Musings of a Dinosaur

A Family Doctor in solo private practice; I may be going the way of the dinosaur, but I'm not dead yet.

Sunday, June 03, 2007

All Minutes Are Not Created Equal

(And now for something completely different:)

Way back in the olden days -- several months ago; before l'affaire de Flea -- we were talking about physician compensation; mostly in the context of Pay for Performance (P4P), but also in more general terms. The irrationality of physician payment for specific procedures and evaluation/management encounters ("cognitive services" or office visits) was contrasted with the fact that attorneys usually bill strictly by the clock.

Bearing in mind that dropping all my insurance contracts and going to a cash-only (well, checks and credit cards too) practice model is my someday-I'd-love-to dream, I began thinking about how I might charge for my services. I think some form of charging by the hour is definitely the way to go, so I tried to work out the nuts and bolts of how I'd manage to do it, what my "hourly rate" should be and so on.

That gave me a headache, so I looked at something else: how I'm getting paid now. For the record, whatever anyone says, we do in fact have price controls on medical fees in this country; it's called the Medicare Physician Fee Schedule, and the vast majority of private plans tie their fees to it in one way or another. I happen to be in an area dominated by 800 pound gorillas, so most of my private plans pay less than Medicare (as opposed to much of the rest of the country, where Medicare rates are bargain-basement.)

It turns out that this information is outrageously easy to access, so I did. If you look up 99201 to 99215 as your range of codes, you come up with each of the five E/M codes for new and established patient office visits in the Philadelphia metropolitan area.

At this point, let me explain again how time enters into the coding calculation. Although there are times associated with each of those 10 codes, you can only use them as the deciding factor in assigning a code when more than 50% of the face-to-face time is spent in counseling or case management. Still, in a sense, those times -- when combined with the fee schedule values -- can be used to show that Medicare values certain minutes more than others.

Here's what I figured out Medicare is paying on a minute-by-minute basis:

New PatientMC Fee$/min
first 10 minutes$38.33$3.83
next 10 minutes$28.20$2.82
next 10 minutes$32.08$3.21
next 15 minutes$50.17$3.34
next 15 minutes$37.54$2.50
Established Patient

first 5 minutes$21.80$4.36
next 5 minutes$17.79$3.56
next 5 minutes$23.68$4.74
next 10 minutes$32.53$3.25
next 15 minutes$33.81$2.25

It turns out that on a minute-by-minute basis, Medicare actually pays less for a new patient. The math works out this way because the time divisions for established patients are much shorter for the first three levels, and although the fee for a "New level 1" visit is higher than an "Established level 1," it isn't "higher enough" to offset the time factor. Isn't it interesting, though, that the longer you spend with a patient, the less you get paid on the margin. I hate to put it this way, but there you have yet another incentive -- numerical -- to limit your time with any given patient.

Just for the hell of it, let's look at how those numbers crunch into hourly rates:

New Patientvisits/hr$/hr
10 minutes6$230
20 minutes3$200
30 minutes2$197
45 minutes3/4$198
60 minutes1$186
Established Patient

5 minutes12$262
10 minutes6$238
15 minutes4$253
25 minutesabout 4/10$230
40 minutes2/3$194

(And realistically, who's going to squeeze twelve level 1 visits into an hour?) Keep in mind these are evaluation and management fees generally paid for primary care, "cognitive skills." That's your Family Practitioner or Internist sitting and talking to you, getting your complete medical history, examining you, deciding what's wrong or what testing needs to be done to figure out what's wrong, explaining it all to you, answering all your questions and making sure you understand it all.

There's also something called a "Consultation," which pays more. Consults are defined as an evaluation requested in writing by another physician. Plenty of specialists go out of their way to run a "Consultative practice only" (although for followups on the same patient they're supposed to use the E/M codes); much more lucrative that way.

Just try finding a lawyer -- highly skilled and in his prime -- willing to work for those prices!

(Anyone have any idea how to get rid of those large empty spaces before the tables?)


At Sat Jun 02, 10:06:00 PM, Blogger Xavier Emmanuelle said...

I'm sorry, but I can't imagine how you could be upset at making $250 an hour. I don't make that much in a week! Yes, you've gone through extensive training and all, but that is still a very good hourly wage!!

At Sat Jun 02, 10:38:00 PM, Blogger Midwife with a Knife said...

xavier: That's not the hourly wage though. That has to cover malpractice, taxes, payment for your staff (nurses, assistants, a billing person to hassel with the insurances, etc.). Your hourly wage ends up being about 1/4 of that, which when compared to people of similar education and training (i.e. lawyers) isn't really that much at all.

At Sat Jun 02, 11:22:00 PM, Anonymous ami said...

A good freelancing computer programmer/3-D artist can make $70 dollars an hour. But it can be hard making sure there are enough jobs to pay the bills.

At Sun Jun 03, 03:52:00 PM, Anonymous Anonymous said...

Everyone should be able to earn what they can. (here it comes)

It's actually closer to $600/hr.

My recent visit to a doctor was 15 minutes long, and Medicare/Medigap was billed $1000. Furthermore, the doc couldn't wait to drop me and sprint to the next patient, even though he admitted not having a clue as to what was wrong.

When is enough actually enough?

At Sun Jun 03, 05:27:00 PM, Anonymous LLL said...

