The annual Medicare pay cut, based on the seriously flawed SGR (sustainable growth rate) formula has been a topic of great discussion every year. This year it was part of the discussion of the new health care bill. While most Americans are against a Medicare pay cut for physicians, one prominent House Democrat would prefer to let the Medicare cuts happen. "I'm inclined to do nothing," Rep. Pete Stark, D-Calif., told Congress Daily in December of last year.
"My colleagues, my staff say, 'Oh, dear, the doctors would all drop Medicare.' I don't believe it. I don't believe that doctors are willing to give up half their income."
Well, Mr.Stark, the doctors are going to drop Medicare and more third party payers - and here is the step-to-step plan on how to do it.
Simple Action Plan
We have been working more and more for less and less. We are being suffocated by ever increasing regulations, which usually turn out just to be new tricks to pay us less (e.g P4P). Many primary care colleagues are at the edge of viability of their practices. The demand for physicians is said to go up, some even talk about a "physician shortage", yet, in contrast to the most basic economical rules, our reimbursements continue to go down. We have lost 60-70% of our earning power since the 80's, a unique situation without precedent.
Patients perceive us as "rich", the media portrays us as making a most comfortable living in the top 5% of incomes.
The media also prefer to report on errors and scandals, on our weaknesses and failures rather than medical success.
For politicians we are part of the problem, not part of the solution. We have no friends in politics, since physicians only amount to 1% of voters. Americans in general consider us "rich" and "too expensive" and one congressman mentioned that "all health care problems would be solved if we could just get the doctors to be satisfied with 75,000 a year".
Insurances earn by not paying us or by delaying payments. They have successfully applied salami tactics for 20 years to reduce reimbursements.
The organisation that is meant to represent us, the AMA, has long bought into the status quo, has surrendered in every important issue and keeps busy tweaking minutia. The "solutions" the AMA offers are anemic and pathetic, and they lack the guts to confront the root problems.
We have no friends and we have no allies.
Nobody will help us. If we want change, we will have to do it ourselves. We have to remember that we are the ones with the knowledge, the skills and the expertise! We do not need anyone to diagnose and to treat. Those who have pushed themselves into the patient-physician relationship do not know medicine, and they are only able to harass us, because we have signed contracts allowing them to do so. Without us, they are nothing!
We have to remember that we have signed the contracts that allow them to withhold, deny, restrict, control, demand pre-authorization, delay and defraud us. We can cancel these contracts. And, with the coming "shortage of physicians" there is no better time. We have to remove the control of medicine from the third party payers. And we have to do it ourselves. Fortunately, this is not hard and may even be not just rewarding, but fun.
Here is a simple action plan. The actions complement each other, each strengthens the other. The plan is flexible, you can start wherever you want and you can go as far as you want. Going just a little step is good for you, going far helps your colleagues as well. the more physicians participate, the larger the impact on health care overall will be.
After putting our personal finances in order, we take a close look at our practice and see which third party payers (and yes, that incluides Medicaid and Medicare) are loosing propositions. We gradually, deliberately, smartly drop third party payers based on an economic analysis of our practices. This shrinks the networks of HMOs and reduces their power and market appeal. At the same time we unite into large groups working under one tax ID to bill together and negotiate together ("group practice without walls"). This increases our numbers and direct negotiation power with the remaining HMOs until we drop them too. At the same time we educate our patients about alternatives to HMOs, so that they favor more attractive options of insurance coverage, such as HSA, HRA, cooperatives, individual tax deductible health plans etc. We offer cash services at a very competitive price. We can do this since we would greatly benefit if we received the same amount of money in cash right from the patients - rather than from an HMO that pay us only after a lot of administration hoops, shenanigans, withholds and months of delay. "Carecredit" and other options may make it appealing to the patient. The more patients drop HMOs, the weaker they get. And finally, we talk to our colleagues about these issues to come to common concepts and understandings, to unite us. One of the possible ways to do this is sermo, the physician-only online community founded in Cambridge in 2006.
This is the plan:
1. Get your personal finances in order first
Consider a fee-only financial advisor. Fee-only advisers are paid by the hour and consequently have less of a conflict of interest than advisers who live on commission. Go over your personal finances, make a long term plan and a mid-range plan. Determine how much income you need as a minimum, what kind of drop of income you can afford while you drop HMOs, and for how long. Initially your income may decrease when you drop the low paying plans, although it does not have to.
