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Pennsylvania Medical Society
20 Erford Road
Lemoyne, PA 17043-0301
RE: Measuring the objectives of the Council of Medical Economics
The objective of the Council of Medical Economics is stated to be to"get appropriate reimbursement, fast and efficiently for physicians, through third-party payers." Our budget details how much money we plan to spend in this process, but I am afraid that we have not established measurements to identify how well we are succeeding in our objectives. Therefore, I suggest the following:
1. "Appropriate." Last year I saw an article in Medical Economics indicating that Pennsylvania had the lowest reimbursement on average for physicians in any large state in the country. I believe that our council should be obtaining this information from Medical Economics and posting our track record. It may possibly be true that the AMA has even better information which might be obtained more readily for this purpose.
2. "Fast." I believe that we should be tracking the turnaround time for payments at Blue Shield, Medicare, the Welfare Department, and if possible the commercial carriers. This will vary by the time of the year, with January, February and March characteristically having a long turnaround time as a result of the end of the year billing practices of physicians. It might also pay to get some sort o outside verification of the accuracy of whatever figures those payor organizations supply to us. We might, for example, ask the members of our council to keep personal records of the turnaround time of reimbursement in their own practices, just as a check.
3. "Efficiently." I recently ran into a commercial firm which offers to do the entire billing process for physicians. They not only send bills and maintain receivables, but they complete the insurance invoices and maintain an 800 number for complaints and follow-up. For this, they charge 8% of collections. If we calculate that the efficiency of large scale operation approximately equals their profit margin, this suggests that physicians in Pennsylvania are surrendering approximately 8% of their profits (through administrative costs, not mentioning discounts and denials) in order to employ the third party payment mechanism. In addition, there are statistics indicating that the third party itself absorbs another 10%in its own transactional costs. That is not all. There are errors inherent in the system which often go against a physician, and there is the interest cost of the float which grows out of delayed timeless of the payment. All in all, the cost to the public of employing the third party payment system for physician charges is approximately 25%. Obviously, we should be working to reduce this rather exaggerated cost.
Bill, I do not think it would be very difficult to accumulate these statistics and keep running tally o our effectiveness as a council. The ingredient information would be fairly easy to come by, and it requires only a tabulation of year to year changes, as well as a comparison of our success with that of other large states. I believe that this interstate comparison would be a suitable thing to bring up at the convention of State Councils of Medical Economics which we are talking about convening in Washington in December.
If you think well of this suggestion, please go right ahead with whatever is required to implement it. If I have overlooked something, or if you disagree with the premises, please let me know.
George Ross Fisher, M.D.