Who Should Pay Doctors?

flying cadeuciiHonest Pay for Honest Work.

Times have changed. And it’s time they change again.

In the past, medical care was more episodic than it is now. People went to see the doctor when they felt unwell. Diabetes affected mostly older patients, who didn’t live long enough with the disease to develop complications.

There were no blockbuster drugs for high cholesterol, Hepatitis C, fibromyalgia or chronic heartburn; we didn’t manage nearly as many patients on multiple medications as we do now.

In those times, a payment scale based on the length and complexity of the visit made sense, and there wasn’t much doctor-patient interaction between visits.

Today, we manage more chronic conditions, use more medications, do more laboratory monitoring, more patient education, and more administrative work on behalf of our patients than before.

Payment scales based only on what we do in the face-to-face visit have become hopelessly antiquated and stand in the way of the new demands of society – physicians providing longitudinal care for chronic conditions in patient-centered medical homes.

The business reality of primary care is that a doctor in a group practice needs to bring in $400/hour to keep the doors open and the support staff available to do the clinical and administrative work. Insurance billing and waiting to be paid is costly and requires cash on hand.

Electronic medical records are expensive to install and maintain.

Insurance payments for face-to-face visits are arbitrarily “discounted”, yet expectations are increasing for providers to render additional services after or between visits. In many cases the extra work is generated by the insurance company.

  • A new prescription requires a “prior authorization”, but many insurers are secretive about what drugs must be tried before the desired drug will be approved (only a handful of insurers post their preferred drug lists on Epocrates, the central repository physicians can access on their smartphones);
  • A “pharmacy benefit manager” contacts a doctor to suggest that his diabetic patient should be on an ACE inhibitor or a statin, when the patient is actually already taking them. He pays cash at Wal-Mart because that is less costly than the insurance copayment at the local drugstore, so these drugs don’t show up in the insurance company claims data;
  • An insurance company writes to alert a doctor that a patient on expensive medications may be noncompliant with his regimen because he has only used 60 days’ worth of medicine in the last 90 days. That’s because the kind doctor slipped the patient enough samples to save him a copayment once or twice;
  • A prior authorization unit demands a “peer-to-peer” telephone call before they will authorize an imaging study. All the information required may be in the medical record, but they still want a call. The practicing physician is kept on hold for ten minutes ($70 opportunity cost) only to read out loud from the record to the insurance doctor. Other times the rural doctor has to tell a big city cardiologist that he ordered a nuclear stress test on a female patient instead of a stress echo because the nearest facility that does stress echoes is 200 miles south on icy and snow-covered roads in the middle of January.

The economics of the medical practice require a certain productivity level just for survival, so the administrative duties are often given inadequate time, or no time at all, resulting in shorter patient visits just to capture a few moments to do the administrative work.

There is still considerable unreimbursed provider overtime, leading to physician stress, disillusionment and burnout.

We should be paid for this work, as well as for reviewing results and maintaining our patients’ medical records over time and in between visits – all noble ambitions of the medical home.

We should also, of course, be paid for face-to-face visits with our patients.

But who should pay?

The problem with having private insurance companies, Medicare or Medicaid pay is that patients have little reason to consider value for money spent. It’s natural to be less concerned about how we spend someone else’s money, particularly if that money used to be ours, before the tax man or insurance company took it away from us!

I know I am only a country doctor, but I have seen many different systems of health care since I started medical school in 1974, so in my next installment I will outline A Country Doctor’s Proposal for Health Insurance Reform.

Hans Duvefelt, MD is a Swedish-born family physician in a small town in rural Maine. He blogs regularly at A Country Doctor Writes where this piece originally appeared.

29 replies »

  1. Up to some extent I agree with you. Physicians should be paid for their overtime and hard work but the point is that everybody can not pay that much money. Something should be done for the poor patients too .

  2. Thanks. It was mostly idle curiosity on my part. I’m reminded of the concierge practice trend here. It’s not for everybody, of course, but the stories of Dr. Lambert and Dr. Kernisan seem to fall along that line.

    Here’s a fun link to a doctor blog I have been following a couple of years. After walking in the fire a long time and basically dropping out, Dr. Lumi St. Claire seems finally to have found what it takes to make her happy and fulfilled.

  3. “So does that mean his reference to “capitation” is perhaps a rate negotiated with the provincial government?”

    It would have to be, but I doubt it was a single doc negotiation. Not sure if it applies to all areas of the province. Keith would have to provide details.

  4. So does that mean his reference to “capitation” is perhaps a rate negotiated with the provincial government? If so it sounds like how Medicare deals with MA (though the details of that formula are shrouded in complexity resembling near secrecy — another dimension of US healthcare costs having more to do with politics than actual economics).