Secondly, talk to your partner to get his or her agreement. While dropping HMOs may reduce your income initially, this is temporary and it will to a greatly improved quality of life in the long run. It is essential to have the support of your partner during this time.
Consider postponing larger purchases that put you in debt such as a new car, new home etc. Don't fall for the myth that "doctors are rich and can afford luxury". Living above your means will chain you to the third party payers. Limit your luxury purchases and spend wisely in general. Limit your monthly payments (new car, renovation of condo or house etc).
2. Streamline your practice finances
Sit down with your office manager, your accountant and/or your billing service. Write a business plan! The business plan should include your mission is and your financial goals. Write into the plan what you want to earn on a monthly and yearly basis. Look at your overhead. Based on your planned revenue and your overhead you can now calculate what you have to collect, what you have to earn for each visit and what you have to earn for your most common services. Note those figures. This is a standard business process that astonishingly is not done by many physicians.
Now make a spreadsheet with the ten most common procedures or services in your field. List what each third party payer reimburses you for these services. Calculate which payers will allow you to reach your business goal and which payers do not! Plan to drop the payers that do not allow you to reach your business goal! This is a crucial step.
You may also calculate what each third party payer contributes to your overall collections to help you with the decision about which payer to keep and which ones not to keep. Calculate the average payment for each visit from each payer. Consider the number of patients from each payer. Calculate the accounts receivable for each payer - as a fraction of the charges after 30 days and after 60 days. That informs you about their delays and denials, about the hassle and sleaze factor. Decide which third party payer makes no sense economically and also which payer gives you the most hassle.
3. Drop third party payers that threaten your financial viability
A colleague wrote the following: "I started with the lowest paying HMOs. It is a 2 year process. First I stop taking any new patients from that HMO. Then 1 year prior to dropping them, I will send out a letter to the patients with that insurance informing them that I will be dropping that insurance the following Jan. I send out this letter with the labs that I send to them prior to their physicals. They come in for their physical and they have the opportunity to ask me why I am dropping their plan. I inform them. I tell them which plans I will be taking and that they can still see me if they have out of network benefits. I would say that most patients change insurance or continue out of network with me."
Send certified return receipt cancellation letters to those third party payers that drag your practice down. It is likely not feasible to drop all third party payers at the same time. Start small, gain experiences, then drop more. Remember that you are not "abandoning patients", you are merely becoming an "out of network physician". You are supporting HSAs and high deductible insurances. You are moving your practice towards "consumer directed health care" or towards "cash medicine" or towards concierge medicine". Promote HSAs coupled with high deductible health plans (also called catastrophic coverage) to your patients by several means, such as those described in Neil Baum's book. We will talk about this more later.
The following two books are extraordinary useful and well written: "Think Business" by Owen Dahl, $69, a kind of mini-MBA for physicians written by a veteran of medical management, and "Marketing your medical practice" by Neil Baum, $89, a fantastic book by a successful urologist in private practice. And of course there is "Medical Economics" magazine....
Legal disclaimer: Do not coordinate this purely economical plan with your colleagues, since this might be misconstrued as a "conspiracy". In the past acting as a group to flex our muscle or to influence prices was deemed illegal for physicians, since it might "worsen patient access to health care" or "might increase prices" - something that actually never happened. This was ruled "illegal", since obviously the consumer is a higher priority than physician income or influence. This is a hidden compliment and an acknowledgment of our power.
Therefore do not write emails or letter about this using any other terms than "purely economical reasons" and "supporting consumer driven health care" and use only verbal communication in private places. And understand that this is NOT done to fix prices in any way, but to move the health care system to "consumer driven" - a system that offers maximum transparency, and uses market forces to deliver cost effective, affordable, high quality medicine to everybody. Consumer should call the shots and not the insurance, and therefore consumers should holds and control the money and not the insurances. That is why we are moving away from insurances, to empower consumers.
And we are obviously doing this based on purely economical thinking. We "think business", something that we have learned from just those HMOs - remember?
Should anyone threaten, bring up or even hint at us doing something "illegal" or "conspiring", go to the media and show how this person or entity wants to cheat the consumer and wants to prevent the consumer from being in charge! Consumer driven health care is the ultimate democratic health care system and should be supported by everybody! Nobody will dare object to our move in that direction!
