The Shadowy Price Fixing World Of The AMA & RUC

Want to know how the AMA controls prices for healt care in the US?

The RUC (of the AMA) meets in secret to divvy up roughly $85 billion in U.S. taxpayer money every year. And that’s just the start of it. Because of the way the system is set up, the values the RUC comes up with wind up shaping the very structure of the U.S. health care sector, creating the perverse financial incentives that dictate how U.S. doctors behave, and affecting the annual expenditure of nearly one-fifth of the United State's GDP.

From this article from Washington Monthly

While these doctors always discuss the “value” of each procedure in terms of the amount of time, work, and overhead required of them to perform it, the implication of that “value” is not lost on anyone in the room: they are, essentially, haggling over what their own salaries should be. “No one ever says the word ‘price,’ ” a doctor on the committee told me after the April meeting. “But yeah, everyone knows we’re talking about money.”

That doctor spoke to me on condition of anonymity in part because all the committee members, as well as more than a hundred or so of their advisers and consultants, are required before each meeting to sign what was described to me as a “draconian” nondisclosure agreement. They are not allowed to talk about the specifics of what is discussed, and they are not allowed to remove any of the literature handed out behind those double doors. Neither the minutes nor the surveys they use to arrive at their decisions are ever published, and the meetings, which last about five days each time, are always closed to both the public and the press. After that meeting in April, there was not so much as a single headline, not in any major newspaper, not even on the wonkiest of the TV shows, announcing that it had taken place at all.

In a free market society, there’s a name for this kind of thing—for when a roomful of professionals from the same trade meet behind closed doors to agree on how much their services should be worth. It’s called price-fixing. And in any other industry, it’s illegal—grounds for a federal investigation into antitrust abuse, at the least.

Via this post on Medical Spa MD

Effects Of Changes In The Medicare Physician Fee System

Guest post by John Di Saia MD

Relatively newly practicing physicians may not know that the Medicare physician payment system changed pretty substantially in the early nineties. This was by design.

The perception of those who designed this new system was that certain services were overpaid and others underpaid. It likely had much more to do with ratcheting down the costs of health care. As physician fees constitute only 10-20% of the entire equation, the wisdom of concentrating on physician’s fees to change the system is perhaps questionable. This is what was done nevertheless.

A cornerstone philosophy of the new system was that procedure-based specialties were overpaid. The physician fee system prior to this was based on usual and customary fees. This newer one based payments on a model that paid for a service at a uniform rate regardless of who performed it. While this seems fair on the surface, it had predictable effects.

Why would a surgeon with much higher overhead remove a lump in a patient if the new payment system put the procedure in a revenue negative position? The practice of surgeons removing certain lumps gave way to family practice and dermatology physicians removing many of them. These were the only specialties that under the newer system could turn a profit doing so.

The Medicare fee schedule economically regulates procedures in medicine. It also indirectly fed the growth of cosmetic medicine and surgery as this was the escape hatch many practitioners sought as the Medicare boom feel upon us. Surgeons interested in turning a profit quickly figured on what paid adequately and more importantly on what did not. As my grandfather told me as a young child, everyone needs to make a living. It is perhaps unfortunate that doctors do not discuss these matters with patients when telling them why they cannot offer a service. Is it really ever wrong to tell your patients the truth?

About: John Di Saia MD is a board-certified Plastic Surgeon and formerly (he didn't re-certify) a board certified General Surgeon as well. He also serves on the California Medical Board's Expert Reviewer Program reviewing cases of proposed negligence in the field. He blogs at CosmeticSurgeryTruth.com and is a Contributing Author to Medical Spa MD.

The Medical Fusion Conference

Discover all of the options available to you as a physician.

The Medical Fusion Conference is a unique event that allows clinical physicians the opportunity to learn about unique niches where they can apply their clinical knowledge.  Learn more about the Medical Fusion Conference in the following video:

Medical Fusion isn't just another conference where you're sitting around and listening to an endless parade of speakers that lecture from behind a podium. Instead, you'll have every opportunity to talk to any speaker you're interested in learning more from. Our Accelerator Sessions are a perfect chance to make connections and deep-dive into the areas that are of interest to you.

You can view more videos on our Freelance MD YouTube Channel

More about our Accelerator Sessions

What are physicians saying about attending Medical Fusion?

“[The Medical Fusion Conference] was fun, professionally run, and highly stimulating.”

