Reimbursement rates have some doctors working for pennies

Sunday, Nov. 5, 2006 | 8:04 a.m.

Dr. Bill Pierce is a respected family physician whose solo practice in 2005 brought in a half-million dollars .

Still, he ended up $32,000 in the hole.

He took out a $100,000 home-equity loan to cover the difference and pay himself about as much money as a cop or school teacher makes.

Such is the state of being a doctor in Nevada. Economically, some physicians are flat-lining.

Even before he took out the home-equity loan, Pierce had accrued $150,000 in medical school debt and taken out a $195,000 loan to open his Henderson practice in 1999.

Today's world of health care has forced Pierce to be as much a businessman as a healer. His biggest challenges are not treating ailing patients but navigating a complex maze of reimbursements from 150 insurance companies that send him patients. Each insurer reimburses him at different amounts based on separately negotiated contracts - and, more often, his revenue is dropping even as his costs increase.

"We're chasing our tails; we're in a losing game," he said of his fellow family doctors.

Pierce is not alone in the struggle. He knows this because he is president of the Nevada Association of Family Physicians. The situation is so dire, some doctors are considering leaving the state, which already faces a severe shortage of physicians. Other doctors are changing their business models to survive, bringing in physician assistants to see more patients, or operating on cash-pay systems.

Pierce pays $19,000 a year in malpractice insurance and $4,400 a month to lease his office, located in a Henderson strip mall. He figures he needs to generate $272 an hour to make ends meet.

And that means seeing dozens of patients every day, nibbling at them for insurance co-payments while cycling them through the exam room. He doesn't want to treat them as so many widgets, so he tries to spend a decent amount of time with each. But that just gets him in financial trouble.

His practice has 4,300 patients. A third of them are covered by Anthem Blue Cross and Blue Shield. It used to pay Pierce $66.53 to see a patient for a typical 20-minute visit. It was recently cut to $47.37, some of which may be paid directly by the patient.

(By comparison Medicare, the federal government's insurance program for people who are disabled or over age 65, pays $84.51 for the same type of visit, Pierce said, though those rates are also expected to drop.)

Remember: Pierce figures he needs to make $272 an hour. If an average 20-minute visit makes him $50, he and the physician assistant need to schedule between five and six patients an hour. Problem is, many visits stretch beyond 20 minutes - setting the doctor back and increasing wait time for other patients. Squeeze in time for painstaking insurance paperwork, phone calls and untold patient concerns, and the math just doesn't work.

The reimbursement rules are so nonsensical, it sometimes pays more for the doctor to inconvenience patients. For example, when a Blue Cross patient needed a skin lesion removal, a procedure that takes 30 minutes of staff time, Pierce had the option of delaying the procedure to a future visit and receiving about $30 from Blue Cross. Instead, he removed it immediately and was reimbursed 73 cents.

In most industries, business owners can charge more when their costs rise, but that's not the case for doctors.

Dr. Sanford White, a family physician who has practiced in Las Vegas for four years, said he has seen about 25 percent more patients in his growing practice this year, but his revenue has stayed at the same level because of dropping insurance reimbursements. In one case, an insurance company was reimbursing him $6 per shot when his cost was $10. When he asked the company to cover the cost of the shot, he was told his option was to be removed from the company's panel of providers.

The insurance companies don't share the doctors' perspective. Scott Cassano, vice president of provider relations for Sierra Health Services, said the rates he negotiates with doctors are proprietary, but they are created with "give and take." He points to Sierra's stable provider network as evidence that doctors are fairly compensated.

Dr. Florence Jameson, an Ob-Gyn and president of the Clark County Medical Society, said insurance realities are forcing many doctors to join groups and share administrative costs. The solo practice, she said, may become a relic.

"It is a big deal and it's a sad thing, and it's unfortunate that medicine now is just big business, it's now corporate," Jameson said. "It will never go back to the way it was 20 or 30 years ago. Too many people have found out how lucrative it is to be a middle man in medicine."

Jameson said insurance companies are forcing family doctors to change the way they practice. For example, many doctors are extending the reach of their practices by utilizing more physician assistants or nurse practitioners to treat patients. Fewer patients are treated by doctors.

Pierce says he can't keep up with the insurance companies' changing rules and guidelines. He just knows one thing: If they cut back on how much they reimburse him to see their customers, he may be forced to stop seeing them. Other doctors have dropped patients for the same reason - inadequate insurance reimbursements.

Pierce has something else up his sleeve.

He is forming an additional branch of his practice that will bypass insurance companies. Patients who join the program - tentatively called Your MD - would eliminate their comprehensive health coverage. Instead, they would carry less-expensive catastrophic coverage and pay Pierce $2,000 a year - about what many people pay for health insurance - for up to 10 visits, annual lab work and a nutritional assessment. A member's spouse and children will receive reduced rates.

He'll limit the number of patients in the new program to 600, so they can have his full attention. In return, he'll get paid up front by patients.

And he won't have to deal with their insurance companies.