Physician Payment - Lack of Physician Payment Flexibility

Physicians are different from other professionals by virtue of the ground rules for contemporary medicine. These ground rules are largely determined by the way in which medical services are paid for in the United States. An orthopedic surgeon might be reimbursed $500 by Medicare for setting a simple bone fracture, and $1000 for setting a compound bone fracture. Private insurance companies often set their reiimbursement rates based on what Medicare pays. Physician rarely set their own fees. Their fees are dictated to them by Medicare, Medicaid, HMOs, PPOs, and other third party payers. The money reimbursed to them for services rendered may have little or no relation to their cost of doing business. What can be more aggravating is that sometimes the party payers also dictate what physician can and can’t do for their patients by declining to pay for services physicians also believe patient need. This is not the environment most of us work in.

James Merritt, Joseph Hawkins, and Phillip Miller, Guide to Physician Recruiting, April, 2007

A great deal of political interest is focused on alternative methodologies. Four in particular stand out – bundled payments, under which physicians are paid flat rates per episode of care, rather than per service; gain sharing, under which hospitals and doctors agree to share incentive pay and savings form qualityimprovment; medical homes, under which doctors are paid for coordinating care; and payment for performance, under which doctors are paid for quality measures...Delegates also brought up balanced billing. Balancing billings allows a doctor to charge patients the differences between what Medicare pays and the actual costs of services.

Doug Trapp, “Reforming SGR Tops AMA’s Medicare Agenda for 2009,” American Medical News, December 1, 2008,

This blog is a witch hunt, a brief exploration of under which circumstances physicians should be paid.

When I practiced as a pathologist, my partners and I would send a bill for performing a hip bone marrow biopsy, and back would come back a payment for 1/5 of what we charged from Medicare.

There was no arguing - and no recourse. That was what Medicare paid – no matter if you injected an amnesiac drug to ease the pain or if you used a variety of different stains to nail the diagnosis. This is one small example of rigidity of current billing methods – of hardening of the billing categories, of arbitrary and capricious bureaucratic billing behavior on part of government. It is government’s way of insulating Medicare and Medicaid recipients from the true cost of care.

Still, it’s highly unlikely Congressional Democrats will support billing flexibility. Instead they will raise the SGR (Sustainable Growth Rate) formula.

I predict one of the Great Debates in the upcoming health reform debate from the physician side of the aisle will be how to change the SGR formula, which, if implemented in its present form, will drive more physicians out of accepting new Medicare and Medicaid patients and will create a political nightmare over access to care.