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Hospital Finances Inpatient Practice

The Three Most Valuable Specialists In Your Hospital

book and stethescopeFrom reading the title of this post, you’re probably thinking that I am going to list some surgical specialties, interventional cardiology, or gastroenterology since these specialties bring in financially lucrative procedure volume to the hospital. So what I am going to say is going to surprise you. I’m going to make the argument that the 3 most valuable specialists in your hospital are geriatrics, infectious disease, and nephrology. I know what’s going through your mind right now: “What in the world is he thinking about?”. Well, let me make my case and then you decide. And it all starts with CPT.

CPT codes, or the Current Procedural Terminology codes, are the coding numbers that are assigned to every service and procedure that a physician does, from an office visit to an appendectomy. So for example, CPT 99221-99223 code for the 3 different levels of new inpatient encounters and CPT 99251-99255 code for the 5 different levels of inpatient consultation encounters. For decades, those consultation codes charged by a specialist paid more than the standard new patient encounter codes that would be charged for an admission history and physical examination by a generalist. This makes sense – if you are a specialist and providing a specialty consult opinion drawing from your additional years of training and experience, you should be paid more than the generalist doing a standard history and physical exam.

But on January 1, 2010, Medicare got rid of the consultation codes and required specialists to use the same CPT codes that the generalists were using for the admission history and physical exam. The net result of that decision was that cognitive specialists (i.e., those that do not have a procedure that they do) saw a significant drop in their income compared to the procedural specialists (i.e., those that do a procedure, like cardiac stress testing or colonoscopy). The three subspecialties that were affected the most were infectious disease, nephrology, and geriatrics.

Every year, the Medical Group Management Association (MGMA) publishes the starting salaries for physicians in their first year after completing training. In the past, specialists made more money than generalists. It makes sense… if you do an extra 2-3 years of training as a subspecialty fellow, you should expect a return on investment for that training and so you should expect a higher salary. But since the elimination of the consult codes by Medicare, some specialists, namely those that don’t involve doing lucrative procedures, have seen their salaries drop to the point that there is no longer any return on the investment of the extra years of subspecialty fellowship. Here is the most recent data from the annual MGMA salary survey from 2015 (based on data from 2014).

Physician salary

 

With general internal medicine, family practice, and hospitalist medicine, all you need is 3 years of residency and you are ready to start practicing. For all of the other specialties, you have to do 2-3 years of additional fellowship training. For infectious disease and nephrology, there is no salary advantage to doing those additional years of fellowship training (geriatrics is not listed in the MGMA report but their salary is typically similar to general internal medicine). In fact, the cost of doing the additional years of fellowship training is that you are going to make less than a family physician or a hospitalist who stopped after 3 years of residency.

For any of my colleagues in academic medicine who are looking at these numbers and saying, “I don’t make anywhere near that amount even though I’ve been practicing for years”, relax. The MGMA data is largely derived from private practice physicians and not academic physicians and as has always been the case, you make a lot more in private practice than you do in academics.

All of this has not gone unnoticed by medical students and residents when choosing a subspecialty. Recently, the National Residency Match Program released the results of the 2016 resident and fellow match. The results paint a frightening picture for the future of the cognitive specialties.

NMRP

This graph shows the percentage of available fellowship positions that were filled by graduates of American medical schools (blue) and the percentage of fellowship positions filled by all applicants, including foreign medical graduates (orange). In keeping with the starting salary data, residents just are not going into geriatrics, nephrology, or infectious disease. There is simply no return on the time investment of doing a fellowship.

So what does this mean for hospital medical directors? Geriatricians, nephrologists, and infectious disease specialists are going to become increasingly scarce. It is going to be harder and harder to recruit these specialists. Of equal concern, there is a danger that the best and smartest residents will be drawn to the other specialties, resulting in an overall drop in the caliber of the new cognitive specialists in future years compared to past years.

We are fortunate at our hospital. The Director of the Division of General Internal Medicine and the Chairman of Internal Medicine have placed a high value on geriatrics. We have great nephrologists and one of the premier interventional nephrology programs in the country. And 2 years ago, the Director of the Division of Infectious Disease recruited one of the best clinicians I know as our hospital’s lead infectious disease specialist and director of hospital epidemiology.

