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True prices and importance of supply and demand
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A central concern for any physician is reimbursement: “How do I get reimbursed fairly for the value of my services?”
Unfortunately, many physicians approach this question from a very naive perspective, due to a lack of formal training in economics. Some argue that if we show third-party payers how much it costs to treat their patients, they would surely pay us more. But these payers are not interested in our costs. They are interested in our price vs. their likely costs if our services aren’t used.
Other physicians argue that if only we could show payers how valuable we are, they would happily pay us more. But, they must already know we are valuable. After all, they are meeting with us and not the people who make hula hoops.
Data analysis
Some physicians want to ask the payers for their financials on endocrine patients, not realizing this information is often proprietary. They assume the data will show cost savings when patients are treated by an endocrinologist. But what if the data show otherwise? If we do indeed treat patients more thoroughly than non-endocrinologists, this may well cost more, both in the short run and the long run. Those who would have died without us are now still alive, continuing to consume health care dollars.
Richard O. Dolinar
And aren’t these physicians assuming we will be able to interpret these data better than insurance actuaries, accountants, and other financial analysts, despite our lack of business training? My contacts in the insurance industry believe this to be highly unlikely. Their trained professionals, including company physicians, go through their data with a fine-toothed comb. They know it inside and out.
It seems unlikely that we will ever see such data. After all, we’re asking the payer to give us that information so we can use it against them to get paid more. And if we obtained the data, we would have little ability to verify it. Some insurers have lost court cases for processing claims fraudulently, in which cases the data we received would have been corrupt.
Medicare billing data should be available, but reviewing it is like looking at the meal prices on a restaurant menu to determine the quality of the food.
Supply and demand
Many physicians do not realize that the true price of their service is not a function of how long they went to school, what degrees they accumulated, how much time they put in on a case, or how difficult the case was. Nor is price a function of the quality of the work or the outcomes achieved.
If not the above, then what is a true price based on? Unlike government-decreed artificial prices, true prices are a function of supply and demand.
To illustrate, let’s imagine you live in a university town and all of the residents, except one, are either college professors or students. The exception happens to be a plumber, and you happen to have a leaky pipe. What do you think the plumber is going to charge you for that repair? Will you be able to pay him less because he doesn’t have an advanced college degree or the same office expenses as you? Of course not. The price is based strictly on supply and demand.
Supply and demand answers the diamond-water paradox that once vexed economists. Why is it that a life-sustaining commodity like water is so cheap, whereas frivolous diamonds are so expensive? The answer lies in the principle of diminishing marginal utility. Quite simply, there is a relative abundance of water, and thus, the demand for each additional unit is low. But because diamonds are extremely limited in supply, the demand for each additional diamond is high, thus the marked difference in price.
Endocrinologists are like diamonds. Previously, I reported there were about 5,000 practicing clinical endocrinologists in the United States. Since then, I have been told the true number is closer to 2,500. Our strength is in our numbers, not because they are large but because they are small. We are extremely rare, and that can be used to our advantage. After all, at the end of the negotiation, only we can treat the patient. The payers can’t do without us.
Like a diamond merchant negotiating with his customers, we certainly should negotiate with third-party payers. But remember, when you are doing this you are not in the exam room; you are in the marketplace. You are not at the bedside; you are at the negotiating table. This involves a whole different set of skills, ones in which your opponent has been thoroughly trained. I believe our medical meetings should include sessions teaching physicians how to negotiate so that we can hold our own in such situations.
In the end, after all, the price you get for your services is not going to be what you deserve or what you think you deserve. You are going to get what you negotiate.
For more information:
Richard O. Dolinar, MD, is a senior fellow with The Heartland Institute and a clinical endocrinologist specializing in diabetes in Phoenix, AZ; email: drdolinar@dolinar.org.