Sunday, January 19, 2014

Minor Procedures, Entrepreneurial Specialists, and Large Hospital Bills

A way of performing something: an act composed of steps: a set of established methods for conducting the affairs of an organization.

Procedure definition

A physician who performs procedures.

Proceduralist definition

Today’s New York Times features a front page 4000 word article entitled “Patients’ Costs Skyrocket: Specialists’ Income Soar.”  


The article, perhaps “expose” might be more appropriate,  is a thinly-veiled attack on physician entrepreneurship.   Its subtitle sets the tone, “When a doctor becomes an entrepreneur, small procedures offer big returns.”  

The article opens with the story of Kim Little, a history professor at an Arkansas college.  A dermatologist biopsied a small lesion on her cheek. It was skin cancer.  The diagnosis led to a procedure, an excision of the small cancer, at the Baptist Medical Center in Little Rock. The procedure  involved an dermatologist,  an anesthesiologist, and an ophthalmologist.   The excision required a few stitches to close.   The bill was $25,000.  The amount outraged the history professor.

According to The Times, the skin lesion excision “racked up big bills because it involved three doctors from specialties that are among the highest compensated when done on the grounds of a hospital. Many specialists have become particularly adept at the business of medicine becoming more entrepreneurial.”

“It does not matter if the procedure is big or fact, minor procedures typically  offer the best return on investment.\.”

“That math explains why the incomes of dermatologists , gastroenterologists and oncologists rose 50% between 1995 and 2012, while those of primary care physicians rose only 10%.”

“...In America’s for-profit, fee-for-service medical system, dermatology has proved especially profitable because it offers doctors diverse revenue streams – from cosmetic treatments that are fully paid by the patient to medical treatments covered by insurance.”

The Picture

You get the picture: fee-for-service  physicians are ripping off patients in a  captive hospital environment – an environment in which patients are ignorant and helpless to change what is going on.   Presumably this would not happen in a system run by government.  

“In contrast, in Germany where private doctors’ allowable charges are set by the government, dermatologists are paid $30 for a whole body check, $40 for a standard biopsy and $30 for a pathology exam.”

Hospital Pay for Specialists

The point of the article is that minor procedures cost a lot and generate handsome revenues for the hospital and incomes for specialists.   

Incomes for specialists paid by hospitals and hospitals are listed as follows:

·         Orthopedic surgeons, hip and joint,  $920,555
·         Orthopedic surgeons, spine, $820,509
·         Neurosurgeons,  $707, 252
·         Cardiologists, invasive, $583,837
·         Dermatologists, Mohs Surgery,  $516,661
·         Gastroenterologists,  $488,200
·         Hematologists/Oncologists, $425, 006
·         Anesthesiologists, $378,005
·         Ophalmologists, $345,726
·         Obstetricians/Gynecologists, $300,000
·         Neurologists, $264,863
·         Internal Medicine, General, $200,000
·         Pediatrics, Child Development, $166,570

Source: Medical Group Management Association

The article highlights increases in specialists’ incomes – 60% over the last 30 years. 

For balance,  it points out that medical school is expensive (average debt $150,000) and malpractice premiums are high (sometimes over $100,000).  

But it notes that incomes for physicians in “life-style specialties “ – radiology, ophthalmology, anesthesiology, and dermatology – work shorter hours and have higher incomes than physician colleagues. These and other highly paid specialties have powerful lobbies protecting their incomes.    And the AMA’s Relative Value Update Committee composed of 26 specialties,  which advises CMS and Medicare what to pay doctors, stacks the income deck for specialists and against primary care doctors and generalists.

The result of all these factors is that hospitals are a haven for specialty procedures.  Performing  procedures are where hospitals and specialists achieve their margins and make their incomes.  Specialists go to hospitals to perform procedures.  Hospitals charge for drugs,  equipment, operating room space,  recovery rooms and hospital rooms, salaried physicians, emergency departments,  and  “facility fees,” the privilege of using their institutions.

Another Dimension

There’s another dimension to the high cost of procedures.  Procedures are concrete and tangible acts, objective, easy-to-understand, and to charge for while general care performed by generalists tends to be subjective and involves talk and time, which can be subjective, intangible, and hard-to-pin down in monetary terms.

What To Do

What to do to bring down cost in the House of Procedures and Specialists?  A number of things have been suggested.  

Suggestions  include:

·         Pay based on “outcomes” and “value” for the patient.  What constitutes “outcomes” and “value” remains elusive, and for this reason, pay for value has not caught on in a big way yet.

·         Paying specialists on salary, rather than on a procedure-by-procedure basis.   This is becoming common in large health care organizations, and the pay differential between specialists and generalists is narrower than in the outside world.

·         Bundling total payment on the basis of an episode of illness or the various services associated with a hospital procedure or medical condition,  or even for the total cycle of care from outpatient, to inpatient, to rehabilitation or palliative care.   

·         And, of course, a government-controlled health system, where government sets the fees for hospitals and specialists.

To date, independent physicians have resisted these solutions. 

Tweet:  The New York Times  says physician entrepreneurship is responsible for high costs of many common medical procedures.

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