Why Don’t the Carriers Reimburse Sufficiently?

Author: Marc Grossman

Every physician at one time or another has asked this question and those even beginning the process of considering a retainer or fee for service model are often obsessed with it. The easy answer is that the Insurance companies are greedy and only care about their bottom line. While they are in business to make money, that is much to simplistic an answer.

A large part of their justification for their reimbursement levels is based on the cost structure they use for a medical practice. In these models, the typical office is run very efficiently. They do not believe that they should pay for the physician’s inefficiencies; however, based on my experience, an efficiently run practice is the exception rather than the rule. Part of the cause is that unlike most small businesses there is no high level person who considers it their main task to run the business. The doctor(s) are medical practitioners first and foremost and the office manager is neither trained nor compensated to be equivalent to a COO.

Since it is unrealistic for small practices to invest in the level of employee necessary to always be efficient, there are really two options. First, which happens quite often, is that doctors join together in larger groups or hire extenders in order to achieve some sort of economy of scale. However, unless the group is large enough and smart enough to hire the true skilled COO level person, they are just going to multiply the problems.

The other possible solution is a type of physician union. The main advantage the Insurance companies have over the doctors is size and resources. Any one physician or practice is never going to have enough leverage against the carrier or enough influence to affect the regulators. A thousand doctors with the same specialty in the same geographic area is another story. A consortium like that will have enough data to perform a statistically significant study. With the assistance of the correct lawyers, lobbyists, actuaries and consultants could compete on even footing with the Insurance industry. Over time I have mentioned this idea to many physicians and they are always interested but never motivated enough to do something about it. I think the time is coming that those physicians who are not lucky enough to have a patient base which that can switch over to a retainer based practice will have no choice but approach the issue as large groups and not as individuals.