I’ve toyed with the idea of writing about how medical visits are typically billed for a while, but have thought of enough reasons not to to defer up until now. For one, it’s a rather dry topic. Also, I wasn’t sure if it would be wise to do so. Though I have a hard time constructing a scenario in which discussing medical billing could come back to haunt me, it’s not a subject that doctors typically raise. As I will mention later, ethical questions around billing can arise, and perhaps it’s not advisable to be too transparent. That said, I’m absolutely certain that everything I could tell you has already been said by someone else, and that enterprising people could get this information if they wanted. These aren’t state secrets.
However, the subject of how doctors bill is something that’s some up hereabouts, and so I figured there was enough interest to merit a post. Apologies if this gets too dry.
One thing I think is prudent for me to say right at the outset is that I have never felt any pressure from my employer to juice my billing. Quite the opposite, in fact. We are strongly encouraged, in letter and in spirit, to bill only as much as the encounter merits, and there is no incentive for me to code visits more “efficiently” than they’re worth.
If you’re already bored, stop now.
So, what do I use to bill patients? There are three components upon which the encounter is “coded,” which corresponds to how much one bills for it. They are history, physical, and medical complexity. The rules are slightly different for new patients vs. established patients, and I’ll stick to discussing the latter. For patients who are known to the practice, the code is set based upon two out of those three components.
What does that mean? Let’s start with the history. There are a lot of things I can ask about any given problem. The more questions I ask, and the more detailed the history I document, the more I can bill based on that component. Similarly, the more I examine the patient and document what I find, the more I can bill based on that component. Finally, after taking the history and doing the exam, I have to formulate a plan. The more risky or complicated the medical decision-making, the more I can bill based upon that component. The code for the visit is set based upon the level of complexity for two out of three. If I take a brief history but do a thorough exam and have a complicated decision to make, then the exam and decision-making set the level I can bill. Conversely, if I take a detailed history but do a short exam for a simple problem, I can’t bill based upon the history alone. By and large, you need two out of three aspects of the visit to justify the amount you bill.
So, where can problems arise? First of all, the billing system is based upon how Medicare reimburses, and the criteria are incredibly arbitrary. I’m already running the risk that this post is so much inside baseball, so I’m wary of going into too much detail. Suffice it to say, certain things count as billable details and some don’t. For example, you get a maximum of one point for including the location of a problem. So I could say “pain in the abdomen” or “pain in the left lower quadrant of the abdomen just lateral to the umbilicus radiating to the pelvis” and get the same amount of credit. As far as the physical exam goes, you get lots of credit for examining the arms and legs, but hardly any for doing a neurological exam, no matter how detailed. I apologize that I’m probably painting a vague picture, but the bottom line is that anyone who has sat through a coding seminar is confronted with how arbitrary the guidelines are.
However, once one becomes sufficiently familiar with the vagaries of the coding system, one can become very “efficient” at coding. If one knows which details count in the history and physical and which don’t, one can be sure to include as many necessary elements to justify a higher code every time. For example, you can bring your kid in for a straightforward problem like a runny nose. I, knowing the coding system well, can ask the right questions and do the right parts of the exam to justify a relatively high code for the visit, even if the medical decision-making is very simple for this small problem. Remember, the code is set on two out of three elements (history, physical and decision-making), and so I can make sure to always do more detailed histories and physicals, no matter how straightforward the complaint.
Of course, “upcoding” for easy, straightforward visits isn’t ethical. But it’s easy enough to do. (I hasten to repeat that we are strongly discouraged from doing so at my practice.) And physicians who are feeling the squeeze of declining reimbursement for services rendered may look to “efficient coding” as a way of getting more out of each encounter. I worry that cutting provider reimbursement for Medicare patients would simply lead to more upcoding. I believe most of us behave ethically and bill appropriately, but the system is full of holes and gimmicks and I have seen no serious attempts to improve it.
For what it’s worth, I find this stuff fascinating.
I’ll tell a story and you can explain the “behind the scenes” of it to me.
Until I switched from the half-moon clippers to the scissor clippers, I used to get The Mother Of All Ingrown Toenails every three or four years. One time, when it was really bad, I did a walk-in to a local podiatrist. He gave my toe the shot, took the nail out, cut it in half before throwing it away at my request (I WIN, TOENAIL!!! I WIN!!!), and, at the counter, asked me what I thought about paying.
I asked “seventy five bucks?” because that’s pretty much what I had (I could have gone to one hundred but would have preferred to end up there via bargaining rather than starting there) and he told me that, if this was insurance, he’d have charged $200 for the shot alone. I boggled. He told me $75 was fine. I wrote the check and walked home on the sunny side of the street.