If you have a good geriatrician, a good nephrologist, or a good infectious disease specialist, take good care of him or her because he or she is going to be hard to replace. And when you have strategic planning meetings with your hospital business leaders, speak up for these specialties because hiring them now before their supply drops further is going to be a good long-term business decision. For medical students who have always dreamed of a career in one of these specialties, take heart, because in a few years the invisible hand that governs the law of supply and demand in capitalism will cause their salaries to rise again in the future.

July 23, 2016

Categories
Hospital Finances Medical Economics

MOON Over Medicare Or MOONed By Medicare?

Moon: verb; to expose one’s buttocks to someone to insult or amuse them, see also the Center for Medicare and Medicaid Services.

So the good people at CMS have developed a new program designed to reduce the national unemployment rate for hospital case managers. It’s called “MOON”, or the Medicare Outpatient Observation Notice. This is the latest rule in the Observation Game, which was created and brought to you by Medicare.

In the Observation Game, the players are the patients, the hospitals, and Medicare, each of whom try to avoid paying as much money as possible when a patient gets sick. Unlike most games, in the Observation Game, the goal is not to win the most money but rather the winner is decided by who loses the least money. When the game gets too predictable to the point that all of the players understand how to pay the game, CMS changes the rules to make the game more interesting, sort of like the character President Snow in the movie The Hunger Games.

The basic premise of the Observation Game is that Medicare tries to pay as little as possible when a person becomes ill or injured and needs hospitalization. If that person has an illness that would normally require less than 48 hours in the hospital, then Medicare defines that hospital stay as “observation status” and the patient is considered an outpatient. It is only for an illness that would normally require a hospital stay greater than 48 hours that the hospital stay is considered inpatient. The important differences are:

  1. Inpatient status:
    1. Covered by Medicare Part A
    2. Medicare covers the cost of the hospitalization
    3. Medicare covers the cost of any drugs given during the hospitalization
  1. Observation status:
    1. Covered by Medicare Part B
    2. The patient has a 20% co-pay for the hospitalization
    3. The patient is responsible for the cost of any drugs through their Medicare Part D plan, or if they do not have a Medicare Part D plan, then the patient pays for them out of pocket

In the Observation Game, Medicare tries to get as many admissions into observation status as possible whereas the hospitals try to get as many admissions into inpatient status as possible. The patients end up being sort of by-standers in the Observation Game – they can reduce the amount of money that they lose when they get sick and need to come into the hospital by buying supplemental insurance and Medicare Part D plans but the only way that they can control whether their illness is going to result in inpatient status is by waiting until their illness gets so bad that it is going to take more than 48 hours of hospitalization to treat it.

In order to ensure that the hospitals are not cheating by declaring too many patients requiring hospitalization as inpatient, Medicare uses Recover Audit Contractors, or the RAC, which are sort of like the referees in the Observation Game. The RAC are companies that can review medical records of patients who have been hospitalized and then determine based on the documents whether or not the patient’s hospitalization qualified as inpatient status or not. If the RAC determines that a patient whose hospitalization was billed to Medicare as inpatient status did not meet the rules for being an inpatient (and instead should have been observation status), then the hospital has to pay back the money from that hospitalization to Medicare and then the RAC gets a commission based on the amount of money returned to Medicare. This is kind of like the referee in a basketball game getting paid more for every foul that they call.

In the past, Medicare found that just defining observation status as being hospitalized for less than 48 hours was not challenging enough for the Observation Game so it changed the definition of observation status to be hospitalization for less than 2 midnights. Therefore, a patient who is admitted to the hospital for 36 hours starting at 6:00 AM would be considered observation status (i.e., one midnight passes before discharge) whereas a patient who is admitted to the hospital for 36 hours at 11:00 PM would be considered inpatient status (i.e., two midnights pass before discharge). The hospital players of the Observation Game have pretty much figured out how to play the game with the 2-midnight definition of observation status versus inpatient status so Medicare has decided to change the rules a bit in order to keep the Observation Game from getting too dull.

So here is where MOON comes in. When a hospitalized patient is in observation status, the hospital has to have a patient sign a form notifying them that they are in observation status and therefore considered as being an outpatient with all of the addition costs that the patients will have to pay. This notice is called the Medicare Outpatient Observation Notice or MOON. On the surface, that sounds like a pretty simple rule but Medicare wanted to make the Observation Game more interesting so beginning on August 6, 2016, the MOON has to be given to the patient after 24 hours of hospitalization but before 36 hours of hospitalization. In other words, the hospitals have a 12-hour window during which time they have to have the patient sign the MOON. If hospitals don’t follow this rule, then they don’t get paid.

