Tag Archives: healthcare costs

Are U.S. Doctors Overpaid? Yes, but. . .

Funny: If you ask a doctor if she’s overpaid, you’ll get a long-winded answer largely around an emphatic “no.”

The real answer is a much more nuanced “yes” — and is summarized every year in this one chart:


The why of this chart isn’t some big mystery. I’ve written about it very directly here: Med Student Gives Sober Assessment of Future With $500K in Student Debt.

Healthcare training takes an incredible amount of time and money, so those who survive as freshly minted docs have a huge debt — roughly equivalent to a nice home mortgage. Oh, and unlike all other types of financial debt, student debt is not dischargeable through bankruptcy, so it’s lifelong until satisfied.

None of this is a mystery to U.S. med students. They are exceedingly bright (by necessity) and start planning their career trajectories fairly early. A key component to that planning is the amount of debt they’ll have when they graduate — and the number of remaining years they’ll have as high wage earners. The math leads directly to the above graph.

If you have a choice at graduation of being a family practitioner or internist (with long, grueling hours, inside exam rooms all day) for $15,000 a month — or the cushy job of being a radiologist (reading images remotely for eight hours a day) for $30,000 a month — where’s the choice? It’s not a choice. It’s a no-brainer (for most), which is why we have a severe shortage at all the specialties on the right side of the graph.

That’s the U.S. (and why our system is dysfunctional from the start). The system we have is optimized around revenue and profits, not safety and quality.

France, by contrast, has a different view and (not surprisingly) better health outcomes and cost. France’s view is that medical training is an “infrastructure” cost, and the best way to accommodate that is to have med students graduate with $0 debt. Now, in fairness, doctors in France don’t have the opportunity at a lavish wage of $400,000 to $500,000 a year (or more), but the French also don’t have a shortage of primary care docs. We do — and it’s also a contributing factor to why our system is now a global embarrassment and perpetual national crisis – as represented by this one chart:


Easy Way to Spot Workers’ Comp Fraud

While there is considerable talk about fraud in workers’ compensation, the discussion usually refers to fraud by claimants or employers. Unfortunately, fraud and abuse also occurs in medical management.

Poorly performing medical doctors produce high costs and poor claim outcomes. When they are also corrupt, the damage can be exponential. We know poorly performing and corrupt doctors are out there.

More importantly, we also know how to find them!

Disciplining providers by not paying them when they knowingly overtreat is one solution, but even better is avoiding them altogether. Identify the bad doctors and carve them out of networks.  Most agree with this philosophy, yet few medical networks in workers’ compensation have seriously addressed the issue.

Efforts to solve the problem should focus on identifying the perpetrators by means of a well-designed analytic strategy. The data, when analyzed appropriately, will point out medical doctors who perform badly.

There is a trail of abuse in the data. Bill review data, claims payer data, and pharmacy data, when integrated at the claim level including both historic and concurrent data, present a clear picture of undesirable practices. Outliers float to the surface.

Fraudulent providers treat more frequently and longer than their counterparts. They also use the most costly treatment procedures, selected as first option. The timing of treatment can produce evidence of corruption, such as when more aggressive treatments like surgery are selected early in the claim process.

Some of the more subtle forms of medical fraud involve manipulating the way bills are submitted. Corrupt practices attempt to trick standard computerized systems. They consistently overbill, knowing the bill review system will automatically adjust the bills downward. Systems can miss subtle combinations of diagnoses and procedures and allow payment.

Likewise, some practitioners bill under multiple tax identifiers and from different locations. Unless these behaviors are being monitored, computer systems simply create different records for different tax ID’s and locations, making the records appear as different doctors. When attempting to evaluate performance, the results are skewed. Provider records must be merged and then re-evaluated to arrive at more realistic performance scores.

Disreputable providers may obtain multiple NPI numbers (National Provider Identifier) from CMS (Centers for Medicare and Medicaid Services). Once again, the data is deliberately made misleading.

The data can also be analyzed to discover patterns of referral among less principled providers and attorneys. Referral patterns can be monitored.

The data can be scrutinized to find doctors who are consistently associated with litigated cases. That may mean they are less effective medical managers or could indicate that they are part of a strategy to encourage litigation and certain attorney involvement. Kickbacks are obviously not shown in the data, but the question is raised.

