Physicians

PHYSICIANS: The sky is falling

Capitol2Mark McClellan says that Medicare payments to physicians are going down 5%. This of course is leading to political pressure, with the President of the AMA writing op-eds showing that the sky is indeed falling on the heads of seniors. And don’t let any of those pesky researchers at HSC tell you that cuts in Medicare reimbursement actually don’t lead to doctors dropping out of Medicare.

Oh well, perhaps the doctors will make their money back by investing in more specialty hospitals–after all, that moratorium is over. Let the self-referrals begin.

CODA: The AMA Pres uses this sentence "In 2006, Medicare is reimbursing physicians about the same as it was in 2001 — that’s in real terms, not adjusted for inflation." Someone needs to take him to a very basic economics class. "Real" means that it is adjusted for inflation. He means "nominal". And of course someone else needs to explain the P x V = I phenomenon.

 

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  1. What do you think of the practice of Physicians using two or more tax id’s to increase the compensation for their services. They file claims with the 2nd Tax Id which in not under contract with certain insurances to intentionally get the “out of netork” price which can result in a higher compensation. This is becoming very popular in my area(Nashville TN)

  2. Barry,
    I have read your comments on two blogs and I have come to the conclusion that your opinions are similar to mine. I am assisting with the writing of a bill in my state that will require “price transparency”. I would like your opinion on the topic.
    All of the debate above is well and good, but it is only speculation until we get true price transparency. I feel for the doctors who are trapped within the constraints of hospital systems and insurance billing contracts, but as Peter has pointed out, there are plenty of doctors abusing the system, and it takes just a few to give a black eye to them all. I’m a little disappointed in the doctors’ response to Peter and no I don’t agree with him (especially on universal care), but he points out abuses (by doctors, hospitals, & etc) that are currently taking place in our system. I have my own personal complaints about hospitals, doctors, insurance carriers, and etc. These are legitimate concerns that medical providers should themselves be concerned with. If medical providers don’t listen to the consumers, they will be in deep trouble. I am currently looking for a new physician, because as I asked questions about my treatment plan, my “doctor” became obviously irritated that I was asking questions and he was on a “schedule”.
    I agree with the doctor who wants to separate from insurance and medicare and establish a fee for service practice, as long as his fees are posted for the public and he does spend the time with his patients.
    I am NOT for a medicare-for-all concept. Too long to explain and you already know the reasons.
    Health care has become a money making industry that is controlled by the hospital systems and the insurance carrier negotiations. There are no true market factors that assist in regulating and setting prices. The prices for services MUST come to the forefront to control the “inflation” that takes place.

  3. hi
    where do i go to find quantitative data on the subject of US physician reimbursement and compensation both in aggregate and by speciality?
    thanks

  4. Interesting discussion. In my opinion, much of the underlying tension in the thread is due to the inexorable industrialization of health care, in which professionals are treated as labor. In the industrial model, replicable, evidence-based algothrims replace “professional judgment” based on “experience.” The net result, eventually, is that many docs will move up the industrial food change to “manage” the data or else to focus on extremely profitable and highly technical interventions; direct relationships with patients will be taken over by those lower on the food chain. One might envision a future in which a majority of docs won’t see any patients at all — PFs (patient facilitators) will do that — but will become masters of shifting screens of data and resulting decision trees that will be sent through the info pipes for manipulation and subsequent application by lower level techs (those humans who still can’t be replaced by technology). Maybe in the future we will all be bloggers and occasionally check in with our bots/info agents to see if we’re still “healthy.” But maybe not. Depending on the day, I could argue the other side.

  5. Good luck trying to get Peter’s profession out of him. Until he fesses up I will assume the worst. Probably a lawyer or maybe a retired Canadian tax collecter.

  6. Peter, you mentioned you proudly earn a higher-than-average income. Maybe we should compare. What do you do, and what do you make for doing it?
    As a family physician, I have earned an average of $145,000 the last four years. Interestingly, I averaged $160,000 5-8 years ago. For this money, I work around 75 hours a week, including going in to the hospital an average of 2 nights per week (after 10pm). For this money I studied through 4 years of college, 4 years of medical school, and 3 years of residency training. I was lucky to come away with only $120,000 in loans, and am now down to about $20,000 left.
    On three different occasions the last two years, I have written letters to my patients explaining why I would be changing my practice to an all-cash-up-front, VIP-type practice. Each time I threw away the letter because I saw too many names in the mail merge listing that I knew would be forced to find a new physician, dependent as they are on their employer’s health benefits.
    I am not considering this move because I want to make more money (though even a 1%/year increase would be nice). Instead, I want to decrease my overhead and make the same for seeing fewer patients, so that I can actually spend an adequate amount of time with each patient and improve the quality of the care I provide.

