The raw cost of medical care.

By Robert J Tilley MD, MBA

The raw cost of medical care.

As a physician who has owned a clinic for the uninsured and underinsured patients I’m going to let you in on one of the dirty secrets of US healthcare. The actual cost of healthcare isn’t that high. It’s the cost of administration that is so high and even more disheartening is that many people are becoming extremely wealthy administering, counting, documenting, auditing, regulating and advising the healthcare system without contributing so much as a Tylenol for a headache.

We were able to operate a clinic that provided routine, outpatient care for $87 a visit, flat fee, no matter what the issue. This included meeting all state and federal requirements for medical record-keeping, a staff that included both front and back office, a full-time office manager who also did our marketing and a second practitioner.

We also offered discounted laboratory and x-ray services. Let me rephrase that, we offered astonishingly discounted laboratory and x-ray services. As an example, even with insurance the deductible for a head CT scan at that time was in excess of $1000. This was with the so-called “member discount” that the insurers touted as a benefit of having their insurance. I was able to offer the same head CT scan from the same freestanding radiology center for slightly less than $500. Why? We paid cash. We had a simple contract, the freestanding center billed us monthly for all services and we billed the patient in advance prior to the service. We kept a small “float” account and charged a small premium of about $75 over cost for ordering the test and interpreting the results. When the word got out we even had patients with insurance coming to us for labs and X-rays.

I could repeat the same story time and again for literally hundreds of laboratory tests and x-ray services. We even had a dermatologist providing our patients with specialist level care for slightly over $100 for a visit. All in all our patients were paying sometimes as little as 20% out-of-pocket for the same service that an insured patient would pay.

We then tried to negotiate with the state to take care of Medicaid patients. Our state could not service all of their medicaid recipients and so patients were going unseen, most utilizing the ER for routine services. We were willing to offer a bulk rate, accepting 2000 patients and even going so far as to make the offer of opening a clinic in an underserved area and hiring staff at our own expense as long as we were paid a discounted rate of $75 per visit. We had no interest in different fees for different levels of service, we would just throw in the complicated and uncomplicated patients in one huge bucket and let the numbers fall out where they may. I knew from experience that this would cover our expenses and leave a little in the bank for expansion and unexpected expenses. This isn’t complicated. I also explained that I didn’t have a problem with them auditing our charts to ensure quality of care (a vital function). Initially the state was very interested in having us provide service but when they found out that we were not willing to jump through the absurd processes for tracking, billing, paybacks, referrals, pre-authorizations and all of the other administrative drudgery that is so much a part of healthcare today their attitude was not only dismissive, it was downright rude. When I explained that to do it their way would cost more than double what I was offering they didn’t even bother to answer me, the two representatives simply stood up and walked out. I guess that as administrators they felt their job would have been threatened by somebody simply providing medical care. It was very clear that the state had more interest in administrative busywork than providing care to the sick.

I don’t have an answer to the mess we find ourselves in. The system is collapsing while a few are becoming rich beyond belief. I have quit practice entirely and like so many of my colleagues who have left before me I can no longer face the administrative drudgery and even bullying that is integral to practicing today. Perhaps the system needs to break before it can be replaced.

Robert J Tilley MD, MBA is President InHouseDoc.

4 Comments on “The raw cost of medical care.

Glenn McLeroy
September 4, 2017 at 7:48 pm

Your experience is no surprise to me. I see so much administrative waste, intentional and unintentional fraud, political self interest, it is so disheartening!

Abraham Morse
September 5, 2017 at 9:15 am

This is a great post Dr. Tilley. We often forget that 95% of what we do is cognitive work that doesn’t involve huge costs or high technology. Outpatient medicine really doesn’t have to be so comlicated and burdensome. However, to be fair, part of the reason we are in the mess we are in now is because many doctors and hospitals (yes many, not just a “few bad apples”) decided they could dispense with professional pride and ethics and game the system to increase their paychecks. We need to find a way to pay health care providers a solid wage comensurate with their level of education, long training and the (sometime)hardships of the job WITHOUT basing their compensation largely on production. We need to educate the public to understand that more testing and treatment is not always better.

I am sure that working in your clinic is often satisfying and even joyful. I hope it continues to be that way.

David Conti
September 5, 2017 at 10:04 pm

Congrats to you Dr. Tilley and your team. You’ve found effective ways to take “slack” out of the health care system. I applaud your efforts to simplify billing and reduce the “administrivia” that has dramatically weighed down our great American health care system.

September 8, 2017 at 1:22 pm

Administration’s release of doctor-specific information about Medicare payments made last week “a breakthrough week for Benistar health-care transparency,” illuminating “the workings of a complex system of fee-for-service medicine whose seemingly uncontrollable costs have challenged U.S. policymakers for decades…


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