Human capital makes doctors special

If you’ve ever been sick, especially with anything serious, you quickly realize that doctors, nurses and their ilk are an unusual and precious resource.

First you have to find smart people with personalities willing and able to put up with a lot of guff in the service of their fellow man.  Then they have to be willing to (usually borrow, and) spend tens or hundreds of thousands of dollars for medically-related schooling and training. They devote the prime years of their lives to this – typically completing residencies and fellowships between the ages of 28 and 35.  While their old school chums are partying and starting families and enjoying the blessings of youth, most of our doctors and nurses are locked up in hospitals and clinics with people who many other Americans would literally pay money to avoid: the infectious, those with draining wounds, dementia, or mental illness, people who are often neglected, smelly and dirty, gang members with gunshot wounds … the list goes on and on.

Of course our young clinicians aren’t alone in their misery.  Lots of people make truly amazing sacrifices in the course of their careers.  Our soldiers sleep outside in the elements, take great personal risks and see their comrades killed and wounded before their eyes.   Policeman, firemen, sailors and airmen, coal miners, rescue workers, all have it rough from time to time.  Even pig farmers don’t get off easily.  As the Discovery Channel has shown us, there are lots of people with “dirty jobs”.

So when you come right down to it, what makes doctors so special?  One thing:  “human capital.”

Having gone through so much time and training, these people are darned difficult, expensive and time-consuming to replace – especially after they’ve had the chance to gain some experience.  They don’t grow on trees.  So you’d be justified in thinking that, as a society, we ought to be nice to them.  Not necessarily doting, but decent.  Fair.  Honest.  And appreciative.  Not because they’re some sort of aristocracy, but because they valuable to us as human and economic resources.  It would not be a good idea if, for example, they all decided to quit tomorrow and open up cupcake shops, become computer programmers or go work on Wall Street.  After all, someone who is smart and hard-working enough to become a doctor or nurse is smart and energetic enough to go do something else if they become sufficiently fed up.  So let’s be nice to them, right?  As a matter of smart public policy if nothing else.

Someone might want to tell this to  the people at HHS and CMS who are responsible for nurturing America’s healthcare delivery systems .

Today’s lesson in public policy comes to us through the courtesy of a physician we’ll call Mark.  Mark is a medical internist and endocrinologist – one of those relatively few specialists standing in the way of an epidemic of diabetes that is sweeping the developed world.  Endocrinologists aren’t exactly a thick as bugs on a bumper.  The pay is not phenomenal, the patients can be complicated and relatively few endocrinologists are trained in the first place.  He is a classic example of the sort of provider you wouldn’t want to lose.

Mark also happens to be one of the fast-disappearing breed of physicians: those who are small businesspeople in solo practice.  Saddled with the same costs and business overhead of any small business with employees, modern solo practitioners also face two additional problems: declining insurance reimbursement and a crushing burden of administrative overhead caused by rules and regulations.  As a result it’s getting harder and harder for them to stay in business.  So Mark was understandably alarmed when he received an e-mail in February of 2011, entitled “”Claims Affected by the Affordable Care Act and 2010 Medicare Physician Fee Schedule Changes‏”.  Scrolling down farther, here is, in part, what it said:


On March 23, 2010, President Obama signed into law the Affordable Care Act.  Various provisions of the new law were effective April 1, 2010, or earlier and, therefore, were implemented some time after their effective date.  In addition, corrections to the 2010 Medicare Physician Fee Schedule (MPFS) were implemented at the same time as the Affordable Care Act revisions to the MPFS, with an effective date retroactive to January 1, 2010.

Due to the retroactive effective dates of these provisions and the MPFS corrections, a large volume of Medicare fee-for-service claims will be reprocessed.  Given this large workload, the Centers for Medicare & Medicaid Services is taking steps to ensure that new claims coming into the Medicare program are processed timely and accurately, even as the retroactive adjustments are being made.  CMS will begin to reprocess these claims over the next several weeks.  CMS expects that this reprocessing effort will take some time and will vary depending upon the claim-type, the volume, and each individual Medicare claims administration contractor …

Medicare claims administration contractors will follow the normal process for handling any applicable underpayments or overpayments that occur while reprocessing your claims.  Underpayments will be included in your next regularly scheduled remittance after the adjustment.  Overpayments resulting from institutional provider (e.g., hospitals, inpatient rehabilitation facilities, etc.) claim adjustments will be offset immediately, regardless of the amount, unless there are insufficient funds to make the offset.  When these overpayments cannot be offset, the amounts will accumulate until a $25 threshold is reached.  At that time, a demand letter will be sent to the institutional provider.

CMS is, of course, the Center for Medicare and Medicaid Services – the federal entity that controls Medicare.  In plain language what this letter means is that, when Congress passed the Affordable Care Act (aka “ObamaCare”) into law, they also retroactively changed the amount that they had agreed to pay doctors for seeing patients between January 1st and March 23rd, 2010.  For some things the amounts were going to go up, and for others they would go down.  But the changes in compensation were going to be made and applied not only after the doctor had already seen the patient, but after he or she had already been paid the previously agreed upon amount!  Of course, all doctors accepting Medicare patients during this time had seen the patient in good faith, and with a contract in hand for the period from January 1st to June 30th 2010 that said that they would be paid one amount.  Now Congress and Medicaid were saying that the original contract wasn’t worth the paper it was written on, and they were, in some cases, going to claw back some of the money that Mark and others had every right to believe that they had fairly and legitimately earned.  Sure, they would get paid more for some other things, but there is no guarantee that the amounts would magically balance out.

