By Anthony Luafalealo, on October 16th, 2008
Former nurse and retired attorney S.J. Robinson, author of The Price of Death, has practiced law dealing with medical malpractice and insurance companies over the last 30 years. Her book focuses on issues such as health insurance reform, oversight for prescription drug production, and the growing power of healthcare conglomerates. For more information about Robinson and The Price of Death, visit www.sjrobinson.com. (Interview conducted by R. C. Anderson and Dr. J.C.)
In a capitalist healthcare system focused on profits, what is the most effective reimbursement structure to reward providers for care while also managing costs?
We need a regulated system – a private/public partnership [that…involves payment to the government for healthcare and government-monitored, private health insurance companies administering payment to privately employed doctors and privately run hospitals]. Over the last 20 years, we have been depending on the free enterprise system to bring costs down. Over that time, healthcare costs have risen faster than the rate of inflation. That is because we don’t really have a free enterprise system. The free market is skewed by politics. The large healthcare companies have huge amounts of money to pass along to Congress via lobbyists, who influence Congress to pass laws that benefit big business healthcare.
What we are not cognizant of is the tremendous amount of profit realized by these companies, healthcare insurance, managed care, and pharmaceutical companies. These companies drive up our healthcare costs. We have the most expensive healthcare in the world, spending 17% of our GDP. France, Italy, Germany, Japan, and Taiwan spend roughly 8-9% of their GDP on healthcare, cover everyone, and have extremely happy patients.
We are told that the only alternative to the system that we have is the Canadian style system. That is a false story put out by the beneficiaries of our current system, primarily the insurance companies.
One obvious consequence of bringing down big pharma and device companies is that they will no longer spend the huge R&D on blockbuster drugs if there is no capital reward via reimbursement. Thus one clear consequence of making healthcare more affordable is a slowing of discovery and advancement. How can we incentivize advancement in medicine while controlling costs?
Big pharma spends 10-15% of its profit on research and development and 30-40% on marketing. Professor Karl Lauterbach of Germany said in a PBS interview on Frontline, titled Sick Around the World, “I don’t know of a single economist who would buy into that argument. I think this is a lobbyist argument. A market works best if there are no inefficiencies, and higher-than-necessary prices are inefficiencies. And the drug companies now spend more for marketing the drugs than for innovating the drugs. This clearly is an artifact which comes across with this system of subsidized and too-high prices.”
Do you think that class-action lawsuits by providers against insurance companies are a good solution to balance the inequity of power insurance companies wield in the current healthcare climate? Or does this merely clog the judicial system and become a distraction from what providers should be doing: helping patients?
Class actions and lawsuits in general are very wasteful of resources because the outcome is extremely uncertain and the suits are very costly in time and money. They would take time away from healthcare and possibly put health care workers in an unfavorable light vis-à-vis the public. As I said, the outcome of lawsuits is uncertain, and I think they should be used as a last resort. The better approach in this case is to influence the public and Congress for the development of a new healthcare system: a public/private partnership which eliminates the excessive profits of health insurance companies, big pharma, and managed care.
In your August newsletter, you describe the many and varied problems the U.S. has had with contaminated or improperly supervised drugs coming from China. Would it not solve a lot of the U.S.’s problems as well as poor patient outcomes if we simply stopped accepting drugs from China and instead paid a bit more for drugs that are properly supervised in countries that care to ensure it? What do you think it would take to reduce consumerism from China, especially given that drugs are not the only problems we have had, but also melanin contaminated products and lead contaminated toys?
I don’t think it likely that world trade is going to be turned back, and it may not even be a good idea. We already pay two to three times more for pharmaceuticals than other developed countries, for example Canada. We have been told that we must pay more in order to safeguard our drug supply and promote the development of new drugs.