  7. Peter, I suspect that the pricing issue could be largely resolved, or at least mitigated, if (1) we had complete transparency with respect to what Medicare and private insurers actually pay for services, tests, and procedures and (2) we removed the prohibition against price discrimination in billing. Then, Medicare and other third party payers could be billed at their agreed upon contract rates while self-payers could be billed at anything from a reasonable list price for those clearly able to pay to discounted or even free care for those who can demonstrate financial need or hardship. Over time, the gap between Medicare rates and full list price should shrink dramatically.
    As for doctors operating completely outside the scope of Medicare and private insurance, some primary care physicians might be able to make this work while specialists and surgeons probably couldn’t and hospitals certainly couldn’t.

  8. Well Barry I guess “if” the list price is the one that the provider establishes to cover costs + reasonable profit. But I suspect that, as with all list prices, the number is set artficially high to accommodate the marketing side of the business. The furniture business is notorious for setting unrealistic high list prices that it knows it won’t sell at, but for which 70% discounts look great to the buyer. I wonder when this health system progressed from direct pay by consumer to insurer pay what those initial numbers looked like? Was the consumer then paying an inflated price which allowed the insurer to negotiate a lower one? If the system back then was a truly competitive based free market system then there should not have been much room for a lower price. If you look at the doc that I posted about earlier, who does not work through insurers, his charges are vastly lower than what he would have to charge working through dozens of insurance companies. By your argumant he should be charging list price.

  9. Peter, I can’t answer your question definitively, but maybe one of the providers can. My guess is, particularly with respect to hospitals, the insurer is telling the provider that you will get access to x thousands of lives that have their insurance with us. In exchange, we want a reasonable discount off your list price for that access which should provide you with a good base of business. We will not, however, guarantee you any specific amount of volume. The provider also gets the assurance that he/she/it will, in fact, be paid at the agreed rate whereas the self-pay patient may pay at the time of service, may pay sometime after receiving a bill, or may never pay. On balance, some premium for self-pay or discount for an insured patient (depending on your perspective) is probably reasonable.
    Of course, the discussion would be moot if everyone had at least basic (HMO type) coverage, but that is a separate debate that will likely be ongoing for some time.

  10. Posted by: Barry Carol | Aug 13, 2006 5:52:27 AM
    “Peter, I can see this one both ways. As you say, not having to deal with billing the insurer and waiting for payment suggests that the cash customer is less costly to serve and should justify a lower rate, assuming he or she pays at the time of service. On the other hand, someone who has purchased insurance and paid a hefty premium is quite likely to use less in healthcare services than the premium paid. Though the insured person also bought the peace of mind that comes from knowing that out-of-pocket exposure is limited to a reasonable sum, there is some justification for charging the uninsured person more.”
    Barry, (If you’re still reading this Topic) I can’t connect your reasoning about justification for charging the uninsured more simply by the fact they don’t have insurance. From a marketing stand point I know why insurers want the uninsured to pay more, and I suspect that under contract they enforce this on the providers, but from a provider’s side it makes no legitimate sense other than, we can make more money that way. Now if providers used those extra charges to create a pool for unisureds that can’t pay and thereby offset costs that the uninsured are not paying into a pool to cover now, I might buy into that argument. But there is no such pool and each provider just pockets the money for themselves. For instance a doc might use the extra money to pool for those “charity” cases, which would help all uninsureds, but I don’t think from what I’ve been reading here there is such a thing as a charity case for docs. Arguing that the uninsured need to pay higher (most often, way higher) to offset the ones that can’t pay, especially 1000’s in hospital care, only increases the chances they won’t be able to pay.

  11. Scott,
    Thanks for the follow-up information, especially about Tenet (a company I hold in especially low regard) and its charges vs CMS. These arbitrary and ludicrously high list prices combined with their expectation that the uninsured should actually be prepared to pay them is an extreme example of arrogance. I wonder how their CEO, CFO and other executives would feel if they were uninsured and on the receiving end of such bills. This is another reason why I think CMS rates for all DRG codes should be easily accessible on its website to use as a benchmark for patients to use to assess the reasonableness of their own bills.

  12. Barry,
    At our office the average collection from an insured patient (this includes all types of visits and payers) is about $92. The vast majority (about 85%) of visits are for established patients and we only charge $75 for this type of visit. Clearly, my office policies are very “arrogant” and offensive to some readers of this blog. A cash urgent care visit across the street from us is about $150.
    Comparably, Tenet charges about 700% of CMS for their hospital services, so while 150% of CMS may seem steep, it is about a 75% discount from what the uninsured are currently getting.
    Have a good one!

  13. Just to follow up on my prior post, the negotiation between the large retail drug chains like Walgreen and CVS as well as big box retailers like Wal-Mart and Costco vs insurers and state Medicaid systems is a battle between parties with comparable economic power. Walgreen, for example, can and does sometimes walk away from a large block of business if it feels it cannot earn an adequate return under the proposed contract terms. Usually, the parties eventually get together and work out a mutually satisfactory arrangement.
    This balance in economic power accounts for why I think a 15% spread between insured rates and cash payers is reasonable for drug retailers whereas 150% of CMS rates is probably reasonable for PCP’s. With respect to some high cost cardiac surgical procedures that CMS reimburses very well for, no premium over CMS rates at all may be appropriate, no matter who is paying.

