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!
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.
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.
A friend recently asked me whether it matters if a physician is board certified in his or her specialty. For those of you who don’t know, the medical profession is governed by both a national and state medical board. In order to practice medicine, physicians must have a state license and a national certificate showing they have passed all the three steps of the United States Medical Licensing Examination. Once they are fully licensed general physicians, they typically obtain board certification in their specialty. Their specialty may be something broad, such as general family practice, internal medicine, or general surgery, or they may go on for further training to get subspecialty certification, such as in plastic surgery or cardiology. Essentially, at every step of their training, physicians need to pass an exam that says that they are competent according to national standards in that field. Board certification exists to ensure that there is a minimum standard practice among physicians in a specialty.
There are many physicians who do not have board certification in their specialty. This does not mean that they cannot practice medicine or their specialization. It may mean that they will have a difficult time gaining privileges at hospitals. It may also mean that the discerning patient may choose to go to someone who is more qualified. But, typically, it only matters if there is a complication or the patient is not satisfied with his or her outcome. If there is a lawsuit, it is likely that someone who practices a certain specialty without having the appropriate certification would be more exposed than someone who does have all the certifications.
One example of this is the notorious plastic surgeon on Dr. 90210, Dr. Robert Rey. I cannot confirm this, but I have read several articles that indicate he is not board certified, and he has been quoted as saying that he simply was too busy to get board certified. It does not surprise me that patients continue to flock to Dr. Rey for this services. Given his notoriety and fame from television, patients seeking a doctor to the stars will happily pay for his services.
From an economic point-of-view, this illustrates something very powerful in medicine – that reputation and business-savvy can trump qualifications. You do not have to be the best doctor or care provider in order to have a busy practice. It is well known in the medical community that, if you really want to find out whether a doctor or surgeon is good, you need to ask the key personnel who work with many doctors. For example, surgical scrub technicians know which surgeons have the best hands and the best intra-operative judgment. The average person watching Dr. 90210 does not know whether Dr. Rey is good or bad at what he does. He gains his reputation from the patients shown on television, his good looks, and the fact that he has his own TV show.
It makes me wonder why we have board certifications, after all, if the general public does not care much about it. Physicians in medicine seem to be chasing their tails getting more and more qualified, but perhaps this is all a futile endeavor.
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.
One of our readers left an interesting comment regarding the medical profession and its desire to seek profits for its members. I quote from his comment:
The nature of the AMA, a protected and virtually untouchable union, certainly believes in maximizing its members’ profits. It clearly restricts the supply (as all unions do) in face of a steadily growing demand, forcing prices high and higher.
This sheds some interesting light on the medical profession. It is often overlooked by consumers that the medical profession is limited in its numbers and doctors themselves are part of the reason there is a shortage of doctors. In particular, the number of physicians trained in the United States is far less than the need for doctors. As a country full of patients, we are bulging at the seams and in need of more doctors.
However, the number of physicians in this country is limited by the number of U.S.-trained physicians as well as the number of foreign medical graduates coming here to finish training and to practice. The physicians’ lobby in Washington ,D.C., is very strong in limiting the expansion of training programs. In some specialties, there is such a shortage of physicians that you have to wait several months in some communities to see a doctor.
An example of this would be the surgical subspecialty of Ear, Nose, and Throat Surgery, also known as Otolargyngology or Head and Neck Surgery. There are only a few hundred training positions available in the United States each year for this specialty. If these specialists were evenly divided up across the country, that would leave only 3 or 4 per state. However, physicians tend to be concentrated along both coasts and the Midwest, leaving huge gaps in many states across the country. Thus, the demand is very high, and the supply is low. Like many other specialties in medicine, the lobby is strong to limit the expansion of residency positions, keeping the supply low.
Thus, inherent in the system is a type of unionization to prevent competition. The profession protects itself and is profit driven. However, this monopolization and protectionism is not unique to medicine. If you look at almost any other industry, you will find that there is intense national protectionism from offshoring and outsourcing in the form of tariffs, tax credits, and favorable legislation. Similary, in the U.S. the medical profession limits the number of physicians and creates arduous licensing and credentialing requirements to limit supply.
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.
Most of you are familiar with the headhunters of the financial world. Bankers and finance people are notorious for migrating from one firm to another. Typically, it is the headhunters that cold call and go after the best and brightest of any firm. It is a lucrative business based on the concept of a placement fee or a commission.
Medicine has its own version of headhunters called placement agents. Typically, these staffing companies target newly minted young MDs and try to place them into an existing practice. For those types of physicians who are in high demand, such as specialists, the placement fees can be astronomical. After all, typically, a physician usually only moves once or twice in his entire career. Some do not ever move from their first job. This is in stark contrast to those in the corporate world who may move every few years for upward mobility. The main difference is that a physician is a small business owner and spends years building up his reputation and practice. Like any small business owner, moving locations is expensive and definitely dings your business for a while.
Thus, placing a specialty physician into a practice can earn the placement agent a fee in the tens of thousands of dollars, if not more. It is a big business that inundates resident and new physicians with mail, email, phone calls, and a lot of schmoozing. If you make the mistake of getting your name on one of these lists, you will never get out from under the deluge of marketing materials.
Unlike the regular corporate world, staff placement agents typically have no medical background. They know a lot about the field from their work, but if you ask them about the scope of any physician’s practice, you will soon leave them with a confused look on their faces. They want to move a very lucrative and highly valuable product – the physician who has gone to school for decades.
While I have posted previously on how various business models in the practice of medicine, there is one business that is actually quite profitable for a physician who does not want the cost or hassle of running a private solo, group, or managed healthcare type of medical practice. That is the job of being a locum tenens.
A “locum tenens” position is a temporary physician position where a doctor fills in a need for a short term assignment. Typically it is a traveling position, and the doctor will register with a locums company. A hospital or practice needing a physician on a short term basis can hire a locum temporarily. It is actually quite similar to the “traveling nurse” type of career where nurses move from one location to another.
There is a small percentage of physicians who work as locums permanently with no home practice. In this day and age of shift work type of medicine, the locum position is probably most similar to an ER physician’s career where the work is shift work: you come to work for a condensed period of time then you relax and take it is easy when not working.
What is attractive for a physician to do locums is that they are filling a need and typically get paid by the day, with travel and lodging included. Thus, that physician does not have to worry about running a medical practice or hiring employees or getting patients or any overhead.
I personally know a handful of friends who do locums work. They are semi-retired and want to travel a bit while also working to make some money. They don’t want to retire fully because they don’t want to lose their skill set.
As far as compensation, you are a “hired gun” and can make good money. It is an eight-hour workday with overtime usually. For those in specialties in demand, a locum position can be several thousand dollars per day. You don’t necessarily get the satisfaction of building relationships with patients or running your own business, but you can have a better life if you set it up right.