Monday, July 5, 2010

Lying Scumbags and Health Insurance

Some of you will recall that we had health reform earlier this year. Some of it eliminated egregious practices by health insurance companies, which is very good. Who could believe that in the United States of America a company could rescind a health insurance policy once the patient became ill? Maybe that tells us more about our country than we would like to know.

But insurance companies don’t just interface with patients; they also interface with us, the doctors. Health insurance companies are equal opportunity companies – they treat us just the way they like to treat patients, and this side of the pathology of American medicine went completely untouched by Health Reform. Alas. Just this week a fine example of insurance pathology visited itself upon me. It has been uncomfortable.

The issue in question is this: immunizing children with vaccines has always been important, but in recent years many new vaccines have been introduced. These new vaccines are not only numerous, they are costly. When I first started in practice a vaccine cost about $5 apiece; now some are in the $100-$200 price range, some of them requiring three shots for the series.

Happily, the new vaccines are very effective. In fact, they are so effective that pediatricians and hospitals now care for many fewer illnesses. Financially speaking, I’m not certain of the ultimate effect for health insurance companies and pediatricians. Health insurance companies pay for vaccines, but they also have to pay for fewer sick office visits and hospitalizations. They don’t win on the new vaccines that prevent genital warts and subsequent cervical cancer years later, but I bet they are winners for vaccines that prevent pneumonia, septicemia, and meningitis. I used to have several cases of meningitis per year, now not at all. My intuition tells me that they make money on the deal, but I can’t be sure.

I’m also not sure of the financial balance for us as practitioners. We can make money on giving the vaccines (if the insurance companies allow us to – that’s one of the points of this post), but we certainly care for fewer sick children – thank God, of course. It really depends on how well we are paid for our vaccination services. (Children’s hospitals, on the other hand, simply lose the income of caring for sick kids. But I never feel sorry for those inefficient, union-bedeviled, nurse-bedeviled financial sinkholes called hospitals.)

Thus, our work as pediatricians has changed. Vaccines have become less of a sideline for us, and more of the main show. In business terms, they have become a full-fledged service line for pediatricians. It’s good – getting paid for keeping kids healthy rather than tending to them when they are sick. But this substitution has changed the business model of pediatrics. If we don’t make money on this important business line, we will be out of business. Most pediatricians are not great business people, and most pediatricians don’t yet realize this. The more savvy pediatricians do realize this, and our section of the American Academy of Pediatrics put together “The Business Case for Vaccines.” This paper calculated that paying us 117-128% of the vaccine cost would cover overhead. That calculation is certainly too low (leave it to pediatricians to shortchange ourselves), because they neglected important elements of vaccine loss, which happens in every office – from omissions in billing, lost vials, parents deciding at the last minute they don’t want the vaccine after all even after it has been prepared, a kid grabbing the dose and throwing it away, just kicking a dose under a table, whatever. But even if the number is too low, there it is, a number to be respected.

In contrast to pediatricians, however, Insurance companies, understand their business pretty well, at least in the short run. They are, after all, pretty much exclusively business enterprises, rather than professional care givers plus businessmen as pediatricians are. Insurance companies see the increased price of vaccines and try to figure out how to lower their costs. It’s not their business to figure out how to keep pediatricians in business – it is up to pediatricians to take care of themselves and their incomes. The insurance companies also don’t figure it’s their business to fix the American health care system, which is very deficient In primary care mainly because primary care docs don’t get paid nearly as well as specialists. For insurance companies, if they can economize on the cost of vaccines and still reap their benefit of fewer sick bills, it’s a wonderful life.

Bad as they are, health insurance companies have their own pressures. They are being squeezed by consolidated hospital systems that are price-givers rather than price-takers, and by large integrated multi-specialty groups, such as Sutter Foundation and Palo Alto Medical Foundation here in Northern California. The insurance companies figure that they need those contracts, and as a result they pay those providers very, very well. In addition, I think corporations like to do business with other corporations, rather than a different kind of entity completely, which doctors in private practice are.

So, the health insurance companies give here and take there. Private practice primary care docs, however, are prevented from negotiating together by antitrust laws, despite the fact that the health insurance companies on the other side of the table are very consolidated. The results of these negotiations are then predictable.