U.S. drug companies are making record profits but still want to make more. They are having their drugs made in China to increase profits. Because we pay a premium for pharmaceuticals, I believe that we are a target for counterfeit pharmaceuticals, not more protected. Counterfeiters have no compunction about who they kill and want to make the most money. In my book, The Price of Death, I discuss the point of view of the Chinese on counterfeiting. Because this administration has actually reduced funding for the FDA despite the fact that world trade has increased, we are at great risk. At its current rate, the FDA will be able to inspect the 700 plants now open in China in the next 40-50 years. What we should do is require importers to pay a government fee to have their imports inspected. There is no reason that they should be making record profits and putting the consumer at risk as they are.
There was a problem with Baxter International heparin earlier this year, which, according to the FDA, probably came from China. The FDA says that the manufacturer used oversulfated chondroitin sulfate (OCS) instead of chondroitin sulfate (CS). The relative cost of the bogus chemical was only $9 per unit vs. $900 for the correct ingredient. There had also been a reduction in the availability of other materials to make heparin because it comes from pigs, and there was a pig epidemic in China. While it is difficult to prove, one can speculate why the plants would have substituted the new ingredient when stocks of other ingredients fell short and became more expensive. I say that it is difficult to prove partly because the Chinese government had not admitted that the OCS was the cause of the problem even though the FDA has indicated so on its website. The bogus chemical fooled the standard tests [about the protein content of the product], impeding immediate discovery of the problem.
Now Here’s Your Chance to Ask the Questions (and Win One of Three Copies of The Price of Death, Too!)
Do you have a question that we didn’t ask? Here’s your chance to pick S.J. Robinson’s brain. Submit your questions for her in the comments section, and she’ll be available for a week to answer them. Also, by submitting your question, you will be automatically entered into a drawing next week in which three winners will receive a free copy of her book. (Sorry, you must be a U.S. or Canada resident to participate in the drawing.) Please see our Book Giveaways information page for complete details and ask away!
By J.C., on October 15th, 2008
I previously wrote about the EOB and how insurance companies try their many tricks to decrease reimbursement to physicians. Most physicians do not fight back. Some do. Medical Economics has highlighted the plight of one physician who has been fighting back. Their story is about a Chicago ENT surgeon who brought a lawsuit against an insurance company for bundling and downcoding claims. Apparently, the insurance company settled with him for $140,000.
As I mentioned in a previous post, bundling is when insurance companies downcode or combine multiple codes into one in order to reimburse the provider less. In this physician’s case, the insurance company was bundling endoscopies with office visits and was reimbursing for the least costly services only. Additionally, the insurer downcoded several codes based on software it uses and tried to say that the lowered reimbursement was a “negotiated write-off” as though the physician’s practice had agreed to it. This is exactly the type of thing I was referring to when I said that insurance companies “force” physician’s to accept lower payment. As this insurance company’s logic shows, failure to fight downcoding and bundling is equal to “acceptance” by the physician. Thus, if you do not correct it, it is assumed that you accept it.
Interestingly, the practice in question has a threshold for when to trigger legal action. When denials reach over $50,000 by one insurer, it triggers the next step in legal action.
Details are not given as to who actually pays for all of these legal costs. However, you can be sure that the addition of an attorney to your practice is probably prohibitively expensive. But when the potential windfall is large – this practice says that several hundred thousand dollars are collected each year via denial appeals – it may well be worth the investment.
If any reader out there knows of any stories like this, I would be interested to hear about them. It is not often that you find a provider willing to sue an insurer over downcoding. But I anticipate to see this gain popularity in the future.
By J.C., on October 10th, 2008
I previously posted about insurance companies and the EOB. I’ve been thinking more and more about this issue and have come to the conclusion that physicians must band together and file class action lawsuits against insurance companies in order to collect the reimbursements that they legally deserve. If you take a closer look at the dynamic between insurance companies and physicians, you will find that it is heavily skewed in favor of the insurance company.
