One size does not fit all, and one fee does not fit one service. This is even true of the services performed by physicians located in adjoining offices. In fact, the opaque nature of medical economics is compounded because physicians do not necessarily know the exact fee for an exact service and do not know that colleagues are paid more than them — or less.
Many a fellow dermatologist, as well as myself, have been frustrated and perplexed by the seemingly random way in which Medicare and insurance companies reimburse us for our services. This column will focus on some examples of differences in fee setting, so that you may become aware of the vast fluctuations that probably also exist in your practice area.
Medicare Pays Differently by Locale
In New York City, a Medicare rate is in place for medical fees for things such as 99213 (level three follow-up visit) and 11100 (skin biopsy), to name a few.
The fees for these items are not uniform throughout New York State. The fee for a 99213 varies between New York County (zone 1), Westchester County (zone 2) and Duchess County (zone 3). The difference in fees is linked to the cost of doing business and other variables. This information is public; information from private companies in the public domain is not readily available.
Payment for Services Provided for HMO Patients
In New York City, the world of private insurance is much more complex. One has to be on the panel of, let us say, XYZ insurance company to get payment for caring for certain patients. If you are not on the panel of XYZ insurance company’s HMO arm, XYZ will not pay your fees (we will leave PPO and indemnity insurance on the side). The complexity does not end there, and getting on panels can be an adventure. It can take months or even years to get on a panel. I recall one insurance company’s plan, which was a combined Medicare and Medicaid plan, that took me 3 years to join. Why? Each time my application got to the final stage, a piece of my application had expired and the application had to be done over and over again.
Fee Schedules of Insurance Companies
What does XYZ pay the doctor? The answer is — it’s complicated. Sometimes a fee schedule is hard to obtain, and even when one gets a fee schedule, the insurance company deems it a confidential document not be shown to others. But back to the fees. At the XYZ insurance company there is a so-called generic or rack rate for a 99213; let us say that amount is $70.
Rates are often set as a percentage of Medicare rates — for example, 100% Medicare, 120% Medicare, and 80% Medicare.
The Rack or Generic Rate Is Not the Only Rate
Physicians affiliated with a hospital can appoint such hospital (in the form of the hospital’s independent practice association [IPA]) as their agent for negotiation and enrollment in a managed care organization. The use of the IPA does not come for free and can cost between $500 and $2,000 dollars.
Joining an IPA is usually worth it. However, not just anyone can join an IPA. You must be able to get privileges at the apposite’s IPA base hospital and fulfill whatever duties (teaching, fees, meeting attendance) that the hospital requires, which are all obviously additional expenses in time and money.
The IPA in Action
When XYZ insurance negotiates with “Man’s Best Hospital” (a hospital name I’m inventing for this example), interesting things happen. XYZ can agree with the Man’s Best Hospital’s IPA to pay the doctors of Man’s Best Hospital rates as much as 45% to 50% higher than the rack rate.
Why can an IPA command higher rates? Bargaining power. If the executives at Goldman Sachs or Morgan Stanley have XYZ insurance and want full access to the doctors at Man’s Best Hospital, then they will get their human resources people to make sure that XYZ has doctors from Man’s Best Hospital on its panel. In this type of scenario, lies Man’s Best Hospital’s IPA’s bargaining power.
The complexity does not end there. At the We Try Harder Hospital (again, a fictitious name), administrators are aware of what XYZ and Man’s Best Hospital have done, and so the IPA of We Try Harder Hospital strikes a deal with ABC insurance plan to have ABC pay doctors in We Try Harder Hospital’s IPA higher fees than the rack rate and to maintain its distinct place in the market. ABC does not enter into negotiations with Man’s Best Hospital’s IPA, so the doctors in the IPA of Man’s Best Hospital only get the rack rate.
Pricing is so hard to track that members of Man’s Best Hospital’s IPA can sometimes get rates lower than the rack rate perhaps because the IPA is not updating the contract frequently enough.
So you can see how a variety of fees are paid to doctors for the same services. This is compounded and compounded again by the different plans that insurance companies offer.
