Overall, health care providers lose money on 80% of their Medicare patients. So apparently most health care providers are being “efficient” in the sense being used.
Earlier you said that people were not going to be more productive while paying them less, but now you are saying they will.
:shrugs:
Regards,
Shodan
That is correct.
Huh and huh. That they are losing money now doesn’t say much about efficiency. How do you know they wouldn’t be making money with efficiency improvements.
How much something costs is not so easy to calculate. First, hospitals pushing for higher Medicare reimbursements are going to tend to structure the numbers to make it seem they are losing money. But if there were no Medicare patients, what would happen to the allocation to fixed costs that Medicare patients pay. For instance, Medicare might not pay as much for my MRI as a private insurer, but if I were not going to it it would be sitting empty, which would increase the costs fora all others.
I worked on cost allocation for the much simpler problem of electronics manufacturing, and it isn’t easy.
Do you really think a doctor falling from the 1% to the 2% is going to be that much less efficient? You must believe that paying a CEO $25 million rather than $50 million is going to ruin his work ethic. When pay causes hardships, that’s one thing, but it is hardly the case here. We could talk about fairness also, but that would be a distraction.
We all agree that health care costs are skyrocketing. If physician pay was the major factor in costs, we’d expect surgeon pay to be skyrocketing also.
However, here is an article on physician’s salaries.
My point in mentioning the 1% was that even if surgeons took a pay cut (which I was not advocating) they wouldn’t suffer too much. And it looks like it would not help very much. So, it looks like we have to find efficiency someplace else. Like better utilization of facilities and less duplication across competitive hospitals.
This is an example of behavior that causes hospitals to respond in ways that decrease overall efficiency. That new MRI machine is exactly an example of one of those “shiny new toys” mentioned up thread that increases costs of medical care. So if you will do this, do not be surprised if administrators buy things that attract patients (bigger fish tanks, new machines) and skimp on areas with lower profile.
I’m not saying that you can’t make the choices that you need to. I’m just saying that the system that is as efficient as you want is not what you are used to.
So the anti-trust laws not only cover companies banding together to set prices they will sell things at, but also companies banding together to set prices they will buy things at?
Anti trust laws prohibit any two distinct enterprises from acting together to harm a third party economically. This includes colluding to sell at higher prices or buy at lower prices.
Tacit collusion is a different case and is not always illegal. So Walmart could announce that they are buying widgets at $X from a buyer and then Target could then insist on the same price. For obvious reasons this is almost never done about wholesale purchases but is sometimes done about retail prices.
Exactly my point. Now, I had good reason to avoid a cheaper in-office test with somewhat nasty side effects (which are TMI) and if you I am going to do this I might as well go with the machine which will give the best results, but the MRI section was not crowded, and there was one machine that was idle when I was there.
The system as a whole would have been served better if I had used one closer to home in another facility, but our competitive system is not set up to do that. In fact, my clinic is owned by a monster company which owns lots of hospitals, so I should have been able to go to one of them, but the components of the company are somewhat competitive too.
It still seems to me that your behavior in the second post belies the opinion expressed in the first post.
The forces that would lead to greater efficiency would prevent patients “shopping around” for the “shiniest toys”. If it did not, there would still be incentive for “managers …[to]… want shiny new toys to advertise”.
How do you propose squaring that circle?
To defend myself some, I wasn’t shopping. My specialist outlined the options, and the one I chose was a clear winner. And I’m not opposed to shiny new toys that do better, I’m opposed to lots of copies of toys with low usage rates.
The way to solve that is to optimize across all providers, and not work in the silos we have now.
When I was on private insurance the closest hospital to me was not covered. (Not a problem, I wasn’t thrilled with their numbers.) Patients can’t do much about this.
I’m not in favor of government running the system, but I am in favor of putting pricing pressures on medical providers to make them solve the problems themselves. It works - as a veteran of the Bell System I saw it work.
I’m not blaming you for seeking out your best opportunities for best care.
I will point out that your specialist “shopped” for you, to some degree.
And I still think it’s not right to complain about managers getting the latest equipment when you yourself will travel sone distance to avail yourself of it.
Just chiming in about the prices. First of all, I doubt that doctors lose money on 80% of Medicare patients. If they did, none of them would take Medicare. They may not make as much profit as on commercially-insured patients but they aren’t giving away their services for free.
When it comes to pricing something like an MRI, you have to look at how reimbursement is done. Medicare pays $91.42 for an MRI. One commercial insurer may allow $100. Another may allow $150 but require the patient to pay the first $100. A third may allow 115% of whatever Medicare pays. In all cases, they pay the** lessor** of their allowed amount or the charged amount.
Now the average provider may participate with 20 or 30 insurances, each of which has multiple plans, such as HMOs, PPOs, POS plans, etc. Now when you are billing, you can keep a spreadsheet of every one of these hundreds of plans and what they reimburse and make sure to update each one every 6-12 months for the thousands of procedures available, or you can make sure you set your price high enough that it is higher than the highest reimbursement and just charge everybody the same amount. It’s not necessarily trying to scam anybody; its just trying to avoid leaving money on the table and avoid having to hire multiple staff to deal with it.
