Does contracting with third party payers compromise ethics?

Physicians have historically been fairly well compensated for their efforts and thus have enjoyed many of the comforts of modern life. Most would agree this is the result of years of hard work, perseverance, intellect and dedication. In general these are also traits along with professional integrity, which raised physicians to a position of relative prominence and trust within our society. But in recent years that social position and economic security have begun to decline as healthcare services have come to be characterized as a basic human right. The growth of this philosophy is the direct result of various third parties becoming interposed between the patient and their physician for the sole purpose of guaranteeing payment.

Whether the payer is Blue Cross, Aetna, or the government, the impact is the same; the third party indirectly influences medical decision making, potentially to their own benefit. About 9 years ago I made the conscious, all be it impulsive, decision to resign from every private insurance contract. I believed then, and still believe today, that these contracts with their pre-authorizations and denials of payment were inappropriately influencing a wide variety of medical decisions. Plus, under these contracts I had no say in determining what the actual value of my services should be. Essentially, I had become an employee of the insurance companies since they were the ones who paid me, according to their non-negotiable fee schedules. So I quit, and boy did everything change. I was suddenly “Out of Network,” the equivalent of a medical “Scarlet Letter.”

Almost immediately most of my referring physicians quit sending me patients. I had worked with many of them for 20 years or more. In many cases I‘d provided surgical care for their family members and even the docs themselves. When I asked them why they stopped sending patients my way the answer was “You don’t take insurance.” I tried to explain, “I still file claims for patients, I’m just not bound by the insurance companies’ fee schedules, which means I have the freedom to individually contract with each patient.” This concept seemed beyond the grasp of many who somehow believed it inappropriate for a physician to actually bill the patient directly. Others offered words of encouragement with statements like, “I wish I could do that, but my practice is different.”

Perhaps the most enlightening moment of my professional career occurred a few weeks after dropping off the insurance roles. Two separate patients called on the same day to tell me they wanted to come to me for their elective surgery but they said they “couldn’t.” I assumed it was because they couldn’t afford to pay my fee. When I explained that I’d be willing to work with them on my fee, they both issued the same rather startling statement, “My insurance company won’t let me come to you.” What? That’s right! It seems that since I wasn’t willing to play by the companies’ rules, they would do whatever they could to ensure that their policyholders didn’t become my patients, even if they had “out of network” benefits. I wondered, was this some form of coercion to force me back into the fold, or was it just a prudent business practice? Either way, it was clear that they controlled the patients and if I wasn’t willing to play by their rules I would have a tough time seeing enough patients to maintain a viable practice.

One afternoon as I was rearranging my office I happened upon my framed copy of the Fellowship Pledge of the American College of Surgeons; something that has been “revised” in recent years. As I read it again, I was struck by the third paragraph, which began, “Upon my honor I hereby declare that I will not practice fee-splitting.” Obviously, this was written nearly a century ago by the founders of the college as they formalized the basic principles of conduct and ethics they wanted their Fellows to abide by. Splitting one’s fee with another doctor in order to secure a referral was considered unethical, so the founders of the college included specific language in their pledge, emphasizing that such behavior would not be condoned. As I pondered this idea, it occurred to me that the reason I was no longer seeing insured patients had nothing to do with my skills, bedside manner, reputation, availability or even my fees. It was because I had the audacity to tell insurance companies that I was no longer willing to “split my fees” with them.

If the early leaders of the surgical profession considered fee splitting to be unethical, is it still an issue of ethics today? If not, why not? Over the last few years I’ve asked many of my colleagues that question, and I typically get a nod of agreement, or some actually say, “You’re right, but that’s just the way the system is today.” Perhaps this is in part because for decades our leaders have spent most of their time and efforts lobbying our government for more crumbs from their healthcare budget. (Payments to physicians account for only about 12% of Medicare payments) What they should be demanding is a return of the basic American freedom that would allow all physicians to determine their own fees for the services they provide. Instead, our organizations, led by the American Medical Association, have actively participated in the actual creation of the current payment system based on fixed fees, determined solely by the government based upon its willingness to allocate resources. No other component of our economy, and no other individual professionals are subject to this level of government control, which has filtered down to every insurance contract. So its not surprising that many of the best and the brightest of our nations youth are choosing careers other than medicine.

Perhaps organized medicine may have finally begun to challenge the status quo. At the annual meeting of the AMA in June of 2010, a resolution was passed by an overwhelming margin calling on the AMA to write its own legislation that would allow for physicians and patients to privately and individually contract for healthcare services within the Medicare program, without penalty to either party. The result is the “Medicare Patient Empowerment Act,” a bill, which is currently under consideration in both the US House of Representatives and the Senate. (HR-1700 and S-1042) I’m not sure whether the delegates who voted to have the AMA take this unprecedented action actually recognized it or not, but to me what they were saying is that the key to the patient/physician relationship, traditionally the core of our American healthcare system, lies in the ability of both parties to deal fairly and honestly with each other without being inappropriately influenced by any third party.

