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Physician Payment: Why So Complicated?

Over 25 years ago I witnessed a crime, committed by my family doctor. I was waiting to pay for my visit when an elderly, dignified, but obviously poor woman pulled out her checkbook, clicked open her pen, and asked, “How much do I owe?”

The receptionist’s answer piqued my interest and admiration, “The doctor said no charge, we’ll just bill your insurance.” I still remember the gratitude conveyed by her body language as she said, “Thank him for me,” returned her checkbook to her purse and left.  Naïve to the complexity involved in medical billing, I was unaware that anything wrong had been done and did not resent having to pay for my office visit since our family could afford to pay; however, he eventually served time in jail for what I have always considered crimes of compassion. Perhaps I lack the details of his legal case to properly consider his actions but I’ll never forget the respect shown him by my home town in rural Tennessee after his time had been served; my family among many he continued to care for.

Today, I know it is illegal for a doctor to forgive someone their deductible or co-pay and still bill Medicare; yet, for me, seeing it as wrong is a moral stretch. This, in large part, explains why I have chosen to work outside the third-party payer system which dominates the medical landscape of today.

The way physicians have been reimbursed has gradually changed over several decades but will evolve rapidly under the intense pressure of Health Care Reform. My family doctor, rooted in his past, was operating under the old practice of charging his poorer patients less than those with more ability to pay–Uncle Sam included.

Before the system of third-party payers gained control of the Health Industry, physicians throughout our country used a sliding scale to charge their rich patients more than their poorer patients and many of the community hospitals existed to provide charity care. The AMA’s 1957 Code of Ethics stipulated that physicians’ fees “should be commensurate with the services rendered and the patient’s ability to pay.” Physicians in 1962, on average, charged their high-income patients 40% more than their poorest patients.

After the Medicare Act of 1965 standardized medical fees supplanted the sliding scale, for better or worse. But the federal government made it illegal for a doctor to waive the portion of their fees owed by the patient (stating that waving the physicians’ fee would encourage patients to overuse Medicare).

Physician reimbursement has changed greatly over the past 25 years and I would recommend reading Maggie Mahar’s book, Money Driven Medicine, for a detailed review. But if you prefer to look forward, two ideas being ballyhooed today might allow you a glimpse of our future: Bundled Payments and Pay-For-Performance.

Michael Porter Ph.D, an economist, authored a perspective piece in the July 9th issue of the NEJM, writing, “Reimbursement must move to single bundled payments covering the entire cycle of care for a medical condition, including all providers and services.” In other words, payment is to be made for each separate illness a patient suffers from. Hospitals, doctors, pharmacies, labs, etc. are to share these payments, each according to the role played within that specific disease.
While this might work for a salaried physician employed by a hospital, I shudder to think of the back-office staff a private-practice physician would need to keep track of a doctor’s portion of a bundled payment. Maybe the three new government agencies Dr. Porter said would be needed to implement Bundled Payments would help simplify things but I suspect the lion’s share of that bundled payment will be spent on administrative costs.

Pay-For-Performance has been a reality for primary care doctors in England since 2003 with 25% of their income linked to quality of care as measured by a point system. Points are awarded for 65 clinical “indicators” related to 10 diseases. Telling a diabetic to stop smoking earns our British colleagues 5 points, while 6 points is the prize for a seizure free epileptic.

Results from England were published in the July 23 issue of the NEJM. Quality of care temporarily improved for diabetes and asthma but not heart disease and within 4 years improvement was not seen in any of these conditions. Quality of care declined for patients suffering a disease without an incentive. Somehow, Pay-For-Performance prevented patients from seeing their own doctor as continuity of care suffered an immediate and sustained reduction.

In my practice we charge our patients based on time in 5-minute increments which is transparent, easy to understand, and does not necessitate a large clerical staff to administer. We work outside the mainstream, to be sure, but our office currently functions with three clinicians, a nurse, and one clerical worker. We are able to focus on real medicine instead of the standardized facsimile of medicine cobbled together by Insurance companies and Government agencies. Most rewarding, we don’t have to reconcile our ethics with a complex set of rules and regulations and remain free to follow our own conscience while our patients are free to stay or go as they choose.


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