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.
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.
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Doctor’s do have more power than the insurance companies. They don’t have to sign those insurance contracts. Instead they can receive payment directly from the patients.
In response to the first comment, that may technically be true but it is not realistically true. The system that has been created has the physician held hostage. Sure, the doc can refuse to sign a contract with Medicare or Blue Cross, the 800 pound gorillas. But if you are primary care doc and you do this, you just lost better than 80% of potential patients. And, although a cash or retainer system is much better, until the physician can build a patient base, he or she will have to get a job doing something else because the practice will go bankrupt. However, like I said, you are technically correct. The emergence of retainer medicine is a classic example of your statement and it would be a much better system. However, it takes a large patient base to develop enough relationships with patients that 300-500 of them would be willing to ante up $1000+ per year to see the doc.