But here is the sad reality of the Observation Game. When a person gets sick or injured, it costs money to treat him or her. By using the rules of the Observation Game, if Medicare doesn’t have to pay for that treatment, then either the patients or the hospitals do. And if the hospitals have to pay for that treatment, then the hospitals are going to charge more to everyone else so that the hospitals can eventually cover their costs.

So think back to the definition: moon: verb; to expose one’s buttocks to someone to insult or amuse them. The next time you are hospitalized, if you get MOONed, were you insulted or amused?

July 23, 2016

Categories
Hospital Finances

Articles about hospital charges will never get you a Pulitzer

Every year, an eager young reporter will call up hospitals in some large U.S. city and ask how much they charge for procedures like a hip arthroplasty, MRI, or obstetric delivery. He or she will become outraged to find out that there is enormous variation in the amount that different hospitals charge and write a newspaper article exposing the “high cost” hospitals and hoping to be rewarded with a Pulitzer Prize. All I can do is shake my head and sigh.

If you are a foreign prince coming to the United States to get your hip replaced, this information may be valuable to you but if you are an average American, the hospital charge is irrelevant. The reason… almost nobody pays the amount that appears on the hospital charge list.

If you are 68 years old, the cost of your hip replacement is going to be (almost) the same at any hospital you go to and that is because the hospital and the orthopedic surgeon get paid the amount that Medicare will pay for a hip replacement regardless of what the hospital or the doctor charges. I say almost the same because there are some minor adjustments in what Medicare will pay based on the geographical location of the community, whether the hospital is a teaching hospital, etc. but the amount is pretty close for all hospitals.

For people under age 65 on Medicaid, it works the same – regardless of how much the hospital “charges”, Medicaid pays only the same fixed amount. For those people under 65 who have commercial insurance, it is a little different: the insurance company will usually have a standard rate that they will pay regardless of the hospital charge and when the hospital and the insurance company negotiate a contract every few years, the hospital will agree to what that rate will be. Big hospital organizations can often leverage their size or notoriety to negotiate rates that are higher than the “standard rate” (but that is a topic for a separate post).

For most hospitals and most physicians, the “charge” for a hip replacement will be 1.5 to 3 times higher than what commercial insurance companies will pay. So why set the charges so high if it doesn’t affect how much you get paid? Two reasons:

First, the hospital (or doctor) always wants to set the charge for a procedure higher than whatever the highest-paying insurance company will pay for it so that they don’t leave money on the table. For example, lets assume Medicare pays $400 for an MRI test, insurance company A pays $450, and insurance company B pays $500. If the hospital charges $400 for the MRI, then that is all insurance company A and B have to pay so the hospital will leave $50 from insurance company A and $100 from insurance company B on the table. On the other hand, if the hospital charges $600, then they will get paid $400 from Medicare, $450 from insurance company A, and $500 from insurance company B.

Second, sometimes, the hospital will get paid whatever they ask for with their charges. This doesn’t happen very often but if your hospital has a lot of foreign princes flying in for their hip replacement, then it makes sense to ramp up the charges since that foreign prince will pay whatever you charge him. There are a few rare occasions when an insurance company will pay whatever the “charge” is – in my experience, this mainly happens when a lawyer or an insurance company pays a physician to do an independent medical examination for disability determination. The hospital charge can also apply to people who don’t carry insurance; this was pretty common before the Affordable Care Act when the percentage of our hospital’s patients who were uninsured was running about 13% but since the ACA was enacted and Medicaid was expanded in Ohio, our uninsured percentage has dropped to < 3%. Most of those who remain uninsured have low incomes and the hospitals will usually negotiate some reduced charge based on the patent’s ability to pay or write it off completely if the patient is indigent.

If you want to find out what Medicaid pays your doctor for a procedure or service, you can look up the current Medicare Medicare Physician Fee Schedule Search – regardless of what your doctor charges, this is what he or she is going to get paid by Medicare.

So next time you come across an article about unfair hospital charges written by an infuriated reporter, do what I do… skip to the sports page.

July 19, 2016