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November 06, 2005

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Thanks, Elisa for your comments. I left some remarks back on the last post: http://www.healthyconcerns.com/2005/11/secrets_to_a_sm.html#comment-10945883

In my town, where there's 80%+ managed-care penetration (thank you very little), the insurance company would use your premiums to build it's cash reserves to 5x what the state requires it have on hand. Why? So it can acquire other companies and get it tentacles wherever it damn well pleases.

Or, your $3k is subsidizing the small percent of patients who use a huge majority of medical services (I think I heard 15% of patients cost 80% of the resources.) Now those patients may have a brain tumor or, more likely, they're sedentary, blooming-onion-eating smokers who don't wear seat belts.

I'm eager for the arrival of consumer-driven health plans. Other professionals and business owners earn success by providing excellent service at a fair price. They're expected to stay on their toes, take care of their customers, innovate for the future and respond to market forces. If not, they're done.

My colleagues and I have been denied the standard business model by the 3d-party payor system. It will take some effort to re-tool. But it's about time.

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Dr Stephanie:

Hi! As one who's been touting CDHC for a long time, let me assure you that it's becoming more and more accepted in the marketplace. And I agree with both you and Elisa that it's overdue.

But if I may, I'd like to ask you if you're willing to part with your own (perhaps proprietary) information: would you be willing to explicitly state your fees, in advance, for your cash customers?

Reason I ask is, that's been the most important tool in the CDHC formula (mixing metaphors, sorry!), and yet it's the one least likely to be found.

When I walk into McD's to order a Big Mac...er, uh, Salad, I see the price prominently displayed above the counter. Will I be able to walk into your office, and see the price of a strep test, or routine physical (or whatever)?

I'm not looking to pick a fight; I just think that this is a piece of the puzzle that's long eluded us. And until we know, explicitly, the charge for a given service, then I don't think that you can expect an honest answer to your question.

BTW, boutique practices have been around a while, so that may be a partial answer to your dilemna.

Absolutely, patients deserve to know the fees upfront. There should be a "menu" that's accessible in my waiting room, my website, or by mail by request.

It's crazy that the whole notion of money changing hands at the doctor's office has become some kind of He-who-must-not-be-named secret. But this is what we get from the 3d parties--the fees currently charged for services in my office aren't mine. They're set by the payor and treated like some kind of trade secret. I'm contractually obligated to charge you $X for service Y--but I can't tell you what it is, or I violate the contract. (you might leak it to the plan down the street.) Also, I can't waive your co-payment if I want to because I'll be violating the contract. If I "downcode" and charge you less, theoretically I'm committing fraud and could be fined or worse.

I'm a surgeon, and don't think boutique practices would work for me. I object to that model on several grounds--but I wholeheartedly support the idea of treating patients like grown-ups who are capable of making decisions if provided with accurate information.

CDHC can't arrive soon enough. What are your predictions on penetration/acceptance over the next 2-5 years? Will there be regional differences? What will key factors be?

Elisa - Just a wag, but if you had a medical condition in which your bill ran $50k+, my guess is you would not be complaining as much about the $3k you pay for coverage.

Stephanie - No, the boutique model wont work for specialists and it is questionable how well it is working for family practitioners & internists. The internist we used until earlier this year entered into a boutique arrangement with 2 other docs. The concept was introduced with much fanfare, engraved invitations to a dinner, glossy literature about the high level of personal services and . . . a price list.

Annual "membership" fees are $1800 . . . per person. You get a complete physical (lab work is extra), a private number to call, no wait office visits, etc.

Of course you also have to continue to carry health insurance for those things not treated by your internist, so this is an additional "premium" if you will for that personal touch.

They expected 300 patients to sign on (out of a combined practice of 1400. Indications are they did not even come close to the projected 300. Other, similar practices have encountered similar issues in keeping/attracting an adequate patient load.

As for the managed care contracts, you are free to agree to the terms or not. No one is forcing you to accept the fee schedule.