Right now, this business drama is playing itself out with a new vaccine, called Prevnar-13. The old version, Prevnar-7, protects against 7 types of pneumococcus, a virulent pathogen that causes pneumonia, sepsis, meningitis, and ear infections. The new Prevnar-13 adds six more serotypes of the bacteria to the protected list. Pediatricians buy the new version for 30% more. Most insurance companies are raising their payments appropriately. Anthem Blue Cross – that’s right, the same company that proposed 39% premium increases to patients right at the end of the health care debate, thus helping immeasurably to pass the legislation – wants to pay us 5.6% less for this more expensive vaccine.

The decrease in payment is partly because we have had a pretty good contract for the last three years after some very tough negotiating. But it’s also because Blue Cross has been bought out by Anthem, and Anthem plays even harder ball than Blue Cross used to, and they were very bad boys and girls indeed.

Clearly, since our new business model depends on vaccine delivery as a major service line, we can’t accede to this new fee schedule. They will hit us first for Prevnar-13, and then come after the rest of the vaccines. So we have to be strong in negotiating, and possibly even terminate our contract. This would be a major step to be taken only with lots of forethought, but if they are persistent, it may be necessary. It’s uncomfortable, but it’s business. In fact, for me personally, it’s very uncomfortable, not my favorite part of the business. But on the other hand, I’m not one to back down. Quite the opposite. You don’t screw around with Budd Shenkin.

All companies are not the same. There is no one way to do business. A company can be businesslike and aim for profit, but also be civil, honest, and look for common elements. In the negotiation three years ago, I emphasized how common our interests are. They sign the patients up and we have to make sure they are well served and happy. Together, the insurance company and Bayside have the common competitor of Kaiser – we both have to give patients a reason to come to us. They listened then, maybe bought it, maybe didn’t. I heard that what really clinched it was they were convinced that if we didn’t get a decent deal we were going to terminate.

On the other hand, a company can be dirty and demeaning. Guess where this story is going now.

First of all, at the beginning of the year Anthem Blue Cross stopped paying us for an emergency care code (a billing code is how we get paid), 99058. They just said they weren’t recognizing that code anymore. Can you believe they can do that unilaterally? I actually don’t think they can, and maybe we can take them to court over that – just the kind of diversion from our main business of running our practice that we need. Doesn’t it sound like the way they have treated patients, with rescissions, etc.? Then I just found out this week that, at the same time they stopped recognizing the 99058 emergency code to all their contractors, they raised the amount they are paying for vaccine administration (we get paid separately for the vaccine itself and for administering it). Amazingly, while they took away our emergency fee, they didn’t revise our payment for this fee upward. Dirty pool.

So now we’re fighting over payment for the new vaccine. Here is how it is going. You know how doctors complain about the part of managed care where they have to justify their plan of treatment for patients to an under-educated insurance company employee? It’s an insulting process to the doctor, not only because of the educational discrepancy – why should a doctor have to get permission from a clerk? - but even more because of the social power discrepancy. The usual roles have been reversed in a sociological anomaly. It’s like my objection when I go to a doctor’s office and some 25 year old high school grad comes to the waiting room and shouts out, “Budd?” It’s Dr. Shenkin, you twit.

So, this is what I have been going through. There is the local Anthem Blue Cross employee, a not very nice young woman who declares their policy to me in imperious tones. When I object in writing and declare myself insulted, she becomes more fearful and conciliatory and we consult superiors, I make phone calls that go unanswered, and finally reach someone, who sets up a call with the VP of Reimbusement Strategies, a man whom I will call John Doe, because my attorney wife informs me that identifying exactly in writing the person I will refer to as the Lying Scumbag might lead to legal troubles, despite the unquestionable accuracy of the charge.

So in my quest for fair payment for Prenar-13, I have to endure a one-hour conference call with the young imperious rep, the nicer superior who is unaware of these issues but wants peace, and the Lying Scumbag. The Lying Scumbag then proceeds to lie like a scumbag. He tells me that the American Academy of Pediatrics has approved of their payments – a claim made earlier by the young imperious rep. “Oh, yeah?” I say. I was elected to the Board of the AAP Section on Administration and Practice Management (SOAPM), and selected for the Committee on Child Health Financing (COCHF). Who exactly gave that OK?