I think about this, from time to time.
Did he do me a great benevolence that was worth far, far more than the seventy-five bucks I gave him? Did he give me a peek behind the curtain of the scam that is insurance?
First of all, your podiatrist was almost certainly in violation of his contracts with whichever insurance plans he accepted. You are absolutely not allowed to bill people differently based upon their ability to pay (or your whim on any given day). If he upcodes visits for insured patients or downcodes visits for the uninsured (even if he does so in the spirit of charity) he does so fraudulently.
Now, there are easy enough ways for him to jigger the system if he wants. For your ingrown nail, there are lots of billable parts. There’s the visit itself, the injection and the extraction of the nail. He may have opted to defer payment for any of those, thus lowering the cost to you. He may have charged only for the injection itself and deferred the “administration fee” that often accompanies injections. It’s easy to see how he could fit your bill to however much he did or did not want to charge.
It was, however, still unethical for him to have done so.
See, this is the *LAST* thing that would have ever occurred to me.
I never would have thought that I was an active participant in an unethical act. Even now, reading your response, I think “that can’t be right”.
Well, obviously, your participation was unwitting and your ethical obligation was only to pay what you were charged.
However, I guarantee that your podiatrist was in violation of his contracts. Think of it this way — how much does he usually charge for those services? He subsidizes your low cost by charging more for others. Now, one might argue that he’s just overcharging evil insurance companies. But those costs are passed on to people who purchase coverage from those companies. He’s passing on your costs to other people.
Yes, but it was also enthusiastic.
Could I see time spent doing paperwork and time spent waiting for the insurance company and time spent writing stuff down and time spent on the phone as time wasted and my check to him essentially turned our interaction from one that took weeks plus materials plus cleanup time plus sterilization into one that took 20 minutes plus materials plus cleanup time plus sterilization?
Does that change the calculus at all?
1) If your podiatrist doesn’t want to be bothered with the tedium that goes with accepting insurance, then he shouldn’t accept insurance. That way, he can charge everyone whatever he wants. Once he agrees to accept payment from insurance companies, he is obligated to bill them fairly.
2) He told you that he would have billed an insurance company “$200 for the shot alone.” One can reasonably infer that he would also have charged for the visit, and for the extraction of the nail (plus other things he might come up with). One could plausibly guess a bill of $300 or more, if the shot alone would get him $200. That means he was willing to mark up the cost 4X (or possibly more) for an insured patient. I do not think that is a reasonable mark-up to cover the costs of dealing with the insurance company.
Once he agrees to accept payment from insurance companies, he is obligated to bill them fairly.
Is it likely that he bills something at $200 and the insurance company says “not $200, we’ll give you $55 for that”?
Possibly. If, over time, the insurance company consistently refuses to pay what he feels is a reasonable reimbursement for his professional services, he can decide to stop being a participating provider.
However, it is my understanding that insurance companies say “We will pay X for Y service,” not “We will pay X% of what you bill for Y service.” So, if they pay $55 for the shot, then he can bill them $55 or $75 or $200, and they’ll still pay $55. However, if he knows that they’ll pay $200 for a shot he only charges you $75 for, then he’s overbilling them by $125.
One more probe and then I’ll be quiet:
What about analogies to pro bono work?
When I get my medical bills back from my insurance company, it shows a Medicare code and some highly abbreviated description, then it shows four dollar amounts, the billed amount (let’s say $200), the ‘Allowed Amount’ my insurer paid ( $75), the ‘Provider Responsibility’ ($125) and the ‘Amount You Owe’ ($0).
I had always assumed that the ‘Provider Responsibility’ portion was the discount the insurer required of providers off of some kind of price list, is that the case? Is it just as unethical for Jaybird’s podiatrist to just charge him the same amount he actually gets back from the evil insurance company (assuming that might be the actual difference?)
I’ll be honest… this doesn’t really make sense to me. Isn’t part of the “negotiated rates” precisely because the medical profession is rife with different charging for the same services? Isn’t negotiating rates part of what they do? So how then can they object if doctors set up different rates based on other criteria?
The negotiated rate is at least theoretically due to the volume of business that working with the insurance company brings in. I always figured the discount for self-payment was due to the fact that their money is guaranteed without having to utilize the expensive billing apparatus.
I know that a dermatologist I saw back out in Mormonland had a pretty substantial “cash discount.” And it was pretty clearly posted. Consultation $130, $80 if you pay today. Now it’s possible that the insurance company would be closer to the $80, but I would suspect not. Like I said above, I figured the reason for this was that they got their money automatically and there was no billing hassle (either sending creditors after me perfectly or haggling with BCBSML).
