Tuesday, June 30, 2009

Medical Economics

Ever wonder how doctors get paid? I know what you're thinking. We enter the room, spend 10 or 15 seconds mostly ignoring you, slap some ice-cold instruments onto your body just to watch you jump, then depending on when our next BMW payment is due, we make up a dollar amount that WE think is fair.

Doctors may have been able to charge what they thought was a "fair" price 40 years ago, but not any longer. Many docs don't even know what they charge (sounds amazing doesn't it).

As the largest single payer, the government sets fees and billing rules under Medicare that have been adopted in one form or another by the insurance carriers. So, it doesn't matter what the doc charges, the payers tell the doctor what they WILL pay. In most states, the doctor has to accept it and can not bill the patient for any more than their deductible or co-pay.

Recently, I attended a seminar on medical billing (not my idea by the way). I thought that an explanation of HOW the government determines physician reimbursement might be instructive to those who think it is random, and to those who still can't wrap their head around the concept that government involvement is a/the major problem in medicine already! As you read through the following (or at least skim it, because reading it might be hazardous to your health), please consider the vast bureaucracy of people necessary to determine, process, audit, and bill all of this stuff. Maybe you'll get an idea of why there are so many clipboard carrying useless flesh-bags in hospitals today (the ones Dr. Tim Johnson proposes that we retrain to provide your medical care).

First, you have your RVU's or Relative Value Units. Of course, there are 3 types of RVU's (the actual physician work, the practice expenses, and the liability insurance). The RVUtotal = RVUwork + RVUpractice expense + RVUliability.

Now you're probably thinking about the fact that in different areas of the country, these costs may vary and that is true, so there is the Geographic Practice Cost Index (GPCI). This ranges from a low of 1.0 to a high of 1.5 (Alaska).

Medicare uses a Conversion Factor or CF which varies from year to year in order to control payments. This factor was just lowered another 5.3% in 2009 to $36.0666666 per RVUtotal.

So, the formula is:

Medicare Payment = RVUtotal X GPCI X CF

So, all of this gets plugged in to determine a charge for each level of billing from 1 to 5 (where 1 is a patient with whom you have barely any contact, and 5 is complex) plus a critical care billing for the most life-threatening and time consuming cases.

So, we're done right? The doc just marks the appropriate billing level, right? Nope. Not in the ER anyway. For us, the billing fun is just beginning!

Remember your medical record? That thing that you THOUGHT was for keeping your medical information? Well that SHOULD be it's primary purpose, but it's not. It serves two other purposes that sadly have eclipsed it's importance as a source of information about you.

The first is obvious and that is as a source of medico-legal protection for the health care staff. Your record is replete with exactly what you said including specific symptoms you denied having, and specific warnings you were given, etc. Anything you refused or argued about will be in great detail. This isn't for your benefit. It's to protect us from the vultures. But I digress.......

The second alternate purpose of your record is that it has become your billing template! In order to bill you at any of the 6 billing levels, it must be documented that you were asked certain numbers of questions and examined in a specific number of areas.

Here's how this part works:

In taking the history of your presenting problem, there are 8 elements of your symptoms that I could ask (location, quality, timing, severity, etc); I can document your Past History, your Social History (job, smoking, drinking), and/or your Family History; then there is the Review of Systems (the litany of questions that don't seem to have anything to do with anything such as "do your gums bleed", or "do you have any rashes", or "any burning on urination"). There are 14 such body systems that can be touched upon in a system review.

Finally, there is the physical exam which can be broken into roughly 7 body areas or 12 organ systems.

Remember that no matter how good of a job that I do, only the stuff that gets written down will support a bill. If I spend an hour with you and document poorly, I can't legally charge for my time or effort....even though you will likely think I did an excellent job and appreciate my time and attention, it doesn't matter. Sadly for this very reason, your medical record is the more important patient to some providers. Especially with Medicare beginning to audit charts for billing compliance!

So, to justify billing any of the different levels, you actually have to document different permutations of: historical elements; past/family/social elements; certain number of system review questions; and certain numbers of physical exam areas documented. The higher the billing level, the more items from each list required to bill that level of service. (For example for level 4, you need 4 or more historical elements,; a family, social, or past history; up to 9 systems reviewed; & 5-7 body systems examined).

