By J.C., on October 21st, 2008
The theme of my last several posts has been the profit motive inherent in the medical system. Many parties appear to be responsible for this including industry and the physician’s lobby. I submit that the most responsible party is the consumer. The consumer is the one who demands the most advanced procedure, the best medicine, and the “best” doctor. The consumer is the one who demands the best prognosis and a return to the highest function possible.
One example of this is the cyberchondriac who comes in demanding the latest medicine or implant that they have seen on television. You explain to the patient that you feel that the generic medicine is just as good and is cheaper and that you are most comfortable with prescribing it because you are familiar with its side effects. However, they have seen the commercials and they have heard of the snazzy brand name. Additionally, they do not mind paying the exorbitant price of the brand name.
It is not unusual to also have the healthy young asymptomatic patient who would like a routine work up of all of his labs. My feeling is that if you are young and have no symptoms you should have the most inexpensive tests done, if any tests at all. If they are normal then you shouldn’t have anything done for a while. These patients are the kind of patients that want to stay on top of their healthcare and come in for unnecessary tests.
Sometimes there is a patient with knee pain without a history of trauma. The patient wants an MRI when there is ample evidence that the majority of knee pain resolves within six to eight weeks of conservative therapy including icing, NSAIDS, and activity modification. The MRI costs about a thousand dollars, but the patient doesn’t care because his insurance pays for it. Thus he insists to have one and if one is ordered there is a reasonable chance that it might show an equivocal signal in the mensicus. Then an expensive Orthopedic referral is made. If the surgeon is unscrupulous or if the patient insists on having surgery, an arthroscopic procedure is done. And the chain of expensive events goes on and on in this manner, costing the health system a lot of money for an issue that probably would have resolved on its own.
The underlying theme driving the demand of healthcare by the patient is a sense of entitlement. We in the United States don’t understand that if you travel halfway across the globe there are thousands of people dying everyday of disease caused from lack of basic sanitation. But when we have an annoying pimple or wrinkle on our forehead we want to pay several hundred dollars to have it zapped. When we have pain we want and expect our healthcare system to fix us. If we are not fixed then we blame the doctor and the system.
In the end, the most expensive thing is human resources. If we as patients make people work to improve our health it is going to cost money. That cost is worth it when the situation is dire. When it isn’t, the cost is wasteful. As a patient and consumer it is important to understand this concept–making the healthcare system work for you costs everybody a lot of money and makes the system more expensive. We are all intertwined in this manner, whether we want to believe it or not.
By J.C., on October 8th, 2008
In the medical industry, there is a dirty word called “bundling.” Bundling is the combining of multiple procedure codes into a general substitution code that ignores procedure code modifiers. Essentially, it is one of the ways insurance companies figure out how to pay doctors less. Here is an example of how the mechanics of reimbursement work in relation to procedure coding:
After a doctor sees a patient, he submits a claim form to the insurance company that lists all the procedures he did on the patient. The procedural coding method is quite complex and involves a series of modifiers when the procedure strays from the norm. For example, when you see your doctor for a general office visit, it is categorized as a simple, moderate, or complex office visit. The payment is different for each code, with complex reimbursing the most. Documentation for a complex visit is more extensive than a simple visit.
So how exactly does bundling work? Let’s say you go to your doctor for evaluation of hypertension. He notices that your pressure is abnormally low and that you are dehydrated. Thus, he decides to give you an IV infusion of fluid to rehydrate you. When it comes to billing, he has done three things with three different codes: evaluated you for hypertension, given you an IV, and done an infusion of fluid. The insurance company may try and bundle the two codes for IV placement and infusion together into one with the reasoning that an IV placement is included in the infusion code.
This type of bundling is widespread in every specialty of medicine and amounts to the simplification of multiple medical procedures into fewer. Thus, bundling is a technique used by insurance companies to mess with the coding system to lower reimbursement for physicians. As you can imagine, most physicians are not going to spend hours each day going over these codes and modifiers to see what they have bundled together. Some physicians actually test the system by continuously re-submitting claims with different codes until they get paid. In my opinion, manipulation of codes by physicians could be fraudulent – there is wide interpretation of how to code various procedures among the medical community. Many physicians feel that if insurance companies are manipulating codes, then doctors should fight back.
It is all a game of cat and mouse: the insurance companies bundle, and the doctors unbundle.
