Murphy said it was potentially unethical for doctors to charge such high out-of-pocket fees that left families in severe financial pain, and that contrary to some patients’ hopes, paying more didn’t equate to better outcomes.

The call comes as desperate families increasingly turn to crowdfunding, remortgaging their homes and eating into their superannuation to raise tens of thousands of dollars for surgeries and other medical expenses.

It is perfectly legal for a doctor working in private practice to charge what they believe is fair and reasonable. It’s a private market, so buyers beware.

But that doesn’t mean it’s right, or that it should be allowed to continue.

Not everything is available in the public system

Some patients’ out-of-pocket costs are from the gap between what their private health insurance and/or Medicare will pay for a procedure or treatment.

But some treatments aren’t funded by Medicare or offered in public hospitals because their safety, efficacy and value for money have not yet been demonstrated.

Medical technologies, devices and surgical techniques need to be rigorously tested in clinical trials to demonstrate safety and clinical effectiveness. They will only be widely adopted when they have a strong evidence base.

When the government pays for a health service, value for money is also considered. For really expensive services and medicines that have the potential to greatly benefit patients, the government will try to negotiate prices down, to reduce the impact on the health budget.

While a lack of evidence of a benefit does not necessarily mean the procedure does not benefit patients, the outcomes need to be reviewed and demonstrated to justify its ongoing use.

Sometimes new technologies are adopted prematurely based on weak evidence and strong marketing which can lead to poor investment decisions. This was the case with robotic surgery for prostate cancer, offered early in private practice in Australia, only to find later it was no better than traditional surgery.

If a patient chooses to spend money on a high-risk surgery, is it really anyone’s business?

Sometimes patients will choose to undergo high-risk surgery, not covered under the public system, and are willing to pay out of their own pocket, or raise the funds through crowdsourcing or remortgaging their home.

Some will argue the value is whatever the patient is willing to pay for it and it’s up to the patient’s own risk-benefit preferences.

There are some major problems with this. Patients often make health decisions while distressed, ill and emotional. They may not be able to determine the best course of action or have all the information at hand. They must trust the doctor and his or her superior knowledge and experience.

Health economists call this “asymmetric information”. The doctor has extensive years of training, expertise and qualifications. The patient has Dr Google.

A key reason governments intervene in health care systems is to avoid market failure arising from unequal information and the profiteering of providers.

Our ‘fee-for-service’ system is failing

In the private system, doctors are paid a fee for each service they provide. This creates an incentive for doctors to provide more services: the more services they provide, the more they get paid.

But the high volumes of testing, consultations and fragmented services we’re currently seeing aren’t translating to a better quality of care. As such, economists are calling for major reforms of our fee-for-service private health system and the way that doctors are paid.

This could involve paying doctors for caring for a patient’s medical condition over a set period, rather than each time they see the patient, or charging private patients a “bundled fee” for all the scans, appointments and other costs associated with something like a hip replacement.

Out-of-pocket costs are very high for some Australians with cancer. A quarter of Queenslanders diagnosed with cancer will pay provider fees of more than A$20,000 in the first two years after diagnosis.

While what constitutes “value” will be in the eye of the beholder, a well-functioning and sustainable health system is one that puts patients’ interests above all others and holds health providers accountable.

Australia’s universal health care system is one of the best in the world and we need to work hard to preserve it. Surgeries costing tens of thousands of dollars will continue unless the government regulates private medical practice or reforms the way doctors are remunerated.

It’s time to cap what physicians can charge for services and provide incentives for specialists to bulk-bill their patients.