Stop taking new patients 2 years prior to dropping the plan because it is often the case that many other doctors are dropping the same plan. You may have a rush of new HMO patients because the panel of that insurance is drying up. It is harder dropping an HMO which is 30% of your practice than 15%.
Inform the patients a year in advance because many insurance plans require the employee or employer to sign up for the following year 6 months or more before the end of the year.
4. Join or create a "Group Practice Without Walls"
This is the solution when you are faced with one or two dominating HMOs in your area holding 40 plus percent market share, which makes it very hard to cancel their contracts. This is a good solution for colleagues who prefer to have someone else handle the business aspects of medicine and for those who prefer to be employed.
Group Practice Without Walls means the physician continues to practice in his/her own facility, yet is part of a group, just not under one roof. The group does marketing, billing and collections, sometimes, but by now means necessary, also staffing and management. All members have the same tax ID. This way a large number of apparently independently practicing physicians can represent themselves as one group, buy and negotiate as one group, with the obvious advantage of using your larger numbers. The laughter of HMOs about you will become a lot softer.
I have seen this work very well in South Florida, by a group of ObGyns, who prefer not to be named.
Joining this group gives an ObGyn reimbursements of about twice Medicare/Medicaid. For example: global fee for prenatal care, delivery and postpartum care yields $1538 from Medicaid, and group members receive about $3000. Same amount of work, probably even a lot less for a Non-Medicaid patient. Much better payment for group members. Members of the group work in their own private offices, with their own staff, own equipment and rooms, own clinical guidelines and decisions, own budget, own finances, own everything. Except: they bill together and negotiate together under one tax ID. They pay 5% of collections for billing. Codes are entered in the practice computer in the same way you enter information for a clearinghouse. Members pay an entrance fee of 25-50,000 for admission to the group and would have to pay an equal fee in case they left.
The group management will negotiate with the remaining HMOs and routinely fire the lowest paying third party payer. Expect reimbursements of 150 to 200% Medicare. These groups can be set up so that your practice is an LLC within the LLC of the mega group. Billing goes through one single entity, you can pool labs and technical services such as Xray, mammography, ultrasound, bone density, but also cosmetic services, such as botox, epilation, vein therapy etc
How do you set it up? You first spread the word among the best doctors and the key players in the area offering to join you. Then you retain an attorney experienced with formation of such as group. this is expensive, but worth it in the end. You must stand up to anti-trust scrutiny. Your ultimate goal is to attract enough doctors to reach enough critical to have negotiating power, but not as many to violate anti-trust laws. Consider staying under 50% of physicians in your specialty in the area. This may take several years, but is well worth it.
5. Get support from your patients
The transition towards consumer driven health care (and away from HMOs and third party payers) will be much easier with patient support. There is a profound lack of knowledge about consumer driven health care, high deductible insurance plans (HDHP) and Health Savings Accounts (HSA). Once we help our patients understand these issues, they will help us in the transition to more economic and more responsible care!
Learn: buy a HSA/HDHP for your own employees and your family. Browse the most educational and easiest to understand websites on HSAs. Summarize the info into a one half page note. Post this in your office, hand out leaflets to your patients, leave them in your waiting room, post it on your website, in your monthly newsletter, email it to friends and colleagues, drop in mailboxes of other docs in your hospital. Ask your hospital HR to offer them, give a talk at the hospital and at the local chamber of commerce. Write a blog. Create a Google Alert on "HSA". Read and lay out Regina Herzlinger's book "Who killed health care" in your waiting room.
Teach: Educate your patients that they might save 30-40% of coverage costs, that HSAs are funded with pre-tax dollars, that they own those dollars, that they roll over to the next year and may collect interest! Even Medicare has Medical Savings Accounts available during the current enrollment. A huge benefit -it eliminates the need for MediGap coverage. HSAs teach the patient accountability and are the only solution to ever increasing health care costs.
Act: Offer cash services for your patients with HSAs! Patients need to know what to do with their HSAs!! Post a list of prices for your 10-20 most common services. You could even post a comparison list with the prices of a local plumber, electrician etc for comparison - an eye-opener!
Direct patients to the cheaper HDHP providers that actually save money. Traditional HMOs may price these plans so that they become less attractive. Tell your patients that every bank can administer a HSA.
