Physicians

How Doctors Are Trapped

Every lawyer, every accountant, every architect, every engineer — indeed, every professional in every other field — is able to do something doctors cannot do. They can repackage and reprice their services. If demand changes or if they discover a way of meeting their clients’ needs more efficiently, they are free to offer a different bundle of services for a different price. Doctors, by contrast, are trapped.

To see how trapped, let’s look at another profession: the practice of law. Suppose you are accused of a crime and suppose your lawyer is paid the way doctors are paid. That is, suppose some third-party payer bureaucracy pays your lawyer a different fee for each separate task she performs in your defense. Just to make up some numbers that reflect the full degree of arbitrariness we find in medicine, let’s suppose your lawyer is paid $50 per hour for jury selection and $500 per hour for making your final case to the jury.

What would happen? At the end of your trial, your lawyer’s summation would be stirring, compelling, logical and persuasive. In fact, it might well get you off scot free if only it were delivered to the right jury. But you don’t have the right jury. Because of the fee schedule, your lawyer skimped on jury selection way back at the beginning of your trial.

This is why you don’t want to pay a lawyer, or any other professional, by task. You want your lawyer to be able to reallocate her time — in this case, from the summation speech to the voir dire proceeding. If each hour of her time is compensated at the same rate, she will feel free to allocate the last hour spent on your case to its highest valued use rather than to the activity that is paid the highest fee.

In a previous Health Alert, I noted that Medicare has a list of some 7,500 separate tasks it pays physicians to perform. For each task there is a price that varies according to location and other factors. Of the 800,000 practicing physicians in this country, not all are in Medicare and no doctor is going to perform every task on Medicare’s list.

Yet Medicare is potentially setting about 6 billion prices across the country at any one time.

Is there any chance that Medicare can get all those prices right? Not likely.

What happens when Medicare gets them wrong? One result: doctors will face perverse incentives to provide care that is costlier and less appropriate than the care they should be providing. Another result: the skill set of our nation’s doctors will become misallocated, as medical students and practicing doctors respond to the fact that Medicare is overpaying for some skills and underpaying for others.

The problem in medicine is not merely that all the prices are wrong. A lot of very important things doctors can do for patients are not even on the list of tasks that Medicare pays for. Some readers will remember our Health Alert on Dr. Jeffrey Brennan in Camden, New Jersey. He is saving millions of dollars for Medicare and Medicaid by essentially performing social work services to reduce spending on the most costly patients. Because “social work” is not on Medicare’s list of 7,500 tasks, Brennan gets nothing in return for all the money he is saving the taxpayers.

We have also seen that there are other omissions — including telephone and e-mail consultations and teaching patients how to manage their own care.

In addition, Medicare has strict rules about how tasks can be combined. For example, “special needs” patients typically have five or more comorbidities — a fancy way of saying that a lot of things are going wrong at once. These patients are costing Medicare about $60,000 a year and they consume a large share of Medicare’s entire budget. Ideally, when one of these patients sees a doctor, the doctor will deal with all five problems sequentially. That would economize on the patient’s time and ensure that the treatment regime for each malady is integrated and consistent with all the others.

Under Medicare’s payment system, however, a specialist can only bill Medicare the full fee for treating one of the five conditions during a single visit. If she treats the other four, she can only bill half price for those services. It’s even worse for primary care physicians. They cannot bill anything for treating the additional four conditions.

Since doctors don’t like to work for free or see their income cut in half, most have a one-visit-one-morbidity-treatment policy. Patients with five morbidities are asked to schedule additional visits for the remaining four problems with the same doctor or with other doctors. The type of medicine that would be best for the patient and that would probably save the taxpayers money in the long run is the type of medicine that is penalized under Medicare’s payment system.

Take Dr. Richard Young, a Fort Worth family physician who is an adviser for the federal government’s new medical Innovation Center. As explained by Jim Landers in the Dallas Morning News:

[When Young] sees Medicare or Medicaid patients at Tarrant County’s JPS Physicians Group, he can only deal with one ailment at a time. Even if a patient has several chronic diseases — diabetes, congestive heart failure, high blood pressure — the government’s payment rules allow him to only charge for one.

“You could spend the extra time and deal with everything, but you are completely giving away your services to do that,” he said. Patients are told to schedule another appointment or see a specialist.

