Same Doctor Visit, Double The Cost

On August 26, 2012, the Wall Street Journal published a story describing a situation whereby a patient who sees a physician employed by a hospital essentially pays double out-of-pocket what they would have paid for the same exact office visit with a physician NOT employed by the hospital.

I actually wrote about this situation in January 21, 2012.

Beyond what the Wall Street Journal reported, what's going on?

Assuming all things equal whereby a private practice physician and a hospital-based physician are equally competent and the supporting staff for each are both equally good (such assumptions are debatable in some circles, but will be ignored here), it all comes down to money.

When a patient sees a private practice physician, the government-established fee schedule only incorporates payments to the physician.

When a patient sees a hospital-based physician, the fee schedule not only incorporates physician payments, but also additional payments to the hospital.

Now, the patient doesn't pay what insurance covers in either scenario, but typically there is a copay or coinsurance payment that the patient is responsible for that typically is 20% of the total charges.

Here's an example using the Medicare fee schedule from 2002. I elected to provide "old" 2002 data as this information can be found easily and corroborated, but rest assured, the numbers are starkly different and perhaps more lopsided today. Medicare was selected as it is the bar to which all other insurance plans are typically based on.

In a physician run private practice, the only charges that are incurred is from the "Physician Fee Schedule". In a hospital-based practice, a patient incurs not only the physician fee schedule, but also additional charges based on the "Outpatient Prospective Payment System".

As you can see, the physician fees are slightly higher in the private practice setting compared to hospital-based practice... BUT, given the additional hospital charges involved with a hospital-based practice, the patient ends up being charged more per service for a simple clinic visit ($16.48) than if they had been seen in the private practice office ($10.06).

The cost differential for the patient is far worse with any procedures ($62.62 versus $342.47).

For the same exact procedure or service, a patient automatically ends up paying more to be seen in a hospital-based practice.

This payment system is the same whether you go to a tertiary care teaching hospital like Massachusetts General Hospital or a tiny 98-bed community hospital.

As an aside... for any physicians employed by a hospital, it behooves you to consider this differential payment in terms of how a hospital determines your salary and productivity. Do they consider ONLY the physician fee schedule or do they also take into account the outpatient prospective payment system?

I should also mention that Congress is considering abolishing the outpatient prospective payment system for clinic visits only. Click here for more info.

Source:
Same Doctor Visit, Double the Cost. WSJ 8/26/12

Hospital-Based Practice Versus Physician Private Practice. Fauquier ENT Blog 1/21/12.

Elimination of Differential in Medicare Payment for Clinic E&M Services Furnished in Hospital-Based Outpatient Departments Proposed. Martinedale 12/10/11

Medicare rules for hospital-based clinics. American College of Surgeons. Vol 87, No 4

Medicare Physician Payment Updates and the Sustainable Growth Rate (SGR) System. Congressional Research Service. 8/6/2010

Hospital-Based Practice Versus Physician Private Practice

The other day, an astute patient of mine asked what the difference is between a physician who works for a hospital (hospital-based practice) versus a physician run private practice.

After all, a patient still sees a physician in either case...

Is there an actual difference from a patient's perspective???

Assuming all things equal whereby a private practice physician and a hospital-based physician are equally competent and the supporting staff for each are both equally good (such assumptions are debatable in some circles, but will be ignored here), it all comes down to money.

When a patient sees a private practice physician, the fee schedule only incorporates payments to the physician.

When a patient sees a hospital-based physician, the fee schedule not only incorporates physician payments, but also additional payments to the hospital.

Now, the patient doesn't pay what insurance covers in either scenario, but typically there is a copay or coinsurance payment that the patient is responsible for that typically is 20% of the total charges.

Here's an example using the Medicare fee schedule from 2002. I elected to provide "old" 2002 data as this information can be found easily and corroborated, but rest assured, the numbers are starkly different and perhaps more lopsided today. Medicare was selected as it is the bar to which all other insurance plans are typically based on.

In a physician run private practice, the only charges that are incurred is from the "Physician Fee Schedule". In a hospital-based practice, a patient incurs not only the physician fee schedule, but also additional charges based on the "Outpatient Prospective Payment System".

As you can see, the physician fees are slightly higher in the private practice setting compared to hospital-based practice... BUT, given the additional hospital charges involved with a hospital-based practice, the patient ends up being charged more per service for a simple clinic visit ($16.48) than if they had been seen in the private practice office ($10.06).

The cost differential for the patient is far worse with any procedures ($62.62 versus $342.47).

For the same exact procedure or service, a patient automatically ends up paying more to be seen in a hospital-based practice.

This payment system is the same whether you go to a tertiary care teaching hospital like Massachusetts General Hospital or a tiny 98-bed community hospital.

As an aside... for any physicians employed by a hospital, it behooves you to consider this differential payment in terms of how a hospital determines your salary and productivity. Do they consider ONLY the physician fee schedule or do they also take into account the outpatient prospective payment system?

I should also mention that for 2012, Congress is considering abolishing the outpatient prospective payment system for clinic visits only. Click here for more info.

Source:
Elimination of Differential in Medicare Payment for Clinic E&M Services Furnished in Hospital-Based Outpatient Departments Proposed. Martinedale 12/10/11

Medicare rules for hospital-based clinics. American College of Surgeons. Vol 87, No 4

Medicare Physician Payment Updates and the Sustainable Growth Rate (SGR) System. Congressional Research Service. 8/6/2010

Health Insurance Billing Explained

So there are many patients who do not quite understand how billing through their insurance companies work. Words like deductible, copay, coinsurance, and premium all seem to blur together resulting in confusion in terms of what they may anticipate paying for a given medical service. This blog is to help demystify and clear up the confusion so that hopefully, there will be no surprises when you get a bill from either your physician or the hospital.

SO, perhaps the best way to explain the differences is through an example. Keep in mind that every single health insurance plan have different charges (even within the SAME plan with the same name), so look at the contract you signed to see exactly what your obligations are.

EXAMPLE: Mr. John Smith has Anthem PPO which has the following criteria:
Premium: $10,000 per year
This means he must pay $10,000 per year just to have Anthem PPO health insurance.
Deductible: $500
This means he must pay $500 in a given year BEFORE his health insurance coverage even kicks in.
Copay: $30 PCP/$50 Specialist/$75 ER
This means that if he sees a primary care doctor, he will have to pay $30 every time. $50 and $75 for a specialist or ER visit respectively.
Coinsurance: 20%
He will be responsible to pay 20% of allowable charges of his healthcare bill set by his insurance company, Anthem PPO.

In case you lost or misplaced your contract, call the number on your insurance card to get all this information. For those individuals where their health insurance is covered by their employer (ie, you are not paying premiums), you STILL are paying premiums reflected in lower wages OR hidden costs that may not be readily apparent. However, the expense of health insurance in a company is spread out through all its workers and the company gets a "group rate" that is cheaper than if an individual gets health insurance on his/her own.

HINT: Before you make an appointment with a doctor, make sure that the physician participates with your health insurance plan. Otherwise, you may find yourself paying the entire bill out of your own pocket! Click here to read more about this situation.

A final point to consider is that the copays, deductibles, co-insurances, etc discussed above apply if a physician is IN-NETWORK. OUT-OF-NETWORK coverage means a given doctor participates with your insurance, but you will be paying much more than if you remained with a physician who is an IN-NETWORK participating provider. How do you find out whether a given physician is in-network or out-of-network? Call your health insurance plan and ask. Click here for more info regarding in-network vs out-of-network.

To see what health insurance plans Fauquier ENT participates with, click here.