Here is typically what happens. A patient sees a physician who has an agreement in place with an insurance company. The physician sends the bill or claim to the insurance company, and the insurance company remits payment along with an EOB. One hundred percent of the time, the insurance company does not pay the full amount of the bill. The physician typically accepts the payment and does not bother with trying to collect more. When the insurance company denies the claim, the physician may try to collect payment and resubmit the claim. But typically there is a huge loss by the physician who does not have expertise in collecting payment.
If you look closely at this you will find that essentially the insurance company short changes the doctor and does not pay the full bill. In any other consumer-vendor interaction, it would be a violation of payment contract. This would be equivalent to going out to dinner and then paying half the bill instead of the whole thing. I’ve never thought of doing that, and I doubt many readers have. In those situations, it would clearly be unacceptable. We know it, and the restaurant would know it.
What makes it any different if a doctor is not paid the amount of his bill? One could argue that doctors provide a community service, and that, if a patient is getting a free ride by the doctor, that is not such a bad thing. However, the reality is that it is the insurance company getting a free ride, not the patient.
What is going to change the system? Class action lawsuits. In my next post I will highlight some examples of how this could all work.
One could argue that taking such action would essentially bankrupt insurance companies and break the healthcare system. If I had to choose between squeezing doctors or insurance companies, you know who I would choose.
By J.C., on October 8th, 2008
In the medical industry, there is a dirty word called “bundling.” Bundling is the combining of multiple procedure codes into a general substitution code that ignores procedure code modifiers. Essentially, it is one of the ways insurance companies figure out how to pay doctors less. Here is an example of how the mechanics of reimbursement work in relation to procedure coding:
After a doctor sees a patient, he submits a claim form to the insurance company that lists all the procedures he did on the patient. The procedural coding method is quite complex and involves a series of modifiers when the procedure strays from the norm. For example, when you see your doctor for a general office visit, it is categorized as a simple, moderate, or complex office visit. The payment is different for each code, with complex reimbursing the most. Documentation for a complex visit is more extensive than a simple visit.
So how exactly does bundling work? Let’s say you go to your doctor for evaluation of hypertension. He notices that your pressure is abnormally low and that you are dehydrated. Thus, he decides to give you an IV infusion of fluid to rehydrate you. When it comes to billing, he has done three things with three different codes: evaluated you for hypertension, given you an IV, and done an infusion of fluid. The insurance company may try and bundle the two codes for IV placement and infusion together into one with the reasoning that an IV placement is included in the infusion code.
This type of bundling is widespread in every specialty of medicine and amounts to the simplification of multiple medical procedures into fewer. Thus, bundling is a technique used by insurance companies to mess with the coding system to lower reimbursement for physicians. As you can imagine, most physicians are not going to spend hours each day going over these codes and modifiers to see what they have bundled together. Some physicians actually test the system by continuously re-submitting claims with different codes until they get paid. In my opinion, manipulation of codes by physicians could be fraudulent – there is wide interpretation of how to code various procedures among the medical community. Many physicians feel that if insurance companies are manipulating codes, then doctors should fight back.
It is all a game of cat and mouse: the insurance companies bundle, and the doctors unbundle.
By J.C., on October 1st, 2008
I’ve posted previously on how tough insurance companies can make it for doctors to collect their payments. Those of you in the profession know what I am talking about and are probably familiar with the acronym “EOB.” The EOB is the “Explanation of Benefits” that insurance companies provide to their patients and physicians.
If you are a patient, you probably only look to the bottom line or the far right which shows how much you owe the provider that the insurance company does not cover. You probably clearly overlook the fact that the amount paid by the insurance company is much less than what is billed by the doctor. When a physician provider receives the EOB, it looks a little different from the patient’s: there is usually an explanation of why the claim was not paid fully and/or why the claim was denied.