Young calls the payment rules “ridiculously complicated.”

That’s an understatement.

John C. Goodman, PhD, is president and CEO of the National Center for Policy Analysis. He is also the Kellye Wright Fellow in health care. His Health Policy Blog is considered among the top conservative health care blogs where health care problems are discussed by top health policy experts from all sides of the political spectrum.

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JohnNate OgdenBarry Carolsouthern docVikram C Recent comment authors
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John
Guest

Although I found many of the comments provided very insightful and provocative, in particular, Margalit Gur-Arie hits on the subtext of this entire conversation. Many people are still running on the preconceived notions that all doctors are rich. However, according to recent studies, not all doctors may be doing as well as you think. Be sure to look at this article by the American Action Forum, which discusses the recent financial position of doctors in the U.S

.http://bit.ly/ykxbHN

Vikram C
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Vikram C

I meant above why doctors dont open on Saturdays

Vikram C
Guest
Vikram C

OK back to my question on why doctors open on Saturday. Based on doctor’s response it seems reasonable to conclude that there is no revenue loss by operating on Saturday. Doctors are not competing for business. So the customer- patients have to come based on doctor office convenience. There are’nt too many such business around these days which force customers to shop by as per business convenience. The other factor mentioned is overhead involved. I have seen many foreign born doctors have office open on Saturday. Somehow they are able to make it work. Now who exactly is trapped? I… Read more »

SJ Motew, MD
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SJ Motew, MD

These are all great comments, and really to be appropriate, time-based ‘costing’ has to be hammered out before billing can follow. All of the issues Barry mentioned can be ‘accounted’ for when determining an hourly cost for physician time-malpractice, training, work etc..which actually are part of the basis for work RVUs under the current CPT methodology. Once a true ‘hourly’ rate is defined, it can be applied to surgery time, patient time, on-call time, administrative time etc. It is a lot easier to trace costs and determine appropriate charges. The distinction as to which specialties time is more valuable will… Read more »

Margalit Gur-Arie
Guest

Second everything you said, Dr. Motew.

And just to clarify, this post here is about doctors being trapped, so this is about the so called professional component of charges. The hospital racket is quite a different beast, and by the way, while everybody is obsessing about the “rich doctors”, most of the money is quietly spent elsewhere.

Barry Carol
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Barry Carol

Margalit – While I can appreciate the conceptual appeal of billing for time across as much of the medical spectrum as possible, the legal profession is a less than perfect model. All lawyers, no matter what their specialty, were able to become lawyers after four years of college, three years of law school and passing the Bar exam. By contrast, there is considerable difference in training time to become a PCP vs. a neurosurgeon or an oncologist, etc. Second, there is astronomical variance in the cost of malpractice insurance between PCP’s and surgeons, especially neurosurgeons and OBGYN’s. Third, some physician… Read more »

Nate Ogden
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Nate Ogden

“It is much simpler (and accurate) to validate that the doctor spent half an hour with a patient then it is to ascertain that a 99215 was justified.” And you know this how? Not being present at the office visit how do I know if the doctor spent 10 minutes or 30 minutes with the patient? That is the only criteria I have to evaluate. With CPT there is complexity, medical history, time, several factors which can alert me to potential fraud. How much have you paid in Legal fees in your life? After working with Dozens of attorneys and… Read more »

Barry Carol
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Barry Carol

Margalit – It’s hard to say about the impact on costs. For surgical procedures, though, bundling is clearly the most appropriate way to price as opposed to billing for each CPT-4 code. At the very least, assuming patients and referring doctors also have information about risk adjusted quality and outcomes metrics, it makes comparison shopping easier for procedures that can be scheduled well in advance though not for those that need to be done on an emergency basis. The bigger issue involving surgeries and costs is appropriateness and its impact on healthcare utilization. There are probably lots of unnecessary back… Read more »

Margalit Gur-Arie
Guest

Barry,
I am not convinced that time & materials is not appropriate for procedures. Some of these surgeries are consistently taking less and less time, but we are still paying as if they took forever.
Paying for time is simple. No one is struggling to understand how lawyers are paid.
DRGs did nothing to contain hospital costs, and some argue that the opposite is true. We need to stop making policy based on belief, and start looking at the numbers. There are plenty of of numbers out there.