  14. “It seems that a person paying cash should get a better price, as the doc does not have the wait and hassle of insurance billing.”
    Peter, I can see this one both ways. As you say, not having to deal with billing the insurer and waiting for payment suggests that the cash customer is less costly to serve and should justify a lower rate, assuming he or she pays at the time of service. On the other hand, someone who has purchased insurance and paid a hefty premium is quite likely to use less in healthcare services than the premium paid. Though the insured person also bought the peace of mind that comes from knowing that out-of-pocket exposure is limited to a reasonable sum, there is some justification for charging the uninsured person more.
    Furthermore, the CMS price is basically a dictated price and not the result of a negotiation between parties with equal or at least comparable economic power. Insurer prices, while not dictated, are not generally the result of what we would view as a fair negotiation either.
    With prescription drugs, for example, I have pointed out in the past that the pharmacy generally collects, on average, 15% more from uninusred (cash) customers than the sum of insurance payments plus co-pays from the insured. I think the 15% spread strikes a reasonable balance, at least for the prescription drug category. For PCP charges, 150% of CMS rates is probably reasonable.
    The drug sector is also well ahead of hospitals and doctors in providng patients with before the fact pricing transparency.

  15. Posted by: Scott Robertson | Aug 12, 2006 9:50:09 PM
    “Copying and pasting some article that states that Medicaid is being defrauded an unknown amount and then citing examples of fruadulent behavior of a pharmacist, a hospital, and 20 dentists still does not show me that there is widespead profiteering among physicians.”
    Did you look at my second post of examples? How many would count as “wide spread”?
    “I value my time and you clearly have a poor understanding of the healthcare system in the U.S.”
    Sorry Scott, I’m just a patient/user living in the U.S., who has seen and used the U.S. system from the patient side, and who doesn’t like what he sees. I guess we should leave the comments to the docs and insurers, who by the way haven’t offered any way to fix the system, that most people seem to view as broke and headed for worse times.
    “So reading or reponding to your posts is no longer meaningful.”
    Typical arrogant and “meaningless” doc attitude.”Let them eat cake!”
    “I don’t think that the uninsured should pay over 150% of the CMS-allowed fees. They shouldn’t get a rate as low as those paying premiums-but they shouldn’t be extorted either. Some private plays will pay as much as 130%, but that is rare. At our office we charge a flat fee for the uninsured: $100 for new patients and $75 for established ones.”
    Do you think docs should be charged more (but not extorted of course) for the same services in the community due to their greater ability to pay? Should a person with car damage, not covered by insurance, pay more for the same work than one using their insurance? It seems that a person paying cash should get a better price, as the doc does not have the wait and hassle of insurance billing.Just some more meaningless comments.

  16. Dr. Robertson,
    I thought your answers to my questions very very complete, sensible and fair. I might quibble a bit on the 150% of CMS as a maximum for hospital charges, especially for some of the expensive surgical procedures that CMS pays very well for, but for PCP doctor charges, it’s a very fair approach, I think.
    I also don’t understand why insurers won’t tell doctors what they will be paid for the various services they perform under the contracts that they sign. I can’t think of any other industry that has such a crazy approach to doing business. Hopefully, as insurers slowly move toward greater pricing transparency for employers and insureds, this will change for the better.

  17. Barry Carol asks: “Dr. Robertson – I have several questions for you.
    “1. What do you think is a reasonable rate to charge either for a routine office visit or per hour of your time?”
    For most office-based primary care physicians, a revenue (before expenses)of $300/hr is necessary.
    “2. Do you think an uninusred patient, even if relatively prosperous, should pay more than 20% above what you routinely accept as full payment from insurers? If so, why?”
    I don’t think that the uninsured should pay over 150% of the CMS-allowed fees. They shouldn’t get a rate as low as those paying premiums-but they shouldn’t be extorted either. Some private plays will pay as much as 130%, but that is rare. At our office we charge a flat fee for the uninsured: $100 for new patients and $75 for established ones.
    “3. How do you feel about the general issue of pricing transparency for doctor and hospital charges as well as developing quality metrics that might be useful to patients trying to make rational choices among medical providers?”
    What hospitals charge patients is meaningless, since they never collect that amount. As I said before, I would support a 150% of CMS as a maximum. Of course it should be transparent, but I can’t even get my contracted fee schedules from some insurers – I don’t fully understand why that make it so difficult.
    “4. What is your view of the emerging competitive threat from walk-in clinics starting to open up in retail stores?”
    There is no threat as far as I’m concerned. The key is providing good customer service at your office and having scheduling policies that allow for urgent visits. I highly doubt that anyone would prefer to see the Wal-Mart “nurse in a box” (these are not staffed by physicians) over their own physician(as long as he/she is a good clinician).
    Peter-
    Copying and pasting some article that states that Medicaid is being defrauded an unknown amount and then citing examples of fruadulent behavior of a pharmacist, a hospital, and 20 dentists still does not show me that there is widespead profiteering among physicians.
    I value my time and you clearly have a poor understanding of the healthcare system in the U.S., so reading or reponding to your posts is no longer meaningful. I read this blog for thoughtful content.
    I wish you well,
    -Scott

  18. Do you physicians struggling to make ends meet as you run your little businesses with your horrid reimbursement think that physicians employed at Mayo, Cleveland Clinic, Kaiser, or any number of other medium to large multi-specialty clinics struggle the same way you do?

