Trying to recoup the real costs of care


Category : Medical Rants

The payment for an office visit often does reflect the true costs of providing care. Insurers and patients consider the 20 minute office visit as a contained unit. You are paying a fair price for 20 minutes of the physician’s time. From the physician’s viewpoint, the office visit is traditionally the only piece of patient care that leads to income. We are not reimbursed for reviewing the chart, checking the labs, calling back the patient when necessary, answering the emails or discussing the patient’s diagnosis with a consultant. Try any analogous activities with a lawyer or accountant – you will be charged. Robin Cook’s op-ed (featured on these pages last week) addresses this inequity. I am starting to favor the concept of paying for time spent – with a full understanding of the possible abuse that such a system could engender.

Some physicians have chosen to adopt the “pizza principle”. Under the pizza principle, you can buy a plain pizza for the standard cost, but if you want any toppings you pay more. Doctor’s note? It might cost you

Ching, ching! Doctors — particularly primary care doctors — are increasingly billing for services that patients have long expected to get gratis: prescription refills, photocopies of medical records, phone consultations, family medical leave forms, medical disability forms, waivers of insurance premiums, waivers for handicapped plates.

Automotive forms. And life insurance premium forms.

Travel insurance forms.

And now, e-mail responses.

The practice, almost unheard of five years ago, has disgruntled some patients and is starting to come to the attention of consumer advocates, who denounce it as one more sign of a broken-down medical system.

“It shows that healthcare is like any other enterprise: It is revenue-driven,” says Arthur Levin, director of the New York City-based Center for Medical Consumers. “The system is moving further and further away from being a public good to one in which the physicians are mere shopkeepers. How many times can they ring up the register?”

Even many physicians admit being uneasy about what they themselves refer to as “nickel-and-diming.” And those who have so far bucked the trend suggest it is only a matter of time before they join the crowd.

“We think about it a lot,” says Dr. Yul Ejnes, an internist in group practice in Cranston, R.I. So far, he says, “We’ve chosen not to do it, for the same reason we don’t do a lot of things: We don’t want to offend our patients.”

But many doctors see the practice as a necessary evil in times of increased business costs, flat incomes and declining reimbursement from insurance companies — and the lack of a way to bill those companies for services that don’t involve face-to-face patient visits.

“In the old days, we just did it, it was part of doing business and doctors would absorb the cost,” says Dr. Richard Lander, a New Jersey pediatrician who currently charges $5 for school, camp or athletic participation forms. “But in today’s climate with so much paperwork involved, doctors feel they can no longer give services for free.”

Such “administrative surcharges” have been officially endorsed by several large medical organizations, including the American Medical Assn.

On the business side of medicine (yes medicine is a business), our only product is our time. In pure economic terms, spending time on your email, telephone call, insurance forms, has a real cost. Economists have a term –
opportunity cost.

Opportunity cost is a term used in economics to mean the cost of something in terms of an opportunity forgone (and the benefits that could be received from that opportunity), or the most valuable forgone alternative.

For us the opportunity cost is the additional patient that we might see if we had enough time. If we can only bill for a patient seen, then the opportunity cost has real monetary value.

Is this nickel and diming? I really do not think so. Given that our only real commodity is time, we should receive fair value for that time.

I believe this is one of the attractions of retainer medicine. The physician is prepaid for all the time necessary to care appropriately for the patient. Since time is our business, we must have ways to appropriately compensate that time.

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Comments (7)

“Try any analogous activities with a lawyer or accountant – you will be charged.”

I won’t speak for accountants, but with lawyers if you pay for twenty minutes of activity on a contract which provides for hourly billing, that covers the services provided in those twenty minutes.

Please forgive me if I misinterpret, but you seem to be describing an initial charge by the hour and an additional charge for each service provided during that time already paid for. Cook’s editorial describes something very different – being expected to charge the same price for more complex performances of “the same” task – “A lawyer in general practice is not expected to accept the same low fee he gets for writing a simple will when he writes one that involves complicated business circumstances. Nor does an accountant charge the same amount for a difficult tax return as for an easy one.”

I think, though, that medicine already reflects similar billing. Take two patients diagnosed with congestive heart failure. One may be a candidate for medication or a minimally invasive procedure. Another may be a candidate for a heart transplant. Nobody expects that doctors would charge the same amount for a heart transplant as would be charged for a prescription.

When it comes to more narrow distinctions – with two patients who fall into roughly the same category for diagnosis, treatment and prognosis – even if one patient takes longer to treat, and even if insurance companies nonetheless provide the same compensation for the treatment of each patient – you’re describing a circumstance similar to the fixed fee billing many lawyers and accountants offer for particular types of work. It’s pretty easy to find a lawyer who will provide a fixed rate for evictions, bankruptcies, simple divorces, and similar tasks – even though some cases take longer than others, and some will consume time grossly disproportionate to the agreed compensation, the amount they bill is based on the average and they still make money. Many accountants will prepare tax returns, within specified parameters, for a fixed fee – with a similar expectation of making a profit on the average return even if they lose money on various specific returns.

