Squeezed on both sides

Medical practices dealing with increasing health insurance premiums and decreasing reimbursements.

Issue: June 2003

ByDouglas W. Jackson, MD

Douglas W. Jackson, MD [photo] --- Douglas W. Jackson, Chief Medical Editor

Medical practices, just like all small businesses, are experiencing increasing medical costs. In addition to the higher costs of health insurance and workers’ compensation to cover employees, medical practices are also seeing reductions in reimbursements.

In spite of the current situation, most medical practices are trying to provide quality health insurance benefits to their employees. Medical plans, however, are demanding higher employee co-pays and seeing a diminishing number of physicians accepting many of the current lower end plans. Employees are not pleased that some of these increasing costs are being passed along to them. They have difficulty meeting the higher deductibles and are frustrated by the reduced coverage.

The questions are the same for all small businesses: How much can employees pay toward health insurance and how much are they willing to pay? On the other side, how much can employers pay for health coverage and workers’ compensation costs for their employees?

Higher than taxes

All small companies will be forced to make tough decisions with another upcoming round of health care and workers’ compensation cost increases. As small businesses, physician practices are feeling both sides of this health care coverage crisis. In a recent survey, the National Federation of Independent Businesses found that health insurance has surpassed taxes as the leading problem for small employers.

On the other side, physicians share the experience of Administrators of American Hospital Association (AHA) member hospitals that continue to rank reduced reimbursement from government sources as their number one worry. (For more information, see http://www.hospitalconnect.com.)

Situation getting worse

Health care costs in 2002 jumped more than most of us had anticipated. Although these costs have increased for several years, double-digit increases are anticipated in the coming year. The situation appears to be getting worse, not better.

These rising costs are impacting companies’ profitability and eroding employee satisfaction. For most small business employers, relief is nowhere in sight.

Physician offices have the same choices as other small businesses. We also have to find ways to adjust. Like other owners of small businesses, we are opting to shift more costs to employees and ourselves rather than give up on the plans completely.

In some cases, in addition to cost shifting and reducing coverage, many are considering working with fewer employees by outsourcing work, reducing services and using more part-time employees.

The costs related to workers’ compensation and time off from work are also increasing. As medical employers, we are more aware of the variation in treatment of industrial-related illnesses and injuries. There are legal and medical industrial injury mills and operations that flagrantly abuse workers’ compensation and need to be controlled.

Every large and even some smaller communities have these operations, which specialize in milking the workers’ compensation system. These often result in excessive testing and diagnostic studies, prolonged physical therapy, extended time away from work for the patient, surgery with questionable indications and eventually high disability ratings.

As part of future solutions, our profession must step up to help develop reasonable return-to-work programs and help reduce the obvious fraudulent behavior.

Small companies are singing the health care blues. In spite of the current situation, health care coverage for our employees and their families is a major concern. Employees working in physician offices tend to be frequent users of their health care coverage so they are not desirable to insurance companies. I am told this frequently when shopping for plans for our employees.

We cannot keep raising costs and cutting benefits. The current system for obtaining coverage needs a major overhaul. Part of this overhaul should have rewards for individual responsibility for a healthy lifestyle and more barriers to over-use of insurance coverage.

We cannot continue to insure destructive individual health habits and behavior. In addition, as a profession we have to help control the abusers of the disability and medical system and continue to develop reasonable return-to-work programs. We are all in this together and passing on costs and reducing coverage and reimbursement will not solve the underlying problems.

Unfortunately, I am not certain our political system, health insurance industry, workers’ compensation system, medical organizations and physicians are up to the challenge. If it were easy, it would have occurred. Will we have to wait until the crisis requires rescue of our health care coverage? In the meantime, those of us trying to provide for our employees’ health and disability coverage are having to function with a failing approach to the problem.