    You’re right about gaming systems. They’ve been around a long time. The world’s oldest profession isn’t called that for nothing.

  5. “There’s a point behind this question but I can’t figure out what it is.”

    “So the question then remains, how much of that amount is professional compensation and what portion must be used for other, presumably business and professional, expenses?”

    John, you’re right “it’s not an academic exercise”. In the real world, outside of health care compensation, competitors keep most honest and humble by the comparison of “the price”, which includes all the “expenses” and “fat” and “greed” and “disposable” for life style.

    The Canadian comment is based on a negotiated rate with the government – the single payer. Extra billing was banned in Canada a while back. Not sure about the “double” income.

    I do know that in any system attempts at game it are the norm – even in Canada. My wife nursed at a hospital in Ontario for over 20 years and found back then some docs would pop into patient rooms and say “good morning” then bill for a consultation.

  6. There’s a point behind this question but I can’t figure out what it is. I’m not trying to tell anybody how to spend their income, but there is a difference between compensation and income.

    The distinction between living expenses and disposable income is artificial. One man’s essential expense is another man’s luxury — from utility bills and basic transportation to membership dues in a private club and generous charitable donations. I don’t have a problem with annual cruises, nannies for the kids or second homes for vacations. The earned benefits of success don’t bother me.

    But “compensation” doesn’t always have a price tag. A working environment, for instance, can range from a well-run environment with many resources and flexible schedules to a thread-bare, cramped place with manipulative administrative tactics, incompetent technicians and surly support staff. If I learned nothing else prior to retirement it was that earnings is partly for what we do and partly for what we put up with.

    I appreciate that doctors put up with a lot of shit, some of which comes with the territory and some of which deserves extra pay. But taking the patient’s point of view, I don’t mind paying for my own problems but I don’t like the idea of sharing costs of someone else’s.

    This morning’s comment by the Canadian doctor is a case in point. (And he claims to have doubled his income!)

  7. Peter, they did “do something”, but the patient does not get the option of knowing what the final bill is before committing to the “something”. There is no shopping option to keep providers honest and profits within reason.

    As well when we all seem to complain about health care costs it’s the prices that affect those costs.

  8. John B, what part of anyones compensation is for living expenses and what part disposable?

  9. I would suggest that all the Family Practice physicians look north to Ontario Canada. I started billing fee for service in 2002 and to keep up with expenses most appointment times were 10 min or less. Thankfully on 2007 I switched to a capitation model of care that still has a small fee for service percentage built into to it for shadow billings. My income more than doubled, my daily patient load reduced to half because now I could discuss things with patients by phone or it could be taken care of by my nurse. EMR was included in the model which reduced overhead significantly. I would never go back to a fee for service model. What we have in Ontario is as close to ideal as it will ever get.

    Take a look at http://www.oma.org and search “family health organizations”


  10. I’m not arguing for or against any particular physician or bill. And thanks to insurance anything done for me is more than reasonably priced (unless you want to discuss dental work — which I and many regard as optional). My point is what Barry Carol points out below, that the amounts that appear on bills have more to do with negotiating what the market will bear than either costs or rates of compensation. That’s all.

  11. Providers, especially hospitals, set ludicrously high and completely arbitrary prices for their services that bear no relation to the cost of providing them. There are two reasons for this. First, they view it as a starting point for negotiations with insurers though most of the larger insurers now negotiate payment based on a percentage of or above Medicare rather than a discount from the chargemaster (list price). The second reason is that by law, providers must bill everyone the same including Medicare, Medicaid and private insurers. It’s the unfortunate uninsured patient that get hits with the absurd bills with some hospitals using aggressive and obnoxious collection tactics to come after patients to squeeze whatever blood they can out of the stone.

    With regard to what the payment represents – professional compensation vs. practice expenses, malpractice insurance and the like, Medicare’s Resource Based Relative Value Scale (RBRVS) payment system deals with this. Princeton’s Uwe Reinhardt describes its in one of his essays. Each relative value unit breaks down as follows: 52% covers the physician’s skill, knowledge and technical effort; 44% is intended to cover practice expenses and the other 4% is for malpractice insurance costs.

    The differential between what specialists and primary care doctors are paid is a separate issue. Our pyment system favors procedures over E&M codes and the RUC’s dominance by specialists perpetuates that bias. While there is certainly room for adjustment in favor of PCP’s, I think specialists do deserve some premium to provide a return on their investment of time, money and lost income (opportunity cost) for the additional years of training to become Board Certified in their chosen specialty.

