To Our Patients: Medical Musings - September 2006 Since I started practicing medicine, I have seen a lot of changes in the business and administration of healthcare. As a physician, the business of healthcare can be a frustrating one, since the insurance companies (not the doctors) call all the shots. This is not supposed to be a sob story, but I feel that we physicians owe our patients an explanation, since suddenly many of you will find that you have large deductibles and you will be rightfully shocked at the cost of your basic healthcare. At the same time our ability to run a viable business may be seriously jeopardized. HOW ARE DOCTOR'S SERVICES PRICED? First of all, please understand that medicine has become a “discounted fee for service” business. What does this mean? It means that it’s been a long, long time since anyone was expected to pay 100% of charged fees. Why? Because insurances pay only a percentage of physician's charged fees. For example, one insurance company plan may pay 50% of our charges, while another may pay $150 for the same service. This has led to the creation of fees that are higher than we expect to get paid (click to get another example). That is also the reason you get an “Explanation of Benefits" or "EOB” from your insurance company where our services have been repriced. It is only reasonable to think "the doctor charges more than than the reasonable, allowed fees!" The insurance company states it just that way. Insurance companies appear to go out of their way to make our charges appear over-priced. Yes, we charge more than they pay: we have to. If we charge less than the negotiated, agreed upon rates, they pay our charge only. So, we have been forced to do this to deal with a marketplace where insurances call the shots. Medical care is a VERY controlled business. Legally, we must have one quoted fee schedule, one list of prices for everyone and every insurance. However, insurance companies are allowed to pay whatever they have agreed to pay for the same services. We can give a cash pay discount a time of service, and we do: 20% off the usual charges. But, if you have an insurance plan, and we hold a contract with your insurance company, and you KNOW that your physical won’t be covered or will be applied to a deductible, we are not allowed to offer you a cash pay discount!!!! By the terms of our contract, we must submit our bill through your insurance. Here’s an especially annoying example: as physicians have a single fee schedule but, for example, Quest Labs has many fee schedules. For example, if we draw screening labs for you, and you have a Blue Cross/Blue Shield plan that does not cover screening labs, you may get a bill for $400! If you walk over to Quest, don’t use your insurance, and buy those same screening labs, they might cost $40! This is a real life example. We could sell you a service cheaper, but your insurance won’t allow it! Even though they may not be paying a single cent, even though they may not cover that service at all! HOW ARE CHARGES ARRIVED AT FOR INDIVIDUAL VISITS? Medical services are priced in many ways. For example, if more than 50% of the time is spent counseling, we use time. Some services are billed as a service: for example, fitting a diaphragm is a single flat fee. Some services are based on something called “complexity” which seems like a poorly defined entity. However, there are specific conditions that must be fulfilled to arrive at different levels of service. Medical billing is something we physician have had to learn, and it’s complicated. MEDICAL BILLING AND ADMINISTRATION: On top of saddling us with an arbitrary fee structure, insurance companies have also forced on us a cumbersome billing system that requires us to hire highly trained people who submit very complicated forms. If we don’t receive your payment, and that often happens , we may have to make sure the insurance company received the bill. If we don’t constantly check, we can run out of time: the bill may be “out of timely filing”– if the insurance company claims they haven’t received the bill in a "timely manner" they don’t have to pay it. This means that our billing persons must not only submit the bills, they must check that it is received and processed and paid. If we give an immunization, and the reimbursement falls short of even the wholesale cost, or if all the i’s are not dotted and the T’s crossed on the form, the billing person must appeal and appeal and appeal, and rebill, rebill and rebill. And call, and wait on hold. All day long. In our office, billing is actually handled by one and a half people! That adds substantially to our overhead and your costs. Recently, United Health Care decided that they are not going to send us checks or EOBs (explanations of benefits). Instead, they are going to simply deposit checks in our accounts. When we review our bank statements each month, we have to see “where did this money come from?” and when we see that United has deposited that amount directly in our account, our billing people have to go on line and individually look up an explanation of whose bills and what portion United is paying with that deposit, and then apply the money to each individual patient’s account! This is a lot of extra work for our staff (and less for the insurance company). United Healthcare claims that this system in simpler (and it is for them) and that if we do not sign up for this program, they will slow up our payments. Moreover, whether we sign up or not, after , January 1, 2007, they will deposit their checks in whatever accounts we have been depositing their checks in anyhow. In another words, United says “sign up or don’t! We will do whatever we want!” As you can see, physicians office are providing and paying for a lot of the insurance company's administration. This adds another layer of expense to our office, and it’s reflected in what we must collect in order to stay in business. If we did not have to deal with insurances, think how few staff we would need. Our prices would go down quite a bit. PHYSICIAN OVERHEAD Administration for insurances is a significant part of our overhead.