Unfortunately, the insurance companies have expertise in being as opaque and confusing as possible – the language in these explanations involves a mixture of legalese and what many of us would call “B.S.” It is the kind of language that confuses doctors and office staff and usually is only understood by the billing specialist at the insurance company. Additionally, it is a canned response by the insurance company computer system. Essentially, their computers flag certain errors or omissions and then send the generic computer response that is meant to deter the physician from resubmission or chasing the collection.
In a weak effort to provide some evidence behind my strong opinions, I found this article dated in August 2008 from the North County Gazette in New York. This is in reference to a health insurance company being fined $600,000 for failure to provide EOBs or adequate explanation of EOB denials to patients with their coverage. Interestingly, I could not find an example of a health insurance company being fined for providing inadequate EOBs to providers.
As I mentioned previously, the problem lies in the fact that the provider is good at his profession: providing medical care. He is not trained in how to maximize medical billing and how to chase down insurance companies to make sure they pay what they owe. It is a sad state of affairs and is actually a major reason why many new providers are opting to join a large managed care organization such as Kaiser Permanente, where they do not have to worry about scheduling, billing, EOBs, and human resources.
By J.C., on September 22nd, 2008
In response to my last post regarding health insurance companies, I received a comment from a physician who noted that health insurance companies try to make it difficult for doctors to collect payments. I could not agree more. It is the classic example of a big business trying to take advantage of the little guy.
Any regulation scheme that is added to a system adds additional layers of costs. When health insurance companies demand a certain format for billing submissions, this requires the physician’s office to either outsource their billing to a third party vendor with expertise in billing, or it requires the hiring of a skilled biller in the office. Both of those options essentially add the equivalent of another person to payroll. If you think you can find an administrative assistant or a medical assistant with skill in billing, then you are wrong.
Health insurance companies are aware that they are the 800 pound gorilla and can push around the small doctors. They have several strategies to prevent physician reimbursement. One easy strategy is to simply not pay claims at all or in a timely manner. A large percentage of claims go unpaid this way because doctor’s offices simply do not have the manpower to chase down unpaid bills. Sometimes the insurance company will simply deny payment and request additional documentation. You can imagine that a typical doctor’s office doesn’t have the time and energy or the infrastructure to track down and reconcile their billing.
Perhaps the most treacherous tactic by insurance companies is to pay less than the physician requests. For example, the doctor will bill out $100, and the insurance company will pay $20. There is no recourse for the physician other than to accept the payment or just stop doing that service for his patients. When health insurance companies offer you cheap insurance quotes, don’t be naive and think that they aren’t taking advantage of the doctors.
I like to relate this whole concept as a scam in which you provide service first but do not get paid. In any other industry this would be unacceptable. Non-payers would quickly go out of business because they would get the reputation for not paying and people would cease to do business with them. Unfortunately, there is collusion in the health insurance system, and there are not that many payers. There is no competitive process as everyone is pegged to Medicare rates.
By J.C., on September 19th, 2008
I know this is going to be a controversial post, but I wanted to illustrate how silly our health insurance system has gotten.
Back in the old days, people did not have health insurance. Most hospitals were run on donations, and medical visits to the doctor were not so prohibitively expensive that you couldn’t see the doctor without insurance. But the concept of health insurance evolved to be a benefit for employees, almost like a recruiting perk. It got to the point where employees were needed so badly that it became a standard fringe benefit to get health insurance. To help justify the matter was the fact that medical costs rose so that it was almost prohibitive to see a doctor, let alone get a procedure or go to the hospital, without causing a huge financial setback.
Enter insurance companies. Insurance companies came into the picture to help contain costs. They started making sure that doctors did not order unnecessary tests. They started making sure that patients paid some copayments in order to provide a disincentive for overutilization of healthcare. Basically, they didn’t want you going to the doctor frivolously and wasting money.
In order to be financially solvent and even profitable, insurance companies started raising premiums very high. Thus, health insurance costs so much now that it is a huge percentage of payroll expenditure in the United States. Health insurance companies also started playing both sides – they charged patients more and reimbursed doctors less. Thus, as middlemen, they have found a way to save a lot of money and put it into the pockets of their MBA administrators.
