Dr. Andy

Reflections on medicine and biology among other things

Monday, August 29, 2005


One thing I find fascinating is how different physicians approach billing and how various incentives impact this. For so-called "non-procedural" specialties (those that rely on the brain not interventions) like allergy we have so called E&M codes which we have to assign to each patient. There are 5 levels, with 1 being minimal involvement and 5 an incredibly complex patient. New patients are worth more and for specialists billing a new patient as a "consult" (meaning someone, usually the primary care provider but sometimes another specialist specifically sent the patient to you) yields a higher payout.

Codes among specialties (E&M versus procedures for surgeons, etc) are each worth something called relative value units (RVUs).

The rules as to what you need to do (and document) for each level of billing make quantam mechanics seem easy, so there is a lot of subjectiveness in billing.

When I was a fellow we had 2 types of attendings: full time academics and volunteers in private practice who'd come in around 1/2 day per week and precept fellows. The full-time academics were signficantly more aggressive (i.e. billed at higher levels) in their billing than the attendings in private practice. Since each increase in RVU meant an increase in revenue, I'd have thought a priori that the private practice attending would bill higher since the money went right into their pocket, whereas the academics made a salary with some incentive income at the end of the year based on billing.

After a year as a full-time academic attending and having talked to a lot of attendings in both academics and private practice, I think I understand a bit better.
Physicians are very risk-averse and overbilling is a high risk strategy. It increases your current income (or incentive pay) but if you get audited, you can be in real trouble.

Imagine the private practice attending who gets audited. He gets a request for records of a set of patietns which is a pain to start. Then the insurance company concludes he has overcharged for a certain percent, extrapolates that to all his patients they've paid for and demands X dollars back. Then he has a dilemma. Do you just pay the money back (and this could be many months later, making it a big pain to come up with and an accounting/tax nightmare) or to fight. Every hour the attending personally spends is time not seeing patients and the outside is uncertain. He could hire help to fight, but that costs more money, again with uncertain return. So the low-risk strategy is to bill conservatively, make a bit less and not have to give money back when audited.

For someone in an academic instituion, the calculus is a bit different. First, since the money doesn't go right into your pocket it also won't come right out. I get paid a salary and I think there is some clause about fraud, but what might be considered a difference of opinion on billing isn't covered, so it would be very hard for the hospital to take money back from me. Second, the hospital is standing behind me ready to fight. Any academic institution has a small army of coding experts, lawyers and administators to comb records and contest "down-coding" done by insurance companies. The hospital incentive is to fight tooth and nail to discourage future audits not just of me but of every doctor and department. So from the perspective of someone on salary plus bonus you might as well bill aggressively and figure it won't be my problem if I eventually get down-coded on audit.

Of course, some institutions have relatively perverse incentives. In my case, I get a bonus based on hitting a signficant produc


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