How to Fix Healthcare, From a Doctor on the Frontlines: Part 1.

This is the first of a 3 part series by Dr. Moeller, the infamous Doctor on the Frontlines. In this series he explores ways in which our healthcare system is failing, and how it can be improved from the perspective of those who live and breathe healthcare every day. . . doctors. Click the links to read Part 2 and Part 3.

I want every person in America to have access to quality health care all at a reasonable price because our citizens deserve this. Unfortunately, universal access to care at a reasonable price cannot materialize unless lawmakers look to doctors on the front lines of care for specific input.  We as doctors know in many ways why costs are high and why the public is unfortunately misinformed about how it all works.  But we need a representative sample of practicing doctors in Congress discussing these issues so that these “insider” insights can be applied to our current laws.

In this series of  posts I will outline 3 central  ideas that would lead to better and more affordable care.

1. Costs Need to Be Simple and Transparent.

The first idea involves making costs and reimbursement more simplified and transparent.  These changes would help clarify misconceptions about doctor’s pay.  Leaders need to stop attacking doctors for how much they earn because they do not really know how it works.  In all other professions, one gets paid what the bill says.  If a handyman comes in to fix your sink and charges $80, you pay him $80.  If you seek a lawyer, and he says he charges $250/hour and he works 4 hours for you, you owe him $1000.

Unfortunately, the medical billing is unique, confusing, and wrong.  The charges (bills) that patients see in the mail are not what doctors get paid.  These are inflated numbers derived from contracts between hospitals or groups and insurance companies.  A recent New York Times article headlines read “As Hospital Prices Soar, a Stitch Costs $500.”  Sadly, these inflated numbers have nothing to do with what the doctor gets paid. In fact, those bills do not go to the doctor at all, but rather to the hospital.

When a hospital or doctor submits a charge (bill), the insurance companies or Medicare/Medicaid, depending on the patient’s insurance, utilize a fee schedule.  This schedule consists of thousands of codes that give dollar amounts for individual procedures or clinic visits.  Each code has a dollar figure to determine how much to reimburse that doctor.  This is called a “Medicare fee schedule” and insurance companies will pay a certain percentage of the fee based on Medicare.  This can range from 80% to 180% of Medicare depending on the insurance carrier.

If a patient has Medicare, however, one can see exactly what that doctor will get paid based on the code for that procedure, test, or office visit (CPT code) by using the fee schedule.  This is often called the “allowable charge” in patient’s bills.   The revenue the doctor receives is in fact this fee and is set no matter how much the hospital or doctor chooses to charge.

To complicate matters, there are usually two different charges in a patient’s bill: a “professional” charge from the doctor, and a “facility or hospital” charge.

First, the doctor only collects a fraction of the “professional charge.”   This is the charge for the doctors’ services (e.g. office visit vs. procedure vs. MRI interpretation).   The doctor only receives a fraction of this “professional charge” because this is reduced by the fee schedule to the appropriate amount.  Remember, charges and what the doctor actually gets paid are very different in medicine.   The doctor does not collect any of the hospital charge as this charge goes to the hospital.  After all of this, a doctor gets paid only a small fraction of this “professional charge” because these allowable charges do not include overhead expenses the practice incurs (which can range from 30 to 60%).

This situation I describe above is not understood by our leaders as verified in this video of President Obama discussing foot amputations in diabetics.   President Obama claimed that surgeons get paid “30, 40, 50 thousand dollars” for a foot amputation.  Looking at the Medicare Fee schedule, CPT code 28805 states that the surgeon would get paid $738.90, which is the fee before his expenses are considered.  This $738.90 needs to cover his office space, staffing, medical liability, and years of training to have the privilege of performing this life saving operation.  Thus, the doctor actually gets paid 1.4% ($738.90/$50,000) of what President Obama claimed he got paid. Our leaders are clearly confused and have no right attacking physicians’ reimbursement.

Another example of confusing costs of medical treatment hits closer to home as my own mother presented to the ER with sudden blurry vision.  Concerned for serious causes for this symptom, several tests were run to rule out causes such as stroke or tumor.  Thankfully, her diagnosis was nothing life threatening and is recovering.  She then received the following bill two weeks later in the mail explaining her charges.  I have attached a copy of the bill.

She was shocked at how high the charges were and could not decipher this bill.  Referring to my explanations above, under “professional/physician charges,” it “appears” a physician gets paid $450.00 to interpret a CT head and $580.00 to interpret a MRI of the brain.  As I described above, this is far from the truth.  Looking at the fee schedule, code 70450, a CT head would pay a doctor $29 for a Medicare patient.  This is far different than the $450 shown on the bill.  In fact, it is only 6% of what the bill states!  Likewise, an MRI brain, code 70558, would pay a radiologist $109.  Way off from the charge of $580.   There are other inflated fees for the hospital as you can see in this bill totaling over $11,000, but these are not related to a doctor’s compensation.

This clearly illustrates that doctors payment systems are confusing for patients and creates much anxiety when trying to decipher a bill in the mail.  It is apparently even confusing to lawmakers and the president who are trying to modify reimbursement yet do not know how doctors get paid.   Even though a stitch may cost $500, the doctor got paid $28 dollars to read a complex CT scan of the brain.  We need real costs to health care, not inflated charges from hospitals.  This needs to be addressed so patients and lawmakers can understand where doctors are coming from and realize that doctors are getting paid much less than meets the eye.

In addition to the above explanation, doctors do not get paid for talking on the phone to patients or other doctors, writing prescriptions, or ordering lab work or radiology tests. This is simply work we do to allow patients to get the best care and do not charge hourly fees for this work.  We do this work in between seeing patients in the office.

Further, if we drive to the hospital in the middle of the night to perform a procedure, we get paid the same and we do not charge extra.  Doctors do not collect whatever they want for clinic visits or procedures; this is all determined by the fee schedule explained above.  In addition, if one procedure takes longer than average or is more complex, a doctor does not collect more for that procedure unlike other professions that are paid hourly.  The fee is pre-determined by the Medicare fee schedule no matter how sick the patient is.  This is clearly different among other professions which charge an hourly rate.

In addition, if there is a follow up call or letter after the procedure, this is all part of the one fee and no additional fees are billed.  If that patient calls at 9pm that night with a health complaint or the patient arrives 30 minutes late to an appointment, there is not an increased charge (ie. we do not get paid more).  I am not stating that hourly rate work like how lawyers get paid is flawed or wrong; I am simply stating it is very different and sometimes this contrast is not noticed.  Do I speak with patients at 9pm and do I spend the extra 30 minutes helping patients get the quality care they deserve?

Of course, I willingly do this because I went into medicine to help those in need and I get satisfaction from this. I do worry, however, that this may not continue to be the case for all doctors if reimbursement models are not modified and doctors’ fees are not corrected for inflation and practice expenses.  They simply will not bring in enough revenue to cover their expenses. Again, doctors’ fees have been declining, are not secure (please read about the SGR formula), and do not adjust for inflation.  Solutions involve making costs and charges more transparent and realizing the true (not inflated) costs and benefits of medical devices, services, and materials.  With actual costs (not inflated charges) being available and transparent, patients would be given choices and autonomy about their health.

The vehicle for this would be health savings accounts (which I will describe in more detail in this series), which would allow patients to use their own money with their doctor’s advice to decide on what care is best for them.  This would increase competition amongst providers, lower prices, and offer more choice and involvement in their care.

-Matthew Moeller is a practicing Gastroenterologist. He can be reached on twitter  (@DrMMoeller).

Related Post: An Open Letter to Washington, From a Physician on the Front Lines of Medicine.

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