The Lying Scumbag gives one source as the California Pediatric Council. Another is the national AAP representative for private payers. I know he is being mendacious. I have made sure to inquire, and they have assured me that’s not so. The Lying Scumbag tells me that of the 14 states he covers, I am the only pediatrician who has complained and been dissatisfied. That’s a pretty amazing claim, and clearly counterfactual. He sidesteps my assertion that every other insurance company (except one, CIGNA, so far at least) pays a lot more. I tell him I know he feels this is a triumph for his company, to pay less than others.

The Lying Scumbag quotes our own Business Case on Vaccines to the effect that if you add together the payment for vaccine and administration and get up to 117-128%, that’s enough. The wording of the Business Case could be clearer, but that’s not the case at all. He tells me, “Let me explain to you how this works,” about our own Business Case. The Lying Scumbag then deigns to instruct me on the economics of our practice and how it works. He wonders if he can explain to me the RBRVS system, which governs our payments. He is a young man, full of himself but not very smart, it seems. He tries to snow me. I tell him, stop being patronizing. I’m more of an expert on this than he is. I tell them all that their policy is self-defeating. If they starve us and let the corporate practices thrive, that’s all they will have left to deal with, and how will that be for them? Long silence. They have a mission, which I view as search and destroy. I’m not at the right level of Anthem Blue Cross employee. I’m stuck with someone whose role is to be a Lying Scumbag.

The Lying Scumbag repeatedly refers to a “neutral party” that they consulted that recommended their proposed payment rate. He also tells of the approval he got from the AAP national when he proposed to inform pediatricians how to buy vaccines more cheaply (he’s telling me?) so that Anthem Blue Cross could then pay us less. The Lying Scumbag and his confederates on the phone all inform me that Anthem Blue Cross considers vaccines “just a commodity.” “We’ll pay you for your work, but not for a commodity,” they tell me pointedly. That’s the tone, from these jerks.

So, as I say, market power reigns, corporations take over, pipsqueaks and Lying Scumbags come to the fore, and this is what we have to deal with. There is a market imbalance, and Health Care Reform did not address it. The power imbalance is too much to deal with, since there are a few powerful health insurance companies, and private practitioners are forbidden to combine in negotiations. In addition, while some elements of the AAP are supportive, the Board and the President of the AAP maintain a distance from the fray – God forbid they should get involved with the financial viability of their constituents.

With this kind of market economics prevalent, it’s hard to see how the health care system can improve on the foundation of primary care. And me – I’m trying to stop steaming. I think I’ll try to hire someone to do this negotiating. It’s just too wearisome. I can’t ruin my life dealing with Lying Scumbags and Jerks. And that’s all too much the story with this most heinous of industries, the health insurance industry.

Budd Shenkin


  1. Anyone can go over a state line to buy health insurance if they want to. Anyone can purchase health insurance from any insurance company no matter where they live, or where the company is...

  2. From your posts before, I got a good understanding of how health care reform only deals with part of the workings of the insurance system for health care. Law makes some important changes but falls short of all that is needed.

    This makes it clearer. The impact of the asymmetry between private practice groups and insurance companies is reflected in this example. I certainly hope you get some relief in this regard. A further consolidated health care system is not likely a better outcome for consumers or docs. I am curious whether this story bears any light on the proposed decentralization of the NHS in the UK.

    And but the way, next time Budd, can you tell how you really feel? None of this beating around the bush stuff.


  3. Very nice post. From your post I got learn so many new points about health insurance and how health insurance reforms work. As of now we can buy any type of insurance policy sitting anywhere, anytime with the help on internet. Also with this advancement even one can make out a cheaper deal by comparing quotes of several providers at a time.

  4. This will be an important step is to take a lot of prudence only, but if it is sustained, it may be necessary. It's uncomfortable, but it's business. In fact, for me personally, it is very uncomfortable, not my favorite part of the business.