By J.C., on October 3rd, 2008
A friend recently asked me whether it matters if a physician is board certified in his or her specialty. For those of you who don’t know, the medical profession is governed by both a national and state medical board. In order to practice medicine, physicians must have a state license and a national certificate showing they have passed all the three steps of the United States Medical Licensing Examination. Once they are fully licensed general physicians, they typically obtain board certification in their specialty. Their specialty may be something broad, such as general family practice, internal medicine, or general surgery, or they may go on for further training to get subspecialty certification, such as in plastic surgery or cardiology. Essentially, at every step of their training, physicians need to pass an exam that says that they are competent according to national standards in that field. Board certification exists to ensure that there is a minimum standard practice among physicians in a specialty.
There are many physicians who do not have board certification in their specialty. This does not mean that they cannot practice medicine or their specialization. It may mean that they will have a difficult time gaining privileges at hospitals. It may also mean that the discerning patient may choose to go to someone who is more qualified. But, typically, it only matters if there is a complication or the patient is not satisfied with his or her outcome. If there is a lawsuit, it is likely that someone who practices a certain specialty without having the appropriate certification would be more exposed than someone who does have all the certifications.
One example of this is the notorious plastic surgeon on Dr. 90210, Dr. Robert Rey. I cannot confirm this, but I have read several articles that indicate he is not board certified, and he has been quoted as saying that he simply was too busy to get board certified. It does not surprise me that patients continue to flock to Dr. Rey for this services. Given his notoriety and fame from television, patients seeking a doctor to the stars will happily pay for his services.
From an economic point-of-view, this illustrates something very powerful in medicine – that reputation and business-savvy can trump qualifications. You do not have to be the best doctor or care provider in order to have a busy practice. It is well known in the medical community that, if you really want to find out whether a doctor or surgeon is good, you need to ask the key personnel who work with many doctors. For example, surgical scrub technicians know which surgeons have the best hands and the best intra-operative judgment. The average person watching Dr. 90210 does not know whether Dr. Rey is good or bad at what he does. He gains his reputation from the patients shown on television, his good looks, and the fact that he has his own TV show.
It makes me wonder why we have board certifications, after all, if the general public does not care much about it. Physicians in medicine seem to be chasing their tails getting more and more qualified, but perhaps this is all a futile endeavor.
By J.C., on September 17th, 2008
Most of you are familiar with the headhunters of the financial world. Bankers and finance people are notorious for migrating from one firm to another. Typically, it is the headhunters that cold call and go after the best and brightest of any firm. It is a lucrative business based on the concept of a placement fee or a commission.
Medicine has its own version of headhunters called placement agents. Typically, these staffing companies target newly minted young MDs and try to place them into an existing practice. For those types of physicians who are in high demand, such as specialists, the placement fees can be astronomical. After all, typically, a physician usually only moves once or twice in his entire career. Some do not ever move from their first job. This is in stark contrast to those in the corporate world who may move every few years for upward mobility. The main difference is that a physician is a small business owner and spends years building up his reputation and practice. Like any small business owner, moving locations is expensive and definitely dings your business for a while.
Thus, placing a specialty physician into a practice can earn the placement agent a fee in the tens of thousands of dollars, if not more. It is a big business that inundates resident and new physicians with mail, email, phone calls, and a lot of schmoozing. If you make the mistake of getting your name on one of these lists, you will never get out from under the deluge of marketing materials.
Unlike the regular corporate world, staff placement agents typically have no medical background. They know a lot about the field from their work, but if you ask them about the scope of any physician’s practice, you will soon leave them with a confused look on their faces. They want to move a very lucrative and highly valuable product – the physician who has gone to school for decades.
By J.C., on September 15th, 2008
While I have posted previously on how various business models in the practice of medicine, there is one business that is actually quite profitable for a physician who does not want the cost or hassle of running a private solo, group, or managed healthcare type of medical practice. That is the job of being a locum tenens.
A “locum tenens” position is a temporary physician position where a doctor fills in a need for a short term assignment. Typically it is a traveling position, and the doctor will register with a locums company. A hospital or practice needing a physician on a short term basis can hire a locum temporarily. It is actually quite similar to the “traveling nurse” type of career where nurses move from one location to another.
There is a small percentage of physicians who work as locums permanently with no home practice. In this day and age of shift work type of medicine, the locum position is probably most similar to an ER physician’s career where the work is shift work: you come to work for a condensed period of time then you relax and take it is easy when not working.