Unfortunately, over the last few decades physicians have become economically addicted to a system based on third party payment, despite the massive regulations and impersonal controls they have imposed. While many physicians applaud the effort to restore “the right to privately contract” within the Medicare system, and justifiably so, very few have actually seized that opportunity with non-Medicare patients, even though to do so is perfectly legal.

Perhaps all physicians, as well as all our professional organizations, should step back from the pursuit of better contracts and more secure government payments, and reevaluate our true roles within the healthcare system. In doing so, one basic question must be asked – does contracting with third party payers, including government programs, actually constitute a compromise of our professional ethics? Just asking.

Robert Sewell is a surgeon who blogs at The Spirit of Healthcare.

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  • Margalit Gur-Arie

    “But in recent years that social position and economic security [of physicians] have
    begun to decline as healthcare services have come to be characterized as
    a basic human right.”

    Don’t you think that your first paragraph in general, and the above sentence in particular, “actually constitute a compromise of [your] professional ethics? Just asking.”

  • Vikas Desai

    Now that you have dropped your insurance, how has your income changed? You don’t have to answer but it would be interesting to know. Its good to adhere to your principles especially without a significant income drop off, but as a surgeon if you are making less than the average NP or PA then you will be alone in your quest.

  • sFord48

    “As I pondered this idea, it occurred to me that the reason I was no longer seeing insured patients had nothing to do with my skills, bedside manner, reputation, availability or even my fees.”

    It was probably because of your fees.

    I don’t usually go out of network for financial reasons, ie I can’t afford it.

    My insurance, after a large deductible only covers 50% of out-of-network providers instead of 80% for in-network and I would then be subject to balance billing.  So if you charged me $1000 for a procedure, and the insurance company allowable is $700,  then the insurance would pay $350 while I pay $650.  With an in-network provider I would the insurance would pay $560 and I would pay $140.  So really you would have to charge only $280 for your out-of network  fees to be comparable to be a financially better choice.  Are you surprised that your patients would make a decision based on money.  Clearly your ethics are limited to your bottom line.

    I find a conflict of interest in the way doctors are paid more for doing perhaps unnecessary procedures to make more money.  I have had that experience where it seemed only reason that an MRI was recommended was because of profit for the doctor…he owned the machine.  Where’s your outrage for this? Oh yeah…it increases your bottom line.

    If it makes you feel any better, without insurance, most of the medical care I have received would have been out of my price range and you don’t have to worry that I will ever be your patient.

    • CorpAvenger

      BUT that is exactly the good Doctor’s point here… That the Insurance Carriers are the ones making for an unlevel and unfair, ANTI-Free Trade, Fee Splitting situation here.. They are twisting your arm, making you choose between how much they keep verses how much they will pay towards your bill based upon the doctor’s willingness (or not in this case) to bend to their extreme coerrisve strong arm tactics to stay “In Network” or not…

      What all of you have to remember is that most doctors accept a lower rate in exchange for “access” to their own patients, the people who are the recievers of their end services. Now many docs “Charge” more because they have to, to get the carriers to pay full bang, they must make sure to always “charge” more than the highest payor or they leave money on the table, another rule in this insane game. So only those without a contract (those without insurance) get banged at full buck… BUT If the doc doesn’t “Charge” you the same as Blue Cross, Aetan and CIGNA, they are performing “Insurance Fraud” by not charging everybody equally… Get the BS here in the rules and the game yet???

      Worse yet, the stats prove that the average doc, especially in primary care (who are going Bankrupt literally from a lack of fees while running hamster wheel like speeds to get more office visits in because they do NOT control their own prices, can’t raise fees, can’t cut back the cost of rent and G&E, only solution, see more patient visits… now you know why most PCP’s race you in and out and those that don’t starve to death, drowning on school and business debt) Loose about 20-40% right off the top to all the garbage that the system imposes on them, between billing expenses, rejected resubmitted claims, lost claims, “Bundling” no less Prior Auth’s and other busy work which is but actual barriers to your care and their income, that BOTH parties should be able to simply engage in….

      If we simply got rid of the present system that makes docs jump these insane barriers and hoops all day, every day, and with the loses that they incure because of it, they could actually live and profit pretty well on today’s lower rates because they would need less staff and support services to process all this JUNK, and would not have to worry about lost fees, lost in the process of the system that is set up to do exactly that.. make them majically “Disappear” for the benefit of the greedy carriers….