The complaint here seems to be, having contracted with the insurance company to provide a particular service at a particular price, no matter how long it takes, the doctor is seeking to increase profits by declaring that services traditionally included in that package are now separate and come at an additional fee.

I think time based billing is the way to go. Even for specialists and groups that have a lot of diagnostic equipment in the office, they should bill based on time and price that time at a level sufficient to provide an adequate return on both their time and their equipment.

In the case of surgeons, if a particular type of operation usually takes 45 minutes but may take as little as 30 or as much as an hour and a half (can’t tell in advance), price it based on the expected average time so you make an adequate income overall.

In the case of lawyers, my family lawyer is a sole practitioner. There have been several times that I called with a question, we spoke for 5 or 10 minutes, and he refused to bill me even after I suggested that he do so. He says he works about 10 hours for every six he bills. Hopefully, his hourly rate times his billable hours provides an income that reflects his value.

Time based billing lends itself especially well to PCP’s. If they don’t like the hassle of dealing with insurers and find their reimbursement rates (offered on a take it or leave it basis) inadequate, they should shift to an all cash business model and make ad hoc arrangements for patients who can’t afford their full fee.

Commenter #1 is making the false assumption that Robin Cook has a clue as to what he’s talking about.

Aaron: Cook is WRONG about doctors presently getting paid a flat fee regardless of time spent of complexity of the problem. We have not “contracted with the insurance company to provide a particular service at a particular price, no matter how long it takes” and we are not now “seeking to increase profits by declaring that services traditionally included in that package are now separate and come at an additional fee”. Therefore your comments, and unfortunately those of any other non-physicians who fail to realize that despite Cook’s “MD” he is no doctor, are meaningless. (Check out my post on this topic.)

Just to expand a bit on #1 Dinosaur, here is how most doctor’s billing works:

1) The doctor’s staff checks in the patient, collects all the relevant paperwork, and generally do some preliminary work (e.g., vital signs, ask what is bothering the patient, etc.), The doctor then reviews the chart, checks any lab and diagnostic reports that have come in since the last dictation, interviews the patient (taking a history), examines the patient (the physical), makes a diagnosis (including doing some quick literature research if the problem is unusual), develops a plan of further diagnostic workup and care, provides some of said care (e.g., lab tests, injections, prescriptions, etc.), sends the patient for any additional needed tests/care, and completes any required paperwork. The required paperwork generally includes a sheet with a bunch of codes for services. Most doctors select these codes, which drive the billing, after they do the services, although some preselect the codes and provide the services to correspond to those codes. The office staff then takes the codes and files the required paperwork with the insurance company.

2) The big three codes are for New Patient Evaluation, Existing Patient Visit, and Consultation. (A consultation is essentially a new patient evaluation that is initiated by another doctor–it requires more chart review and hopefully better reporting back to the referring physician, but is more focused on a particular issue.) Each of these codes is subdivided into 5 or 6 levels of complexity. The level of complexity is theoretically driven by how complicated the patient/problem(s) are, and each has a ‘suggested’ amount of the doctor’s time that is expected, but in practice the coding is driven by the amount of documentation (paperwork) the doc does. Marcus Welby could make a one in a billion diagnosis, call his buddy at the U and get the patient scheduled the same day, and generally be a hero by solving every problem, but if he doesn’t write down exactly how he did it he is likely to get zilch from the insurance company. Conversely, some clueless physician who does a third-year medical student workup documenting every mole on twenty second cousins, as well as a 10 minute rectal exam (this, BTW, is not a slam against 3rd years–they need to do everything because they haven’t yet learned what to skip; but a practicing doc with a license…) can be paid full freight as long as he issues a 10 page computer generated report.

3) Aside from the 16 or so evaluation codes, there are hundreds of additional diagnostic and procedural codes. Each of these codes is linked to a fee that is, in theory, appropriate for the amount of time and expertise the service provides. In practice, though, they typically pay a great deal more per unit of time than the evaluation codes. Note that all of the services listed in #1 are covered by the evaluation code except for some lab tests, injections, etc. which may be coded separately.

4) Doctors do contract with insurance companies to be paid a fixed amount per code, but this is usually a ‘take it or get nothing’ negotiation. Where a lawyer or accountant can charge a bit more if their office is nice, they have good staff, are in a nice part of town, etc., doctors generally can’t make such pricing adjustments.

5) Because the evaluation codes are the most common, insurance companies often are the most hardball with those costs. An expensive operation that only pops up a couple times a year is much less a problem to the bean counters than a $1 rise in an evaluation code that is submitted a million times a year.