Let me give you an example. I was charging $35 for a flu shot, to be competitive with the local pharmacies. When I got reimbursed last year, I found that Medicare was paying $14.50 for the vaccine and $20 for administration, or $34.50. However, some of my commercial insurances were paying 115% of Medicare prices or $39.68. I was still only collecting $35. Now I could continue to charge $35 and throw away the money from the commercial insurances. Alternatively, I could charge Medicare patients $35 and commercial patients $40 which leads to awkward discusions when you have a couple where one partner has Medicare and the other doesn’t, or I could just charge everybody $40 and take what they pay. However, there may be one plan that I take that decides to boost its payment to 120% of Medicare on January 1st. That means I would be raising the cost to $42 halfway through the season, and then presumably raising the price again the next year. Alternatively, I could raise the price to $50, and not have to change my fee schedule for a couple of years, be able to bill everybody the same which saves on staffing and billing costs and continue to accept what each insurance pays. Its a whole lot easier to do the last.
If we had Medicare for all, it would be much easier. Everybody would pay the same and we would know what to bill rather than trying to make sure the bill stays higher than the highest reimbursement.
Could we have a citation for the article?
~Max
I manage a medical office and this is the reason our “charge” amounts are so high. It has nothing to do with self-pay prices or negotiation tactics, it just takes less effort if we charge some slightly-more-than-reasonable amount per service and let the individual payors write off what they want. I have on my wall a separate list of prices for self-pay patients.
Believe me, if we could set the rates at a reasonable price we would do so. Unfortunately doctors don’t usually set the rates - every insurance contract has a clause that says they will pay the lesser of the insurance companies fee schedule (which they can unilaterally amend) or the charged amount. Sometimes I have a little leeway for a percentage increase over their fee schedule, but other than that it’s take-it-or-leave-it. For smaller insurance companies they just appropriate the local Medicare fee schedule.
~Max
That dynamic is about right - the government contracts with a local company called the Medicare Administrative Contractor or MAC for short. This local company is who we mail the bill to, and Medicare checks (EFTs) come from the MAC. The MAC in turn gets paid by the government.
The Medicare rates themselves are calculated per-region by multiplying a “relative value unit” by a regional multiplier and an inflation factor. There’s a semi-secretive committee that determines the relative value for every service Medicare covers. I say semi-secretive because they don’t exactly hold open meetings, but these are doctors appointed by multiple specialty boards and the RVUs are published publically on the CMS website. They don’t review RVUs annually, but on an as-needed basis (slowly).
But then Medicare doesn’t actually pay the “Medicare rate”.
First, Medicare A and B splits the allowable rate into 80%/20% Medicare and patient responsibility. That’s where the $18.28 comes from.
Then, Medicare doesn’t actually pay the full 80%. All Medicare reimbursement is cut by 2% due to the Budget Control Act of 2011. Then there are further cumulative cuts of 1% for every year the provider fails to meet Meaningful Use criteria from 2014. On top of that there are adjustments of +/-7% depending on how well the provider scored on the Merit-based Incentive Payment System two years prior. Notably, the criteria for MU and MIPS depend on the capabilities of the provider’s software, which can be excruciatingly expensive to modify or replace.
If you think 2% isn’t a big deal, let me tell you that our profit margins for many services are right around 6-10% before factoring in administrative overhead, office supplies, or maintenance. Some services break even, which makes for a loss after accounting for the above.
~Max
Not quite. When we write off charges they go to a “bad debt” expense account which is deducted from gross revanue (total charges). So it doesn’t work to our advantage or disadvantage come tax time. The IRS collects on what we actually collect.
~Max
Ah. I’m not actually complaining. The way the healthcare system works today is a function of the incentives built in, and all the players in it are being reasonably rational. To change the system we’re going to have to both change the incentives and the amount of information available. When we go to the store we see a pricetag - I didn’t see one. I pay for a Medigap plan without a co-pay so for me all the prices are the same, but that isn’t true for the system.
And the way insurance works there is not a lot of incentive to cut prices too much, since they get a percentage.
Price disclosure and price pressure might change things. Expecting people to force it won’t do anything.
I almost forgot about the recent push to apply the multiple-procedure rule to all procedures. That would have been lots of fun. Basically if a doctor performs more than one procedure from the multiple-procedure list during a single visit, reimbursement for each additional procedure is cut to 50%, 25%, etc. Right now this sort of makes sense for codes in the list, because the RVU committee calculates the value of each procedure as if it were stand-alone. There was a push last year for CMS to extend this rule to all procedures, which would be extremely careless because there are many procedures that require multiple units and many instances where multiple tests can be performed on one visit, where the fee schedule already barely covers costs.
That sort of change, on a couple months notice, could have put a lot of doctors out of business. Especially specialists who do a lot of testing. Luckily it was not implemented.
~Max
This didn’t work for us - local pharmacies somehow get away with offering flu shots for free which tanked our flu shot administrations. Also our software vendor refused to integrate with the state immunization registry, which meant we couldn’t administer any more vaccine without hurting our Meaningful Use scores.
~Max
Maybe doctors would not need nearly as many employees? Insurance seems to be what my doctor’s employees are usually working on.
Do you mean the pharmacies give the flu shots for free to anyone , or do you mean the insurance companies don’t require a copay? I just got a shingles vaccination and my choices were