  19. “I will keep beating the drum that all physicians need to get out of Medicare and drop all insurance contracts and go back to fee for service. Could then cut the office staff by 50% and spend more time with patients.
    On another note, I see the younger doctors getting more angry and as the old baby boomer docs turn over the tourch to the young ones watch out! No more free lunch!”
    pgbMD, you have exactly the right idea, and we are angry, as well as nervous as to what the future holds. Afterall, spending time with patients was the reason most of us chose the endeavor in the first place, imagine that!

  20. Posted by: Scott Robertson | Aug 10, 2006 5:31:59 PM
    “Your argument would be more persuasive if you had a few specific examples of healthcare providers (physicians) exploiting and profiteering and not anecdotes from other industries.”
    Scott, here’s a couple or three,
    “In 2003, GAO added Medicaid to its list of high-risk programs, owing to the program’s size, growth, diversity, and fiscal management weaknesses.2 We noted that insufficient federal and state oversight put the Medicaid program at significant risk for improper payments. Improper payments may be due to mistakes, abuse, or fraud.3 Because, by their nature, fraud and abuse are not apparent until detected, the amount of Medicaid funds lost through health care providers’ inappropriate billings cannot be precisely quantified. A nationwide rate of improper payments for Medicaid has not been estimated, but even a rate as low as 3 percent would have resulted in a loss of about $5 billion in federal funds in fiscal year 2004. To put this hypothetical figure in perspective, it is more than the amount that the federal government spent in fiscal year 2004 on the State Children’s Health Insurance Program (SCHIP).4 Further, Medicaid can be subject to waste, or extravagant and unnecessary expenditures. Because Medicaid represents a large and growing share of state budgets—more than 20 percent of state expenditures—funds lost to improper payments and waste can impact states’ abilities to serve beneficiaries in need.
    Fraud, waste, and abuse drain vital program dollars in ways that hurt both taxpayers and beneficiaries. Seeking and receiving reimbursement for services not provided squanders public funds that could have been used for beneficiaries’ health care. For example, in 2005, a North Carolina pharmacist was sentenced to 33 months in prison and ordered to pay more than $2 million in restitution for defrauding the Medicaid program by submitting claims for long-term care patients’ prescriptions that had not been refilled, delivered, or even requested by their caregivers. Similarly, a New York hospital agreed to pay $76.5 million to resolve allegations that it overbilled the Medicaid program for services provided in its clinics. In addition, when providers receive payment for unnecessary services, it can have a negative impact on health care quality. For example, consider the case in 2004 against 20 dentists in California who were charged with conspiracy to defraud the state’s Medicaid program of $4.5 million. The dentists are alleged to have billed Medicaid for unnecessary or inappropriate services that placed patients at risk of pain, infection, loss of teeth, and bodily injury—including reusing dental instruments without sterilizing them, performing dental surgeries without adequate anesthesia, and developing treatment plans that called for unnecessary root canals and fillings.”

  21. Dr. Robertson – I have several questions for you.
    1. What do you think is a reasonable rate to charge either for a routine office visit or per hour of your time?
    2. Do you think an uninusred patient, even if relatively prosperous, should pay more than 20% above what you routinely accept as full payment from insurers? If so, why?
    3. How do you feel about the general issue of pricing transparency for doctor and hospital charges as well as developing quality metrics that might be useful to patients trying to make rational choices among medical providers?
    4. What is your view of the emerging competitive threat from walk-in clinics starting to open up in retail stores?
    While I certainly understand the hassle and aggravation that comes from trying to deal with multiple insurers, all of whom have different rules and reimbursement rates, we in the patient community who pay our bills and try to be compliant with doctor’s advice and recommendations could use some help and cooperation from providers in the areas of pricing transparency and quality assessment.

  22. I will keep beating the drum that all physicians need to get out of Medicare and drop all insurance contracts and go back to fee for service. Could then cut the office staff by 50% and spend more time with patients.
    On another note, I see the younger doctors getting more angry and as the old baby boomer docs turn over the tourch to the young ones watch out! No more free lunch!