6) Thus, most practices cannot survive on evaluation codes alone, because the cost of service exceeds the reimbursement. Why? Well, start with the fact that the typical doctors office has about 7 staff for every doc. Maybe one assists the doc, one handles other patient contact (phone, etc.), and the rest do admin and paperwork, mostly billing. (Why? Because every insurance company has a different form, different information requirements, different prices, etc.–they use paperwork as a barrier to delay or deny payment.) So you start with $120+/hour nut in personnel costs. Add in office, supplies, etc. and you are easily looking at $160+/hour before the doc gets a dime for his/her time. And what to evaluation codes pay? It varies by location and insurance company, but it is common for them to pay $100 – $150 per hour of ‘suggested’ doctor’s time.

7) So the doc has few choices: Go out of business, do more procedures, or charge for everything else that takes his, or his staff’s, time. It’s true that in the ‘good ole days’, a lot of these services were unofficially rolled up into the evaluation codes and general overhead, but the insurance companies and Medicare have changed the rules of the game. In an effort to reduce their payments, they don’t include these ‘optional’ services in their time calculations, so they are not paying for them in the initial fee as Aaron presumes.

Looks to me like cash is the only real way to remain sane in this environment. Why not just make payment due at the time of service (like the dentists do) and give the patients a receipt that they can then submit to their insurance company?

SteveSC: Are you a doc? Because I am, and several of your points are way off base, at least for primary care.

#1: Kind of mechanistically stated, though you left out the biggest part: explaining all of those things to the patient. Maybe your doc leaves that part to his staff, but I do it myself. And when more than 50% of the face-to-face visit time is spent on counseling and/or education, the visit CAN be coded on the basis of time spent.

#2: You are flat out wrong about being able to get paid for any given level of service just on the strength of documentation. I don’t know if you’re familiar with the 3 components of documentation, but they are the history, the physical, and “medical decision making”, which incorporates things like how much data (lab/x-ray/studies/etc) needs to be reviewed, how many other problems the patient has, the number of possible diagnoses/treatments, and the riskiness of all of the above. Medical decision making trumps all; even if you do a “full workup” on a healthy person with a simple problem, it is not legit to code a higher level visit, even if you have an EMR printout to “support” it. Furthermore, insurance companies RARELY actually look at the documentation. I just have to have it available in case they do (if they choose to audit me.)

#3: Evaluation and Management (E/M) codes are the main ones used by office-based primary care docs. All those other “hundreds of codes” are used routinely by other specialists for surgeries and procedures and “global fees” for other problems. For example, an orthopedist can charge $300 for “closed management of a metatarsal fracture” consisting of 3 office visits for someone with a broken foot who only needs a wooden shoe and crutches (both of which are charged separately.)

#4: The problem is that we have de facto government price controls on physician fees in this country. ie, Medicare, to which most other carriers peg their fees.

#5 is essentially correct.

#6: Where the blazes do you come up with 7 support staff per doc? I have 2. The latest figures for primary care are in the range of 2.5-3 Full Time Equivalents (FTE) per physician. What do you mean “every insurance company has a different form”; not true. The HCFA-1500 (I suppose it’s now called the CMS-1500) is pretty standardly accepted. And just about all insurances require the same information. Different fee schedules have nothing to do with billing, only with posting payments when they come in. And in terms of an “hourly rate of $100-150”, if the fee is $60 for a level 3/15 minute visit, my “hourly rate” is closer to $240. (compare to $300/hr mid-range for a lawyer in his prime) There are plenty of primary care offices who may not be doing as well as they’d like, but are certainly ekeing out a living just on E/M reimbursements.

#7: The rules of the game haven’t changed so much as actual reimbursement hasn’t kept up with costs. The bottom line is that the concept of ” health insurance” has led people in this country to believe that the cost of medical care shouldn’t come out of their pockets. (I blogged about this today.)

With all due respect, your take on “most doctors’ billing” is seriously flawed.

Dinosaur–I totally agree that I left out the discussion with the patient. Hmm, I wonder what kind of slip that was? 🙂

On #2 my experience is that the insurance companies will underpay in any way they can, and that documentation is the major determinant. Sure, if you do a ‘full workup’ on a simple problem they won’t pay for a complex evaluation. But likewise, they won’t pay for a complex service if you don’t document all the required components of the history, physical and decision-making. I am glad you don’t get audited, you must have a ‘balanced’ practice. On the other hand, if you see a preponderance of complex cases, causing your evaluation code distribution to be skewed to the high side, there is a lot more risk.

Regarding support staff, I admit 7 was an anecdotal number. So I looked up a few references. The Medical Group Management Assoc. reported in 1999 a range of 4.86 to 6.2 FTEs of support staff per FTE physician, depending on how much capitation income the office received . A more recent report found a range from 4.91 to 6.02 support FTEs per physician varying by size of group . Another source indicated a benchmark between 4.0 to 6.0 for primary care physicians. So mea culpa, 7 is high. But I think 2.5 to 3 is low, and most practices I have been associated with are in the 6 and up range.

Regarding the $60 for a 15 minute visit, great for you! If that is the typical amount you get paid (versus what you bill) no wonder people shrug their shoulders when doctors complain. We get $30-$35, and even less for Medicaid. If I was forced to survive on E/M codes alone, I wouldn’t.

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