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  1. Thanks for your response. Here is what happened in my case which seemed odd to me. Although it doesn’t have anything to do with Medicare, per se.
    I received a bill from Sharp Hospital that said the balance was the amount owed by the patient which is the balance not paid by my insurance. The amount was $15,000.
    Well, my plan has a $5,000 per year maximum out of pocket expense. So I called Sharp Hospital and they referred me to Sharp Community Medical Group. Sharp Community tried to refer me back to Sharp but I said that would not help. Instead, Sharp Community said they would have to verify with Pacificare. In the meantime, I filed a grievance with Pacificare.
    A few weeks later, I received a letter from Pacificare that said that they have nothing to do with the billing since Sharp Community Medical Group is the one that paid Sharp Hospital.
    Since than, Pacificare cancelled my policy and I received a Certificate of prior subscription drug coverage in case I need it for my Medicare Plan D Medicare plan. I am not eligable for Medicare until the year 2037.
    My understanding was that if I did have Medicare, that Medicare would have paid 80/20 which would come out to $15,000.

  2. SBD– the article does not have all the info necessary to give you a perfect answer.
    But my sense is that the medical group must have an exclusive contract with Pacificare (now UHC) which calls there medicare advantage plan ‘secure horizons’. In this case, UHC only contracted with the one medical group, and the group must not have any contracts with other medicare advantage plans.
    I do not think the negotiating was necessarily for a higher rate, given the low medicare rate ceiling, but rather to have exclusive access to a larger pool of patients.
    The medical group and the hospital are likely separate entities, even if they are intimately related, so the medical group would not have to pay for hospital services.
    Another possibility is that the medical group has a capitated contract for the 22,000 lives, meaning it is given a set amount per enrollee per month– this would cover only the physician services provided.

  3. Thanks Eric, that does help a lot. Not sure what ‘smell-o-vision’ is though?
    So I get it now, but still have the question regarding the Medical Group. Here is a quote from an article last February in the San Diego Union Tribune.
    “Dozens of doctors are protesting a Sharp physician network’s demand that their senior patients enroll in one health plan, Secure Horizons, if they want to use Sharp’s services in San Diego County. Some 22,000 patients could be caught in the cross hairs, the doctors said.”
    “These 45 doctors have until Tuesday to accept or reject Sharp’s ultimatum. If the physicians decide to work exclusively with Sharp, their non-Secure Horizons patients must switch to Secure Horizons or find primary-care doctors who accept their current health plan by June 1.”
    “The conflict pits four groups of independent primary-care doctors against Sharp Community Medical Group, a network of 250 physicians affiliated with Sharp HealthCare. Sharp has an exclusive contract with Pacificare’s Secure Horizons, its health plan for seniors.”
    So if I understand you correctly, the Sharp Community Medical Group being a group of doctors would negotiate with the HMO in order to get paid for their services.
    Sharp Healthcare owns around 5 hospitals in San Diego. That would mean that they would get paid from the HMO upto a maximum of the Medicare fee for service rate.
    Now that the 11% increase has begun, Sharp Community Medical Group issued the above ultimatum in order to gain those 22,000 patients and negotiate a higher rate per patient with the HMO correct?
    In addition, since they will be exclusively using Sharp HealthCare’s Network of hospitals, the hospitals will benefit by the increase in patients correct?
    This is different than how a regular relationship between an HMO, Hospital, and Medical Group right?
    My understanding is that the HMO pays the Medical Group a per month fee for all of the patient’s care. If the patient needed to have surgery in a hospital, then the Medical Group would have to pay the Hospital.
    Why would it be different in the case of a Medicare HMO patient?

  4. SBD– (i am glad this is not ‘smell-o-vision’…)
    I will try to briefly answer your questions, but will change the order and add a little additonal information:
    A. Medicare advantage is the reincarnation of medicare+choice of the 1990s. This is an alternative to the standard fee-for-service standard medicare program (which has certain hospital components and a 80/20 plan for outpatient services). Thus it fits well with everyone’s idea of a medicare part A,B, C(hoice),D(rug).
    B. In its initial version, medicare+choice providers (private insurers) were given an adjusted capitated amount based upon the yearly average costs of medicare in the area. For example, if the ‘average’ medicare enrollee in Florida uses $1000/ month in services (about the truth, btw), the government paid the insurer $12,000/ year per enrollee. From that, the insurer paid all internal expenses and paid the providers (doctors, hospitals, imaging centers, etc.).
    C. Problem– insurers discovered that they could not make any money, and most dropped out.
    D. In the new medicare advantage program, in 2004, a 10.6% premium above the expected costs were added to the payments to insurers. Thus, if it cost $12,000/ year to provide care, the insurer would get about $13,300/ year per enrollee.
    E. It is actually infinitely more complicated than this at the margins… but that is the essence of it.
    Now on to your questions:
    1.How does the insurer get paid? see above.
    2. RRR medical group does not quite fit , so I am not sure how to answer.
    3. How does USA hospital get paid? The hospitals negotiate with the insurer for rates just as if it were negotiating for any other contract. Except the ‘maximum’ is basically the fee-for-service medicare rate for a DRG, etc. If the patient shows up at an ‘out of network’ hospital, then the hospital does not get ‘billed charges’, but rather the full medicare fee-for-service rate.
    4. How does the doctor get paid? Same as for the hospital. Insurers regularly try to get the doctor to accept anywhere from 95%-80% of the fee for service rate.
    5. Out of pocket (at the time of service, my issue with this whole concept is for another time) costs are part of the contract the patient signs with the medicare adavantage insurer. CMS (the fed government) must approve the details of all potential medicare advantage programs.
    So, the key point is that insurers get paid about an 11% bonus to have a plan above expected costs while simultaneously squeezing reimbursement rates lower than standard fee-for-service out of providers.
    The medicare part D plan, as it was written, will only exacerbate this problem, as the government has similar ‘bonus’ payments in place for insurers providing a drug program… just look at what the rate increases have been for 2007 if a medicare patient stays with a drug program only, rather than signing up for a medicare advantage plan with it.
    hope this helps.