Links: AMA brochure... http://www.ama-assn.org/ama1/pub/upload/mm/363/hsabrochure.pdf
US Treasury Dept...http://www.ustreas.gov/offices/public-affairs/hsa/
Consumers for Health Care Choices is a national membership organization, chaired by a former president of the American Medical Association. http://www.chcchoices.org /Greg Scanlen, firstname.lastname@example.org, tel:301-606-7364
Politicians, blissfully unaware of true details of healthcare, may claim that consumers actually do not know enough about and are "not smart enough" and not "educated enough" and "too weak" or "need protection" from all the other players in health care - and that of course, the "government knows best" and has only the best intentions and the best advice for consumers.
"Hi, I am from the government and I am here to help you"
A well designed HSA can save 30-40% on total coverage costs, including the HSA contribution. Further, this contribution is not lost, but owned by the individual, is rolled over into the next year and may collect interest. For the 80+% of us who are basically healthy, HSAs are a great deal. For those that are chronically ill, it is a wash. Employers like HSAs because they save money for the employer. HSAs have proven to decrease costs. Taking all risk away from the patient leads to overuse of resources because it is a lot easier to spend the insurer's money than your own money.
The vast majority of transactions can occur with a debit or credit card at point of sale, no need to file a claim.
Currently, pre-tax HSA dollars can be spent according to IRS section 213(d) which defines healthcare broadly as anything therapeutic, including "alternative medicine" or chiropractic care, while cosmetic surgery is not an "allowable expense"
The opposition to HSAs takes several forms:
1. Only the well-off can afford them
2. People with HSAs will see them as just another investment scheme, and will avoid needed medical care (including essential screening) to "save" this retirement money.
3. We have 4 or 5 generations of consumers / patients in the US who don't have a clue how much their insurance / Medicare is really paying, and will be shocked back to the old ways when they get their bills.
4. Unless they are combined with a cash-for-care schedule of lower payments (less hassle, less paperwork, lower charge) there is not much advantage to having an HSA.
HSAs would actually work great in a "health care cooperative", where physicians AND their patients unite and truly work together to combat their common enemy, disease.
Big opposition will come from HMOs, since they have the most to loose. Pharma is lobbying for a "carve out" of drug costs from the HSA dollars. If patients know the actual cost of drugs, they will prefer generics and "Direct to consumer advertising" will tank.
Unfortunately, most physicians are not offering cash services. We all should post a list of our services for cash payers - independent to the fact if we take HMOs and or Medicare / Medicaid etc. Just good business sense. You inform the patient, you give them an option and you get them thinking in the right direction.....hm, this is what it costs....with all the ramifications, such as why is my insurance so expensive or so cheap, could I afford this on my own without insurance? and so on
Educate your patients about alternatives to insurance, mention HSAs and high deductible plans. The AMA has a leaflet on this.
Patients often think that we receive all the money they pay to their insurance. They assume we make millions. It often is an eye-opener that we receive about the same amount the HMOs keep for their administration (withholding and denying) and they are often very surprised to find out how little we get paid for services. It is incredible effective to create a list comparing our services point by point with with that of a electrician and plumber - and you will find that they come out ahead. This creates sympathy from the patients and the willingness to drop HMOs
6. Get support from your colleagues
Previously we had recommended to put your own finances in order to be able to survive for a while with less income, then approach your practice from a business point of view: first establish how much you want to earn, calculate what each payer has to pay for your most common services and then drop those HMOs that do not meet your business needs. When Jack Welsh was CEO of GE her routinely dropped the two least profitable lines of business. Do the same with third party payers. This is plain economic thinking, and obviously not a plan to boycott third party payers. Start or join a group practice without walls. Encourage patients to enroll in HDHP / HSAs instead of conventional HMOs. This saves our patients money, allows them to accrue savings tax free, while paving the road for cash practice for us.
The last component is to spread the word to as many physicians as possible! Encourage your colleagues to join Sermo, to join our discussion. This way we can learn form each other how to save the health care system. Let them participate and contribute to our discussions. Keep talking about health care reform, stay in touch, write a blog, read about the issue, email a summary of the plan to friends and colleagues, drop a flyer in mailboxes of your colleagues at the hospital. Just invite them to Sermo, the rest will follow!
Follow the plan for yourself and it will be very helpful. Tell your colleagues about it, spread the word and the effect will multiply