(In addition to all of this, your "medical decision making" is quantified based on whether the history came from the patient, a family member, the EMS, or others; documentation of Labs, Xrays, EKG's, reviewing old records and summarizing them, etc. Points are given for these activities that count toward more difficulty to "support" your billing level in case there is a question). Remember, all of this has to be documented for it to have officially happened!

Yes, in case you are wondering, legions of people known as "Medical Coders" actually sit down with each and every chart and count these items and bill the charts accordingly! All of these people make a good living, and their salaries are built into your medical care costs (and it's governmental rules and regulations that cause these people to exist).

So, now that you know how simple medical economics is, you know why it's so simple to reform the health care system! The government has simplified it so far, who would ever doubt that more government involvement couldn't possibly simplify it further therefore making it less expensive without cutting services!!!

So, the next time your doc has his/her face buried in a chart instead of making eye contact with you; or the next time the doc spends 5 minutes with you and excuses themselves to sit outside the room and spend 15 minutes with the chart, you'll know why.



  1. Best explanation of billin Clusterfuck I have ever read. well done.

  2. I've got a question I hope you can help me with. I am looking for a family physician, and I'd like to find one who is ideologically conservative. What would be the most efficient way to accomplish this?

  3. Thanks a lot.

    I am a recovering biller, and you just gave me a really bad case of the flashbacks....

    (Oh, and be sure to put THAT into my chart so you can bill for it... we used to joke that if the patient sneezed while in our building, we'd have to call the insurance company for authorization to give them a tissue. And heaven help us if they needed to use the restroom....)

  4. Cranky,

    I spent my last 2 days at that conference with coder/billers working on charts. I have NO idea how they do it. Good news for me was that after intensive training, I was always able to get within 4 levels of the "right" answer (out of 6). Never got it "right", by the way.

    PeggyU, a few pointers: be observant and rule out any doctor whose:

    1. car is a hybrid or any model volkswagen.
    2. car has "Greenpeace" or "Trees Are People Too" bumperstickers.
    3. waiting room has an electronic fish tank.
    4. waiting room has the TV tuned to MSNBC or CNN.
    5. receptionist looks like Chastity (Chaz) Bono.
    6. office promotes pamphlets touting the health benefits of the Wicca Diet.
    7. office music is by Kenny G or Yanni.
    8. office has ANY photo, or magazine of Nancy Pelosi which is not defaced in some manner.
    9. shoes are comfortable (except for Crocs). NO BIRKENSTOCKS or HUSHPUPPIES!

    Seriously, if you chose a doc in private practice (i.e. a small businessman) chances are very good that they'll be a conservative. The ones who don't actually see where their money comes from are more likely to be liberals.

    But in all seriousness find yourself a good doctor that you like personally. I know a few liberals that I really like and respect, so don't rule all of them out!

    Best of luck.


  5. Thanks, erdoc85. I found one, I think - if she'll take me. She has six kids, lives in a conservative community near here and is involved in her Christian church. Those would seem potential indicators. I think.

  6. Pegs,

    Agreed. They all signal that she sounds like a good person.

    If her H3 has a gun rack, mud flaps, Hank, Jr playing, and a "Nuke the Gay Whales" bumpersticker....you got yourself a keeper!

    You might just have found OF's twin sister too!

  7. Under this coding and billing system, the best-compensated doc will be a Jack-In-The-Box drive-up, interfaced with an old PC, and a digital camera for the rashes and such.

    Which is probably what they are aiming for.

  8. erdoc85, or any of the docs here...I read a news story the other day about a woman from Canada clearing up some stuff about their single payer health insurance dealie...facts below

    Canada spends 10% of GDP to insure 100% population
    USA spends 17% to insure around 85%

    A high percentage (over 20%) of each dollar of HI in the US goes to paperwork and bureaucracy. Only a measly 1% in Canada.

    And so on. If I had the URL handy, I'd post it, but I don't. Just wanted to know your thoughts.