Dr. Mark Kroll, former Chief Technology Officer of St. Jude Medical

“My son thought being a doctor might get boring. I brought him to the Medical Fusion Conference and he saw whole worlds of medicine that he never dreamed existed. Now he can’t wait to go to medical school.”

Kenneth Kamler, MD, VP of The Explorers Club and author of Surviving the Extremes

“The Medical Fusion event is a unique forum to learn from and network with like-minded medical entrepreneurs. Our organization connected with other attendees from the 2010 event and we are well along the path collaborating on joint initiatives.”

Jeffrey Segal, MD, JD, Founder & CEO of Medical Justice Services

“The Medical Fusion Conference is a great way to meet other physicians considering non-clinical transitions or learn more about how to supplement your income. If you’re stuck in a rut, I’d recommend it.”

Arlen D. Meyers, MD, MBA, President and CMO of Medvoy.com, CEO, Society of Physician Entrepreneurs

"The Medical Fusion Conference is a unique event that brings together entrepreneurial physicians, business people, and investors to explore the intersection between business opportunity and clinical medicine."

Bruce Robertson, PhD, Managing Director, H.I.G. BioVentures

“Medical Fusion is setting a standard for physicians seeking alternative non-clinical careers that go beyond medical directorships or pharma jobs. [The Medical Fusion Conference] will continue to provide excellent insights into career options for physicians who no longer want to be only clinicians.”

Dr. Philippa Kennealy, Founder/CEO, The Entrepreneurial MD

“If you are interested in meeting like minded physicians, who are empowering themselves, and doing some AMAZING things in their practice and outside of medicine, you’ve got to attend [the Medical Fusion Conference].  The first conference was not only great for networking, it also inspired me to meet other doctors who “get it.”

Dr. Mike Woo-Ming, internet entrepreneur and founder of IncomeMD.com

Investment Strategies To Beat Inflation

In a previous post I discussed some ways you can beat inflation through changes in your workload and expenses.

At some point, however, you’ll have to make some changes in your investment portfolio.

Real Returns

Instead of working harder or longer, you can generate inflation-beating returns (known as real returns) from your investments. The goal is to preserve an investment portfolio’s purchasing power so that future liabilities, which increase at the rate of inflation, can be adequately met by an equal or greater increase in assets.

Due to the compounding effects of inflation, there is a greater erosion of purchasing power over time. Assuming a 3% inflation rate, your purchasing power declines by over half in 25 years, which is well within an individual’s investment timeframe. With just a slight increase to 4%, it declines by nearly two-thirds. In other words, it would take twice as many dollars in 25 years to purchase the same goods and services as it would today assuming average inflation, and almost three times as many dollars assuming inflation rate is 4%.

Stocks

Stocks historically have provided long-term returns in excess of inflation of about 6%, albeit with high variability. To beat inflation with stocks, make sure you invest in them for a minimum of 10 years since in the short term, stocks have had negative real returns with unanticipated high inflation the majority of the time. For most of the 1970s, and again most recently from 2000 to 2002 and 2008, the real rate of return on U.S. stocks as measured by the Dow Jones Industrial Average was negative, indicating a loss of purchasing power.

On the other hand, in the long-run real-estate stocks beat inflation, as shown by the fact that the Consumer Price Index (CPI) more than doubled from 1980 to 2006, while real estate stocks increased over five fold.

Bonds

Bonds fare worse than stocks with inflation, but still have achieved a long-term real return of about 2%. The interest payments from a bond include the risk assumed for anticipated inflation. With unanticipated high inflation, prices of bonds decline even more than stocks. In fact, for a period of four decades from 1940s to 1970s, the real return on U.S. Treasury bonds was negative. To mitigate the effects of inflation, make sure you buy short-term bonds with maturities less than five years.

Two types of government-issued bonds guarantee inflation protection, I bonds and Treasury Inflation Protected Securities (TIPS). The I bond is a savings bond which pays a fixed interest rate and on top of that adds an inflation rate based upon the CPI, so that it nearly guarantees a return that beats inflation. TIPS are government bonds whose face value periodically increases at the inflation rate. Interest payments also increase based upon the inflation adjusted face value to guarantee a positive real return.

Gold

Gold historically has been seen as a safe haven in times of inflation. As a commodity it is expected to have a return of zero after inflation. One study determined that from 1895 to 1999, the price of gold matched inflation but did not beat it. Over the past two decades, though, gold has lost its glitter. In 1980, gold was selling for more than $800 per ounce, the same price it was trading at almost 25 years later. Even after gold’s recent run-up in price, to match inflation over that time frame, gold today should be selling for more than $2,000 an ounce! By comparison, an investment in U.S. stocks from 1980 to today would have grown over 10 fold.