But the problem with the system is that health insurance companies are so profit-driven that they actually penalize you for having pre-existing conditions, even if those conditions are pretty benign. They go through your doctor’s record, and anything that your doctor writes in it they will use against you and charge you a much higher premium.
An example of this is a friend’s son who has mild asthma and rarely uses an inhaler. When applying for insurance on his own, the insurance company wanted to raise his premium 50% higher than someone of the same age without asthma! Similarly, someone who has a resolved condition such as a psychiatric diagnosis can have a higher premium even if his or her disease is in remission.
So what happens if you are currently healthy and you do not tell your doctor that you have had these health issues before? You guessed it – you pay a lower premium.
It’s a really messed up system, kind of like not reporting your car accident to the insurer so your premiums don’t go up. But the difference is that health premiums are expensive and can easily become prohibitively expensive for the average family. I’m not suggesting that you be dishonest in any way. I am just illustrating that the system has some serious flaws that need to be corrected.
By J.C., on September 11th, 2008
I’ve mentioned several times before that doctors are not good businesspeople and that the current state of the health reimbursement system is a mess. One reason it is so messy is that it is all about business and not about care. In this country, the basic teaching of medicine is that “continuous care” is the gold standard. This essentially means that when you see one doctor they are your doctor who knows you and they are the doctor that you will continue to see (if you are happy with your care). This patient-doctor relationship is the rewarding one that allows a physician to see you grow from a child into an adult into an elder. Similarly, it allows the patient to have that one person who they can trust to govern their health. The only thing that could end such a relationship was either the patient or the doctor ending it. Most typically, it lasts until the patient either passes away or the doctor retires and sells his practice to another doctor.
Enter the enemy – the insurance company. Nowadays, that type of relationship is almost non-existent. It is the insurance company who works on the patient’s behalf to enter into the patient-doctor relationship. If your doctor does not have a contract to provide care to that insurance company’s patients, then you cannot see that doctor unless you switch insurance companies. Thus in some respects the insurance company holds the patient hostage. The insurance company owns the patient, and the doctor can only see the patient if the insurance company allows this.
Recently, a doctor in the area was ill and needed to take 2 months off of work. He wanted other doctors to cover his patients and see them while he was gone. Unfortunately, all of those patients had one type of insurance that few doctors had a contract with. Thus those patients could not be cared for.
You don’t have to be a rocket scientist to see how messed up the whole thing is. Curiously, they are still teaching “continuity of care” in medical school. Soon they will be replacing that class with Economics 101 for dummies.
By Evelyn Black, on September 1st, 2008
Brandy Brady and Rick Huggins of Lake Charles, Louisiana, met in February at a Mardi Gras party and fell in love. They both feel certain they would have eventually married each other regardless of their current circumstances, but the fact that they decided to marry each other by April, after dating for only two months, was so that Brandy could be added to Rick’s Blue Cross/Blue Shield health insurance policy.
Brandy Brady has end-stage renal disease. After a kidney transplant last year left her with lots of medical bills, an unpredictable medical future, no job, and no healthcare, she met Rick, and the rest was a no-brainer. According to a recent New York Times feature article which tells Brandy and Rick’s story and others, more and more couples are marrying, divorcing, or staying together when they want to divorce because of health insurance issues.
A recent poll conducted by the Kaiser Family Foundation (a health advocacy group) found that 7% of all participants had at least one family member who had recently arranged marriage or divorce around issues of insurance coverage. More and more often, marriage is becoming a financial necessity driven by factors of health, legality, and the constraints imposed upon a financially struggling society by the insurance industry.
I can personally validate that poll, if not scientifically, at least in my own gut reaction. I personally know of at least three people who would obtain a divorce today were it not for the fact that the partner with a chronic, serious illness would be instantly thrown into such dire straights that not even Rasputin would have the heart to go through with it. So they carry on separate lives, married in name only, so one of them can stay  alive.