  23. Scott,
    I’m going to disagree with you on your feelings on whether Peter is a bright guy or not, because he’s not. I’m not sure what his background is, but it sounds like he knows nothing about health care, and just likes to go off about it.
    However, I do believe that as a physician you know what you are talking about. I checked out your website and saw you have an MBA as well. I can relate, I will have my D.O. and MBA in a year, and have seen already the uphill battle I am facing. From my educational experiences so far, I beleive that most people not actually dealing with health care provision and reimbursement do not realize that doctors are really in a minority. We do not have much lobbying power, unlike the insurance companies and pharmaceutical manufacturers (sorry Peter, the AMA and AOA can only do so much without unlimited resources). The reason? They have billions of dollars in profits, and the majority of doctors have school loans to pay off before they can start making much profit.
    It’s amazing to me that people are unwilling to spend much money for their health care, but they’ll do anything they please for entertainment or pleasure, and therefore physicians are expected to accept less payment for their services. How many other industries allow the payment to the service providers to be negotiable? I can’t think of many, except health care. Drug companies have made it so their prices are non-negotiable, and think about the gas prices right now. We are at the mercy of the compaines that supply it. Yet, Peter thinks that we as health care providers should just be happy that our patients spend money on tobacco, alcohol, etc, and yet receive Medicaid and are non-compliant with what we tell them. I know not everyone receives Medicaid, but a large portion of patients do, and doctors are usually expected to treat them. I would never say that all doctors are perfect and innocent, either, but I know that we are not the only problem.
    Now to attack an issue, I think that reducing reimursements is in NO way the option to improve health care and reduce costs. What needs to happen is the reduction of waste. Medicaid and disability qualifications need to be more stringent, and there needs to be more crackdown on fraud. Also, things like HSAs are good because many people do not have insurance through an employer. My last suggestion… get rid of ALL the illegal immigrants. I just read an article today about TennCare in Tennessee spending $15 million each year on emergency care for illegals that they just have to eat. That’s ridiculous, and you know that the other 49 states pay eat way more than they should paying for these people’s care. Also, these illegals don’t pay taxes, and if they did, they could better fund their (as well as the rest of America’s) health care.
    —Just a little opinion about health care from another person on the health care side of the issue.

  24. Pete-
    You sound like a bright guy, but …
    Your argument would be more persuasive if you had a few specific examples of healthcare providers (physicians) exploiting and profiteering and not anecdotes from other industries.
    The government has and always will subsidize private business to a certain extent. They are(and should be) in the business of proving infrastructure so that business can operate more efficiently. This raises worker productivity, lowers costs to consumers, and entices competition – all of which are good in a capitalistic society.
    Back to healthcare – if the potential ROE was so great in my area, then Kaiser would come and set up shop with a staff-model HMO practice. But nearly all of the HMO’s have come and gone from SLO County because the business is tough and the patients don’t want to be involved with practices with high physician turnover.
    I promise that if I went back to 1989 (the year I graduated from high school) and calculated the net present value for the time and money that I have spent on my medical education, I would be in far better financial shape in nearly any other career than as a physician. While I now have a good revenue stream ( and a large debt to service), there is no value to be placed in the trust that patients give me over their lives.

  25. Peter – The examples you cite in your excess profits post come under the heading of what I would call the need for “full social costing.” Examples include:
    1. High tobacco taxes to discourage smoking and recover at least some of the money spent on healthcare for smoking related illness.
    2. Energy efficiency rules for cars, appliances, buildings, etc. These all raise the cost of affected products but produce the benefit of lower energy consumption. Indeed, since the early 1970’s, energy consumption per unit of GDP in the U.S. declined by approximately 50%. Higher gas taxes would contribute further to this effort but would raise the price of a necessity (gasoline) that would disproportionately affect low income people.
    3. Regulations to achieve cleaner air that required electric utilities to add polllution control equipment to coal and oil burning power plants. These costs get built into higher electricity prices, but the society gets cleaner air.
    4. Auto safety regulations such as requiring seat belts and air bags increase the cost of cars but save lives and reduce injuries.
    5. Tougher building codes in hurricane prone areas like South Florida raise the cost of homes but reduce damage from hurricanes.
    All of these are worthwhile societal goals that raise the cost of initial purchase for the customer and may or may not reduce profits for the producer. Since all of these rules come out of federal and, sometimes, state regulation, it is important to balance costs vs benefits based on sound science. Opposition to the proposed regulations usually comes from both the corporate and consumer side because they don’t like the higher product costs that are the necessary tradeoff to achieve the other goals.
    My bottom line is that everything we produce, buy and sell in our economy should be priced to reflect the full social cost of producing it, and that pricing should be as clear and transparent as possible. Let the corporate sector figure out how to operate within those parameters and earn a reasonable profit.

  26. Barry, I’ll only answer your Q on examples of excess profits from a general opinion point as I want to move on from this topic, and I won’t get into a pissing match over a number.
    There is no number to define excess profits, or at least there should not be. The incentive to EARN more profit can be a good one, providing you’re doing it from your own inovation and not through friendly legislation, corrupt accounting or a virtual cartel. But I think we all can recognize excess profits when they are brought to our attention. Corporations work very hard at down loading costs to someone elses books, usually taxpayers. Corporations that spend too little on environmental controls usually end up getting the taxpayer to do the eventual clean-up, or having individuals take the financial hit from resulting health affects. When our eating habits are so poor and junk food is marketed to children, resulting in out of control obesity levels and diabetes, and the food industry is not charged something to help pay for those problems then that is reflected in higher sales and profits for them. When the State of Louisiana never had any building codes or zoning restrictions, which brought more sales and profits to the building industry, but which after Katrina, downloaded huge expenses on to the federal taxpayer, I would consider those excess profits. When the cost of a gallon of gas does not account for the need to fight taxpayer funded wars in unstable regions, then I would say that would lead to excess profits. Now you can argue that prices go hand in hand with profits, so the cost of those items, due to any “consequence” tax necessary to achieve pay-as-you-go, would only raise prices and therefore profits. But in a climate of true accounted for costs which affect affordability and number of sales, then I would think that business has then to look to adjusting their profit levels to achieve increased sales, or achieve efficiencies to earn more profit.