While there is no perfect inflation hedge, the key is mixing a variety of investments together in order to produce long-term positive real returns, since each responds to inflation differently. Physician pay has not kept up with inflation, resulting in a decline in our purchasing power. Strategies to offset personal inflation include boosting gross income by increasing workload, reducing expenses, or investing in inflation-beating investments. Each strategy has its own unique advantages and disadvantages.

Hey Doctor, What's Your Personal Rate Of Inflation?

I’ve noticed a disturbing trend over the past few years: my gross income has declined but my workload has increased.

I make less per patient and per hour now than I did over five years ago. Whether the reason is malpractice premiums, flat insurance payments, inability to increase fees and collect them, or corporate practice of medicine, one thing is certain: I’m not alone. According to the Medical Group Management Association, in 2006, physicians in my specialty reported a compensation increase of just 2.7%, compared with the inflation rate of 3.2%. We all know why we are feeling the squeeze but the question is, what can we do about it?

Inflation is a general rise in the price of goods and services in the economy. It results in a loss of purchasing power if income fails to keep up with inflation since each dollar of income will buy less of a good or service than it did previously. Inflation is usually measured by the Consumer Price Index (CPI), which reflects the weighted average price of a basket of goods and services consumed by the average household. From 1926-2010 inflation has increased at an average rate of about 3% annually. However, there have been periods such as the 1970s and early 1980s when inflation increased by over 10% annually.

Personal rate of inflation

It should be noted that these numbers deal with averages; a more appropriate measure of inflation for an individual is the personal rate of inflation. Inflation affects individuals differently depending on individual income, geographic location, consumption of specific goods and services, and allocation to various investments. For example, a married physician living in New York City with two college aged children may be more sensitive to inflation due to higher housing costs, heating costs, and education costs than a single physician living in the rural Midwest with no children. The only way to determine your personal rate of inflation is to accurately measure your yearly personal expenditures and compare that with your yearly income.

6 STRATEGIES FOR FIGHTING INFLATION

Work more, faster

Simply put, if your personal rate of inflation exceeds your rise in income, you can always work faster, see more patients, do more procedures, or work more shifts. For incentive-based physicians, seeing more patients per hour not only increases gross income but it also increases pay-per-hour. However, at some point you reach a limit to the number of patients you see per hour, and you increase the risk of making mistakes leading to possible malpractice lawsuits. Similarly, there comes a point where the number of days or shifts you work compromises your lifestyle.

Budget living

A second way to address the inflation gap is to reduce your personal expenses by adhering to a budget. After all, do you really need heated car seats when you live in Florida? Do you need to finish the basement on your 5000 square foot house when you have no children and face $100,000 in student loans? Of course some expenses are fixed, such as mortgage payments, insurance premiums, and child care expenses for which expense reduction is nearly impossible.

Real returns

The third option is to generate inflation-beating returns (known as real returns) from your investments. The goal is to preserve an investment portfolio’s purchasing power so that future liabilities, which increase at the rate of inflation, can be adequately met by an equal or greater increase in assets. Due to the compounding effects of inflation, there is a greater erosion of purchasing power as the time horizon lengthens. Assuming a 3% inflation rate, your purchasing power declines by over half in 25 years, which is well within an individual’s investment timeframe. With just a slight increase to 4%, it declines by nearly two-thirds. In other words, it would take twice as many dollars in 25 years to purchase the same goods and services as it would today assuming average inflation, and almost three times as many dollars assuming inflation rate is 4%.

Next time I’ll talk about some investment strategies to beat inflation. 

Physician Income: Adding A Nutriceutical Pharmacy

By Dr. Dean Raffelock D.C., Dipl. Ac., CCN, DIBAK

Many fine physicians I know have been struggling with working longer hours for significantly decreasing revenues.

The dilemma they face is that they want to be able to spend enough time with their patients to provide quality health care but feel pressured and handcuffed by insurance company dictates. This problem has gotten so troubling for some that they question whether all the hard work and investment in medical school has been worth their present frustrations. These frustrations increase stress levels, potentially harming the physician’s own health. Some even question staying in practice.

There are a number of possible solutions to this dilemma. Some with busy practices with motivated patients establish concierge practices. Yearly fees for joining offer patients more quality time with their doctor. Insurance companies are still billed for services rendered but the entry fee often covers basic overhead and sometimes more. This allows patients to receive better health care and guarantees the physician a baseline income that can allow them to practice in a more thorough, less hurried manner while retaining more profit.

