Imagine a doctor actually trying to save money for his patients

It has always been my assumption that my new practice will be as “digital” as possible.  No, I am not going into urology, I am talking about computers.

[Waiting for the chuckles to subside]

For at least ten years, I’ve used a digital EKG and spirometer that integrated with our medical record system, taking the data and storing it as meaningful numbers, not just pictures of squiggly lines (which is how EKG’s and spirometry reports appear to most folks).  Since this has been obvious from the early EMR days, the interfaces between medical devices and EMR systems has been a given.  I never considered any other way of doing these studies, and never considered using them without a robust interface.

Imagine my surprise when I was informed that my EMR manufacturer would charge me $750 to allow it’s system to interface with a device from their list of “approved devices.”  Now, they do “discount” the second interface to $500, and then take a measly $250 for each additional device I want to integrate, so I guess I shouldn’t complain.  Yet I couldn’t walk away from this news without feeling like I had been gouged.

Gouging is the practice of charging extra for someone for something they have no choice but to get.  I need a lab interface, and the EMR vendor (not just mine, all of the major EMR vendors do it) charges an interface fee to the lab company, despite the fact that the interface has been done thousands of times and undoubtedly has a very well-worn implementation path.  This one doesn’t hurt me personally, as it is the lab company (that faceless corporate entity) that must dole out the cash to a third-party to do business with me.

Doing construction in my office, I constantly worry about being gouged.  When the original estimate of the cost of construction is again superseded because of an unforeseen problem with the ductwork, I am at the mercy of the builder.  Fortunately, I think I found a construction company with integrity.  Perhaps I am too ignorant to know I am being overcharged, but I would rather assume better of my builders (who I’ve grown to like).

Yet thinking about gouging ultimately brings me back to the whole purpose of what I am doing with my new practice, and what drove me away from the health care system everyone is so fond of.  If there is anywhere in life where people get gouged or are in constant fear of gouging, it is in health care.  Here are some obvious examples:

  • Prescription drugs are priced at a level that none but the wealthiest can afford to pay.  Seriously, if health insurance did not subsidize the price of brand-name drugs, who would ever buy them?  The argument has always been that the research needed to develop new drugs is staggeringly high, but that rings hollow when granny hears about the record profits by the drug company who makes the $150/month cholesterol drug she takes.  The truth is, the drug companies can gouge because the subsidies enable them to do so (see a previous post on this).
  • The argument of why prescription drugs cost so much rings even more hollow when one looks at generic drug costs.  These companies don’t have to do the R&D to develop the drug (although now many of the brand manufacturers also make the generic). Why then does the cost not drop for many drugs when they go generic?  The FDA, in limiting generic manufacturers and hence limiting competition, as well as the deals between pharma and the insurance industry, allows gouging to flourish after patent expiration.
  • Hospitals are famous for charging $10 for a Tylenol tablet.  Why?  Because the patient has no choice and the insurance company (inexplicably) pays for it.

Then I turn my eyes to my old practice, and what I used to do.  There is plenty of gouging going on there as well:

  • To run the business successfully, we must charge the highest price possible for any given service we offer.  We do this because different insurance plans pay different amounts for the same procedure (be it an office visit, a laceration repair, a strep test, or an immunization).  The differences are often very large.  If we overcharge a given procedure for an insurance plan, they simply pay what we agreed to accept from them and we write off the rest.  But we still charge much more than we expect to get from 99 insurance plans if 1 will pay us the high amount.  So what happens to people who don’t have insurance (or have high-deductible plans)?  They get gouged at the rate we don’t expect out of the 99 insurance companies.  If we discounted them, we’d be breaking contract with the insurance plans (and perhaps committing Medicare fraud).
  • Another way to run the business successfully is to charge for everything possible associated with a visit.  When I saw a child for wellness and immunizations, for example, I billed for the following:
    • Code for the Well Visit itself
    • If there are any sick complaints (stuffy nose, etc) I can tack on a sickness charge for some insurance plans.
    • I can charge for each vaccine administered, as well as an “administration fee” for the nurse giving it.
    • I can also get paid by many plans for counseling regarding the immunizations and documenting the counseling given.
    • The end result is a long list of items the patient sees on the bill, most of which are there for the sole purpose of getting everything I can out of the insurance company.  While many (including me) would argue that this is just me getting what I deserve from the insurance company, to the patient it looks an awful lot like I am gouging.

I could go on, and the list would be quite long and very damning, but I probably should get to my main point.

As I near the opening date of my new office, I am faced with decisions about what services I am going to offer my patients for their monthly fee.  Whatever I feel about the value of what I am offering, a patient’s commitment to pay even $30/month comes with the obvious question: what will I get for my money?  My initial list included:

  • Office visits
  • Office labs
  • Management of problems over the phone or via online services
  • My health education site
  • Access to medical records
  • A personal health record

Yet these don’t convince many people who are basically healthy and want to avoid doctors’ offices.  They see the reality: it’s cheaper to be healthy.  Yet they also realize that they don’t control this, and so they look for more value.  This has been a big part of my mission over the past month: to justify the monthly fee for patients.  Here are some additional savings I have found:

  • I can draw labs in the office and send them to a local lab, which charges me much less to run them.  For the 37 tests on the list, the sum total cost for 1 of each is $530, compared to the $3,100 it would cost if the patient went to the lab.
  • I am negotiating to do the same with radiology tests, having patients pay me directly to get a discounted rate from the radiology facility.
  • I can do the same with generic drugs, dispensing them at a wholesale price, saving a whole lot over what they would pay at most pharmacies.