  27. Peter – Thanks for taking the time to write such a detailed response to my last comment. I would like to offer a couple of additional thoughts.
    First, with respect to your comment about conservatives being concerned that a government healthcare system will be unable to control costs and create unsustainable expectations, both Medicare and Medicaid have clearly demonstrated an inability to control costs. In Medicaid’s case, this is despite generally abysmal reimbursement rates. Medicare pays very well for some procedures and poorly for others, but I suspect most full service hospitals do at least OK financially on their Medicare business.
    It is also interesting to note that 85% of the hospital beds in the U.S. belong to non-profit entities. Many of these do not have a very good handle on what their costs are, let alone be able to control them. Doctors, for their part, have generally resisted pricing transparency and the development of quality metrics that would be useful to patients in making rational economic choices with or without the help of unbiased infomediaries. With more robust pricing transparency and doctor and hospital quality metrics, it would be much easier for patients to make rational economic choices as to where to go for care.
    While I disagree with you on vouchers, I believe we do need to move away from the employer provided healthcare model toward taxpayer funding. Assuming the source of such funding were a combination of higher payroll, income, and, maybe, a value added tax, high income working people will contribute disproportionately to financing such a system. I am curious to know what you think a reasonable tax burden either as a percentage of gross income and/or top marginal rate would be for high income people. It may amaze you to hear that I happen to think that the current 15% top rate on capital gains and qualified dividends is too low! The 35% top rate on ordinary income is about right, I believe, since most states also impose progressive taxes on income.
    Interestingly, on education, which you cited as the other sector that should be more about access than profit, it hasn’t been very effective in controlling costs either, in part, because of the generous helping of government funding pouring into state universities, community colleges, and financial aid programs. At least, the schools do offer pricing transparency and a wide range of costs for students and their families to choose from.
    Finally, I was wondering how you define the term “excess profits.” Excess relative to what? What is a fair rate of profit — one that just barely covers the company’s weighted average cost of capital?

  28. Well I appreciate all the feedback from docs, I must be hitting a raw nerve. How come this blog gets lots of MD posts when issues on doc incomes come up, but when stories on how ordinary people are unfairly hurt by the “system” no doc pipes in?
    As for what I believe lets just recap:
    Profits – good
    Excessive profits – bad, especially when those profits are not the result of a trully free market with choices, but have been gamed through a powerful trade association working through their high paid lobbyist to get profit protecting legislation from “you scratch my back, I’ll scratch your’s, politicians.
    Vouchers – an enticing stealth plan by rich people to pay even less in tax contributions while being able to keep what they have – and keep the masses in their place.
    Above Average Incomes – Already got mine, but the rich and ultra rich in this country keep getting more and more tax dollars while giving less and less back. As Warren Buffet said, “If this is a class war, my class is winning.”
    Republican Politicians – No, even Democrats are bought and paid for, its just now, when Republicans are in power, they get the lions share of lobby $ efforts. Ever heard of “K” street pay to play. Check out how much valuable time congressmen have to spend stumping for dollars rather than studying, even reading, legislation, which by the way is written by – lobbyists. This two party system is just a tweddle dumb, tweddle dee set up by corporations so that the money distribution system is simple and controllable.
    Import Single Pay System – Well if you listen to the vast majority of people in the U.S., who actually have used this health system and been hurt by it, they too would like a single pay system like Canada. But let’s not import it, lets just create one born and bred here. Yes rich, or at least well off, Canadians do come to the U.S. for care (makes those lines shorter), why Canada has even sent the unrich here, and paid for it when wait lists have been too high for certain treatments. And rich connected Canadians do jump their place in line, a natural human tactic I think anyone would use, but how would you feel about someone who did that in the movie line you’re standing in? It has prompted Canadians to get their polticians to allocate more health dollars. But I think Canadians are doing a tremendous job trying to balance access with costs. The big complaint above government social systems by conservatives is that they do not control costs and create unsustainable expectations by the users. Where is the U.S. system on these two counts? Every time here the gov. trys to control costs, the industry lobbys to keep the cash flowing. But I went to Canada for my Cataracts, people every day go to India or Thailand for care, so how does that reflect on conditions here?
    Now for Docs – I don’t have a problem with ALL docs, just those self serving, woe is me ones who whine about reduced and 9 day delayed reimbursements but offer no solutions to fix the system for the benefit of everyone. Who do not try to understand how much economic pain is out in the general population created by healthcare, and who do not take a birds-eye view of economic conditions overall in their complaints leveled from the country club, or at least the country club mentallity.
    In closing, I think free enterprise is the best and most effective way to give everyone a chance. But on education and healthcare, the building blocks that enable individuals to be in a postion to succeed, where real economic choice is not part of the system, and where the design should reflect (I think) a committment that as a country, we’re all in this TOGETHER, those two systems need to be more about shared access than about profits. Cheers