    Also, have we all forgotten the Native Americans? You know, they run those fancy casinos, sell cigarettes w/o taxes...oh yeah, and own all the Hard Rock shit you can imagine. We're legally bound to provide them with free healthcare, as written when we "bought" their land from them. Thoughts on that as well? Because we're doing less for them than we would be if this apocalyptic single-payer health insurance thing ever materializes.

  9. dear alex,
    they had 100% coverage in the USSR. my point is that those statistics, even if they are true, do not give one an idea about how many Canadians are crossing the border to get past the rationing of costly procedures. also, you seem to think it's the government's responsibility to provide health care for its citizens. on this we simply disagree.

  10. erdoc85: All the hospital docs around here wear Dansko professional clogs. And here in Univ of Calif. College Town even the conservatives drive Prii (Pruises?) so their kids won't be bullied at school.

  11. thanks... clear as mud. just like anything else that comes from the gubment.

  12. Alex, it's a question that gets a lot of attention, but I think it's an unfair comparison.

    IMHO it's like comparing a Ford Pinto to a Nissan GT-R. Yeah one's a lot cheaper, but you get what you pay for.

    We've discussed the numbers of Canadian patients fleeing the Canadian system for health care in the US ad nauseam on the blog, so I won't repeat it here. The long waits for care, the rationing, the denials of treatment, etc.

    One statistic that I do think is interesting is the reported 1.3% administrative overhead in the Canadian system. Maybe this is why their system is so inefficient? So, I'm not sure this number is in itself something to brag about, but I would agree that in the US, our administrative costs are way too high.

    This is the point of my post here which is that we're overburdened with excess bureaucratic and administrative overhead now.

    Anyone who says that UHC will bring LESS bureaucracy is delusional. When has government EVER brought less paperwork, regulation, and red tape?

    Health care in Canada IS cheaper, and it's less expensive too. You're being promised Bugatti Veyron care at Chevy Aveo prices. It doesn't add up.

    Somehow, people seem to think that free-market health care has failed in the US. They don't seem to realize that we haven't had free-market health care since the mid 1960's, and that's the problem.

  13. Devorrah,

    I thought bullying was illegal in CA!

    I looked up Dansko Clogs, and after I stopped laughing, I realized something.

    Getting out of a Prius wearing those shoes in Texas could get your son the lead in the school's production of Pippin (if the kid survives).

  14. We're in our own little world out here. I noticed the clogs because my son was in the trauma room, and I had to step out while they worked on him. All I could see were the shoes. This happened a lot, so I made a study of doctor shoes. We're all bisexual in California, you know, so the gayness factor isn't a problem...

  15. Devorrah, you live in San Fran-friggin Sissy-co for cryin out loud...Or Berkley, whereeva, its all the same...
    Real Men DON'T wear Clogs, I know they CAN, just like Michael Jackson could sleep with 10 year olds, you see how that worked out...
    REAL men wear Cowboy boots, or Wingtips sharp enough to fling like Oddjobs bowler from "Goldfinger"...

  16. Dev,

    I hope your son is OK.

    The conference where my head was stuffed with these formulas was in your state. I should have brought a side of beef with me since I tired of the vegetarian lunches.

    As I made observations during my time there, I began to wonder why the terrorists planned to use explosives during the millennium plot? Seemed like a waste of resources to me.

    They could have eliminated 80% of the male population by placing a "Free Hair Gel" poster on the edge of a cliff and watched it attract the metro's like a June Bug to an Energy Efficient Mercury Containing Environmentally Friendly (oxymoron intended) Bulb.

    After seeing the Clogs, I guess the CA males could have claimed a few terrorist "kills" as certainly some would have died from laughter!

  17. I haven't seen nobody in cowboy boots or wingtips around here since my Daddy was alive! It's either bike shoes, Birkenstocks, non-leather sneakers or hemp footwear. I'm serious--I live in a very crunchy place.
    And thanks erdoc85, the kid is perfectly fine now, and I have the docs to thank for that. Must have been the footwear that made the difference (-:

  18. Sure glad he's OK.

    Betcha they could move fast in that trauma bay since they was: (as we say) "light in them loafers"!

    Probably saved his life!