Each of these entities pointed out that I could mark-up the price and make a tidy profit on each of these services.  This is what most docs do when they bill labs, x-rays, or dispense drugs.  But if my goal is to give value to my patients so they feel the monthly fee is justified, these profits would likely hurt me in the end.

And this is when I understood.

Charging the monthly fee puts me in a position where I am no longer motivated to gouge.  I am already paid for the month, so now I have to prove value.  I have no motivation to bring people to the office for visits they don’t need; I can handle them on the phone or online.  I don’t have to charge for every little thing I do.  Heck, I can lose money on things like drugs or labs and still come out ahead.  The better value I give to my patients, the happier they are, and the more likely they will continue to pay the monthly fee.

And I don’t have to apologize any more for every additional charge.  It’s a really nice change.

Imagine that: a doctor actually trying to save money for his patients.

Rob Lamberts is an internal medicine-pediatrics physician who blogs at More Musings (of a Distractible Kind).

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  • Vikas Desai

    Frankly i would love get a capitated payment for 30 dollars a month, I realize while you aren’t “gouging” any of your patients like us private docs apparently do. You are making quite a bit more per patient than most other PMD’s, a small (3000) patient practice under your system can gross 900K a year. That’s a lot more than a “normal” 3000 patient practice can do.

    • Dr. Rob

      You do understand that I did 18 years in private practice doing this, so was more talking about my own experience. I have no negative feelings toward the docs in your situation. Most docs in your shoes (in my town and ones who have read my writing) are hoping I succeed and this model becomes a viable alternative to the normal system (which both doctors and patients hate). Even my specialist colleagues have been incredibly supportive, and see a real benefit to lowering overhead by collecting cash payments. But it’s anything but easy money at this time (your math sounds great, but really offering care that people will accept paying me monthly is quite difficult. There is a very good reason not many docs have done this.

      What I’ve been telling people when they join (and I am up to 140 patients in the 1st 3 weeks), is that if they had to pay $30/month for me as I was in my old practice I would not advise they do it. I am to offer much better care. My income as a PCP (IM/Peds) was in the top 10%. I didn’t leave to make more money. I left because I felt like I was unable to give good care to people. It’s taken me 4 months to get the doors open, $100K debt to do the construction, and I’ve had to put together a business when I have the business skills of a doctor (I say as in jest). It’s the hardest thing I’ve done in my life, but the 1st 3 weeks have convinced me that this is the road medicine should take.

      • Vikas Desai

        Good luck with everything, i hope you succeed. When you consider all the uncompensated care PMD’s have to do, a decent capitated payment is the way to go. Your monthly charge is actually pretty reasonable when compared to other concierge practices. my current patient population cannot afford the 30 dollar a month charge, they barely want to pay the copay once or twice a year they do show up. Short term follow ups for patients with private insurance or high deductibles are routinely missed and I am met with anomosity(The doctor is just trying to get another copay out of me) This is why i feel the insurance companies should offer up a rate similar to that of your monthly fee.and we can offer quality care that can help the insurance and patients save money, It can also save me thousands(even zillions) in billing fees.

        • Kristy Sokoloski

          Dr. Desai,
          If the insurance companies offered up the rate similar to what Dr. Lamberts is going to do with his clinic you would run the risk of losing even more patients that truly need your care. As far as the saying that this type of a payment arrangement would save the patients money, I don’t agree. The reason? For numerous people money is so tight that bills where you are paying $30 a month on something is unaffordable. So the only other thing for them to do is either go on Medicaid, or as I said a minute ago stop seeing their PCPs for wellness visits, and problem visits. For those that have multiple chronic health problems the latter is not a very wise move although it’s their choice.

          • Dr. Rob

            People pay for cable when they can get TV for free. They pay for smart phones instead of basic cellular (or land lines). People buy (or lease) new cars when used cars are far cheaper. Why? It’s what they value. If my care is better enough, people will pay “extra.” I’ve got both Medicare and Medicaid patients following me. I am not offering them “premium care,” I am giving better care. It’s sad that they’d have to pay extra, but to say $30 per month is out of people’s price range is a little silly. It’s more that they don’t see the value in it yet. Once I can show that my care is truly better (and less expensive in the long-run, as they don’t have to miss work – yes, many of my poor patients have jobs), get sitters, spend money on gas, or other things. They will have better access to me for their wellness, disease-related, and sick visit care.

            The bottom line is that I have to show that my care is worth the extra fee. This shouldn’t be hard, as the majority of people get care that is not patient-centered, don’t get educated or engaged in the care, can’t contact their doctor when they need to, and are unhappy with the current system. Once I show that, the idea of $30, $60, or $150 per month (for a family) is not nearly so onerous. Interestingly, it’s not the poorer families or the elderly that raise the cost objection, it’s the folks who have “good insurance” and don’t see the need.