On the other end of the spectrum are married people with medical debt who divorce so that the one carrying the debt can file bankruptcy and they can continue with their lives with a roof over their heads, the only difference being a document saying they are no longer man and wife. It doesn’t take much to pile up unfathomable medical debt anymore, even with insurance. A triple bypass or a bout with cancer will do it quickly. But even a lesser emergency can cause a financial strain severe enough to leave people throwing romance aside and shuffling through their legal options just to stay afloat.
With recent data showing inflation at 17 year highs and real wages dropping like SUVs pushed off a faulty infrastructure bridge, considerations of marriage are once again drifting back to the practical and the necessary. Today’s healthcare crisis adds a final straw to the already crushing financial weight pushing against the lofty principals of love, affection, and holiness we used to demand in matrimony.
Let’s not kid ourselves: it takes two incomes, sometimes three or four, to successfully run a household these days, and somebody in that household better have some health insurance that covers all the members. Frost that with a love story if you can. Love makes it all more palatable, but it doesn’t change the fundamental reality facing today’s families.
I’m reminded of something I learned as a freshman psychology student: Maslow’s hierarchy of needs. Abraham Maslow, a famous humanist, posited that in order for human beings to self-actualize (become their own best true selves), they first had to have basic needs met. In other words, people who spend 18 hours a day hunting and gathering don’t create art or philosophy; that sort of elevated activity only comes about in a society that is well-fed, sheltered, and healthy.
Reading Maslow in college in the 1970s left all of us feeling sad for the third world unfortunates who were so busy pounding taro root in the hot sun that they would never get to, well, read Maslow. Who knew that thirty years later we’d be looking for books on how to pound taro root? Actually, those old psychology texts are heavy enough to pound grain, and they’d also keep a small household warm for several nights if that household is lucky enough to have a pellet stove.
All kidding aside, we need a single payer national healthcare plan and we needed it yesterday. I’m under no illusions that such a plan will materialize quickly if ever. In the meantime, lonely hearts with great insurance plans are in luck!
At least say you like long walks on the beach, though. It makes the whole thing a little less awkward.
By J.C., on August 14th, 2008
In most professions you get paid the more senior you become. An attorney typically bills hourly and as he becomes more an expert in his field and within his firm, his hourly rate continues to increase. Similarly in business, as you climb the corporate ladder, your salary increases. Medical doctors have an unusual situation. Once you become a doctor, you get paid per office visit, per consultation, per procedure, or per surgery the same as whether you have been doing it for 30 years.
The main reason that physician pay does not increase according to seniority is because the payer is usually Medicare or an insurance company that pegs their reimbursement to Medicare rates. When your payer is the government, they don’t care whether you are the best in the field or you have been doing it for 20 years. They don’t care whether you take 1 hour or 10 hours to do the surgery or see the patient. The pay is still the same. Thus in many ways, medicine is sort of an “all you can eat” type of service. You only get paid once, but you must provide complete service.
While the pay increase from resident to attending physician is a typically a huge jump, doctors hit a ceiling early on after they become fully fledged physicians. One reason for this equality in pay among doctors of all levels is that when dealing with human life, it is expected that all doctors provide the best possible care. Differentiating one physician from another or one surgeon from another is very difficult. Additionally, seniority does not necessarily mean that the product or service is better.
Although the pay per service does not increase the more senior you become, in reality the more senior you become the faster you typically perform a service. Thus in some sense pay does increase but this is due to the physician working faster and more efficiently. In practice this is not necessarily always a good thing because some physicians tend to rush or hurry through their patients or procedures. Sometimes this results in poor care or mistakes.
For the physicians who operate non-PAR or take cash payments such as plastic surgeons or dermatologists, they may be able to charge more given their experience or reputation. However, the competitive landscape in any city usually caps levels to cater to what is reasonable for individuals.
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