How Outdated Data Distorts Doctors' Pay

Hugh Pickens DOT Com writes "Peter Whoriskey and Dan Keating report at the Washington Post that Medicare annually pays $69.6 billion for physician services according to an arcane and little-known price list, known as the Relative Value Update over which doctors themselves exercise considerable and less-than-totally-transparent influence. A 31-member committee of the American Medical Association (AMA) recommends what Medicare should pay for some 10,000 procedures — with the fees based in part on how long it takes to complete each one. But this time-and-motion study often fails to take full account of changing technology and other factors affecting physician productivity, so anomalies result. For example, if the AMA time estimates are correct, then 41 percent of gastroenterologists were typically performing 12 hours or more of procedures in a day, which is longer than the typical outpatient surgery center is open and and one gastroenterologist in the Post story would have to work 26 hours, according to the committee time estimates, to accomplish what he gets done in a typical workday. Here's how it works: Medicare pays for a 15-minute colonoscopy as if it took 75 minutes resulting in a median salary for a gastroenterologist of $481,000. It is possible that in 1992, critics allow, when the price list was first developed, a colonoscopy actually took something close to 75 minute when doctors had to hunch over an eyepiece similar to that of a microscope for a look. But technology has advanced and now the images are processed and displayed on a large screen in high-definition video. Responding to criticism that the nation's method of valuing medical procedures misprices payments, a bipartisan group of legislators has drafted a bill that would reshape the way the nation pays doctors. The bill would require Medicare officials to collect data such as how much time doctors spend doing procedures and reducing the doctor payment for overvalued services. 'What started as an advisory group has taken on a life of its own,' says Tom Scully, who was Medicare chief during the George W. Bush Administration. 'The idea that $100 billion in federal spending is based on fixed prices that go through an industry trade association in a process that is not open to the public is pretty wild.'"

Comments

I'm not a gastroenterologist but I am

[mark_reh]

a dentist, and even I can tell you there's more to the story here. That 75 minute colonoscopy is probably an average. No one can predict exactly how long any given procedure will take on any specific patient. If a patient has no polyps, the procedure goes faster. If they find polyps and remove them (that's how colonoscopies prevent cancer) it takes longer. Patient anatomical variations and other medical complications can affect the time required.

I run into the same thing with my patients. A simple 15 minute restoration on a cooperative adult patient can turn into an hour long ordeal on an uncooperative 5 year old, but insurance pays the same for either one.

Oversimplification

[sjbe]

We are talking specifically about how much time the doctor is working on the case of the patient.

The average time a doctor spends on a single patient isn't even close to the entire story. Bit of background: I'm an industrial engineer and also a cost accountant. I have degrees in both and have worked in healthcare doing six sigma projects, time studies and cost analysis.

1) Procedure times are NOT normally distributed. Not all cases are identical and some take considerably longer than the average. These longer cases typically are much more expensive. On a weighted cost basis the average cost will be higher than you would expect if you make the mistake of assuming a normal distribution.
2) You have to account for the time of the doctor PLUS the time of all the support staff. The time a doctor spends on a procedure frequently is not the biggest cost driver. My wife is a doctor. For the work she does her average time per case is about 10 minutes. For every minute she spends on a patient there is about 3-5 minutes of support staff time - sometimes more. On some cases she might spend an entire hour or more plus have to consult with other doctors for a particularly difficult diagnosis.
3) The value of a doctor's time isn't just driven by the average time for a procedure times some arbitrary hourly rate. What makes a doctor (particularly a surgeon) valuable is the value of his time when something unexpected happens. Patient goes into arrest on the operating table for instance. At that point the value of the doctor's time grows exponentially. If everything was just routine all the time, you could use nurse Now granted you can normalize the value of their time with enough study but the number you will get is going to be higher than if everything was routine and identical.
4) Time studies of procedure times are expensive and relatively difficult to perform. I've done a lot of time studies personally and trying to get an industry average for each and every procedure is far more difficult and expensive than most people realize. While there is no excuse for using outdated or wrong information, it is important to realize that maintaining an accurate and authoritative listing of expected procedure times is not a trivial exercise.

