The biggest
challenge we face as health care providers dealing with insurance companies is
explaining to patients that insurance companies are businesses. Business is
driven by profit. But wait a second, doctors and hospitals exist as businesses
as well. So then does profit take preference to all the other Hippocratic Oath
rhetoric we all learn in medical and dental school? Unfortunately yes,
sometimes.
Let’s pretend we are all robots
devoid of emotion and morality. Then our business interactions would be 100%
based on profit even at the expense, injury, and demise of other robots. If you
owned a supermarket and you could sell food for cheaper, even though it was
less safe and less nutritious and therefore make a larger profit you would, if
you had no scruples. But most people have a sense of right and wrong.
Businesses are not people; therefore they have no conscience or morality.
Businesses are owned and operated by people. And many are owned and operated by
good moral people. But like in war, the further you get from the front line,
the easier it is to lose your moral ground.
It is easier for a general away from
the action to order foot soldiers to attack a village. The general has to
consider the big picture and can weigh casualties in more of an accounting method;
the foot soldier is there in person face to face with another human being. Killing for a soldier has a much more intense
value for his sense of morality than just numbers.
Sounds like I am coming down on
insurance companies by analogy with business profits, war and morality. Just
the opposite, I have sat around with other health professionals demonizing
insurance companies. Of course we blame them for all the ills of current
system. But insurance companies are just business and look at health care no
differently than any other business evaluation, their profit in terms of income
and expenses. In their quest to become more profitable they continue to evolve
more efficient ways to limit what they cover and pay out, as improve the sales
of their plans.
Within an insurance company the
employees answer to the managers, the managers to the executives, the
executives to the CEO and the CEO to the shareholders. The bottom line of the
“answer to” is the bottom line. All businesses are about the bottom line.
Sometimes it may seem like a
business is behaving more humanely but, if carefully analyzed, you will see
that it is always about profit in the end. When insurance companies announce
they are now going to cover a procedure they disallowed in the past or pay out
higher for some preventive treatment or lower a patient deductible, on the
surface it may seem like a move away from the strict for profit edict, but the
accountants at the insurance company carefully calculate everything and know
how each change will affect the bottom line. So covering a new procedure may
initially cost the company more money, but this is counter balanced by
increased sales because customers were complaining that this procedure was not
covered and they would not renew or switch to another carrier. For example, an
auto manufacturer recalls a car to fix something at no charge. The initial cost
is a lot but the cost of losing future sales from dissatisfied customers, loss
of reputation or lawsuits are considered and the expense profit equation goes
into effect. Humans are capable of doing things strictly out of benevolence,
but not businesses.
So businesses are not evil, they are
just like machines programmed for profit and whichever formula produces
increased profits is the one they use. When the indemnity insurance formula was
not as predictably profitable due to the problems explained in part one of this
article, a new formula had to be developed.
For any business the key to profits
is predictable expenses. If you know what your expenses will be then it becomes
simple to know what income is needed to produce a desired profit. Health care
insurance companies came up with some excellent business strategies for doing
just that.
First, the creation of preferred
provider and in network plans. This system insures that the company can dictate
the exact fee that a doctor is allowed to charge for any treatment or procedure
(Now to be referred to as codes, just like the war analogy, takes the human
element out and things become less offensive, hence the war euphemisms like collateral,
troops and ordnance. I could argue that war is inevitable and sometimes
necessary as opposed to health insurance. But that is for another day.) By
using statistics that include how often procedures are done (based on the
likelihood of those conditions occurring and/or patient’s willingness to have
them treated) and the set fee for those procedures the amount of payout over a
given population set can be accurately estimated. This gives the insurance
company the ability to set up a cost for selling these plans. Crucial to this
statistical analysis is the population set. The reason why an individual cannot
purchase medical insurance at the same rate as a group is precisely due to
population statistics that work in a large group but are less reliable for
individuals. Insurance companies know (and bank on) the data that says a
certain percentage of people who have medical benefits will not use them, and
furthermore what percentage of those do will cost the company.
The next big profit maker is the
yearly maximum concept. By decreeing a maximum amount the insurance company
will pay regardless of the conditions or procedures needed, dental insurance
companies guarantee that even in a bad year (for them) they will only pay out a
limited amount. This a great way for them to also increase profits each year as
the yearly maximums increase with cost of everything else, in fact some
companies have lowered their yearly maximums. I know of at least two companies
that have had the same maximum for twenty years (how many things can you think
of that have not increased in price or cost in that time span!).
The copayment has been around for
awhile. The concept being if you give patients access to free care they may
abuse it (have too much treatment!). So if you make the patient feel some of
the cost by setting up a portion of the fee that they are responsible for this
may limit the expenditures for the company from a cost sharing perspective, as
well as, hindering patients from having procedures if they can’t afford the
copayment. The latter is exemplified by the way co-payment in dentistry is
designated. For preventative procedures the co-pay is usually small because 1)
it is a good selling point, 2) it may reduce the cost of future bigger more
costly treatment and 3) they are usually inexpensive procedures. For bigger
procedures the copayments are much higher usually in the 50 % category. Meaning
for the expensive things the patient has to come up with 50% of the cost which
right off the bat will deter them from having those procedures in the first
place. Secondly, if they do have those procedures performed, the maximum will
be reached and even less will have to be paid out by the insurance company.
The last idea in the Preferred
provider or “In network” plans may seem like conspiracy theory fodder. But
after 20+ years in this profession I have seen the full transformation of some
dental practices. Here’s how it goes: Once the doctor agrees to be a preferred
provider (similar to Robert Johnson signing with the devil to become the
greatest blues guitarist) initially the practice will have an influx of new
patients coming to them because the doctor gets put on a list. This list of
“preferred” (preferred – one definition: to set or hold before or above other persons
or things in estimation) implies that the insurance company has selected these
doctors based on things that may improve the patient’s experience and treatment
outcomes. The “preferred” status is really an insurance term for any doctor who
is willing to lower his fees and follow the rules set forth by the insurance
plan in exchange for access to patients he may not have been able to obtain on
his own.
No one was forced to become a
preferred provider in the early days, but for many young dentists it seemed
like a good way to jumpstart your practice and start making an income, so
desperately needed after 8 years of college loans, and start up practice debt.
But like Mr. Johnson found out how nothing is for free when you meet at the
crossroads, once the doctor’s office is now populated with in network patients,
it’s not so easy to have time to see other patients and furthermore, the
insurance company knows you are now dependent on “their” patients and your
leverage with the insurance company is gone. Also, in the beginning you were
willing to work for lower fees with the hope that someday that would improve.
If now they decide to lower their allowable fees, your choice is to drop out of
the network (and lose your patient base) or play by their rules. For some, the
ugliness that pervaded the indemnity plans creeps back. Forced with low fees
and shrinking remunerations, some doctors consider inventive ways of lowering
their costs of providing treatment and maximizing insurance payments. That is
how the cat and mouse game begins again. Unfortunately, once again, the patient
is the pawn in this game and their care is sacrificed in the name of profit.