          • Suzi Q 38

            I think that you are “right on.”
            At first, I was not sure.
            Now, I realize that what you are offering is somewhat unique and could catch on.
            I am one that could well afford it.
            Of course our family income at this time is fairly good, but we are far from wealthy. We are both very frugal, and I can see the value in your type of practice.

            Your price is very low ($30.00 a month). Are you going to be able to make it financially?
            My gym membership is about $20.00 a month, so paying $30.00 a month for my physician would be a great value for the money. I like being able to talk to my physician via text or email. How are you going to keep up with this communication volume? Is your nurse going to have your iphone?
            I would have to check into what it would cost for me to go from PPO to HMO, then opt to pay your fee per year.
            The problem is, I have too many health issues right now.
            (spinal stenosis, pre diabetes, hypertension, hyperlipidemia). I feel that if I went down to an HMO situation, you would not be able to get me to a specialist if need be.
            Do you see where I am coming from? I would pay the HMO monthly fee of $400.00 plus your $30.00 a month, for a total fo $430.00 a month ($5,160.00 a year).
            The savings would be that I would no longer pay the $850.00 a month ($10,200.00 + copays) that we pay for PPO insurance for the two of us.
            I notice that when I pay extra for the PPO that everything is easily approved by the insurance company.
            When I was on the HMO system, this was not the case.

            I definitely would consider this, especially when we have to tap into medicare at age 62.
            Are there doctors that do this is Southern California?

          • Homeless

            ” it’s the folks who have “good insurance” and don’t see the need.”

            One quarter of my families income goes to health care…insurance, copay, Medicare, Medicaid…and you’re surprised that I feel paying another $1800 for my family doesn’t feel like being gouged? While I wouldn’t consider myself healthy, I saw PCP provider once last year, my children had well checks and my spouse…the typical male…would have to be dieing before stepping foot into a doctor’s office.

            I would rather have my smart phone so could consult Dr. Google.

          • Kristy Sokoloski

            Dr. Rob, I understand what you are saying about those that choose to pay the prices they do for cable and smartphones. However, those are not the ones I am talking about. I am talking about those that truly do not have the money to spend $30 a month for a bill of any kind. And these are people that are in extreme poverty.
            And for those that have very good health insurance sometimes finances are such that they still can’t afford to pay that “extra” bit to get the healthcare they need. There was an article that came out in one of the news articles posted on the AMA site that mentioned this issue of those that have insurance and still can’t get care. It said that a lot of people with insurance are having to cut out wellness visits. The reason is because even though the wellness visits are covered at 100% the diagnostic tests and treatments necessary to care for problems that are found are not covered at 100%. What are these people supposed to do now?
            I understand the reason for what you are trying to do, and admire your efforts for making this happen. I wish you all the best with that. I have friends that fall in to both categories of which you speak, and I know that for them paying the kind of fees per month that you mention would be a financial hardship. They would not be able to get the care they need, and of course for them to not be able to get that needed care is not a good thing.

          • Dr. Rob

            The truly poor can’t afford medications either, even if the care is free. So far I have justified my care many of patients by cutting cost of medications (like cutting the cholesterol pill in 1/4 and saving $90/month. I know there are some who can’t afford $30/month, but they are a small minority for whom the safety net was created. Most of my Medicaid patients (and I had a fair number) had some money. Uninsured patents, in general, had a little more. I had 400 uninsured patients in my old practice, and the care I give now is much more cost effective.

          • Kristy Sokoloski

            Dr. Rob, I agree with you 100% about that the poor can’t afford the medications either. What bothers me with that aspect is that there are programs out there made available by many of the pharmaceutical companies that offer help, but yet there are those that don’t make use of it. How much of that is because they don’t know about the programs I don’t know.
            And as for the breakdown on the number of patients in the various categories, interesting, and very good. I look forward to seeing how this works out for you with this current set up. Thanks for keeping everyone up to date on how this is going.

          • Vikas Desai

            what i’m saying is the insurance should pay the doctor 30 dollars a month capitated, directly as opposed to fee for service with the patient not having to pay a copay coming in. This way we can monitor people a few times a year as opposed to whenever they get sick. Seems like a good deal for the patients, as well as me. When you consider that the primary can do upwards of 50-90% of the actual health care/maintenance of a patient they should be entitled to 7-9% of the premiums paid to the insurance company annually.

  • querywoman

    Thank you for your clear breakdown of allowable insurance charges!

  • Beau Ellenbecker

    Thanks, I plan to read a little more on your blog. I am struggling with the charging and cost as I transition from the military into a civilian practice. I don’t have as much leeway over my costs as I basically have a franchise but I do have the ability to make changes. I am considering adopting a yearly “management fee” that would give online/email access and drop administrative fees (venipuncture and immunization etc).

  • YoungMD

    Great idea!! Good luck!!

  • Nathaniel Copeland

    That you for that extremely detailed analysis of the charges. I had a question though; do you have any idea if NeedyMeds Drug Discount Card is of any good to your average senior citizen living on SS benefits?

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