  12. @Peter1,

    What is wrong with amount paid by ins. and amount you owe on the EOB being paid to the doctor? Did they not do something for you?

  13. Thanks. That’s clear enough. So the question then remains, how much of that amount is professional compensation and what portion must be used for other, presumably business and professional, expenses? It’s not an academic exercise.

    I’m in favor of high professional compensation levels, commensurate with comparable specialty rates, experience, competence, etc. But my guess is that the amounts being discussed are not “pay” in the way most people understand the word.

    Are there specialists among those termed “hospitalists”?
    And if so, are they compensated by the hour or by some other metric?
    Is there an “on call” rate for days, nights or other times when that specialty many not be indicated? And if so, how might that be affected if the specialist on call keeps busy in other ways — say, routine work in the ED, or counseling with patients or family members, or mentoring subordinates?
    “Pay” is too generic a word to be tossed around loosely.

  14. “Beginning with the patient’s bill, the number which appears there as a specialist’s fee is certainly not what the hospital or the insurance company remits to that specialist.”

    Maybe not but the, “amount paid by insurance and amount you owe” on the EOB does remit to the specialist.

  15. “As far as the other comments go….I don’t think we should be dividing physicians on the basis of primary vs. specialists.”

    Madelaine, maybe you should consult the RUC to see why they “divide” specialists and primary care.

  16. Something tells me the issue of “pay” might be clouded by confusing accounting issues. I’m neither an accountant nor a medical pro, but I suspect the word pay may have different meanings to different parties.

    Beginning with the patient’s bill, the number which appears there as a specialist’s fee is certainly not what the hospital or the insurance company remits to that specialist. I suspect that both of those agents retain part of that (can we call it “retail”) price. And depending on whether the specialist is or is not part of the hospital paid staff, the final numbers may skew differently as well. Then depending on the specialist’s personal accounting system, revenue is forthcoming from the specialist’s services needs to be enough to cover accounting expenses (?), office staff (?), liability or other insurance (?), professional work expenses (?) and who knows what else.

    My point is that when we talk about what doctors are “paid” it means different things to different people depending on who’s talking. In my world, the word “pay” means how much of what I get can be called earned taxable income. No matter how I file, whatever appears on my W-2 forms is what I mean by “pay.” There may be other income sources and plenty of adjustments, but any comparison of PCP with specialist *pay* should be clearly defined before this conversation can have real meaning.

    One of my complaints about the system is that too few professionals seem to know the difference between corporate profits and professional compensation. The is especially true of individual and small practices where the only revenue stream is from one or a small number of doctors and/or technicians on staff, but that revenue stream gets tapped for all the overhead (rent, utilities, janitorial, disposables, uniforms, landscaping or common area mainenance, insurance and any number of other costs of running the operation) before actual pay (which should be called “professional compensation”) is determined.

    “Fee for Service” then is still not a very accurate indicator of “pay.” And anyone who imagines that what passes for an “explanation of benefits” clears up that question must be living on a cloud. Those of us who spent decades in the private sector doing grunt work in less sophisticated service industries may have a simplistic view of accounting. But figuring out if you have enough to pay bills from one, two or several income sources breaks it down to an easier to understand level.

  17. I thoroughly enjoyed the blog post and am looking forward to the next.

    As far as the other comments go….I don’t think we should be dividing physicians on the basis of primary vs. specialists. The “cognitive” specialists, such as rheumatologists spend just as much, if not more, time with a multitude of patients on a daily basis. I don’t even think we should divide docs according to procedure vs. non- procedure. (Even though I DON’T do procedures)

    As a profession we need to unite for patient access and care, including maintaining the doctor- patient relationship….Nit picking among ourselves will not help our patients….this type of infighting only strengthens those who are trying to vilify our profession by describing us a money-hungry non caring providers, only out for ourselves.

    As for the payment model…yes, we need money to keep our doors open…I don’t think we should all be employees of large conglomerates. But don’t kid yourself, we are back to the wealthy person paying $250 and the poorest paying only $10…it’s just done through taxes and subsidies….Personally I think we had a closer relationship with our patients when they could pay us out of their own pockets in any way they could…living where I do, I sometimes would get paid in fish or tomatoes!

    I, obviously, don’t have the answer…but a united physician front is much better for our patients than a divided one.

  18. Hans, what you advocate above is achievable with single-pay, not this system. BCBS’s commercials say the U.S. spends 50% more than other industrialized countries on paperwork and administration. Canada (among others) regulates drug prices and physician reimbursement and limits access to expensive or unnecessary care based on need.