Many doctors who skirt ethical practices would be shocked to be called fraudulent. Yet that is exactly what they are. Changing the name does not whitewash the behavior.

Happily, the good doctors are also easy to find in the data. Their performance can be measured by multiple indicators, and, analyzed over time and across many claims, they consistently rise to the top.

Selecting the right doctors and other providers for networks is a complex but important task, and subtleties of questionable performance can be teased out of the data.

The most important approach: Monitor the data in real time so you can intervene and thwart those trying to commit fraud.

We Need to Put the ‘P’ Back in PPO

A leading workers’ comp insurer once asked me to review its provider network strategy. The problem was that it didn’t have one.

The insurer readily admitted that after, a decade-long relationship with its preferred provider organization (PPO) vendor, the insurer could not identify a single quality medical provider in the network.

It was no wonder, because the entire business relationship with the PPO was based on discounts from network providers. The only document produced was an Excel spreadsheet showing total billed vs. total paid charges; nothing about what was paid for or to whom it was paid.

The entire foundation of the insurer’s network strategy was what is known as “percentage of savings” arrangements with the PPO and corporate clients. Corporate clients typically pay 33% of these savings to insurance companies and third-party administrators, making them a major cash cow.

When I asked to see a breakdown of providers by specialty and how they matched up with the insurer’s clients’ work locations, I was met with blank stares. I asked, “If a client is billed for a discount on an MRI that was not medically necessary, how is that a savings?” The reply was a proud, “The more MRIs ordered, the more money we make.”

Not a thing in the PPO network criteria included selecting credentialed, high-quality providers who were experienced in the diagnosis and treatment of work-related injuries and illness. That was a new concept to the insurer. It was not looking for the best doctor in town; it wanted the cheapest.

I found memos in which both the utilization review team and the unit that handled self-insured clients were completely in favor of developing a network based on the quality of care. But they were not invited to the table on corporate network strategy. Nothing was going to change that network strategy and cash cow.

Corporate clients have been paying for phantom savings for decades through these “percentage of savings” PPO arrangements.

That must change.

A corporate-wide network strategy must start at the moment of injury and consist of a pre-planned strategy at the local worksite. People say that all politics is local, and that is true with healthcare. All healthcare is local. Injured workers need to be treated by the best and most appropriate medical provider from the moment of injury. That should be the only network strategy. Period.

Paying the best provider a fair and negotiated fee, while establishing a pre-planned communication and claims process with input from local case managers and other medical providers around key work locations, is the foundation of a real strategy. This approach has been working for many well-informed and progressive companies for decades.

Why is this approach not promoted? Because there is no cash cow on discounts for managed care vendors, insurers and TPAs.

I have worked with major national corporations developing local hubs at key worksites across the country by utilizing front-line providers such as urgent care centers, primary care providers, specialists and facilities, all trained and credentialed in workers’ comp and industrial medicine.

In establishing these pre-planned hubs, we were able to establish excellent working relationships with handpicked network providers that worked closely with corporate clients by actually visiting work locations or reviewing videos of job requirements. The entire process of best practices from injury notification to return-to-work was put in place.

These custom-built networks truly reduced corporate costs 30% or more, savings that were documented using various benchmarks and metrics developed during the process but, more importantly, documented by the causality actuaries in their annual FASB financial statements. Those are savings that went directly to the bottom line and stock price. Instead of paying money to the insurer or TPA for 33% of the savings arrangements on broad-based PPOs and putting millions in PPO vendor bank accounts, I put money in the client’s bank account.

It is time for companies that pay for workers’ compensation to put the “preferred” back in their PPO strategy. A “preferred” provider isn’t offering discounts but is providing high quality medical care and better patient outcomes in compliance with evidence-based medicine practices.  Preferred providers diagnose and treat a given condition and get that injured worker on the road to recovery from day one.

That is a network strategy.

There Is No ‘Free’ Healthcare in U.S.

There is no such thing as “free” healthcare in the U.S. There are people who access healthcare at low (sometimes even no) cost, but the people delivering the service aren’t providing it for free, or, if they are, it’s an ad-hoc charitable donation.