What is attractive for a physician to do locums is that they are filling a need and typically get paid by the day, with travel and lodging included. Thus, that physician does not have to worry about running a medical practice or hiring employees or getting patients or any overhead.
I personally know a handful of friends who do locums work. They are semi-retired and want to travel a bit while also working to make some money. They don’t want to retire fully because they don’t want to lose their skill set.
As far as compensation, you are a “hired gun” and can make good money. It is an eight-hour workday with overtime usually. For those in specialties in demand, a locum position can be several thousand dollars per day. You don’t necessarily get the satisfaction of building relationships with patients or running your own business, but you can have a better life if you set it up right.
By J.C., on September 11th, 2008
I’ve mentioned several times before that doctors are not good businesspeople and that the current state of the health reimbursement system is a mess. One reason it is so messy is that it is all about business and not about care. In this country, the basic teaching of medicine is that “continuous care” is the gold standard. This essentially means that when you see one doctor they are your doctor who knows you and they are the doctor that you will continue to see (if you are happy with your care). This patient-doctor relationship is the rewarding one that allows a physician to see you grow from a child into an adult into an elder. Similarly, it allows the patient to have that one person who they can trust to govern their health. The only thing that could end such a relationship was either the patient or the doctor ending it. Most typically, it lasts until the patient either passes away or the doctor retires and sells his practice to another doctor.
Enter the enemy – the insurance company. Nowadays, that type of relationship is almost non-existent. It is the insurance company who works on the patient’s behalf to enter into the patient-doctor relationship. If your doctor does not have a contract to provide care to that insurance company’s patients, then you cannot see that doctor unless you switch insurance companies. Thus in some respects the insurance company holds the patient hostage. The insurance company owns the patient, and the doctor can only see the patient if the insurance company allows this.
Recently, a doctor in the area was ill and needed to take 2 months off of work. He wanted other doctors to cover his patients and see them while he was gone. Unfortunately, all of those patients had one type of insurance that few doctors had a contract with. Thus those patients could not be cared for.
You don’t have to be a rocket scientist to see how messed up the whole thing is. Curiously, they are still teaching “continuity of care” in medical school. Soon they will be replacing that class with Economics 101 for dummies.
By J.C., on August 21st, 2008
In any small business, including running a physician’s office, the most valuable piece of your business is the real estate. Most people have heard the McDonald’s story of founder Ray Kroc, who believed that the most valuable aspect of McDonald’s was the real estate underneath each restaurant. For small business owners including physicians, getting a piece of the dirt underneath their business is essential.
As I have mentioned in other posts about physician’s offices, the top two expenses in running a business are payroll/benefits and overhead. The most costly part of overhead is rent or leasing of space to run your business. Thus, aside from cutting staff to reduce payroll and benefits, the best thing you can do for your business is to negotiate a better lease or to purchase your office space and pay it off over time. Most retail businesses must choose the best location for their business that generates high traffic and lots of willing customers. Similarly, physicians must also choose locations that are either part of existing hospital medical complexes or are close to large populations and ancillary facilities. Physician’s must also ensure that their offices are accessible to public transportation as many patients must use public transportation to travel.
Many physicians starting out cannot afford to purchase their own space. Thus they must lease space until they have the means to purchase. If you choose not to own your space, then in order to build some wealth you need to invest your income and savings wisely. For when that day comes that you must shut down your practice or your business, it will be the only thing you have to show for all of those years of hard work. If you are able to sell your practice or your business then that is a big bonus. But unlike other retail businesses, most physician’s practices are not sold for much.
One strategy some physicians utilize is to buy larger space than they typically utilize. Then they rent out space to other physicians. This is an excellent strategy for those physicians who have the means to do this. In some respects it turns the physician into a real estate investor rather than just a business owner. Thus for smart doctors who think in advance and invest in their practices, they will have a lasting asset that goes beyond the life of their practice.
By J.C., on August 19th, 2008
We’ve been talking a lot here about physicians and the business of running a medical practice. Lately, I have been seeing a growing number of physicians advertise on television. This makes me wonder – Should physicians advertise for their services?
In some circles many feel that it is unethical for physicians to advertise. It is sort of like ambulance chasing attorneys. More and more I am seeing cheesy ads by Plastic Surgeons on TV. They brag about how you can get a breast augmentation and how no one will even know. They talk about how they stand out above all other plastic surgeons. It all seems so tacky to me, kind of like the lawyers who advertise on TV.