IPAs Are Not the Only Game in Town
IPAs are not the only entities that negotiate with insurance companies. Sometimes groups of dermatologists or even individual dermatologists (or so I am told) negotiate to get rates that are higher than the rack rate.
I was recently discussing a Medicaid HMO, that had been the subject of a former “Legal Ease” article on bundling of medical fees, with another physician who headed a multi-dermatologist group practice.
I was telling him how I had dropped the HMO because of its low fees and strict bundling. He responded that he and his group remain in that plan because they had negotiated a deal whereby they receive 100% of the Medicare rate for their services. The wrinkles of negotiations are vast indeed.
So You Want to Go out and Get the Price Lists?
This article I am sure has sparked your interest to get more fee information and to try to set your fees at higher rates. Several obstacles exist to this course of action.
Most insurance plans boldly state in their agreements and at the top of the pages of their price lists that the information is secret and not to be shared (and maybe is even copyrighted). They enforce this by having a confidentiality clause in their agreements and power of fear of crossing them and being sued or having them refuse to make payments for services owed is a powerful enforcer.
Not surprising, and even so licitly, insurance companies want pricing data, too. One plan it is said (I do not know what plan and cannot confirm this independently) requested copies of explanation of benefits and fee schedules from competing plans from doctors on its panel! Everyone, it seems, knows that fee schedules are a crazy quilt for which it is hard to discern all the colors.
Although doctors might want to band together as individuals and discuss prices and come to price levels to propose to insurance companies, the law finds such discussions and attempts to fix prices, illegal as a type of antitrust violation.
How then do IPAs work? They are akin to unions or corporate entities that can propose a pricing structure on behalf of those they
represent. So, if doctors wanted to form a union and fit into the strictures of the National Labor Relations Act, they could perhaps have more pricing power without having to join an IPA, but that is outside the scope of this article.
A Complex System
One reason why the American healthcare system is so complex is that payment for services is so hard to understand. There is no one authority that has set the purchase of 10 dermatology visits for $1,000. People get their insurance through their employers in a tax-advantaged fashion and do not want to pay more then their co-payments. Patients want access to care even while their physicians struggle with understanding the payment for such access.
Some areas of care are more transparent than others. The prices of cosmetic services are actually a lot more transparent since prices are mentioned in newspapers, but then insurance companies do not pay for such services and thus as there are fewer parties it seems there is less pricing complexity. This is not to say that one doctor might not charge $500 for Botox and another $2,500, but only to say that prices are published.
Things are bound to get even more confusing
The complexity of this system is bound to grow as the government shifts those with Medicare to for-profit companies providing Medicare policies that will have variable reimbursement policies.
Understanding the vast, wide and infinitely varied world of medical pricing (an area that this article can only scratch the surface of) is important for your practice’s success (quite independent from the provision of the healing effects of medical care).
One size does not fit all, and one fee does not fit one service. This is even true of the services performed by physicians located in adjoining offices. In fact, the opaque nature of medical economics is compounded because physicians do not necessarily know the exact fee for an exact service and do not know that colleagues are paid more than them — or less.
Many a fellow dermatologist, as well as myself, have been frustrated and perplexed by the seemingly random way in which Medicare and insurance companies reimburse us for our services. This column will focus on some examples of differences in fee setting, so that you may become aware of the vast fluctuations that probably also exist in your practice area.
Medicare Pays Differently by Locale
In New York City, a Medicare rate is in place for medical fees for things such as 99213 (level three follow-up visit) and 11100 (skin biopsy), to name a few.
The fees for these items are not uniform throughout New York State. The fee for a 99213 varies between New York County (zone 1), Westchester County (zone 2) and Duchess County (zone 3). The difference in fees is linked to the cost of doing business and other variables. This information is public; information from private companies in the public domain is not readily available.
Payment for Services Provided for HMO Patients
In New York City, the world of private insurance is much more complex. One has to be on the panel of, let us say, XYZ insurance company to get payment for caring for certain patients. If you are not on the panel of XYZ insurance company’s HMO arm, XYZ will not pay your fees (we will leave PPO and indemnity insurance on the side). The complexity does not end there, and getting on panels can be an adventure. It can take months or even years to get on a panel. I recall one insurance company’s plan, which was a combined Medicare and Medicaid plan, that took me 3 years to join. Why? Each time my application got to the final stage, a piece of my application had expired and the application had to be done over and over again.