      If we simply broke this strangle hold on doctors the market would quickly start to have a positive effect on the level and quality of care and you could choose between the high volumm lower care assembly line practice or to pay a couple of bucks more to see a slower small practice that engages more with its patients. Heck their prices might even be the same or less because as smaller and leaner companies they might be able to get away with charging less while providing that something special that is all too hard to quantify….

      Fee Splitting is Against the Law and the good doctor is correct, that the insurance carriers are “Forcing” all the in-network doctors to do such with them, they take in the money first and the doctors only gain access to their “Lesser Share” if they play ball with them under their strong armed tactics and rules… Funny how if docs fee split together that is insurance fraud and unethical and against the law…. But when Huge for Profit insurance carriers force docs to do it, simply to have equal access to their own customers of their own end services, this is simply doing business and perfectly fine and supposedly ethical… Well in my book it is a crime and it is unethical…. Could you imagine “In-network” lawyers, tradesman like carpenters, HVAC, Auto Mechanics, and any other trade besides medicine….

      Yes we should provide healthcare for all who need it. It can be provided by providing everyone with a good paying wage, some amount of insurance coverage to help with the larger stuff (out of network only and free trade again) like home owners insurance pays for the fallen tree and the roof repair for the same…. but not for my busted hot water heater or new stove, or auto insurance pays for large accidents and medical bills but not for tune-ups, tires, wipers and other wear iteam and daily upkeep items…. expensive meds, expensive tests and other hard to afford stuff, with a not for profit regulated or single payor system… But we must keep private tradesmen and women out of it so that they too can make a good living and afford to keep their own standards and practice open and up to top snuff…. Not slaves to some monolithic all powerful “Wizard of Oz” like controller who contols for their own selfish reasons….. Pay No Attention to the Man Behind the Curtain”…..

      BTW, primary care doctors only get 5% of all healthcare dollars consumed by the present system…. even though they make up about 2/3′s of all healthcare visits and services and are where we could save the most money by providing better care, more prevent care and keep much of the other expenses under control… Who gets most of the rest after that first 12% that docs get????
      “Beware of the Medical Industrialized Complex” that’s who…..


      • sFord48

        So you want health insurers to pay for expensive stuff and that’s ethical when paying for a physical is not?  Do they get to fix prices or do doctors?  How are you going to make sure everyone gets care?  I have a high deductible insurance plan…one that sounds kind of like what you are advocating for.  I often have chosen the do-it-yourself method of healthcare, just as I would fix my own roof if needed.

  • John Ballard

    I have to tell you, Dr. Sewell, I like this post better than the veterinarian example. You seem to be finding the right track by getting off the main track and for that you have my support. Something in your spirit has told you that when you compare contract arrangements with what most people would call ordinary ethics they don’t pass the smell test. 

    That’s not only a good move, but if the third-party players are blackballing you as a result, that validates your decision to step off the treadmill. 

    The next logical step might be finding another colleague or two for moral support, perhaps sharing an address or facilities. After that (I’m way over my head here, so ignore me if you want) take a look at some of the doctors I have read about who actually practice with a sliding fee schedule, even mixing in Medicaid patients from time to time on a limited basis. I rather doubt Medicaid will shun a willing doctor in good standing. Splitting fees to eliminate patients is not good. But splitting fees to accommodate them is admirable. 

    Good luck and stay strong.  And keep us posted. 

    And while you’re at it, take a look at Dr. Lundberg’s truly excellent suggestion for an economic informed consent.

    • rsewell

      Thank you John for your support. I suspect my other post was not well understood. Many took it as a swipe at veterinarians or at physicians. It was in fact meant simply as a reminder that people must except some element of personal responsibility for themselves and there own decisions. Never the less, I understand the push back that many offered.

      With regard to this post I believe that each physician has to answer the question of the ethics of third party payment for themselves. As a surgeon I can tell you that I would be doing far better financially if were willing to contract with the insurers, but I’d be far less satisfied with my practice. I do indeed offer patients discounts to patients who are economically strapped, and occasionally offer my services at no cost to the patient. However, I believe that nearly everyone has the ability to pay something. People tend to value what they invest in, even if it is a nominal amount it strengthens the relationship. In fact I believe a large part of our liability crisis is related to the lack of value and the absence of a Real relationship between patient and physician.

      • John Ballard

        As a surgeon I can tell you that I would be doing far better financially if were willing to contract with the insurers,

        That may or may not  be true. It’s tempting to believe that what you are calling “fees” are not that in the way that you believe, especially if third parties are involved. After all, the reason they exist is to make the system work more smoothly, but insurance companies, (even the now rare to nearly extinct mutual companies) don’t work for free. They have to get enough of the revenue stream to operate.