  29. I love writing about doctors because it makes my comments counter ratchet up.
    Barry, other than the wrong info about Canada (how many times do I have to tell you guys!) you’ve got it about right. Most of us in the real world except that the rich will trade up, but would like to make sure that the poor get something. A long time ago a hospital orderly I worked with said to me “If that ruch guy’s got a Rolls Royce and I’ve got an old banger (Jalopy in Brit Speak) then that’s alright. But it’s not OK if he has a Roller and I’ve only got a push-bike”
    Finally, smart business savvy docs like Scott are going to figure out what their market power really is, and that will probably mean the fracturing of the AMA guild as these guys add more billable services for their upper echelon consumers…

  30. JtMdMba,
    I don’t think Peter has a problem with doctors. I think he has a problem with profits and people who make above average incomes. If you read his posts, insurers are scum, drug companies are greedy ripoff artists, markets don’t work, Republican politicians are bought and paid for by big business lobbyists, doctors should take care of people out of the goodness of their hearts, vouchers are no good and unfair, and rich people shouldn’t be allowed to spend their own money on better or more comprehensive service than is available to the the middle class and poor.
    Of course, he would like us to import the single payer system that they have in his native Canada. Yet, don’t rich Canadians come here for treatment so they don’t have to work their way up the waiting list at home? Don’t the rich and powerful use their money and connections to get in to see the best doctors to treat their conditions?
    If I were currently uninsured and were offered a taxpayer funded voucher that would allow me to buy coverage from Kaiser or its equivalent, I think I would be hugely better off than I was before even if I knew that rich people could access a wider array of services, a wider network of doctors and stay in private hospital rooms when the needed treatment. That’s fine by me.

  31. Peter –
    You obviously have a problem with Doctors. That is not the issue. The issue is continue to provide the quality and quantity of care that the country is going to need over the next few decades and how do we convince the brightest minds of this generation to choose medicine as a career.
    I could have gone into either business or medicine. I chose medicine because I love it. BUT I am now in my mid thirties, work 70+ hours per week, literally have patients lives in my hands each and every day, and am drowning in educational debt. Many of my colleagues are looking at paying back anywhere between $100,000 and $300,000 dollar loans; and FYI, the average primary care doc will struggle to pay back loans of that magnitude. That’s after 10+ years of a schedule that is nothing less than greuling. Have you ever worked 36 hours straight?
    So the sky may not be falling, but providing clinical services is certainly no longer a “growth industry”. So where is the incentive to put this much of ones life into medical training? With a quarter million of debt – the goodness of one’s heart motivation runs pretty thin.

  32. Peter – you’re killing me!
    Sorry – if CMS pushes me, I’m pushing right back. I perform the highest quality professional and customer service on the Central Coast. Patients never transfer to another office because we consistently and compassionately care for their needs – day in and day out. I take my (70 hour per week) job very seriously.
    Unfortunately, there is no such thing as a free lunch. You can’t leave Wal-Mart without paying for your crap and you can’t get free healthcare from me. My patients know this and they value my service.

  33. Posted by: Scott Robertson
    “This procedure would be well within the CMS, CPT, and CA Medical Board guidelines. Some patients may walk, but their options are very limited in our area.”
    That’s it hold the bastards feet to the fire while you take good Hippocratic Oath measures and take advantage of market conditions. Which, if its because you’re in a rural area, you might want to think twice about, since you see those cheap bastards every day.
    “As a side note, if I call in an improper medication, then I am exposed to liability”
    What you haven’t yet managed to get friendly campaign contribution hungry politicians to write laws that shield you from liability to increase your income? You’re letting your side down.
    “which further persuades me to start charging for this service.”
    Hey, I thought law suit protection was going to bring down the cost of care? I guess you just got used to the extra bonus income. Sorry.

  34. I can tell you what just might happen at my office. We may start charging for services that have been “customarily free”. This can include things such as faxes and copies, but it can also include items such as managing new problems over the telephone after hours.
    One example – if I get a weekend phone call from a 68yo patient who believes they have a urinary tract infection, I have to take an adequate problem-focused history and perform some type of medical decision making which may result in me calling in a prescription to a pharmacy. At this point I could easily bill Medicare for a 99212 code (you don’t have to perform a physical examination for this)and they would pay me about $35.
    This procedure would be well within the CMS, CPT, and CA Medical Board guidelines. Some patients may walk, but their options are very limited in our area.
    As a side note, if I call in an improper medication, then I am exposed to liability, which further persuades me to start charging for this service.