Fee Schedules of Insurance Companies
What does XYZ pay the doctor? The answer is — it’s complicated. Sometimes a fee schedule is hard to obtain, and even when one gets a fee schedule, the insurance company deems it a confidential document not be shown to others. But back to the fees. At the XYZ insurance company there is a so-called generic or rack rate for a 99213; let us say that amount is $70.
Rates are often set as a percentage of Medicare rates — for example, 100% Medicare, 120% Medicare, and 80% Medicare.
The Rack or Generic Rate Is Not the Only Rate
Physicians affiliated with a hospital can appoint such hospital (in the form of the hospital’s independent practice association [IPA]) as their agent for negotiation and enrollment in a managed care organization. The use of the IPA does not come for free and can cost between $500 and $2,000 dollars.
Joining an IPA is usually worth it. However, not just anyone can join an IPA. You must be able to get privileges at the apposite’s IPA base hospital and fulfill whatever duties (teaching, fees, meeting attendance) that the hospital requires, which are all obviously additional expenses in time and money.
The IPA in Action
When XYZ insurance negotiates with “Man’s Best Hospital” (a hospital name I’m inventing for this example), interesting things happen. XYZ can agree with the Man’s Best Hospital’s IPA to pay the doctors of Man’s Best Hospital rates as much as 45% to 50% higher than the rack rate.
Why can an IPA command higher rates? Bargaining power. If the executives at Goldman Sachs or Morgan Stanley have XYZ insurance and want full access to the doctors at Man’s Best Hospital, then they will get their human resources people to make sure that XYZ has doctors from Man’s Best Hospital on its panel. In this type of scenario, lies Man’s Best Hospital’s IPA’s bargaining power.
The complexity does not end there. At the We Try Harder Hospital (again, a fictitious name), administrators are aware of what XYZ and Man’s Best Hospital have done, and so the IPA of We Try Harder Hospital strikes a deal with ABC insurance plan to have ABC pay doctors in We Try Harder Hospital’s IPA higher fees than the rack rate and to maintain its distinct place in the market. ABC does not enter into negotiations with Man’s Best Hospital’s IPA, so the doctors in the IPA of Man’s Best Hospital only get the rack rate.
Pricing is so hard to track that members of Man’s Best Hospital’s IPA can sometimes get rates lower than the rack rate perhaps because the IPA is not updating the contract frequently enough.
So you can see how a variety of fees are paid to doctors for the same services. This is compounded and compounded again by the different plans that insurance companies offer.
IPAs Are Not the Only Game in Town
IPAs are not the only entities that negotiate with insurance companies. Sometimes groups of dermatologists or even individual dermatologists (or so I am told) negotiate to get rates that are higher than the rack rate.
I was recently discussing a Medicaid HMO, that had been the subject of a former “Legal Ease” article on bundling of medical fees, with another physician who headed a multi-dermatologist group practice.
I was telling him how I had dropped the HMO because of its low fees and strict bundling. He responded that he and his group remain in that plan because they had negotiated a deal whereby they receive 100% of the Medicare rate for their services. The wrinkles of negotiations are vast indeed.
So You Want to Go out and Get the Price Lists?
This article I am sure has sparked your interest to get more fee information and to try to set your fees at higher rates. Several obstacles exist to this course of action.
Most insurance plans boldly state in their agreements and at the top of the pages of their price lists that the information is secret and not to be shared (and maybe is even copyrighted). They enforce this by having a confidentiality clause in their agreements and power of fear of crossing them and being sued or having them refuse to make payments for services owed is a powerful enforcer.
Not surprising, and even so licitly, insurance companies want pricing data, too. One plan it is said (I do not know what plan and cannot confirm this independently) requested copies of explanation of benefits and fee schedules from competing plans from doctors on its panel! Everyone, it seems, knows that fee schedules are a crazy quilt for which it is hard to discern all the colors.
