Tuesday, November 6, 2007

Costs Rise Faster than Revenue

The Medical Group Management Association (MGMA) does an annual cost survey of medical offices. It won't be a surprise to any practicing physician who runs an office that practice costs increased by 7.4% while revenue rose only 1.8%. Family practice, cardiology and general surgery fared the worst with even lower revenue gains against losses from last year. Pediatrics and orthopedic surgery were among the specialties with a positive picture of revenue to cost. The MGMA cost survey is based on data submitted by more than 38,460 providers.

I can tell you that receptionists, filers and medical assistants want raises each year. The cost of insurance and rent goes up annually. The answering service is charging more. Supply cost goes up, even though we try to use various vendors and get the best price. I won't even mention the fact that our exam tables are looking pretty shabby and should be replaced. We bought new computers this year...ouch!

In the meantime, Wellpoint, Aetna, UnitedHealth and HealthNet are posting record profits for their investors. They are the wall street darlings which tells me that the medical cost ratio is low. According to Wikipedia the "Medical cost ratio (MCR) is a metric used in managed health care to measure medical costs as a percentage of premium revenues. It is calculated by dividing those premiums allocated for fully insured or self-funded health care coverage into the total expenses for inpatient, professional (physicians and other licensed providers), outpatient, and pharmacy. (Briefly, MCR = Costs/Premiums.)"

Lest you think I am picking on the big for-profit insurers...Medicare is a huge issue also. The waste and bureaucracy create expensive hoops that physicians must jump through just to get paid a rate that doesn't cover the cost of business.

Physicians are at the losing end of the MCR. When physicians lose, so do the patients. Note my prior post on the looming shortage of physicians. When practice costs increase faster than revenue, we have a situation that cannot continue.

Perhaps many readers of EverythingHealth are business people. You get it, right?


Anonymous said...

Yes, I get it. I manage my husband's small family practice. We are in such debt that I fear the worst. All vendors and the government want their share but consistantly deny physicians, especially those in primary care, a fair reimbursement. After 25 plus years, we may end up living in our car. This can't be right. We don't have expensive jewelry or a lavish lifestyle.We've just struggled to put our kids through college. Our youngest will graduate in the spring.

K said...

Thinking about the insurance industry pretty much fills me with rage that can never really be vented, because the chances of their being stopped are so frikkin' miniscule as to be nonexistent. It's kind of irritating, really. Thanks for screwing the future, you jerks.

The Happy Hospitalist said...

One way to fix the system from a physician is to unilaterally get out. By signing that contract with insurance companies making record profits and medicare who thinks our expenses are going down, like their reimbursment, is to say no to the system.

Walk out.

Return to the patient/doctor relationship. On your terms. Would it hurt at first? Maybe. Patients will complain. Your income may suffer at first, but you are free to work on your terms. There are physicians out there thriving on cash only businesses, on their terms.

It will take a massive walk out by physicians to create change in the system. Right now, every year you sign that contract, you are saying I am ok with the details. I will accept less.

Why? Why do we physicians accept that.

If you are not ok, do not sign it.

Insurance companies can't make money if their recipients have no doctors to go to. Money talks.

It is the same with Medicare. If enough get out, the AARP will be up in arms and Congress listens to old people, not doctors.

So do yourself a favor and respect yourself by leaving the flawed system.

Make the patient change the system by way of their pocket book

Anonymous said...

Maybe the idea would be to have a strike. Not a real, total one, just a 1 day slowdown to bring attention to the poor reimbursement rates. Nothing that would endanger patients though. News coverage would be there and an appropriate spokesperson would look right into the camera and say "Change this now and here's why" Thenprovide a website link.
Also everyone with a medical website can provide a link to the sites with info on the mess. The public does not know about this. They can not imagine a Doctor going broke, they just don't get it. Help your patients understand!

GeriatricRN said...

I am an RN who has 1 year old twins. I just moved to the "Big Island" of Hawaii earlier this year with my husband and children. You are right! Here in Hawaii it is a crisis. It seems that not enough is being done to remedy the situation. My husband and I have had difficulty finding Dr's here as well. We live in a remote location and aren't connected to the typical military system and have to rely on the civilian system for our healthcare. When I see the reimbursement that my Children's Dr receives I feel for him and his practice. He has to scale back because his overhead, the Cost of Living here and the Insurance reimbursements aren't enough to break even. Many Dr's are in his same position. Most have shut down their practices and went back to the mainland. Everyone suffers at the hand of the insurance companies. People loose jobs, communities loose good Docs and people may die in the process. All the while the insurance company is winning. I am going to write to the state politicians. I believe our Peds Doc will also. I hope that our dialogues can help bring forth some ideas to remedy this growing problem. Much Mahalo from Hawaii.

Garey said...

Really helpful information, lots of thanks for your post.
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