I am curious where you get your figures on the "5x reserve" factor. I have yet to see anything that comes close to that figure and I have been involved in the industry for over 30 years. Where did you get this data?

FWIW, health insurance reserves vary by carrier and line of business. Most will be in the 28% of net premium range, give or take a few points. A 5x reserve ratio indicates a carrier is way over-reserved and subject to sanction & fines by the DOI. Each state dictates reserve & loss ratios on each line of business. I really would like to know where you got your data. Please post a response.

Lastly on the CDHP movement, at present less than 2M insureds participate in such plans despite the fact they have been around for 5+ years. My personal opinion is that everyone should have a cat plan ($5k deductible and higher) but consumers are addicted to the low copay plans that are prominent in the workplace as well as individual market.

And this . . . I have yet to see a CDHP that is not tied to either a PPO, POS or HMO contract. Even if the CDHP takes over the market place you can still expect to see patients opting for the lower priced services offered by participating providers.

As one of the 15% draining the system - whom is not a bloomin' onion eating slug, I have an immune deficiency - try that on for fun sometime, who has experienced life with and w/o insurance I feel qualified to weigh in on this topic.

I always paid 2-3 times the amount of fees when I was w/o insurance. I had an anesthesiologist who gave me a cash discount once. Once. Had a surgeon who let me pay out over the course of a year. Stephanie - they had exact amounts they could quote. Got them from the secretaries at both offices. I had to pony up to the ana the day of the surgery. She photo copied my credit card and everything.

The best part was the hospital. No discounts there at all. They give enormous discounts to the insurance companies based upon the negociated contracts, but if you have zero insurance - guess what? That sky high amount really is what they charge you. Do some of those things really cost that much? I think not. And there in lies the rub. Just like the $20K toliet seat the gov't pays for - aspirin cost $15 in the hospital. What hospitals can't shop at Sam's?

I fail to see if doctors went to a cash system how the fees would be all that much less. I go see my pulmonologist and his office visit is $125. Insurance pays him $45. He is under contract. If I don't have insurance when I see him it is still $125. I am not addicted to the low co-pay, I pay plenty. Even people who rarely use their insurance and are paying about 5K per year with a family of 4 who take the kids to the dr for a checkup end up paying about $280 for 2 kids w/a checkup. This is w/the insurance that allows for lower payments w/just maintenance type of insurance. This is absolutely ridiculous. And it is happening in my own company. To anyone who is healthy w/kids this is a joke. Trust me those are the ones addicted to the low co-pay.

When I see actual bills that are going to my insurance company and there are items on there that are wrong and I point them out. The answer is always - oh, thanks but we don't care.

The apathy among all parties concerned is amazing. I doubt any doctor knows how apathetic his or her office is about payments. I do and could educate plenty.

I am addicted to a modicum of respect. Respect for my time and dignity. I routinely call to find out if the doctor I am to see is running on time or not. I show up for my appt's with my questions written down and previous lab work in hand. I am organised, polite and intelligent.

Yet I continually run across offices that do not return phone calls. Do not refill rxs - and I make sure I start on refill requests at least 10 days out - or cannot call in an accurate rx. Generally after tons of fustration I leave those offices.

It is a constant uphill battle with me and the insurance company and any medical facility I use. I have never found a doctor yet who will discuss their prices openly. Until that happens I don't see much changing and continued complaining.

Sara, you’re right about the markup—it’s a total mess. For some crazy reason, my colleagues and hospitals think it’s reasonable to charge the uninsured an arbitrary “retail” price. I still chalk this up to the fact that we’ve been brainwashed by third-party payors to believe their made-up schemes actually make sense. An awareness of price/cost has been removed. So, doctors and patients are flailing around when it comes to “what to charge/what to pay.”