Although doctors might want to band together as individuals and discuss prices and come to price levels to propose to insurance companies, the law finds such discussions and attempts to fix prices, illegal as a type of antitrust violation.
How then do IPAs work? They are akin to unions or corporate entities that can propose a pricing structure on behalf of those they
represent. So, if doctors wanted to form a union and fit into the strictures of the National Labor Relations Act, they could perhaps have more pricing power without having to join an IPA, but that is outside the scope of this article.
A Complex System
One reason why the American healthcare system is so complex is that payment for services is so hard to understand. There is no one authority that has set the purchase of 10 dermatology visits for $1,000. People get their insurance through their employers in a tax-advantaged fashion and do not want to pay more then their co-payments. Patients want access to care even while their physicians struggle with understanding the payment for such access.
Some areas of care are more transparent than others. The prices of cosmetic services are actually a lot more transparent since prices are mentioned in newspapers, but then insurance companies do not pay for such services and thus as there are fewer parties it seems there is less pricing complexity. This is not to say that one doctor might not charge $500 for Botox and another $2,500, but only to say that prices are published.
Things are bound to get even more confusing
The complexity of this system is bound to grow as the government shifts those with Medicare to for-profit companies providing Medicare policies that will have variable reimbursement policies.
Understanding the vast, wide and infinitely varied world of medical pricing (an area that this article can only scratch the surface of) is important for your practice’s success (quite independent from the provision of the healing effects of medical care).
One size does not fit all, and one fee does not fit one service. This is even true of the services performed by physicians located in adjoining offices. In fact, the opaque nature of medical economics is compounded because physicians do not necessarily know the exact fee for an exact service and do not know that colleagues are paid more than them — or less.
Many a fellow dermatologist, as well as myself, have been frustrated and perplexed by the seemingly random way in which Medicare and insurance companies reimburse us for our services. This column will focus on some examples of differences in fee setting, so that you may become aware of the vast fluctuations that probably also exist in your practice area.
Medicare Pays Differently by Locale
In New York City, a Medicare rate is in place for medical fees for things such as 99213 (level three follow-up visit) and 11100 (skin biopsy), to name a few.
The fees for these items are not uniform throughout New York State. The fee for a 99213 varies between New York County (zone 1), Westchester County (zone 2) and Duchess County (zone 3). The difference in fees is linked to the cost of doing business and other variables. This information is public; information from private companies in the public domain is not readily available.
Payment for Services Provided for HMO Patients
In New York City, the world of private insurance is much more complex. One has to be on the panel of, let us say, XYZ insurance company to get payment for caring for certain patients. If you are not on the panel of XYZ insurance company’s HMO arm, XYZ will not pay your fees (we will leave PPO and indemnity insurance on the side). The complexity does not end there, and getting on panels can be an adventure. It can take months or even years to get on a panel. I recall one insurance company’s plan, which was a combined Medicare and Medicaid plan, that took me 3 years to join. Why? Each time my application got to the final stage, a piece of my application had expired and the application had to be done over and over again.
Fee Schedules of Insurance Companies
What does XYZ pay the doctor? The answer is — it’s complicated. Sometimes a fee schedule is hard to obtain, and even when one gets a fee schedule, the insurance company deems it a confidential document not be shown to others. But back to the fees. At the XYZ insurance company there is a so-called generic or rack rate for a 99213; let us say that amount is $70.
Rates are often set as a percentage of Medicare rates — for example, 100% Medicare, 120% Medicare, and 80% Medicare.
The Rack or Generic Rate Is Not the Only Rate
Physicians affiliated with a hospital can appoint such hospital (in the form of the hospital’s independent practice association [IPA]) as their agent for negotiation and enrollment in a managed care organization. The use of the IPA does not come for free and can cost between $500 and $2,000 dollars.
Joining an IPA is usually worth it. However, not just anyone can join an IPA. You must be able to get privileges at the apposite’s IPA base hospital and fulfill whatever duties (teaching, fees, meeting attendance) that the hospital requires, which are all obviously additional expenses in time and money.