He billed $1000, but he won't be getting that much. I take care of my father's medicare/medigap insurance. From the explanation of benefits from both, I can see that nearly all the doctors and hospitals bill for 3-5 times as much as what they will eventually receive in total from his insurances.

I do believe, however, that is this conflated billing game is what gives patients and the public at large the idea that doctors make so much money. Which, inevitably, leads most people to have little sympathy for doctors, or hospitals for that matter.

It also causes confusion amongst patients as to the true cost of medical care. Doctors complain ad infinitum that patients don't care about these costs. How can they care when there is so much billing obfuscation between insurers and providers?

BTW, lawyers have to pay for office space, paralegals, legal secretaries, etc. The amounts that they bill do not go straight into their personal bank accounts.

At Sun Jun 03, 07:08:00 PM, Blogger Joeymom said...

My doctor actually gets about $260 an hour, based on what the insurance pays for.

My family runs a genealogy research business. We have to pay health insurance, pay for the contractors, pay for the admin work, pay for the expenses of travel, pay for the use of databases (yes, they charge!), pay for actual research and documentation expenses such as photocopies, pens, fees for library use, business lisencing and insurance,etc. out of $70 an hour. So... how much IS malpractice insurance? $190 an hour?

For years, I wen to a doctor who took no insurance. He charged $45 for an appointment, and took walk-ins (I think it went to $55 right before he retired). No one with an appointment was ever seen late. He did all the height, weight, temp, etc. preliminaries himself. I was happy to pay the man, we got excellent care from him. If he couldn't deal with what was wrong, he sent you to the best specialist in town- or if he didnt like anybody in town, the nearest specialist he felt was competant.

I have a PhD. I survive off $20 an hour- with no insurance, because I'm a contractor. I have to pay for therapies and doctors cash, and it runs $75-$150 an hour for an OT. I need to go back to school- I am obviously in the wrong business.

At Mon Jun 04, 12:58:00 PM, Anonymous tomp said...

Dino; Are you shocked at the number of people who think you, unlike any other business, have NO expenses!

glad to hear that you have set a cash only practice goal-is it date specific?


At Tue Jun 05, 09:04:00 AM, Blogger The Independent Urologist said...

Nice analysis. Have you ever done an analysis of your cost per hour, excluding your salary. Also very enlightening.
Great post!

At Tue Jun 05, 12:54:00 PM, Anonymous tomp said...

Would also be interesting to analyze your collections as follows:
Medicare Collections as % of total
MediCaid Collections as a % of total
Other Specific Insurances as % of total

Then analyze you patient visits the same way.

Not uncommon to find that the greatest number of patients generate the least (per patient) revenue.

Lesson here: The greatest demand on your time generates the least amount, on a per patient basis.

This analysis will also identify the payor that you should be focused on. You will quickly see that it only takes 1 good payor to replace 3-4 of the poor payors!

This will expedite your progress to a cash based practice which allows you to spend quality time with your patients, with quality returns on patient satisfaction, personal satisfaction and economic satisfaction.

Make the leap!!

At Tue Jun 05, 04:57:00 PM, Blogger #1 Dinosaur said...

Thanks to all. Bear in mind that those "hourly rates" would only be what I could get if every single hour were packed with nothing but Medicare patients, which they aren't. Remember too that MC is one of my best payors.

Of course this only represents gross. Net pay is only after all those pesky little things like bills and employees get paid.

The problem with going to cash-only is that many of my patients (the large bulk; the ones with the two 800 lb gorilla insurances that pay sub-MC) couldn't afford to see me that way. In a way, it would be abandoning them. In a sense, it's "me or them", and for the moment my feelings of responsibility towards them are pretty strong. I don't think it'll last forever, though in the meantime there are lots of people who are plenty grateful.

At Wed Jun 06, 11:35:00 AM, Anonymous Anonymous said...

So... how much IS malpractice insurance? $190 an hour?

Depends on where you practice and what your specialty is. For example, in DC-Metro, and OB/Gyn averages about $150,000 a year for malpractice insurance.

With an average 285-practice days, this means that before any other expense can be paid, or the doctor can take a salary, the practice must receive $480 in revenue (not billed for services, but actually paid for services).

Let's pretend same doc is solo - needs an office, equipment, lab capability (minimal to at least draw blood, otherwise needs to send patient to a lab), supplies, office manager, nurse (needs a chaperone with patients), and perhaps a physician-extender to help patients with details - they each need a salary and benefits package, and worker's compensation and such. OK, so each of these things needs to be paid before the doc can take a salary too.

Let's say for discussion overhead of office (rent, supplies, labs, and equipment) is $4000 a month - $48,000 a year, and let's say the 3 FTE's salaries and benefits/insurance for them are a cost of $250,000 a year.

With malpractice and overhead/staff, doctor now must receive $448,000 in payments for services before considering a salary - or bring in about $1572 per day in practice before taking a salary.

Pretending an office-visit is billed at $100 and paid at $75, then said doctor needs to see 21-patients a day before any salary for themself.

At Thu Jun 07, 06:01:00 PM, Anonymous tomp said...

dino; If you had a tire store, and someone came in and said, I want some new Michelin tires, but I can't afford them, what can you do for me?

What would you say?
a. Sorry
b. How about I sell them to you at cost
c. How about I sell them to below cost
d. No problem, I 'll give them to you.

Until patients have more of an economic stake in their own health care-the economics of health care will continue as is-premiums go up, coverage goes down, Doctors are expected to live with it.


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