Why Are Doctor Bills So High?

Who hasn't wondered why doctors need to charge so darn much for an office visit? If you have insurance and bother to look at what the insurance company pays, it is always much lower than the charge. Why does medical care cost so much? Is the doctor gouging? One of the best explanations I have seen is stolen from another blog. I would like to give credit but all I know is the name Dr. Adam. He shows this letter to his patients:

Why are doctors' bills so high?

Over the past few years several patients have asked this question. It is a very good question that needs to be answered in the context of our current health care system.
When I was growing up and went to my family doctor, my parents or I paid around $10 for a typical minor problem visit (in 1966). With inflation, that would be around $62 today (in 2006 dollars) (http://www.westegg.com/inflation). Today Medicare reimburses me approximately $33 to $45 for a similar patient visit. When I was a teenager the overhead costs of my physician’s medical practice were low. My family doctor did not make appointments and thus did not need a receptionist. When you were sick you simply went to his office and waited your turn to be seen. If it was a busy day with lots of patients, I sometimes waited several hours before I was seen. He did not employ nurses nor did he have a transcriptionist (typist) write his notes. He worked by himself, but did have a part-time bookkeeper. He called me back from the waiting room, evaluated me and usually jotted down a sentence or two and that was it. I paid cash at the conclusion of the visit. He did not deal with insurance companies so he had very few phone calls and paperwork to deal with. He did not have high malpractice costs and he worked from his home office.
Over the past few decades, things have changed radically. The overhead costs for a physician are astronomical compared to the good old days of my family doctor.
My overhead costs are many. I pay the equivalent of 5 full-time employees: 1 ¾ transcriptionists/receptionists, 1 office manager/receptionist and 2 ¼ registered nurses. I need a receptionist to make and change appointments, call and remind patients of their appointments, collect co-pays and to answer phone call questions. I need a transcriptionist to thoroughly document all that I do, as insurance companies periodically audit my work to see if my billing level is justified by the work I have performed. The transcriptionist also makes copies of patient records and types letters that I send to other doctors regarding their patients that I see. I need a manager to oversee the scheduling, billing, and other operational activities. My office manger spends much of her time tracking down payments owed to us from insurance companies and answering billing questions from patients. I need nurses to help with patient care. The nurses also answer phone questions, call patients with lab test results, deal with getting approval for medications from insurance companies, and engage in other patient care-related activities.
I have medical licensing fees and ever increasing medical malpractice fees, even though I have never been sued. Medical equipment and supply costs, and building, utility and additional insurance fees add to my overhead costs.
Dealing with insurance companies adds other costs, including payments to a billing service that electronically processes and mails my bills, that cost thousands of dollars a year. It is unfortunate that insurance companies do not pay my practice for the extra work and hassle factors they create for my patients and me. When dealing with insurance companies I am at the mercy of their fee schedule. I document what I do, and I accept what they pay. If I feel that they are cheating me, or my patient, I will write a letter of protest to contest any denial of payment. Some insurance companies pay better than others. Some insurance companies are sensitive to the high cost of providing medical care today and some are not. A given insurance company may pay well for some services but poorly for others. There is one health insurance that I no longer accept because it paid too little and caused too many aggravations.
All the costs of running my medical practice, including the services provided by the transcriptionists, receptionists, office manger and nurses are paid for from the fees I collect for the services that I provide. When a patient receives a bill from me, it is important that they understand that only a portion of the bill actually pays me for my time, the rest goes to cover my overhead expenses of practicing medicine in today’s complicated health care system.
Occasionally there is a patient who is uninsured, or underinsured, who does not have the financial means of making payment for the services I have provided. If you feel you are such a patient, please call us; explain your circumstances and we will work out a reduced payment plan that will help you.

Sincerely,