The IPA in Action
When XYZ insurance negotiates with “Man’s Best Hospital” (a hospital name I’m inventing for this example), interesting things happen. XYZ can agree with the Man’s Best Hospital’s IPA to pay the doctors of Man’s Best Hospital rates as much as 45% to 50% higher than the rack rate.
Why can an IPA command higher rates? Bargaining power. If the executives at Goldman Sachs or Morgan Stanley have XYZ insurance and want full access to the doctors at Man’s Best Hospital, then they will get their human resources people to make sure that XYZ has doctors from Man’s Best Hospital on its panel. In this type of scenario, lies Man’s Best Hospital’s IPA’s bargaining power.
The complexity does not end there. At the We Try Harder Hospital (again, a fictitious name), administrators are aware of what XYZ and Man’s Best Hospital have done, and so the IPA of We Try Harder Hospital strikes a deal with ABC insurance plan to have ABC pay doctors in We Try Harder Hospital’s IPA higher fees than the rack rate and to maintain its distinct place in the market. ABC does not enter into negotiations with Man’s Best Hospital’s IPA, so the doctors in the IPA of Man’s Best Hospital only get the rack rate.
Pricing is so hard to track that members of Man’s Best Hospital’s IPA can sometimes get rates lower than the rack rate perhaps because the IPA is not updating the contract frequently enough.
So you can see how a variety of fees are paid to doctors for the same services. This is compounded and compounded again by the different plans that insurance companies offer.
IPAs Are Not the Only Game in Town
IPAs are not the only entities that negotiate with insurance companies. Sometimes groups of dermatologists or even individual dermatologists (or so I am told) negotiate to get rates that are higher than the rack rate.
I was recently discussing a Medicaid HMO, that had been the subject of a former “Legal Ease” article on bundling of medical fees, with another physician who headed a multi-dermatologist group practice.
I was telling him how I had dropped the HMO because of its low fees and strict bundling. He responded that he and his group remain in that plan because they had negotiated a deal whereby they receive 100% of the Medicare rate for their services. The wrinkles of negotiations are vast indeed.
So You Want to Go out and Get the Price Lists?
This article I am sure has sparked your interest to get more fee information and to try to set your fees at higher rates. Several obstacles exist to this course of action.
Most insurance plans boldly state in their agreements and at the top of the pages of their price lists that the information is secret and not to be shared (and maybe is even copyrighted). They enforce this by having a confidentiality clause in their agreements and power of fear of crossing them and being sued or having them refuse to make payments for services owed is a powerful enforcer.
Not surprising, and even so licitly, insurance companies want pricing data, too. One plan it is said (I do not know what plan and cannot confirm this independently) requested copies of explanation of benefits and fee schedules from competing plans from doctors on its panel! Everyone, it seems, knows that fee schedules are a crazy quilt for which it is hard to discern all the colors.
Although doctors might want to band together as individuals and discuss prices and come to price levels to propose to insurance companies, the law finds such discussions and attempts to fix prices, illegal as a type of antitrust violation.
How then do IPAs work? They are akin to unions or corporate entities that can propose a pricing structure on behalf of those they
represent. So, if doctors wanted to form a union and fit into the strictures of the National Labor Relations Act, they could perhaps have more pricing power without having to join an IPA, but that is outside the scope of this article.
A Complex System
One reason why the American healthcare system is so complex is that payment for services is so hard to understand. There is no one authority that has set the purchase of 10 dermatology visits for $1,000. People get their insurance through their employers in a tax-advantaged fashion and do not want to pay more then their co-payments. Patients want access to care even while their physicians struggle with understanding the payment for such access.
Some areas of care are more transparent than others. The prices of cosmetic services are actually a lot more transparent since prices are mentioned in newspapers, but then insurance companies do not pay for such services and thus as there are fewer parties it seems there is less pricing complexity. This is not to say that one doctor might not charge $500 for Botox and another $2,500, but only to say that prices are published.
Things are bound to get even more confusing
The complexity of this system is bound to grow as the government shifts those with Medicare to for-profit companies providing Medicare policies that will have variable reimbursement policies.
Understanding the vast, wide and infinitely varied world of medical pricing (an area that this article can only scratch the surface of) is important for your practice’s success (quite independent from the provision of the healing effects of medical care).