        Have a conversation with whoever manages your taxes and discuss the difference between profit and professional compensation. You already know that when you send a bill you can’t put every dollar you receive into your pocket. You have professional expenses that must first be paid. What’s left is your professional compensation.

        In your case, as for most freelance workers (not just in medicine but in any line of work) what you charge is by no means what you profit. And you are very courageous to be forthright about saying so. Your example writ large is the future of health care reform if it is to include more people and become more affordable. Perhaps some day in the future when the insurance reforms now being implemented have had a chance to take hold you will want to reconsider your decision to do business with insurance companies.

  • SidewaysShrink

    I am in psychiatry and have dropped Medicare, all managed care, and the mega-companies that under-pay because “they think they can.”  I happen to believe that healthcare is a human right in a civilized society–not the one we are currently living in.  However, in your first paragraph you seem to imply that this is linked to the lowering of the social status of physicians.  I think that the chronology is correct, but I disagree about the causality.  The problem is way in which the profit motives of insurance companies requires providers strapped with medical school debt to not just work long hours, but to work financially strategically smarter long hours to keep their practices afloat and now the federal government with the ACA is trying to create 36 million more Medicaid insured patients at a time when there will be a tsunami of Medicare patients as the Boomers retire with the Congress/Senate threatening to lower provider reimbursement by 27%.  Having grown up in poverty in Texas, I want to live in a civilized society.  However, I borrowed too much money to treat patients (which I love to do), to be able to sell out to insurance companies or be the handmaiden of the government which wants to pretend my generation did not pay dearly for its education. Conversely those currently retiring got their education, comparatively, for pennies on the dollar and, apparently are going to pay for their healthcare in retirement at the same price….

  • doctorbills

    Well healthcare is basic human right as evidenced by jammed EDs full of all kinds of ailments.  These people will be treated at someone’s expense regardless of their ability to pay.  I am a little shocked to hear such a statement from a person who is dedicated to healing.  Perhaps I misunderstood that statement.

  • Maura69

    I happened to be extremely fortunate to have worked for a Cardiologist and ENT Specialist in the late 1960′s and through the 1980′s. They were both wonderful Doctors and loved and cared for their patients and for their employees. I am ever so grateful that both of these kind gentlemen died before they could see the catastrophic equation the medical profession is now enduring. Both Doctors had, what we called “Cross-over Patients meaning both Medicare and MediCal were the providers for insurance. Yes, our fees were loosely dictated by what the allowable rate suggested by the benefit charts and codes for various procedures. Our largest reimbursement problem was for any type of emergency medical services that did not have a TAR (Treatment Authorization Request). As I stated, these were emergency procedures during an emergency visit. When we received a statement saying that our services were not approved/covered we wrote a letter to the Insurance Company and generally the problem regarding fees was corrected – usually within two to four weeks. We had a lot of forms to fill out and many questions from diagnosis to possible treatment and then the duration of said treatment and medication. The patients trusted the Doctors impeccably and by reputation and prior ethics, so did the Insurance Companies. Granted that we worked many years ago and everything was so completely different, it still is a major shame that the Doctors and Insurance Companies are unable to have the type of relationship that we had back then.
    Our service was built on integrity, honesty and mutual respect by the Doctors, the Insurance Companies and the Patients.
    It is a much different world for our Doctors and patients and I truly wish the Government would leave the practice of medicine to the professionals. 

  • civisisus

    Sorry, Dr. Sewell – health is not about you. You are a necessary expedient. (Well, maybe you, specifically, are not necessary. But I digress.) 

    No one WANTS to have a relationship with a physician. They WANT to be healthy. No one cares about your “freedom”, Dr Sewell. They want health and they want it “produced” by individuals who do not harbor the dangerous conviction that THEY are somehow magically endowed with “special” healing powers, capacities insinuated to be markedly superior to the run of medical practitioners – and yet exempt from sensible external performance assessment.  

    The more such delusional individuals insist on their entitlement to autonomy, the more nervous people who want to be healthy should be.

    • rsewell

      You are correct, this is not about me our any other physician directly. It is about you, the patient. But, whether you like it or not, you are reliant on the basic ethics of the physician to help ensure that any treatment you receive is indeed in your best interest. The point of this post is to make you aware of the fact that when your physician becomes an agent of the third party payer his or her ethics MAY, and I repeat, MAY become compromised. 

      I would also point out that physicians are not capable of “producing” an individual’s health. To imply such results is, as you say, delusional. If you want health you must make it a personal priority, which requires personal responsibility. Not a popular concept these days.

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