  5. Posted by: pgbMD
    “I hear so many physicians complaining of the Medicare cuts but no one cutting and running yet. What gives?”
    I think there are a lot of reasons, many docs just see it as another part of their business, those patients using Medicare also have relatives not on Medicare so a doc really doesn’t want to risk loosing all parts of the family generated business. And believe it or not I think some docs actually believe they have an unselfish community duty to look after all aspects of healthcare for different patients. There I said it, and it made me feel good.

  6. I hear so many physicians complaining of the Medicare cuts but no one cutting and running yet. What gives?

  7. I have tried to understand the Medicare reimbursment process and am more confused now than I was before I made the attempt. Can someone briefly explain how it all works?
    Here’s an example situation.
    Patient is a member of a HMO Medicare Advantage Plan and is a member of the RRR Medical Group. Patient has surgery at the USA Hospital Center. Medicare Advantage HMO says total cost was $77,000.
    How does USA Hospital get paid?
    How does RRR Medical Group get paid?
    How does the the HMO get paid?
    How does the surgeon get paid?
    How much would the patient be expected to pay?

  8. “Of course those who see individual responsibility”
    Not all health problems are related to personal responsibility; genetic factors, environmental exposure (diminished government regulation), culture, your parents financial situation, the other guy not showing personal responsibility, just bad luck, all of these and more will put you in the financial meat grinder called U.S. healthcare.
    “diminished government regulation” Sure that works great as we’ve seen, Big Pharma and FDA, ecoli and USDA, mine disasters and dead miners, cigarette smoking and lung disease, WR Grace and asbestos, fast food and fat people, marketing junk food to children, skyrocketing diabetes.
    “and genuine market forces (not those driven by excessive protection of certain groups)”
    Insurance industry, agri business, docs and malpractice, big pharma. Please describe your vision for a “genuine market force” for healthcare, unless it’s where docs genuinely control the market and force the rest of us to foot the bill.

  9. Matthew- I amm surprised that only Peter is weighing in on this… this should be fodder for the anti-AMA, doctors are the problem folks.
    Apparently, in Peter’s view, no matter what the ‘private sector’ is the problem. Of course those who see individual responsibility, diminished government regulation, and genuine market forces (not those driven by excessive protection of certain groups) will be to blame.

  10. “Not that I am against quality, rather I think the government is incapable of identifying and monitoring it.”
    Who is capable of identifying and monitoring it? I would think the AMA would play a LEADING role here?? Instead they look to shield themselves from lawsuits for poor quality.
    I agree that this disconnective tinkering with separate parts of healthcare serves no one properly. If this does bring “collapse”, then maybe we can get on with the job of designing a properly functioning system. But I’ll bet any collapse will bring the “free marketeers” out to rail against gov. run systems, when in fact it is the refusal of the private sector to reform itself that brought us here, while they also lobby government against any meaningful system cost controls and quality improvement.

  11. Sorry to goad you Eric. We both know that this type of cut is not the way to rationally control costs and improve quality. We may disagree on what the right answer is, but the AMA’s head in the sand/threat mode is, I dont think, productive.

  12. Using my name is a good way to get me to put up a quick post. Other roles have limited my participation lately…
    The latest addition to the medicare rules and regs registers only…. 1500 pages. I think we are now upward of 120,000 pages of often contradictory rules…
    Though cutting docs payments by 6-20% for nearly half of docs (while raising hospital payments 3% under part A) is getting us closer to the collapse of the system, the proposals on the table to link payments to a doc paid for/ doc inputed and then potentially doc punished P4P system is worse. Not that I am against quality, rather I think the government is incapable of identifying and monitoring it. The 3% payment for quality for hospitals would likely be the model for physician services.
    Guarantee– it will cost more than 3% for doctors to comply with any new reporting requirements, meaning payments would at best stay level.
    So, surprisingly, though it is bad for me personally in the short run and very bad for medicare recipients… perhaps this will cause the mass exodus from the system that the AMA has warning (incorrectly) about for several years.

  13. I bet docs are meeting with their accountants and office managers right now to see how they can game the system to keep the billings the same. Maybe Eric’s idea of writing contracts with his medicare patients will be covered under the new rules.
    “But in an effort to give more personalized care, the government will pay physicians more to counsel patients on ways to improve their health.” So why are docs complaining – can’t make money off healthy people?