It’s a bit like you’d gone into a restaurant, eaten the food, and came back a few months later and demanded a partial refund, or you’d have your policeman friend close the restaurant and throw the proprietor in jail for retroactively “overcharging”.

Mark was understandably upset.  He wrote this at the time:

What distinguishes a banana republic from a civilized country, primarily, is the rule of law. When you have your government changing the law and applying it retroactively, reaching into your pocket to get the money paid to you legitimately in the past, the rule of law is subverted.

You have to admit, he has a bit of a point.  But the story hardly ends there.   One month later, the results of the claims reprocessing started to filter through the system in the form of revised “explanation of benefits” (EOB) forms.  Since he operates a small practice, Mark routinely looks at all of his EOBs.  On March 22nd he reported:

I got the first 3 statements. Occasionally, there is a tiny fee increase (a few cents). Mostly a decrease, from about $0.40 to about $5 per visit/procedure.  In a busy multi-physician practice, this will amount to multiple thousands of dollars, with all the potential income and tax consequences.  Today, they deposited $0.26 to my account.

As mentioned in the original e-mail, Medicare accumulated the decreased payments until they totaled at least $25.  And on April 6th, Mark received the first of what is likely to be a long series of letters from CMS asking for repayment of the amounts that Mark had “overcharged”.  It contained the following passage, apologizing for the request and asking that physicians be patient and understanding in a time of economic crisis for the nation, and signed by the Head of CMS, Dr. Donald Berwick:

Dear Doctor,

As you know, Medicare is asking you to return a portion of certain insurance payments that were made to you for services rendered to Medicare patients between January 1 and April 1, 2011.  This request is being made as a result of provisions included in the Patient Protection and Affordable Care legislation passed by Congress and signed into law by President Obama last year.  This partial refund request is a direct result of retroactive provisions contained in the law, and does not in any way imply any error or wrongdoing on your part.

All of us here at Medicare greatly appreciate the work that you do on behalf of America’s seniors, and regret the inconvenience that this unexpected, retroactive change in federal law has caused.  We recognize that Medicare payments are already low relative to the cost of providing medical services, especially when the cost of complying with the necessary paperwork is taken into account.  We also realize that you rely on the integrity and predictability of the contracts that Medicare has made with you.  It is both unreasonable and a violation of the trust that you have placed in us to alter the terms of payment under these contracts retroactively.  I can assure you that we will work with Congress and the President to absolutely preclude any future regulations or legislation that would have an adverse impact on you or your practice.

Just kidding!  We completely made that up.  Here is the corresponding passage from the actual letter that Medicare sent to Mark and hundreds of thousands of other physicians across the country:

Dear Sir/Madam,

This is to let you know that you have received a Medicare payment in error which has resulted in an overpayment to you of $25.88.  The attached listing explains how this happened.

Why you are responsible:

You are responsible for being aware of correct claim filing procedures and must use care when billing and accepting payment.  In this situation, you billed and/or received payment for services you should have known you were not entitled to.  Therefore, you are not without fault and are responsible for repaying the overpayment amount.  If you dispute this determination please follow the appropriate appeals process listed below.

(Applicable authorities: Section 1870(b) of the Social Security Act; subsections 405.350 – 405.359 of Title 42, subsections 404.506 – 404.509, 404.510a and 404.512 of Title 20 of the United States Code of Federal Regulations.)

The Actual Medicare “Overpayment” Letter

Of course the difference in these letters is one of both attitude and leadership.  Real healthcare leaders would look at healthcare providers as human capital; a scarce and valuable resource to be nurtured and treated fairly.  After all, neither the President nor Congress nor all of the people in CMS or the Department of Health and Human Services can take care of the medical needs of the elderly.  Only our country’s doctors and nurses can do that; and only if they stay in practice.  Unfortunately there are some early indications that the medical practice environment has become so poisoned that it’s no longer a desirable option for many doctors.  In a recent survey of several thousand physicians conducted by Merritt Hawkins, an astonishing 40% of doctors said that they intend to leave clinical practice within the next three years.  Even if half of them are bluffing, it’s still a staggering number.  But there’s an excellent chance they’re not.  The Massachusetts Medical Society Physician Practice Environment Index is at or near its lowest level since 1992.  Meanwhile, a record 45.5% of U.S. physicians are now over the age of 55.  Folks that old don’t tend to kid around much when it comes to whether their careers are making them miserable.  And anyone that age who can tolerate it financially is just aching to retire.

The other quality that we mentioned with regard to Medicare’s letter is attitude.  Are the leaders of our nation’s largest healthcare trying to pick a fight?  What right does any government official have to accuse doctors of somehow being at fault for this mess?  How can one best characterize the tone of the message?  Arrogance?  Intimidation?  Contempt?  Whatever it is, it’s hardly worthy of a government that is intended to serve the people rather than the other way around.  That’s not the America we know.

Fortunately for Medicare, most of its providers probably never saw this letter.  The vast majority probably don’t even know that the government is clawing back a portion of their income.  Most physicians are far too busy to look at all of their EOBs, especially if their billing is done off-site at a separate location.  Most of their medical billers probably saw the letter, and if they did they probably figured that they were somehow to blame; they felt lucky that they were not being accused of fraud or being charged a penalty.  Perhaps that was the intent of its wording all along.

But what about Mark?  What happened to him?  As a solo practitioner with large numbers of elderly patients, how did he react to all of this?  How seriously do doctors really take this sort of thing?

Pretty seriously.  Mark’s still in practice, but he no longer accepts Medicare.

Doug Perednia is an internal medicine physician and dermatologist who blogs at Road to Hellth.

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