Everybody knows that when you look for a lawyer you don’t find one from a TV ad. In general you find one by word of mouth and referral. The same goes for doctors. If you want to find a good specialist, you see your primary care physician who refers you to who they think is a good specialist. That is the way insurance companies want the business to work. Your primary care physician is the “gatekeeper” who handles and approves the referrals.
Television advertising does appeal to mass populations. However, most lay persons do not know who is a good doctor and who is a bad doctor. Although there are websites out there that now provide patient feedback and opinion on doctors, the truth is that only people who work closely with that doctor know how good they are. Thus one good way to find a doctor is to get in touch with your doctor friends and people who work in the healthcare industry. They will give you the skinny on that doctor you are considering seeing.
So what is the deal with physicians and advertising? Well you will find that physicians who advertise do so because they are in a lucrative field and want to drive up their business. Alternatively it may be the medical center or hospital they work at who would like to advertise a special “center” where that doctor works. For example, a regional cardiac center may want to brag that they have the best heart specialists. Thus they will put up a billboard or TV spot advertising their center with the faces and names of their heart doctors.
In general I believe doctors have the right to advertise their business, but I am not a big fan of it because I don’t believe it places physicians in a good light.
By J.C., on August 16th, 2008
I’ve posted twice now on the topic of the business of private practice medicine. Once about how being a solo practitioner is not a good business and a second post about the group practice model of medicine. There are other models and this time I will address the corporate partnership model of physician practice. This is a model used widely by physicians in Emergency Medicine and Anaesthesia as well as Radiology. In this model, the founding physician or group of physicians run their practice like a corporation and hire young physicians as employees.
This is a desirable model of business because the revenue per employee exceeds the cost of the employee. Thus the group can add more physicians as long as they have the work for these employees. In essence, the founding partners are more like “rainmakers” that must win business for the group. This type of practice is much like a law firm where associates and junior partners must climb the ladder for several years before becoming partner or manager.
One reason why this is possible in the fields of anaesthesia, emergency medicine, and radiology is that these physicians only provide care to patients under a contract basis. Additionally, these physicians contract with other physicians or hospitals. Essentially, the doctors in these fields of medicine work on other doctors’ patients or on patients that belong to the hospital.
For example, an anaesthesiologist typically does not have a medical practice where he sees patients. His specialty is to provide anaesthesia for surgeons who do surgery. Thus in order for him to get cases to do anaesthesia he must be invited by a surgeon or be hired by the hospital or surgery center to do anaesthesia. Thus he can sign a contract for his firm of anaesthesiologists to do anaesthesia for any of those entities.
Similarly, a hospital Emergency Department can either hire ED physicians separately or may go ahead and contract with a group of Emergency Department physicians to provide care for the ED for a certain number of hours or a certain number of patients. In this manner the firm of ED physicians may hire young ED docs to work.
As you can see, the contract side of medicine is a good business to be in and is more of a corporate model of physician practice. What is different about this type of medical practice is that the founding partners actually practice little medicine because they are busy winning contracts or are busy running the firm. They make a lot more money but they typically end up being the “business partner” in the firm.
By J.C., on August 9th, 2008
My post about solo practice medicine brought along some interesting comments and trackbacks. In addition to traditional solo practice medicine, there are other models of medicine that are more economically efficient. One such model is the group model of medicine. In this model, several solo practitioners band together to form a “group” to share costs of overhead such as office space, assistants, equipment, and other services.
The group model is attractive for many practitioners because they get to save money on costs. The model is more economically efficient than a solo practice because office space and personnel are always being utilized. For example, a solo practitioner may choose to take one half day or one full day off from work. However during this time, his employees and overhead are still being paid. Thus, the office is not “closed” but is still open and is generating revenue. Banding together with other practitioners allows full utilization of staff and space.
One great benefit of group practice is also the built-in referral base among group practitioners. Typically in a specialty group, all or most of the solo practitioners have a different specialty interest. Thus they can refer patients to each other. This concept is particularly attractive for those fields in medicine who rely on referral from primary care and other practitioners.
An additional benefit may be more purchasing power by belonging to a group. For example, the group may save money on supplies and may negotiate service contracts. Similarly, a group may purchase their equipment and office space because they can pool together the finances of all members of the group.
However, despite all of the benefits of the group practice model of medicine, at the end of the day each doctor is a solo practitioner – essentially their solo practice within a larger group. Thus, the analogies I made in my previous post about solo medicine not being a good business model still ring true – without the key physician employee, there is no revenue.
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