Thursday, October 16, 2008

What to charge?

Ever notice when you go to the doctor or a hospital, the bills seem outrageously high? That's why all doctors are rich, right? But then did you look at the EOB (or explanation of benefits)? They are very tough to read, and even when you do realize what the different columns are, it seems there a magic 8 ball somewhere determining percents, amounts, and denial codes.
So here's a brief overview. When a doctor contracts with an insurance company or agrees to a medicare contract, they agree to accept "fair and reasonable payment" for services rendered. In many cases, the standard contract does not list what that will be, the insurance company changes the reimbursement rates based, somewhat, on the current "market value". Except that they can really just pay whatever they decide is fair and reasonable. Often this is a percentage (usu from 70-150% ) of the medicare allowable amount. (not usually 150.)
So medicare decides what is "fair" to pay for an appendectomy, a pap test, a chest xray, a basic office visit, open heart surgery, etc. These all have codes, and a medicare committee determines the value of each code. (this committee, by the way, is made up of 17 surgeons and 9 non-surgeons, that's fair, right? not.)
So I could charge $10,000 for a 99213, (a standard office visit), but it doesn't matter because I am only going to get whatever medicare says is "fair and reasonable". (Unless you are one of the uninsured, in which case you're just paying the full amount, whatever it is.) But, medicare and the insurance companies won't pay you extra, so if I only charge $50 for a 99213, even if they "allow" $77 I will only get the $50. So I should really make sure I charge high for every visit to make sure I get the maximum amount back. But if you are in the category of "cash patient", that higher charge makes a big difference. It makes it tough to evaluate what people charge, because in this industry, very few people expect their charge amounts to have any relationship to their amount received.
But I think it makes us look bad to charge more than our service is really worth, just to make sure we get paid the bare minimum. Someone told me they had surgery for a knee replacement. The total bill was $50,000. The final amount paid out was $12,000. How does one financially analyse what was "lost" or not in this transaction. What was the surgery really worth?
So when revamping my business model to exclude the Magic 8 Ball Effect, it is really hard for me to figure out what to charge. I tried to factor in my expenses (ouch this year), my debt from school and the practice, how many patients I hope to see a day, how many patients I am able to see a day, what people might be able to afford, and what other docs get paid. I decided on $100 a visit, unless the visit is over 40 minutes, and shots would be based on market price (like when you order lobster at a fancy restaurant). Is $100 enough? If I can see about 50 people a week it will be fine. Is it too much? I almost hope it is, so that I will be able to lower my rates and make care more accessible to more patients.
I wonder how much the perception of the healthcare crisis would change if doctors really charged what they needed or deserved. I personally have a hard time being sympathetic for someone who is charging $50,000 for a surgery, even if I know they are only getting $12,000. How can people understand what is really going on with their healthcare dollar, if the numbers are so abstract? How can doctors really know what their write offs are if their charges are not really what they need to be? This is a fairly easy step that doctors could take to demystifying health care finances.


KathTac said...

Well, that was really very helpful. I'm sure most people have some mini-clue about this, but now that you explained it, it's beyond annoying. Just wacky. Could you charge by the hour? With a min. and max. built in so it seems fair? How are people responding to the $100? Do other docs hate you for writing this stuff?
Kath Tac

Tac said...

I think the only other docs that know about this so far are jen and bill, if they were going to hate me they already would by now.
Its annoying from every aspect.
Hourly charging is tough, as a lot of the work I do is "behind the scenes" as it were. I try to build that in to the fee, so while $100 for a half hour seems like a lot, figure I will spend 15 min tracking down tests, contacting specialists, etc. I feel guilty when I charge people for the $175 "extended visit", not sure how to get over that.
Maybe that will be today's topic...

Wayne said...

When I started moving my sister's practice towards a cash only model, I also came up with $100/visit except for the 1-hr long comprehensive physicals. $200 for those.