Nate Ogden
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Nate Ogden

Allow me to share with you why it wont work once you leave paper and go to the real world with the idea; When you pay for an attroney the majority of the time the person paying the bill is the one receiving the service. If my Attorney is running up the clock I do something about it since it is my money. With healthcare a majority of the time it will be a third party paying the bill, who is protecting their insterest and watching the doctor to make sure they work efficently? “No one is struggling to understand… Read more »

Margalit Gur-Arie
Guest

The “who’s paying for it” issue, or non-issue, is separate.
I don’t see how fraud is more likely if you bill for time, as opposed to a bewildering array of CPTs. Contract negotiations should be greatly simplified, and transparency will be built in. Just like attorneys itemize everything, doctors could too, and you can run your fraud algorithms on that one parameter a lot easier.
It is much simpler (and accurate) to validate that the doctor spent half an hour with a patient then it is to ascertain that a 99215 was justified.

SJ Motew, MD
Guest
SJ Motew, MD

FYI surgeons are paid on a bundled basis for most procedures which includes a full history and physical within 24 hours prior to the operation, the operation itself and then (in most cases) 90 days of care afterwards.

Similarly, hospitals are paid in a bundled manner for surgery (based on procedure and DRG), with the exception of added charges due to co-morbidities, complications or ‘new’ episodes of care.

Margalit Gur-Arie
Guest

Yes, but is there any evidence that this bundling scheme is reducing costs in any way?

Barry Carol
Guest
Barry Carol

I’ve written numerous times in support of physician billing based on time spent treating the patient instead of by CPT-4 codes. Even in a multi-specialty group practice, they could post a sign in the waiting room listing the hourly billing rate not only for each doctor but for nurses and techs as well. Even within the same practice, the new doc one or two years out of medical school would likely bill at a lower hourly rate than the senior doc with 20 or 30 years of experience. Similarly, law firms have a lower billing rate for first and second… Read more »

southern doc
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southern doc

Just to clarify, I’d love to open on weekends. It’s be a win for everyone: doctors, patients, payors.

But overhead goes up dramatically with holiday/weekend hours, and without surplus pay, I’d lose money.

I presented all this info to my largest payor, and in the profoundly ignorant, contemptuous manner that they use for dealing with docs and patients, they refused to pay.

southern doc
Guest
southern doc

Hospitals in my area pay weekend nurses for 40 hours of work when they clock in 20. Nursing homes are notoriously dangerous places to be on weekends.

It’s not a mindset thing.

Peter1
Guest
Peter1

“It’s not a mindset thing.”

Let’s see, a short list of vocations where employees know there’s weekend/night/holiday work required; airports, EMT, firefighters, police, power company, any animal care vocation, hotels/resorts, etc.

southern doc
Guest
southern doc

OK, you made your point. I’ll staff my office with animal care techs and hotel maids.

Nate Ogden
Guest
Nate Ogden

all you need is a computer cam, monitor, and skype connection to India, staffing wont cost you more then a couple hundred rupe per weekend day

southern doc
Guest
southern doc

It’s a bear to staff reliably on weekends. As hospitals know, you have to pay more for fewer hours.

I “discussed” this with my largest insurer, and they said they would rather pay a $2000 ER bill than my $35 weekend surcharge.

Peter1
Guest
Peter1

“It’s a bear to staff reliably on weekends.”

Apparently not for nursing or any other hospital staff. Must be a mindset thing.

Vikram C
Guest
Vikram C

Yes they are trapped. Regardless of how good or poor they are, the number of patient visits will not change. That’s unless they stop maintaining office decor.

By the way why do so few doctors have visiting hours on Saturday?

surgpa
Guest
surgpa

If you like things the way they are now, wait until obamacare kicks in. Providers will be forced to accept the government “fees” or risk getting paid NOTHING. Where is the right to charge what you think your labor is worth? It certainly does not exist in the US.

BobbyG
Guest

“Where is the right to charge what you think your labor is worth? It certainly does not exist in the US.”
__

That’s crap. Go concierge.

Peter1
Guest
Peter1

“Doctors, by contrast, are trapped.”

No they’re not. Let them open a practice on a cash basis, sans insurance and government. Bill what you want, how you want.