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Who's driving the Health Care bus? Health insurance companies grading doctors?
April 09, 2007
Subscribers Newsletter

Who’s In Charge in Your Doctor’s Office?
First published at

What I mean by that is, who, exactly, sets the price, or if you prefer, the “fee for service.” And not only that, but who ultimately decides whether or not that fee will even be paid, after the fact. If you say it will be entirely up to the patient and the doctor, both of whom are equal before the law, go to the back of the class.

Over time, the populace has been very gradually trained (brain washed?) into seeing virtually all forms of medical care as a sort of entitlement. Employers and employees have contributed into group health plans for so many generations now that most of us just expect to see the doctor for a $10 or $20 co-pay, and get virtually any prescription filled for a $5 or $15 co-pay, and we live in absolute terror of ever not being covered for our own health care. I readily admit that I am as guilty as the next guy in this regard. We have not hesitated in the least to take a pet to the veterinarian and pay sizeable bills to get them well again. Once we even did that with a stray sick cat that wound up on our door step, for quite a sizeable bill. Yet, after I left my last employer and my health insurance ran out, I strenuously avoided the Doctor’s office and “rode out” illnesses with over-the-counter drugs and home remedies, over unreasonable fear of a humongous doctor’s visit and treatment bill, and me with no coverage.

When you have time, if you’re interested enough to do it, take a look at your last doctor’s visit bill and see what it’s cost was. Then, look at what you pay per month, plus what your employer pays per month, into your group insurance plan. Multiply that number by 12 and see what is paid into your health insurance each year. Divide by the cost of your doctor’s visit, and see how many visits you could have had in a year. This should be quite an eye opener for most people. Most of us could have had somewhere between 10 and 15 visits per year just for what was paid in premiums, but we didn’t see the doctor anywhere near that number of times.

Most people who are in pretty good shape only see the doctor about twice a year for checkups, and maybe one more visit every three years or so when we really come down with something bad, or get hurt somehow, or for a follow-up on doctor’s orders. (I’m guessing that most of us don’t even go to the doctor for a cold or a mild case of flu.) What’s being paid into our insurance plans in the form of premiums is a whole lot more, on average, than is paid out to doctors for services rendered. We all need to realize that, and think about it. These dollars have nothing to do with our health. They go into the profits, fixed expenses, variable expenses such as employee salaries and benefits of, not doctors offices, but insurance companies. Insurance is a potentially very high profit, and a very high competition business, but insurance per se has nothing whatsoever to do with health care, other than to raise its cost.

Now, there are exceptions, including people who suffer from a catastrophic illness that may involve extraordinary medical expenses, and we’ve all seen various examples of that among our family or friends or acquaintances. But we are not, all of us, insured merely for catastrophic illness; we are insured for every form of illness that we could possibly be treated for. In my opinion, 90% or more of us are vastly over-insured, and our insurance coverage should be limited to catastrophic illness only. The cost of a doctor’s office visit should be allowed to settle at whatever a free market allows, which should be a whole lot less than what it is now under the mandate of insurance-for-everything. Of course, that’s wishful thinking on my part.

What the Medical Practice Business has to look forward to:

Of course, there is and has been a strong political movement toward popularizing and eventually achieving Socialized Medicine in America; we can all see that. Less visible is a sort of blurring of the lines between the private insurance industry and the government. The most immediately obvious examples of this involve the Medicare Advantage or Part D plans that involve a combination of Medicare coverage with coverage by a private insurer. Under HR 6111, CMS (Center for Medicare Services) is implementing a program involving the grading of doctors and practices. You can see this at the CMS website, and click on Physician Quality Reporting Initiative (PQRI).

It starts out, as so many things do, as a voluntary participation activity, with incentives. It includes a statement that it only applies to Medicare, not to Advantage plans or private fee-for-service plans. Take a look at United Health Care at UHC and click on Finding Doctor Right, and then select Find The Right Doctor Through Our UnitedHealth Premium Directory. There you will find how doctors are being graded by insurance companies on how they “meet standards”, “exceed standards” or “do not meet standards”. This grading involves, among other things, how much the doctor has cost the insurance company. AETNA is also looking forward to rolling out a “Pay For Performance” procedure based upon externally validated “norms” for physicians and medical facilities. The industry is calling this “quality of care” grading, and it may reduce or even end a carrier’s contract with a doctor or a practice.

In 2008, the aforementioned PQRI norms will not longer be voluntary, but mandatory, for Medicare, and (I predict) for private carriers as well. HR 6111 not only allows, but encourages large private insurers to develop norms and standards for grading doctors. The NPI (National Provider Identity) changes coming into force in April 2007 (involving changes to the CMS 1500 box 17 and other areas) is intended and designed to allow future tracking of billed claims for purposes of grading doctors.

Now, the interesting thing is that this grading has little or nothing to do with the beginning or ending condition of the patient, but on how the patient encounter was coded, and on how the event was billed. New codes are coming in under ICD-10 involving lower and more precise levels of coding. Doctors are to be graded on how specific they get with – not how they treat their patients, but – how well or how poorly they apply codes to that treatment. Of course, doctors should always code to the lowest level available for the given treatment. They know that. However, their medical training and most valuable medical experience involved actually treating patients, not coding treatments, or learning and keeping up with extraneous non-medical technologies that are in a perpetual state of motion and never settle into permanence.

It is unsettling when a government official gains the power to grade the performance of medical doctors, based not upon results of treatment, but rather on how their claims are filed. But when a private enterprise is able to do the same thing, and the outcome of their grading has a direct effect on the profitability of the enterprise, I see a direct conflict of interest. As a medical billing company, we have a vital interest in keeping up with these trends. Doctors are our clients; it is our job to get them their money. And our doctors are increasingly to be “graded” on externally validated norms that look at the insurance claims that are filed for them by us.

So what can we do about it? Well, we can do our utmost to stay on top of developments, and we can encourage our client medical practices to:

  1. Make a plan;
  2. Develop coding protocols;
  3. Put them in writing;
  4. Get the entire staff on board;
  5. Stay abreast of future changes.

We can help with all of this and we can communicate upcoming changes to our clients. And we can keep up with all the other ever increasing complexities involving HIPAA and other laws, and keeping the problems of changing software and changing forms off of the backs of our clients. And we can work and pray toward the day when the transaction between a patient and a doctor becomes, again, a comparatively simple thing: a simple matter of the practice of medicine.

We all need doctors.

No matter how well intended the efforts in this area, tampering with and adding complexities into a working system will tend to hurt the function of the system rather than help it. The important thing to recognize is that, even with all its imperfections, we have the very best health care system in the world today.

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