Re:Oversimplification

[jeffporcaro]

Mod parent up - insightful. I'm a cardiologist, and while I'm making more money than a Wal-Mart greeter, the days of doctors getting rich, and the days of hospitals making a profit, are essentially over, despite the large numbers thrown around. The costs associated with providing high-level, subspecialty medical and surgical care are enormous, and the reimbursement is continually declining. Congress continually nibbles away at the margins, dictating the rules of the game, and then acts shocked when the rules they implement don't result in free care.

The time and money that I've spent in training has value. The specific skills I have as a result of that time and money are significant, and useful to many people. I'm happy to use my skills to help people - it has intrinsic reward. However, the current climate requires that I do so 10 hours a day, plus nights, plus weekends, always with a smile, every 15 minutes, and job satisfaction has mostly gone the way of the dodo.

4 years of college. 4 years of medical school. 3 years of residency training. 3 years of cardiology fellowship training (gastroenterology, the example from the article, is also a 3 year fellowship). College & med school leave most of us with >$200k of debt. Residency and fellowship pay essentially minimum wage when you account for the insane hours, all the while collecting interest on our college and med school debt. I didn't have kids until I was in my late 30's because we didn't think it was fair to raise them without seeing their father.

We all have this same conversation when discussing the issue of money in medicine. In the beginning, there was a binary relationship - patient, doctor. The doctor provided services, the patient provided cash. These facts haven't changed, except now the care provided is better, the patient spends much more, the doctor gets paid much less, and everyone else in the system siphons away the money without the hours or the liability we incur.

In any event, you're not paying for 15 minutes of colonoscopy time, you're paying for the 14 years of training necessary for the doctor to do the colonoscopy.

Not to mention the cost of the colonoscope and its upkeep, the techs, the sedatives and management of their associated risks, the endoscopy suite constructed and maintained to restrictive code standards, cleaning of the endoscopy suite between each case, archiving and storage of the images, time to interpret and create a report from the colonoscopy, conversations with the patient, the patient's family, the patient's primary physician, time lost from providing other services (office and hospital visits - people are always clamoring for more availability), the enormous billing apparatus, a significant cut to the insurance company, maintenance of certification & credentialing (which requires many hours a year away from the office in a hotel conference room watching Powerpoint slides, at great expense), etc.

What's it worth to you?

Re:Technology costs?

[bzipitidoo]

It's pretty clear that, in aggregate, doctors aren't fleecing the system

I disagree. First, doctors are horrible at finance. Few trouble to manage their own money effectively. It's common for a doctor to be pulling down 6 figure pay, and yet be broke because he blows all his money on expensive cars, big houses, and trophy wives. They are even worse with their patients' money, going through that like the proverbial drunken sailor. They'll happily order unnecessary $2000 scans, "just in case", and to cover their asses and to get some use out of the really expensive equipment the practice should not have bought in the first place. They prescribe expensive brand name medication when a generic is available, and oft times is superior. An example is prescribing Crestor, instead of simvastatin or lovastatin. Even a generic may be the wrong approach, if patients have not tried other measures first, such as improving their diets and exercising. I realize there is a great deal of pressure on doctors from both Big Pharma and patients. We're really sold on the idea of magic pills that fix all our medical problems. Doesn't help that Big Pharma works the public over with all these ads. "Ask your doctor about ..." But rather than go with the flow, especially since it's more profitable, doctors have a duty to push back.

My own personal experience with this was thanks to an automobile accident. Had my parents with me, and they were both injured. My mother finished her hospitalization in a private place, where she had been sent for rehab. On the day they released her, they shoved a wheelchair at us, and shoved a form under her nose for her to sign. The form said that she promised to pay for the wheelchair herself should her insurance refuse. She didn't need the wheelchair, but at that time we were still just a little too credulous and inexperienced with medical profiteering. I protested that we could get a wheelchair from a friend who no longer needed his, but was ignored. I asked how much their wheelchair cost, and was told not to worry about it because insurance would cover it! I pointed out that the form they were insisting she sign suggested that there was a possibility insurance would not cover it, and so I ought to know what it cost. They replied that they didn't know but it was sure to be reasonable. Uh huh. Turned out that damned wheelchair cost $825, 4 to 6 times what it should have cost. That was hardly the only instance of profiteering.

You should read Bitter Pill (paywalled), and How Dentists Rip Us Off (pdf) if you are truly ignorant of the reckless and cavalier attitude the medical community has towards costs.