As primary care physicians, who don’t provide
highly reimbursed services, unlike say, gastroenterology (price
a colonoscopy lately?), dermatology or surgery, our
overhead, including staff salaries, rent, etc, is about 75% of
our collections! That
means that for every dollar that comes into the office, we
might get 25 cents, before taxes. As you know, healthcare is more than 14% of the national domestic product (data from 2004). Of those costs, about 20% are estimated to be physician costs. SO WHAT’S A PHYSICIAN TO DO? WHAT CAN PATIENTS DO? Well, one thing a physician can do, is go work for a hospital and be an “owned physician”. For example, Boulder Community Hospital and Avista both own offices and pay physicians to staff them. How is it that a hospital can do a better job of running a physician office than a physician in private practice? Well, they can’t, but that’s not the point. When physicians, especially primary care docs threaten to leave practice, the hospital may buy their practice and pay them a salary. That is because the hospital makes about $9 for every $1 a physician makes! That is to say, a primary care physician sends the hospital about 1.5 million dollars per year in ancillary services like chest x-rays, lab work mammograms, etc. So, if I leave practice, the hospital may lose a lot of money. They figure, if I don’t buy Dr. Browne’s practice, maybe Avista WILL. That’s also the reason hospitals love “campuses” with doctors. The hospital may create a lot of incentives for the docs to join them on site, like discounted “finish” for their suites, etc. Once the docs are on site, it’s quite a lot of trouble for them to leave, and almost impossible for them to send their patients anywhere else. The hospital does not even have to own them, then. It no longer needs to respond to them. They’re stuck. In summary, hospitals own and subsidize physician practices for the revenue flow. Doctors are cash cows for hospitals. How much money the doctor makes in the office setting is much less important to the hospital than it is for a truly independent physician. So, if I start going into the red, I will go work for the hospital. I promise to let you know first. HOSPITALS AREN'T THE ONLY ONES WHO WANT TO EXPLOIT PHYSICIAN'S SERVICES TO INCREASE PROFITS: Recently, pharmacies noticed that if they delayed prescriptions for at least 20 minutes, it increased their profits. Why? Because bored people go shopping and spend money while they are waiting for their medications. Even wonder why the convenience of drive up prescriptions never caught on? It eats into miscellaneous sales at the pharmacy. Now, companies like CVS and Walgreen's are putting "docs in the boxes", walk in clinics manned by nurse practioners and physicians assistants. Patients sign in and carry a pager while they go shopping in the store. These companies hope that "captive shoppers" will increase their sales. WHAT CAN PATIENTS DO? Well, just understanding a bit of what’s going on would be a start. Knowing what your insurance company covers and how. Lobbying your human resources people to cover your basic services, like physicals and routine screening tests without having them applied to a huge deductible would be reasonable. That way, you won’t be tempted to ignore routine preventative health screening. Maybe asking for a system where your employer pays your deductible if you need to use it (Whole Foods does this, and has for sometime). Understanding that insurance companies and their stock holders are the REAL winners here – not us as doctors, not you as patients, and really, not the hospitals. Just look at health insurance company earnings reports, and weep, and know that United Healthcare’s Chair and CEO, William McGuire, M.D., made 1.6 billion dollars last year. |