Here’s another solution that is becoming increasingly more popular. I have coached many doctors to establish their own ‘in office’ nutriceutical pharmacy. Many physicians have significantly increased their incomes by taking evidence-based seminars on nutritional interventions for common diseases and providing their patients with ‘doctor only’ professional grade nutritional products. This is a win/win for doctors and their patients. Most patients would much prefer to take nutritional products over pharmaceuticals whenever possible and prudent.

Here’s how establishing a nutritional pharmacy can work. Let’s use the example of prescribing Niaspan (niacin) to help lower LDL and raise HDL cholesterol and even more importantly lower Lp(a). If one prescribes Niaspan, the pharmaceutical company and the dispensing pharmacy make all the profit. On the other hand, if you dispense professional grade niacin out of your office, you make $15 on a $30 dollar bottle than provides 120 tablets of 500 milligrams each. In many cases the co-pay for Niaspan is more than 30 dollars.

If the patient’s liver enzymes elevate on the niacin, a standardized extract of milk thistle herb containing 80% silymarin very effectively restores liver enzymes to normal range in most cases. The win/win is that your patient gets to keep taking a highly effective cardiovascular intervention and receive all the hepato-protective effects of the herbal extract and you have just added a continuing monthly profit of $35 for the one patient.

If you choose to provide this same cardiovascular risk patient with high quality fish oil (Lovaza is massively overpriced and every bottle I’ve tested is rancid), ubiquinol (a superior form of CoQ10), and D-ribose to enhance heart muscle endurance; you now have an ongoing monthly profit of over $100 with this one patient. Plus the patient will thank you for how much better they feel.

About: Dr. Dean Raffelock is a nationally known expert in integrative health care and consults for physicians nation-wide at Raffelock and Associates. You may contact him at 303.541.9019. 

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Mid Career Physicians Blew a Great Opportunity

Everywhere I go I see unhappy doctors.

All everyone does is complain about rising malpractice premiums, more paperwork, declining pay, and 60 hour workweeks.  This includes physicians just graduating from residency and physicians who’ve been practicing medicine for several decades.

All of those complaints are legitimate, but one question I always have in my mind about the physicians who are in their 50s is “Why are you still practicing medicine full time?”

I keep hearing about the “golden age” in medicine. I don’t know what that means, but I assume it has something to do with making more money than we do now.

Suppose you’re a 55 year old physician and you’ve been practicing medicine for 25 years full time.  If you absolutely love it, that’s great. It’s your passion so go for it. But for the rest of you (which is the majority I think) who are in your 50s, who experienced the “golden age” in medicine and are still practicing full time and complaining, I've got to be blunt: you have failed miserably in your investment career.

What do I mean by this? Let’s say you graduated from residency in June 1985 and started making some money. Suppose you socked away on average $25,000 per year in the US stock market each year for the past 25 years starting in January 1986.  The US stock market as represented by the S&P 500 index had an average annual return of 9.9% in that period.  So over 25 years your investment portfolio should be at least $2.5 million.

And that’s with putting away only $25,000 a year on average. Bump that up to $50,000 every year—which is an entirely reasonable and attainable amount for a physician to invest every year---and you should have at least $5 million in the bank.

Even if you invested only in bonds you’d have about $1.7 million saving $25,000 a year and nearly $3.5 million saving $50,000 a year. This is based upon the US aggregate bond market index.

How many of you actually have that? Sure a few you might, but I’d bet that the vast majority of you don’t. And I also bet that the reason you’re working full time right now is because you realize you didn’t save enough and invest well. Common reasons why you have a meager portfolio value are:

1. You spent every penny you made
2. You didn’t save enough because you overspent
3. You took way too much risk and got burned
4. You hired a commission based financial advisor who put you in inappropriate investments
5. You invested in speculative investments like restaurants, limited partnerships, or hedge funds, and they tanked
6. You got divorced.

Now you feel trapped in your current situation.

So if you are a physician in your 50s or older and are complaining about your situation, you completely blew a phenomenal time to invest and really don’t have anything to complain about except your missed opportunity. You should have enough to walk away if you want. If you don’t and unless you jump up and down in joy every time you go to the hospital or when you’re on call, it’s time to crack the whip and get moving because the next 25 years are going to be a challenging environment to practice medicine to say the least. And if the chatter I’m hearing is accurate, I don’t think you want to practice medicine full time until you’re 80.