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

United Kingdom Ends $17 Billion Electronic Medical Records Initiative

The Wall Street Journal on Sept 23, 2011 reported that the United Kingdom will scrap the entire electronic medical records (EMR) initiative that has been 9 years in the making with nearly 6.4 billion pounds already spent.

That action was hinted at back in August 2011 after a scathing parliamentary report stating the initiative to be wasteful and incapable of delivery.

I'm not surprised...

It's hard enough to get a group of doctors in one hospital to agree with a treatment plan let alone agree to a medical records system. The problem is exponentially more difficult when applying it to an entire country.

Physicians practice medicine differently... just like teachers have their own unique way of teaching kids. A method that may work for one doctor or teacher will not work for another. Even the method may change depending on how "busy" things are (teacher with a class of 5 kids versus 30 kids) so a doctor in a busy inner-city emergency room will have different flows and needs from an electronic medical records than a rural family practice with a sedate pace. Furthermore, the needs of a dermatologist is very different from a pediatrician. One can't expect a single EMR system to meet the needs of both perfectly just like one cannot expect a math teacher to use the same teaching methods as a singing teacher.

Forcing physicians to use a single standard electronic medical records without adapting to these realities is bound to fail no matter how much time, training, software, and hardware you throw at it.

A better alternative (my opinion), is to treat electronic medical records like the computers they reside on. There should be many different types of EMR systems just like there are MANY different types of computer models, speeds, makes, cost, sizes, etc.

However, unlike current EMR systems, in spite of who makes a computer and what operating system software it runs, it has standardized components... USB, Firewire, HDMI, VGA, BlueTooth, etc. as well as a universal communication medium called the "internet" that works with phones, computers, laptops, etc regardless of who makes it and what software it is on.

You would think that an EMR system given its digital essence would be able to easily communicate with other systems... but no... they don't communicate at all... which is why paper reports still exist... which are than scanned into the EMR.

Rather than the government (whether the United Kingdom or the United States) dictating what physicians must do and mandating EMR initiatives, I believe the money would be much better spent on mandating inter-operability and communication standards. The free market will create the best EMR systems and physicians will pick the one that best meets their need.

The other more insidious side of EMR is the over-reaching health goal mandates which means well, but runs into the same problem of applying standards to all physicians. Take "meaningful use" set by the Centers of Medicare and Medicaid Services (CMS). One of the core measures of meaningful use is adult weight-screening and follow-up.

Now as an ENT specialist, I see patients specifically for earwax. Why in the world would I want to perform a weight-screening when all I want to do (and what the patient only wants me to do) is get earwax out???

Makes no sense.

Does it to you???

Reference:
U.K. Scrapping National Health IT Network. InformationWeek Healthcare. Aug 4, 2011
U.K. Ends Health-Service IT Upgrade. Wall Street Journal. Sept 23, 2011