  35. I can tell you what just might happen at my office. We may start charging for services that have been “customarily free”. This can include things such as faxes and copies, but it can also include items such as managing new problems over the telephone after hours.
    One example – if I get a weekend phone call from a 68yo patient who believes they have a urinary tract infection, I have to take an adequate problem-focused history and perform some type of medical decision making which may result in me calling in a prescription to a pharmacy. At this point I could easily bill Medicare for a 99212 code (you don’t have to perform a physical examination for this)and they would pay me about $35.
    This procedure would be well within the CMS, CPT, and CA Medical Board guidelines. Some patients may walk, but their options are very limited in our area.
    As a side note, if I call in an improper medication, then I am exposed to liability, which further persuades me to start charging for this service.

  36. “If you don’t like the system – get out of it, start your practice without insurance companies and without medicare.”
    Great advice!!!!

  37. Posted by: Eric Novack
    “Peter- please tell us all how this relates directly to healthcare.”
    Well if peoples income and savings does not relate to increasing affordability/price demands of healthcare – What does? I would ask how have physicians overeall incomes done since 2000 in comparison to other sectors. Whiny assed MD’s have the capacity to, “increase the volume of their work” and let the rest of us pay the tab with double digit compounding price hikes.
    “This phenomenon should be explained also to those whiny Wal-Mart associates. If their incomes are so unsatisfactory, they should simply increase the volume of their work.”
    Maybe they could form a PAC and pay lobbyists to bribe politicians to get favorable legislation to increase their incomes? Seems to be the thing to do in DC. Maybe they could vote themselves raises to the tune of $30K like members of congress – Show me where congress has “increased the volume of their work”, or even at least turned their results (failed war, failed DHS, failed deficit control, failed Katrina cost controls)into justified rewards. Most systems strive to punish incompetence and failure, but not this one.
    Posted by: Tom Leith
    “…and is probably low enough that it no longer looks so attractive as to attract people to go through the rigors of medical training.”
    Great! We can look to less pricy alternatives and to those people who choose medicine for itself rather than the pay. Too many docs anyway, and each one looks for better and better ways to pad income while they whine about the system. If you don’t like the system – get out of it, start your practice without insurance companies and without medicare. It’s a free country isn’t it? Who are you trying to kid saying you’re doing it out of the goodness of your heart.

  38. “The solutions lie more in the introduction of competition- eg. allowing private contracting for Medicare services, rather than in the continued propping up of yet another unsustainable government run system.”
    Private contracting b/w patients and physicians is illegal under the medicare law as it stands. This should be brought up to the SCOTUS to get changed b/c clearly unconstitutional.

  39. pgbMD- for better or worse, the dire predictions of MD groups, physicians themselves have not backed up the bluster of claims of Medicare collapse with an abandonment of Medicare altogether.
    The solutions lie more in the introduction of competition- eg. allowing private contracting for Medicare services, rather than in the continued propping up of yet another unsustainable government run system.
    Facts I do not know- participation rates in Medicaid for the 50 states— but I am quite certain it is much lower than Medicare. If anyone knows if this information is accessible, please let everyone know.

  40. As more specialists drop the bankrupt universal healthcare plan for seniors (Medicare), more and more of those over 65 years of age will begin to discover that they have to pay cash or wait weeks to see their friendly urologist, dermatologist, gastroenterologist, etc. This will then lead to seniors bludgeoning their congressional representatives for cutting physician payments and the spigot while open up again.

  41. And of course someone else needs to explain the P x V = I phenomenon.

    This phenomenon should be explained also to those whiny Wal-Mart associates. If their incomes are so unsatisfactory, they should simply increase the volume of their work. The rate of pay is just fine. Humph!
    Then there are the other Other Key Findings about 2/3 down the page. Pay special attention to the cause-an-effect relatinship implied in the first Other Key Finding. My interpretation is that while the sky is not falling it is probably because it has been prevented through evil lobbying efforts from falling, and is probably low enough that it no longer looks so attractive as to attract people to go through the rigors of medical training. We shall see in 20 years or so whether the government has correctly estimated the supply curve for physician labor.
    t

  42. I think the AMA needs a dose of reality, as usual.
    – Federal Reserve reported that family incomes fell between 2001 and 2004.
    – According to the Fed, average inflation-adjusted family incomes fell 2.3 percent between 2001 and 2004, to $70,700. The median family income (the point which half the families are above) rose only slightly, to $43,200, and the big difference between the median and average reflects how skewed the income distribution is.
    The top 10 percent of households saw their net worth rise by 6.1 percent to an average of $3.11 million while the bottom 25 percent suffered a decline from a net worth in which their assets equaled their liabilities in 2001 to owing $1,400 more than their total assets in 2004.
    – Those in the top 10 percent of the income distribution have been seeing income gains of only about 1 percent a year, or a total of 34 percent between between 1972 and 2001.
    – In that same period, those in the top 1 percent of the income distribution saw a gain of 87 percent, and those in the top .01 percent registered a gain of 497 percent.
    – The 2006 Economic Report of the President (Bush) reveals that the real earning of college graduates actually fell more than 5 percent between 2000 and 2004.
    – 19 percent of American males and 27 percent of females are in poverty.
    My source if want to check and argue.
    http://ehrenreich.blogs.com/barbaras_blog/2006/02/that_sinking_fe.html
    This doesn’t even account for rising debt levels.

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