There is one exception that I know of, but the clinics typically only run over weekends (when providers can donate their time and skill). The exception is called Remote Area Medical and is staffed with clinical volunteers, so there is no charge to patients — and no payment to providers. It’s as close to “free” as I think we’ll ever get. Here are some images of what a weekend RAM clinic looks like:

Patients receive free dental care at a c


RAM has been featured on “60 Minutes” and other news-magazine shows. It’s run by Stan Brock, who founded it. It derived its name — Remote Area — from the idea that it would deliver healthcare to remote regions of the globe. In fact, it started with medical “expeditions” to Latin America in 1992. Today, 60% of RAM clinics are held in rural or urban America. I encourage everyone to watch the 13 minute 60 Minutes episode – from 2012. (60 Minutes – RAM Medical Missions in the U.S. – A Lifeline.)

RAM aside, the argument that EMTALA (Emergency Medical Treatment and Labor Act of 1986) is “free” care delivered through the emergency room is flat-out false. The costs accrued through every emergency department (for every patient, service and supply) is simply rolled into the books under a category called “uncompensated care.”

Uncompensated care is among the three categories of healthcare that for a hospital amount to negative margin. The other two are Medicare and Medicaid. The only remaining opportunity for “positive” margin (and keeping the doors open) is through commercial insurance. That chart (courtesy of L.E.K. Consulting) looks like this:


Cutting Healthcare Costs Doesn’t Lower Quality

Many believe medical quality is sacrificed when attempting to control costs. The logic assumes the way to achieve quality medical care is to deliver more of it. The other side of the same reasoning is that less medical care means less quality. However, the cost-quality balance is not a zero-sum game.

These supposed opposites — high quality and low costs — can coexist in managing the medical portion of workers’ compensation claims. Quality is not counter to cost management in medical treatment. For instance, managing the number of visits or encounters, prescriptions and the number of specialists the claimant encounters are just a few ways to limit medical services that may, in fact, improve quality.

On the one hand, the treating doctor should see the injured worker often enough to understand, direct and maintain control over the recovery process. Yet some physicians embellish their revenue flow by seeing patients more frequently than necessary. To manage excessive utilization of office visits and services, evaluate the data to learn what is reasonable and what is disproportionate. To be effective, the data must be monitored concurrently so that intervention has an impact.

The way to objectively measure excessive visits is to monitor and analyze the data. For specific injuries in a given jurisdiction, what is the mean number of medical visits? Outliers can be interpreted to mean either the treating physician is fraudulent or the claimant is in trouble. Either way, focused attention is needed.

A claims payment organization can set standards for what should be considered the threshold of excess for given conditions. Beyond that point, the claim is examined and intervention initiated. Some states legislate frequency of care. The state of California, for instance, has placed limits on the number of physical therapy and chiropractor visits. The data system can mobilize notification to the appropriate persons when the benchmark is approaching so that limits are not exceeded. Applying similar methods to a variety of medical visits and services adjusted by diagnosis and other factors such as age and comorbidity will similarly lower costs while sustaining quality.

Another example of balancing quality and cost is controlling frequency or volume of services by electronically monitoring prescription practices, especially those for Schedule II or opioid drugs. The literature is replete with examples of ineffective and poor outcomes when opioids are over-used. By monitoring current data, usage and cost can be checked through appropriate intervention.

Yet another indicator found in the data reflecting excessive medical treatment is multiple medical referrals. Too often when the patient is not improving, the doctor’s response is to refer to specialists. The data gives up that information by noting the number of medical providers and specialists involved in a claim. Assuredly, a claim with multiple specialists is a claim in trouble, or at least progressing poorly, needing attention.

Industry research speaks for itself. Consider this Washington state study, “Long-term Outcomes of Lumbar Fusion Among Workers Compensation Subjects: An Historical Cohort Study.” This study concluded, “Lumbar fusion for disc degeneration, disc herniation and/or radiculopathy in a workers’ comp setting is associated with significant increase in disability, opiate use, prolonged work loss and poor RTW status.”

Monitor the data to discover outliers early so that interventions will effectively improve outcomes. The key to supporting quality while cutting cost is identifying potential problems early. The longer an issue persists, the more challenging it is to correct it.

Consider both medical quality and cost control equal goals. They are not mutually exclusive. The medical profession itself is recognizing and addressing the issues of over-prescribing, over-testing and over-treatment. Medical managers need to assist in the process.