Physicians Charging Annual Fees? Stop the Presses!

May 13, 2011
Jeff Brown, MD

For many years, the only headlines involving medicine would cover the occasional scientific breakthrough or pandemic. Increasingly, the business of medicine has become the most pressing subject in the media. The case in point was a recent page one headline which proclaimed "More Family Doctors Charging Patients Annual Fees." It sounds ominous, and the implications are ominous.

For many years, the only headlines involving medicine would cover the occasional scientific breakthrough or pandemic. Increasingly, the business of medicine has become the most common medical subject of public attention. And being contentious, the vitally important relationship between doctors and the public has taken a downward turn.

Most regrettably, this kind of negative attention has adversely affected our ability to do the best we can for our patients. And to Physician Money Digest’s purpose, both the causes and effects of these recent headlines have negatively impacted our collective and individual, current and future economic situations.

The case in point was the page one, headline no less, in the May 3 San Francisco Chronicle which proclaimed "More Family Doctors Charging Patients Annual Fees." It sounds ominous, and the implications are ominous. It quotes a 2009 article in the journal Health Affairs that stated that physicians average 142 hours per year interacting with insurance companies alone at an average cost each of $68,274 ($31 billion collectively). This includes contracting, pre-authorizations, its evil twin, appeals, and billing.

Doctors increasingly are being asked to perform these and more tasks for which there is no payment. And because of the historically skewed payment structure, which puts primary care and cognitively based physicians at a financial disadvantage to procedurally based specialties, that's where the tipping point has developed.

I just read an interview with a primary care doctor who stated that in spite of seeing the same number of patients as in prior years, and some belt tightening where it could be found, her income has dropped a full 50%. In a nutshell, our costs are soaring and there is a ceiling on fees. So in frustration, if not desperation, some doctors are turning to "administrative fees."

In the examples mentioned in the Chronicle article, the doctors impose a fee of $120 to $250 per year, per patient or family, depending upon circumstances. And two predictable results occurred, beside an increase in cash flow: First, some patients couldn't, or wouldn't pay the fee and left the practices; second, several managed-care insurers had their lawyers send saber-rattling letters stating that the charging of administrative fees is a prohibited practice under their contracts.

The rebuttal is that the contract only applies to covered services. The claimed proof is that the insurers have denied payment for claims for these services. One legal opinion suggested that the fees have a better standing for services received, rather than an upfront charge for unwanted or unused services. But that just compounds the administrative hassles and expense, the ponderous existence of which provided the stimulus for the idea in the first place.

Another, similar approach to the "Death Squeeze" -- too harsh? I think not -- on primary care businesses is the rise in concierge medicine. This proposal basically says to the patient that for a flat annual fee of anywhere from $1,500 to $25,000 a year that the doctor will be able to limit the size of his or her practice, and therefore be more available and have more time for the contracting patient. Insurance may also be billed, depending upon coverage.

The newest wrinkle on this idea is there are now start-up, turn-key businesses which will convert, bill and run your practice on a concierge basis. The upfront catch is that they may take up to 50% of your new revenue stream to do so. I just saw an ad for one of these services in the Wall Street Journal calling itself an advocate of "Lifestyle Medicine." Great euphemism, huh?

As you might expect, there are substantial problems inherent in this concept. For one, it generally will only work if:

• You practice in an affluent area.

• You already have a full, and hopefully loyal practice population.

• You sign up with a high-quality proprietary manager.

In defense of a couple of doctors I know who are going this route, they are not so much greedy as desperate.

No one yet knows where these experiments are going or how they will fare. Other ideas born of need will probably crop up in the future as well and we'll try to monitor them for you. But the whole situation exists and is spinning out of any sense of reason because we have such a piecemeal, dare I say cockamamy, medical-economic industry in the first place.

We're all getting tired of gaming an increasingly dysfunctional system. But in the absence of medical organizational innovation and leadership, the situation is too big and complex for it to be rationalized in-house. The market has failed so far to improve the medical-economic problems that are growing, even the anti-government types must admit, so only the federal government is left. It is big enough to foment basic change and already, in fact, pays about half of the nation's healthcare bills. Health Reform was only a beginning, but a flawed one. It's a shame that at a time when the U.S. has this, and of course other, pressing needs, we have a political climate of antagonism and irrationality. May Aesculapius help us all.