While the $75/$300 does sound like a pretty astonishing difference to me, it seems to me the notion of variable billing practices is built into the industry.
You are allowed a little bit of leeway for office financial policy, so long as it is very, very clear and made known to the contracted insurance carriers. Cash discounts, sliding scales, etc. go in this bucket. And you have a little bit of leeway for situations of genuine financial hardship. However, practices can get into a lot of trouble if they are perceived to be in violation of their contracts.
The bottom line remains — providers are contractually obligated to charge patients the same amount for services rendered regardless of ability to pay, insurance coverage, etc. If Aetna discovers that you’re subsidizing your compassionate care of the indigent by charging their patients more, you are skroooooooooooood.
That’s readily understandable. (Personally I have an appetite for more detail than even this but I’m weird that way.) The picture seems clear enough. Doctors are financially rewarded for their mastery of an arbitrary and complex bureaucratic system rather than for either the quantity or quality of their work, although patients seem to get the same care whether their doctors are good or bad at billing.
To some extent this compensation system, like all professional compensation systems, must rest upon the foundation of the biller possessing and using integrity. There’s probably no reform possible that will not ultimately rely on people not lying or cynically gaming the system. But I get the impression that some degree of reform would be possible that could simultaneously cut outlays by weeding out the upcoding and still preserve appropriate compensation to honest providers — which I’m sure is much easier said than done; I’m only speaking of possibilities.
In light of all the political and legal wrangling over health care, that last clause in that last sentence of your post is particularly frustrating.
My apologies Dr. Saunders–I’m banned from EVERY site now–but wanted to send this to Chris–probably a total waste of time, but worth a try. Thanks.
@Chris
Sounds like R.D. Lang. Were they friends? What’s happened to Dr.. Lang?
I had the great opportunity to hear him speak and met him afterwards–not surprisingly, we got into a very long discussion about music (and madness, for that matter) and lo and behold, he pulled out a clavichord from a large suitcase! They’re quite small actually–rather soft sounding but extremely expressive and he played it quite well. For hours on end, we played Bach’s well-tempered clavier (the monstrously difficult Art of the Fugue was attempted–hard, hard, hard–not easy getting four hands to play such a small instrument but it was one of the most enjoyable fun evenings of music making I’ve ever had.
Knots, be damned.
Chris, I doubt you would ever read a single word of my comments, but should you have the misfortune of accidentally stumbling on this, could you at least pay me the courtesy of not deleting them? Thank you.
This is your one and only warning from me. If you do this again, you can add my blog to the list of places you are not welcome. I cannot speak for any of my fellow bloggers, but I have zero patience for this kind of nonsense and I will delete every word you write if you post more rambling, incoherent blather.
Do not do this again.
That insurance vs. out of pocket is a scam isn’t limited to medical issues. Auto repair is the same way, and I’m sure there are plenty of others.
If the shop knows you’re paying a quote will usually be significantly lower than if you’re bringing in an insurance claim. I’ve seen differences of two- and three-fold between them before.
And then if you work with Medicare Advantage patients, you’re apt to get harassed by HMOs to pick diagnosis codes that will be maximally favorable to them for their risk-adjusted payments the next year…
As a medical billing advocate, I find myself explaining these mysteries to people every day. There is actually nothing that can be said to make it make sense. I frequently help people who would have paid less than their coinsurance if they would have simply said they didn’t have insurance. Many never reach their high deductible in a year and would pay less with a self-pay discount for care. High deductible plans are really only asset protection plans, not health insurance. Another obstacle I regularly deal with is providers, usually hospitals, who are attempting to collect a high deductible from a patient (sometimes as much as $10,000). They refuse to negotiate, hiding behind the “contract” with the insurance company. Which is nonsense. This final amount due from the patient is a debt like any other debt. The hospital will send the person to collection without a second thought (and end up only collecting a percentage of the bill) or sue the patient. But they choose to wave the “contract” in the patient’s face and forget they are dealing with PEOPLE. Just another way that our healthcare system has its priorities completely messed up. When capitalism is the king of something as personal and important as healthcare, it is doomed to fail. In the meantime, I’ll keep trying to help people out of these messes caused by this inefficient and overpriced system.
I have to agree. Hospitals and providers don’t often realize that their patients are struggling as much as they are. After 3 months off to collection you go, regardless of your circumstances.
As a medical bill auditor/detectives I decode for people, insurance companies and attorneys.
Providers force you to sign forms, without giving you the time to read them, before you are allowed to receive care. It doesn’t matter to them if you are bleeding or not. And if you can’t sign, then your family must do so. And, they don’t even bother to explain to you what you are signing.
The opening for upcoding will come as the reimbursement rates are decreased and providers need to make up for more lost revenue.