Brad Mitchell

None of these explanations are actually true. This is where I wish I had a real keyboard on my iPhone to make giving everyone the real explanation easier.. Before being in this business, I spent eight years in charge of medical billing, accounts receivables and physician insurance enrollment. I was trained by a retired Medicare adjucary judge and during this part of my life was on the Medicare Advisory Board for the State of Michigan as I with my own hands or oversight billed a "gross" over a hundred million dollars for physician, diagnostic and laboratory services.

I'll explain by practical example as if I am a board certified Internal Medicine doctor who treats patients 18 to senior citizen. I do office visits, small procedures, have some limited diagnostic testing equipment in my office and a small in-office laboratory for processing limited bloodwork chemistries.

I participate with with Medicare, Blue Cross Blue Shield and my states Medicaid program. A small number of patients come to me with one off insurances that I do not "participate" with and from time to time I see patients whose bills are billed to an auto or other such insurance due to an accident and I also do not participate with them as they have no such option, even if they did it would be impractical to credential and include myself in their directories because almost none of my volume would result from this.

I'm an average physician and not a hospital, therefore I am my practice and I know my patients. It's my job to run a viable business, not easy as a small practice. If I don't have sound billing practices, I lose my patients and it affects my community reputation.

Because I participate with Medicare, Blue Cross and Medicaid I can only have ONE prevailing gross charge for any service, procedure, diagnostic or laboratory test. My agreement with the insurers requires this, also that I discount to their fee schedule regardless of what my gross charge is. I am not allowed to bill this difference to any patient. I am only allowed to further bill to my patients according to their insurance payment schedule and amounts determined by their explanation of benefits to be co insurance or deductible due from my patient.

Here is my example:
Service, my gross charge, Medicare pays BCBS pays, Medicaid pays, non-participating (like auto accident) insurer pays:

New patient office visit, $150, $115, $123, $77, $150
EKG, $50, $36, $28, $18, $50
Blood chemistry panel, $60, $18, $39, $8, $60

The difference between my charge and each carriers rate schedule is called a contractual write off. Unlike on our personal taxes, this is NOT a deduction or anything beneficial of the sort. It's just money I am not entitled to collect from the insurer or my patient. I'd be happy to charge less to cash pay patients but if i do so on any routine basis and get caught, I'll get kicked out of participation and be subject to fines and criminal charges. I don't have much cash pay business anyways, less than a few percent. I have about 15% of my patients whose insurers are auto, miscellaneous or that I otherwise don't participate with (out of state, etc) and those are my best paying clients. I need the extra revenue, malpractice insurance is high and it's expensive running a practice. I take some Medicaid patients to give back and help fill my days, but basically on top of being a slow payor, we lose money and need the averaging of the low revenue with our highest private payors to be viable. I have two people in the front office, two doctors that work for me, a full time medical biller for the sea of paperwork, claims and patient questions.. Three medical assistants, a full time lab tech and once a week an echocardiography technician whom we can fill a full day of ordered studies... And I pay a remote radiologist to interpret each and every study.

/end example

In short, whether I'm a hospital or a doctor I can only have one fee for any service rendered. 70% of my patients have one of three insurances and I have to bill at least as much as they will approve to pay, otherwise I'm leaving money on the table. I would just set my fees right above Medicare or Blue Cross approved amounts, but with the number of claims they deny and the amount of co insurance and deductible we are unable to collect from patients, we especially rely on the smaller number of patients with premium insurances who help average up our collections.. And we need that, especially because we are willing to treat the senior population and some of the indigent who only have Medicaid, state insurance with low fees that are 50-70% less than Medicare. And Medicare fees differ by region and geography, taking into consideration the cost of living index.

I can negotiate on balances due me farther down the road after sincere collection efforts. The money I don't collect doesn't provide any tax benefit or write off. In fact, if my business is >10 million a year or if I do accrual based accounting, I need to be very careful to avoid paying income taxes on uncollectable receivables.

Hospitalization is the same in terms of fee schedule rules and regulations. Difference is, you can hate a hospital but you will still go there. Other primary difference is that most are not for profit, what they get paid is different than physicians and often cost plus, also often not for profit. They're not rewarded for efficiency, quite the opposite. Their gross fees are usually offensive. It's not hard to understand why- it's where you go when you get in an accident and auto insurances (etc) pay whatever is billed to them.

I don't think a single payor system could ever work. However, the way things are right now, it's broken. I'm not presenting any solutions here, just wanted to inform everyone what's REAL about billed and collected amounts.

Sincerely,

Brad Mitchell

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