    Wingtips or boots, Frank? Really?

    If I had to scrub blood, vomit, & pee off of my good boots, I'd be really annoyed. I like rubber Crocs. Hose 'em off and you're good to go!


  19. They could have eliminated 80% of the male population by placing a "Free Hair Gel" poster on the edge of a cliff and watched it attract the metro's ".

    Got marker and poster board ... where do I find a cliff?

    "If I had to scrub blood, vomit, & pee off of my good boots, I'd be really annoyed. I like rubber Crocs."

    I think I saw my dad head into the clinic wearing hip waders once.

  20. I once again don't have much to say except,

    Huzzah 85!

    Oh, and I'd never wear Crocs. Hence, I back everything Frank said.

  21. ERDOC 85...
    Thats why they make "Work" Boots...
    I like body fluids on my footwear...reminds me of little league when I'd slide after striking out so it look like I'd played...


  22. I'm afraid of the steel toes, man.

    They leave bruises on buttocks.

    Plausible deniability and all that.

  23. Tap shoes might be entertaining.

  24. Aaah... Redneckland... The cowboys boots, the spitting on the ground from the driver's side at red lights, the BBQ in styrofoam plates, the mandatory Spring photos of the dog/kids/Grandma in the bluebonnets by the freeway, the "fixing" of many things, chicken fried steak with that delicious wallpaper glue on top!

  25. I just love how this post went from medical economics to shoes and hair gel in a relatively short moment! Great reading !

  26. Danskos are de riguer in CA for sure. My experience has been any academic facility = liberal physicians. If Devorrah was at a facility with trauma services, then likely tertiary care and academic, thus liberal.

    I was talking w. one of our fellows recently. He coded a consult as comprehensive (level 4). His note did not contain the elements to code at that level... he commented that they were told to code at that level. I tried to explain the need to support the coding, but he was not interested. Perhaps when he gets charged with Medicare fraud he'll understand.


  27. After 10 years in practice, I'm starting to understand coding and proper use of modifiers. So how am I supposed to summarize this for the patient when they ask what their cost will be? As a specialist performing elective procedures, I'm often asked by the patient what their out of pocket cost will be. The answer is I have NO EFFIN CLUE. I bill what I bill as "usual and customary" and the payer pays what they are contracted to pay which is apparently top secret. On behalf of the patient, my staff (my dime) spends interminable periods of time on the phone preforming surgical pre-certifcations.

    Any conversation with any payer starts like so: "a quote of benefits is not a guarantee of payment" so why proceed??
    Asking what something is going to cost is quite fair, even responsible. The best I can come up with is "your in network covered at 80%". 80% of an unknowable amount. Of course facility and anesthesia are billed separately, and I have no control over what they bill. Hard to explain to a patient. Then if I dick up a modifier the whole thing will be rejected (especially if it's Medicare). This makes my ass hurt. I'm glad the Chosen One is thinking on it.

  28. This thread went way chicky, as evidenced by the constant tangents into shoes.

    As a non-Med, interested observer, I just say, shut up and hand me the bill. It's my business how I find a means to pay your bill. I came into your place of business and availed myself of the services.

    I hate the notion of having to also pay somebody else's bills, at the same time, for the services they choose to consume. I have no means of budgeting that includes me being handed Chance cards, stating that I just added "my" share of another 50 million people's bills, to my bills.

    I don't give a crap how you code a service or material item. Just hand me the bill and allow me to digest it, then accept a check if I have it in checking, or allow me to work out a payment arrangement. I already know that by paying my own bills, I subsidize negotiated settlements with insurance companies, I subsidize crappy re-imbursements from MedicAid and Medicare, and I subsidize those that receive care and pay nothing at all.

    If you want to offer a business model that will attract paying customers, just give us an option where we don't have to share space and time with insurance customers, government customers, and freeloaders. I don't know much about the folks that advertise locally under the name Elite Care; however, they advertise and they have my attention.

    People in medical care that put up with government intrusion and insurance company paperwork don't have my attention.