The fee schedule covered by your insurance is determined by a bunch of number-crunchers. It’s supposed to be a negotiated contract, but as far as I am concerned (and as far as programs like Medicare are concerned), it’s “here’s what your time is worth, take it or leave it.” So, I take it. By doing so, I have declared the value of my services: “this is what I’m willing to accept. It will cover my overhead costs and salary.” It’s up to me as a small businessperson to make that work.

If you come to my office without insurance, you’ll be charged the same fee I’d expect to collect from our typical local payor. It’s ridiculous to artificially inflate that fee to the next guy who walks in without insurance “just because.” In fact, my profit margin is higher in these folks anyway because my staff doesn’t have to go thru the reimbursement charade. Yes, you’ll be expected to pay on the day of service (just like you pay when you leave a store with merchandise.)

The hospital’s $15 fee for the aspirin (so they’ll tell you) also has to cover the salaries for its supply room staff, their pharmacist, the nurse who gave it to you and the paper in the chart that says you received it. When you go to a bar and order a gin and tonic, they’ll charge you $5. A whole bottle of the good stuff is only $20—but they’ve got to keep the lights on, the glasses clean, and the menus updated.

Your final comment: “It is a constant uphill battle with me and the insurance company and any medical facility I use. I have never found a doctor yet who will discuss their prices openly. Until that happens I don't see much changing and continued complaining.” But things ARE changing, and doc’s WILL have to discuss the prices, and spell out the expected course of treatment, because patients like you will expect it. The sooner, the better! Check out the wave of the future at: http://insureblog.blogspot.com/2005/11/marcus-welby-meets-jiffy-lube.html

Going back to an earlier comment in the thread--I didn't want Bob to think I forgot about his request: 'I am curious where you get your figures on the "5x reserve" factor. I have yet to see anything that comes close to that figure and I have been involved in the industry for over 30 years. Where did you get this data?'

From page 24 of Excellus' 2004 Annual Report: "Reserves...of $825.7M at 12/04 increased $107.6M from 12/03...exceeded its minumum required statutory reserve of $483.8M at 12/04...S&P ratings A-..."

I'll admit I knew it wasn't 5x (it's 1.7x), but wanted to sound inflammatory to make my point. Which is: health insurance premiums are equivalent to a tax on employers and the public. Despite it's adequate reserves, this payor raised premiums 15% for 2005. http://www.fltimes.com/Main.asp?SectionID=38&SubSectionID=121&ArticleID=6581

The way I see it, Excellus removed millions of dollars from the local economy
in order to feather its own nest to guard against some theoretical large-scale health catastrophe. Meanwhile, household and business' budgets are squeezed. Perhaps this is why patients are left to settle for service on the cheap.

If a carrier chooses to reserve more than the statutory minimum, that is not a bad thing. The money in reserve cannot be used for frivolous items such as you suggest but rather must be earmarked to cover current and future claim obligations. Actually I would be more concerned if a carrier was only carrying the minimum reserve level on the books.

When you choose to pull a figure out of context and jump to conclusions without knowing all the details, it is like crying "fire" in a crowded theatre.

I have not read their report in entirety and really have no desire to do so.

You may know quite a bit about being a surgeon, but your understanding of the third party payor system leaves much to be desired.

My knowledge of the 3d party payor system comes from funding it as a policyholder and employer; getting stiffed by it as a "provider" (witness the recent rash of lawsuits insurers have lost nationwide when caught violating their contracts); caring for my patients caught in its crosshairs; and as a clinician/business owner who tries to keep up with shenanigans like j-codes, CPT-modifiers and prior-authorizations just to earn a living.

If this system worked as well as you believe, the world would not be so disgusted by it.

If we went to a single-payor system, we wouldn't contribute dollars toward insurance company profits and would likely see a reduction in operational cost. We would have a simpler rate system, and providers would only have to deal with one administrator/claims payor/set of rules. People would be covered for primary and preventive services as well as catastrophic. We would have a single system in which to implement quality initiatives and utilization control.

Why are consumers and providers so scared of this approach?

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