How Doctors Drive Up Healthcare Costs

My Substack article last week discussed a simple way to increase access to healthcare. I suggested that if we had half of the amount of paperwork, that is the time physicians have to spend to complete required electronic medical record (EMR) information and the time physicians waste trying to get prior authorizations for patients, physicians would have twice as much time to spend with patients. Especially with patients in the primary care setting, the very foundation of access to healthcare.

One of my astute readers asked here on Substack about the role that providers in healthcare systems play in the cost of healthcare. There are several ways physicians can be involved in the high cost of healthcare, but when any employed physician does a procedure, the bulk of the patient’s bill goes to not the physician, but to the hospital.

Let’s look at orthopedists.

 As of January 2017 (most recent figures I could find), Blue Cross Blue Shield (BCBS) spent $54 billion to treat orthopedic pain, including muscles and bones and joints. This number represents more than 14 percent of the overall healthcare spending for commercially insured BCBS members. In the Midwest, the surgeons charge for doing a total hip arthroplasty is $1000. The hospital bill is almost $13,000 and the total cost is $14,000. Looking at these numbers, there is no reason for a hospital administrator to object to any doctors doing what might be considered “too many” surgeries. But note that all but a small percent of this cost goes to the hospital, not the surgeon.

In 2017, BCBS reports that 242,000 adult members under the age of 65 had planned hip or knee replacements. That’s 47 percent of total orthopedic spending, or 25 billion for 2017. That’s a shock. Note this spending is just for BCBS.

In this article, I discovered that BCBS wants to save money by doing hip and knee replacement via an outpatient setting. Here is their justification:

• Average price for inpatient knee replacement is $30,249 compared to $19,002 for an outpatient setting.

• Average price for inpatient hip replacement is $30,685 compared to $22,078 for an outpatient setting.

I would suggest to BCBS that this is it a poor solution to cutting costs: decreasing the quality of the surgical setting instead of looking at which of these knee replacement surgeries are really warranted. BCBS obviously has no conception of how much pain is involved with these procedures, which are by no stretch of the imagination minor. There is a host of postoperative complications for major surgery in this 65 and over age group, including myocardial infarction, congestive heart failure, pain management, postoperative bleeding, deep vein thromboses, and pulmonary emboli, to name a few. Assessment of these postoperative conditions would be missing in an outpatient setting. So, there are reasonable ways to control healthcare finances and their are unreasonable ways to control healthcare finances. The real question is who actually needs these hip replacements rather than reducing the quality of postoperative management. I’m 75 years-old and have had no joint replacements. And that’s after running 3 miles a day four days a week for many years. Also note I walked on concrete floors 12 hours a day for 50 years.  We need to question who really needs these procedures. Obviously physician authorization isn’t turning up the difference between needed and unneeded hip or knee replacements. Or put more bluntly, how many of these procedures are performed on patients who will likely not survive many months after the operations. To my knowledge, no one is checking these numbers.

Let’s look at the costs involved in doing cesarean sections.

The U.S. cesarean section rate has gone from an average of 15 percent of deliveries to 34 percent of deliveries, a number I had always considered inexcusable. Why has this rate gone up so high so quickly? We are disincentivizing cost containment by what doctors and hospitals are paid for a cesarean as opposed to a vaginal birth. The payment for a cesarean birth is more than twice as high as the payment for a vaginal birth, and the cesarean takes 15 minutes as opposed to hours and possibly even days for a vaginal birth or a vaginal birth after cesarean (VBAC).

Please note that there is a relatively new charge, called an Obstetric Emergency Department (OB-ED) at some hospitals. This is basically a new way to up-code and up-charge for a routine obstetric admission for any kind of birth. Exceptions to these charges would include a direct OB admission from the doctor’s office, a planned induction, or a planned C-section. This is an unnecessary visit code, but it can increase the bill for a routine vaginal birth by $2755. In the past this was not a charge. It was a free part of assessment to admission to labor and delivery.

Typically, an insurance company will pay a lump sum for all of the services. Anything exceeding that cost will be paid by the patient. There is a routine OB room charge at $2308 and a $1000 bill for the first minute of some thing and a $1200 bill for 2 mg of fentanyl I.V. and approximately a dozen charges around $100.

According to an NPR article, the total bill at Poudre Valley Hospital in Fort Collins, Colorado, operated by UCHealth, a so-called nonprofit health system, for a normal vaginal delivery was $16,221.26. The anthem BCBS negotiated rate was $14,550 with insurance paying $10,940.81 and the family being stuck with a $3609 bill. There are several offensive codes and charges on this bill which are completely independent of the physician. These include the $2755 ER charge, the $1000 bill for the “first minute,” the $2300 room charge, and the $1200 for 2 mg for fentanyl. The delivery fee was $6486.67, a fee over which the delivering physician has no control. 

So, when a hospital makes $13,000 to $14,000 for a 45-minute hip surgery and $14,550 to $16,221 for a normal spontaneous vaginal delivery, who is going to complain? Certainly not the CEO, whose multimillion-dollar salary is supported by busy doctors doing lots of surgeries.

There has been much discussion of making hospital charges public, but the efforts to get this information available has met with considerable opposition from hospitals.

But what happens if somebody does complain about the price, behavior, or competency? No matter who it is whether it’s a patient or whether it’s another provider, the action will be similar.

In the first place none of the doctors want to be affiliated with a “bad doctor,” so, they will want to avoid that label for their friends, but more importantly for themselves. Besides, people who live in glass houses shouldn’t throw stones and let he who is without sin cast the first stone. There is an unwritten code for gentility. After all, anybody can get caught up in a fracas, and we would all like to have a little latitude here and there. Secondly, nobody wants to have their salaries cut, if that can be avoided.

In theory only, the state medical boards are supposed to save the public from “bad” doctors. I’ve written about the political nature of state medical boards on KevinMD. Since the med boards act in secrecy, neither their omissions nor their commissions see the light of day. If they want to make somebody look good or bad, they can. Years ago, there was a sex offender on the med board, but rather than going to prison, the board secretary said so-long, wished him well, and stated for the press, “Oh how we’ll miss him.” That was that. The same board provided a license to a doctor from another state whose license was suspended in that state for murdering his wife.

Getting a seat on a state medical board is very political. The members most likely have some connection to the state governor, like a big donation or to a large healthcare system which has political pull, something all health care systems work to create. The point is that you want to have friends on the board. The “friendships” exceed altruism and extend to being self-serving. The “friends” on the board in the first place do not want, for very political reasons, to “taint” their own clinic. Of course, if the doctor in question is making a lot of money, the friends on the med board don’t want to cut their own salaries either. Being on the state med board has practical purposes.

In the end, the “charges” appear as the board intends and slide right on through to the National Practitioner Data Bank (NPDB) where the intended “punishment” fits the intended “crime” and no one, at least no one who counts, knows the difference. The public relations chant is that all the secrecy protects the public. The only recommendation I can offer is that med boards need to be watched carefully, but the questions remains, by whom? Med boards have many friends. No practicing physician would dare to expose what really goes on.

The primary goal of hospitals and medical boards is to protect the public from dangerous doctors. Medical boards claim they provide “due process” to physicians, but no one really checks to see that they do.

I’ve talked about the problem of trying to fix systems problems in healthcare on KevinMD. It’s time to take the system out of healthcare and put caring back into the physician/patient relationship. That will only happen when physicians take back the practice of medicine.