  29. CJrun: Couldn't agree more. Cash for service makes more sense to me. Offer discounts for same-day payment.

  30. 911 Doc-

    No, we don't disagree. I don't think universal health care should be mandated in the USA. When I lived in Germany, my HC was covered. I liked it. It never failed for me...go in to the doc, pay my 30 euros, a few days later, 29 euros are put back in my bank account. And I never heard anything from my circle of acquaintances that would lead me to believe that there was anything wrong with it. But I'm sure there are, because no system is perfect.

    That said, I think that all people should be insured. I hope we can agree on that. I don't think the govt should underwrite everyone, using our tax dollars, because that's just dumb. It's a tough question, but I'm on your side. I completely believe in the Free Market. But we do have to bring HC insurance costs down, that's for sure. But at the same time, I don't want you guys being screwed out of your hard-earned cash. My mother's an RN, and I've been around nurses and doctors my whole life. I see the labor, and I see the gains, but I see the fucked-over side of you too.

    But my real beef is with the much-maligned Native Americans. Should we or should we not provide them with the HC coverage that we promised them so many years ago? Or do we just let them die on their (small) reservations?

  31. What about the Indian Health Service? Don't we already have a separate program for this population targeted at reservation life?

    I know very little about it other than that it exists and that you can get some nice student loan forgiveness if you serve in these areas. I have known some really good docs that served in the program for a few years for financial reasons, and they did not speak highly of their ability to provide health care within the scope of the program.

    Imagine that, TWO examples of healthcare entirely run by the US Government (IHS & VA) which both suck.

  32. Medical billing... it is just horrid. It is as bad as pharmacy billing... and trying to explain the charges that go with THAT.

    The other problem with how things are written is that patient's can't fight charges. I remember quite well going to the ER for IV abx x 4 days (because my insurance didn't cover home infusion) and the other part was that the insurance paid me and i had to pay the hospital. I got the same infusion every day and there were different charges. Now, day 1 you expect more because of the peripheral IV started, but the other 3 should be the same, right? nope. One day a nurse said she changed the IV... i said hell no she didn't "well she charted she did, you pay it". how cute.

    So, not only does it kill the physician, nurse (and at times me, your lowly clinical pharmacist) to write everything, but if the unethical ones that chart they did what they didn't screw it up for all too.
    Fun times.

  33. You are not alone.

    I had to go to a hospital out of state last year 6 times for a similar issue. All 6 times were for the SAME thing. ABSOLUTELY NO VARIATION.

    I got 6 different bills for 6 different amounts.

    When I called and sought explanations, I was on the phone for an hour and a half. The best explanation I got was: "That's how much the charge was".

    When I questioned why the charge changed each time, the answer I got was: "I guess the price changed".

    Yeah, it's wrong. But anyone who thinks the GOVERNMENT will simplify it when the GOVERNMENT is responsible for complicating it in the first place is clearly delusional!

  34. erdoc85: I have a friend whose husband is half Lummi, so they can avail themselves of Indian Health Services. They do so ... except if the wait time for a service is too long, they go outside the system; if they are unhappy with the quality of care, they seek help outside the system ... they use it when they benefit by it, but they have an "out", which I have known them to use for the more important stuff (for example, for my friend's cancer surgery).

    One of my sisters-in-law is also Native American. As with my friend, my brother's family uses Indian Health Services for the minor stuff, but have had some unhappy experiences with the more complicated health problems. My niece battled a respiratory infection that was never quite properly managed, and for which she was eventually hospitalized. At that point, they self-referred to a pediatrician and an allergist outside of Indian Health Services, and they got it settled. My brother's family doesn't have much good to say about the government-provided care.

  35. I'm sure that there are good and bad stories about the IHS, but it's my guess that the bad ones would outweigh the good ones by far.

  36. knew a wonderful ER doc who spent many years in NM working for IHS. she was tilting at windmills. very interesting point to bring up about nationalized health care.

    here's another interesting point. in GB, the NHS waived the white flag a few years ago and now private hospitals are 'legal' again. in the span of a few years it is now the case that on any given day there are more patients admitted and cared for in their private system than in the NHS. efficiencies do not come from centralized systems.

  37. If I understood it correctly, Canada is also moving toward a more privatized system.