POLICY: Two Scenarios … By Eric Novack

Here is a quick hit for the day. We have read about Medicare (actually CMS, but it sounds better to give Medicare its own personality) publishing payments for 30 procedures. I encourage you check out cms.gov and try to actually understand the Excel file that you get for your efforts.

Only government could call that ‘disclosure.’

Private insurers are also getting into the mix. We have all heard about Aetna publishing the range of reimbursement
  for contracted physicians. Many other companies are announcing that they will
  follow suit. These news reports always include the comment that physicians and
  hospitals do not want this published. I disagree.

Two scenarios can emerge from this, once all insurers publish reimbursement 
rates (and they are not mutually exclusive).

As an orthopedic surgeon, I will use an orthopedic example. If insurer X reports
  publicly that the range of reimbursement for treating a broken wrist ranges from $500 – $750, I will obviously immediately go and check to see where I am
  on that scale. If I am at the low end, I will definitely not sign a new contract
  with that insurer for less than what my colleagues are getting for the same
  work. I will not be alone.

Scenario two is more intriguing. Once all insurers publish their fee schedules, doctors no longer need to participate in insurance plans. All I need to do is set my rates comparably- and reasonably- and drop all the insurance plans. And I can eliminate much of my billings/collection staff. I can also now account
  for the actual work it takes to do different things—and perhaps accept lower
  payment for some things, while charging more for much more complex work. (The example I use is joint replacement: a re-do [revision] joint replacement also pays about 20% more than a first time [primary] joint replacement, even though it can take 4x the work, with increased liability.)

The disclosure would have the absolute opposite effect on insurers than they intended. Although I suspect the smart folks at Aetna, UnitedHealthcare, Healthnet, and others have considered this already, and it is why they are so reluctant to actually make public this information.

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jdRickMaggie MaharEric NovackBarry Carol Recent comment authors
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Erick- I don’t really get how the second scenario arises, or how it would be beneficial to anyone except, perhaps, providers. Why is it any easier for you to leave your network contracts when prices are transparent than when they aren’t? Granted, you can see what the real ‘reasonable and customary” rates are in your area better. But the ability of insurers to direct people to those in their network is not diminised: there will still be much more cost-sharing for providers who are out of network. So wouldn’t you lose business as much then as you would today? How… Read more »

Eric Novack

Maggie- usual and customary does not reflect quality as you point out. Shouldn’t those who do a better job (or believe that they do) be allowed to charge different (higher or lower) rates for their services?
Which funding scheme do you support for medicare for all? Part A- based on payroll taxes and general funds and with rate changes based upon the medical economic index or Part B- 25% patient premium and 75% general funds and with rate changes based upon the SGR, slated to reduce payments by over 30% over the next 6 years?


Barry, insurers already process millions of claims a year, so they know what each doc’s claims history is probably better than the CEO knows his wife. So when contract negotiation time comes up, I’m pretty sure that the insurer’s offer reflects less the zip code of the doc’s office and more of how many hospital re-admits he or she has, or even how many office visits they can squeeze into a day (insurers call that efficiency). I had the good fortune to log on to Aetna’s members-only Navigator as a guest, and had enough time to compare reimbursement rates for… Read more »

Maggie Mahar
Maggie Mahar

Am I right in assuming that, today, when an insurer says it pays $500 to $750 for a procedure, the range reflects what is usual and customary in the area where your office is located–not an assessment of your skill?
And, if so, isn’t there some rationale for paying more in some areas and less in others, insofar as the doctors overhead (rent, cost of hiring a receptionist, etc.) will be much higher in say, Manhattan, than in Boise?
That said, in some cases, regional variations are too wide, and need to be re-examined . . .

Eric Novack

The goal would be to return insurance to being insurance and not complete coverage. Insurers would have to respond to the market and provide products that the public would actually want. But your first point is exactly the goal! Why shouldn’t new docs who want to get busier be able to charge less than a more experienced doc (even in the same office)? If you believe you are the best surgeon, well then, set your fees and see if people will come to see you. This system of having to negotiate first with insurers (where cheapness can often trump quality,… Read more »

Barry Carol
Barry Carol

Dr Novack, Wouldn’t some difference in payment rates be justfied among similar doctors in the same geography based on experience and risk adjusted outcomes data (if that could also be effectively measured and published)? Also, especially with regard to surgical specialties, I wonder how much of the population could afford to see a surgeon that does not accept insurance and either pay completely out of pocket or, if he or she has insurance, absorb a much higher co-payment for going out of network or be required to pay the full fee despite having insurance and not even have it count… Read more »