  19. I do think primary care is undervalued. But there is more than physician pay to consider here. Yes, some specialties’ pay may need to be modified some, but look at what we spend on billing and defensive medicine. Also, look at drug prices and our use of imaging. Does every patient need an MRI before seeing an orthopedist?

  20. Hans, do you favor a better balance between what specialists get paid and how GPs are valued? That would mean reducing specialist pay to reward primary better as this system already is costing us a king’s ransom.

  21. Thanks for all the comments. We need to change things. I am right now proofreading my next installment in the series about how doctors should get paid. Stay tuned.

  22. What about the people who can’t pay because they’re poor, unemployed or have already incurred hefty bills not fully covered by insurance? Are you suggesting we go back to the sliding scale of the old days where the wealthy banker is charged $250 for a simple visit while the unemployed working person pays $10 or nothing at all?

    Kaiser is very successful in CA paying their doctors on a salaried basis and NOT using relative value units billed to determine bonus compensation. They also seem to be able to handle millions of e-mailed questions from patients and can fill prescriptions without the patient having to come into the office. On the other hand, Kaiser hasn’t been all that successful in fully replicating its model outside of CA.

    We need to move away from the fee for service payment model in favor of bundled or episodic payments for surgical procedures and capitation where appropriate such as for the management of chronic disease like diabetes and asthma. That would mean, of course, that doctors would have to absorb some financial risk which could be mitigated in a large multi-specialty group practice or an integrated delivery system like Kaiser.

  23. What a novel idea, the patient herself actually pays the doctor. The doctor has way less hassles and can spend the time needed with the patient.
    The patient can get quality time with the doc, and maybe develop an actual relationship. The pesky insurance companies and other intrusive third parties are left in the cold. The doctor can now actually work FOR the patient.

  24. We need to find a way to place value that creates financial support for all of these non face to face interactions. With the significant shift on how health care is getting paid, we need to work even smarter and faster than just last year. We have some major problems to fix and it is costing medical organizations a lot of money for something that holds no “financial” reimbursement.

    I almost stopped with a snarky “How’s that lack of a public option working out for ya?” but I’m resisting.

    As long as health care is bought and sold as a commodity instead of a right, these problems will only multiply. The only parts of American health care not in danger of implosion are those that have been removed from the “marketplace” — VA, original Medicare, Medicaid, community health centers, active duty armed forces medical corps. The quality levels are widely variable across these truly non-profit delivery systems, but all of them are indispensable.

    A handful of private systems are reported to be doing a pretty good job of paying and treating their people well enough to keep operating. I’m no expert but I keep seeing the same names marching across the screen — Mayo, Geisinger, Cleveland, Kaiser, Stanford, others. Somebody’s getting it right. I hear medical tourism is finally getting a few US-based destinations. (Steve Jobs traveled to Tennessee for a transplant. Others?) Let’s keep our fingers crossed for the great new ACO/medical home experiment.

  25. It is not just private or solo gp’s. It is big group practice gp’s, specialists and surgeons even in the big city. Not only GP’s but specialists and surgeons as well! They are so stressed by being paid based on productivity especially during a time when fee for service is dissolving. There is much more demand for telephone interaction, forms, insurer demands, documentation, coding staff required, quality control logging and maintenance. Over 38% of bills submitted to pay or are not paid first time around, they either decide to request further documentation or they don’t pay on certain codes or just plain error on the payers part. Doctors need to meet certain productivity thresholds to have minimal support staff of approx 600 Work RVUs. That is all face to face time. What about the 60 10 minute telephone conversations left to have as well.Older more experienced doctors don’t get reprieve to help mentor less experienced doctors instead they need to see patients every 10 minutes AND mentor in between, after hours and such. They are burnt out and tired when they should be at the peak of their careers and the intellectual talent they hold should have value to all patients, payors and the group they work for. We need to find a way to place value that creates financial support for all of these non face to face interactions. With the significant shift on how health care is getting paid, we need to work even smarter and faster than just last year. We have some major problems to fix and it is costing medical organizations a lot of money for something that holds no “financial” reimbursement.

  26. Unfortunately, this is not just a solo practitioner problem. It is a problem in primary care practices in general.

  27. “There is still considerable unreimbursed provider overtime, leading to physician stress, disillusionment and burnout.”

    All physicians? In all practice environments? Or just maybe the single family GP in a country setting?

  28. The old joke is that a camel is a horse designed by a committee. The design of the American health care delivery system looks like whatever keeps all those vintage cars running in Cuba. It’s remarkable to function at all.

    This excellent description has less to do with health care than protecting the revenue streams of insurance and drug companies, and in the case of Medicare and Medicaid compliance with a welter of rules and regulations. It begs the question cui bono?