The Dirty Little Secret

By Jon Hillenbrand In Photography, Stories

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S. J. Hillenbrand, B.A., M.S.


Doctors Cause the High Price of Healthcare


            It is widely accepted that the misdeeds of physicians are the reasons why so many people cannot receive health care. The doctors order too many tests, make the patient come in too often, do not take enough time with each patient, do unnecessary procedures, do not ask and if they ask do not listen. These doctors of the people do not read the previous records and are unprepared, then may not see the patient at all (I was seen only by a nurse practitioner). The prescriptions do not work but they refuse to change them. The doctors do not have the time to interact with other physicians or are not open to second opinions. Therefore the patient is not healed and either stays in the healthcare system longer, or leaves it only to become chronically ill.

             In my experience these accusations have not been true. In nearly every instance quite the opposite occurs. In actuality, doctors have had to implement practices which allow their businesses to survive the 45% accounts receivable caused by the abusive Health Insurance industry practice of Delay of Payment. But someone has decided that the high cost of healthcare is due to the doctor alone and that the system is “broken”. The present system serves us well considering that it has a parasitic growth on it that must be surgically excised.


“Insurance Companies Do Not Make Profits on the Premiums”


            This was told to the audience at a seminar run by the owner of Capital Recovery, an agency that teaches physician staff how to get paid.

            When I took the job as receptionist and claim filer at a physician’s office, I decided I needed to take a class to learn about my new occupation. I chose a seminar called, “How to Get Paid,” taught by Jim (not his real name) the founder and owner of Recover Capital, Inc. He began on the first day with the statement, “I turned in my two-weeks’ notice the day my employer, a major insurance company herded us all into a large auditorium to teach us all how to DELAY PAYMENT on claims. As Jim described how it worked, I began to see the healthcare insurance system using fraudulent methods.

            Jim went on to ask if anyone in the audience had ever worked in insurance as a claims processor. About four attendees raised their hands, and he asked them, “Did you ever throw a claim in the trash?” They each smiled sheepishly, and said that they had. Turning to the rest of us, he asked, “WHY would anyone ever throw a claim in the trash?” He told us why and described that insurance companies make money not on premiums, but by “DELAY OF PAYMENT.” A processor, trained to do so, will delay the payment of, e.g., $100, for four to six weeks. When the doctor’s office calls, the processor tells the claim filer to resubmit the claim for one of several reasons in order to gain an additional four to six weeks.

            The delay of one $100 payment, multiplied by the number of claims presented that week, say 500,000, equals $50,000,000. Investing this at a high interest rate, say 20%, earns a ten million dollar profit on a single four to eight week “investment”. Should the insurance company be able to delay the payment even longer, each layer of earned interest accumulates to eventually yield a staggering profit! In the meantime, the company has not paid out a single dime.

            Consider if this large sum represents the profit from only one of the 1500 insurance companies in the United States, the profit multiplied by 1500 gives an amount that beggars belief! A few claims are paid to the doctors regularly to keep them quiet, and the result is that a typical physician’s office runs an Accounts Receivable of up to 45%! Insurance companies are using the monies not paid to the physician to become exceedingly wealthy.

            Thus far, I have discussed only the first sixteen weeks of the 52-week work year. Insurance companies can and do repeat delaying payment up to three more times, producing yields in the billions of dollars! Remember: this begins with a delay of one $100 payment. By now, Jim had my complete attention and asked us to list any other methods we had experienced that resulted in delay of payment.

            This seminar was held in 1994 and you might surmise that this practice is a thing of the past. Fifteen years later, I learned from a friend who took a job as a claims processor with a large Healthcare Insurance Company that her first two weeks in training were devoted to delaying payment. With electronic submissions of bills, some methods are more complex and more effective, resulting in even longer delays. I was eager to learn more about Delay of Payment and asked her what she was specifically taught. She replied:

  • I’d throw the entire day’s claims into the shredder because I was irritable from not sleeping well. – (The claims had to be refiled.)
  • I was premenstrual for three days, and filed the claims in the “Recycle Bin”. – (All had to be refiled.)
  • I did not process the claim, telling the doctor’s office that it was never received, or one part was illegible. – (It is returned to the office to be refiled.)
  • I decided we needed a “Letter of Medical Necessity” because the patient was having visits too often. – (The claim must be refiled.)
  •  The patient was seen for a length of service not pre-approved or indicated by the coding. – (This claim remains unprocessed until the proper documentation arrives; it is then sent to a supervisor for Review or Appeal.)
  • I told the doctor’s claim filer the coding was incorrect, or not allowed for this patient, and gave no reason. – (The claim is not processed until proper documentation arrives and has been sent to a supervisor for Review or Appeal.)
  • I can say the code modifier number, e.g., a prolonged service code, is not allowed for this patient: no reason given. – (The claim is resubmitted with documentation of need.)
  • I decided that the required prior authorization was not done, and was required, even if the patient or the doctor’s office had telephoned or faxed to get prior authorization. – (The claim is completely denied, hence must be resubmitted with supporting documentation attached explaining why the appeal is requested.)

I was amazed. These methods and others like them were exactly the same ones we listed in Jim’s seminar! Additional techniques make this practice even more sinister:

  • The doctor’s office is told, “We never received the claim.” The claim was received but put aside or destroyed. – (The doctor’s office must refile.)
  • An incorrect diagnosis number was used, or was incomplete, i.e., a 5th digit coding was missing, even though no fifth digit code exists for that diagnosis. – (Even if it is later determined that the number was correct, the delay of payment is successful.)
  • Electronic filing debacle: procedure codes are not sequentially listed with their proper diagnostic coding; hence the claim cannot be “unbundled”. – (It is returned unprocessed so that the correct order of codes can be applied. Electronic filing now prevents the “We never received the claim” excuse. So this technique was devised by the insurance companies.)
  • With all the delays and refiling required, the 90-day filing period limit is now exceeded, so the claim is denied in full, and cannot be resubmitted! – (There is no appeal and the entire collection is lost.)
  • “The consulting physician is not in our network; we run a separate deductible on all out-of-network doctors.” – (No money is paid on the claim.)
  • The claim is psychiatric: we do not have parity for this specialty. – (The claim is partially paid and the company keeps the remaining monies.)
  • The prescribed medication requires prior authorization before the insurance will pay. – (The appeal will either be granted or denied and may require the doctor to write a letter of medical necessity, even if the medical record shows that the patient had unsuccessful trials on other “preferred” medications; the patient may be forced repeat one to three medication trials before approval is given. This delays the proper care of the patient, and wastes time paying for needless monitoring visits. Hence, no monies are paid for months, and then the request for the original medication must be resubmitted.)
  • The bill was not “itemized” properly. – (The claim is returned and must be resubmitted. This is a catch-all for the wrong box being checked, the written fee is unreadable, and the like. – (The claim is returned unpaid.)
  • The company will not pay for any physician who does not have a National Provider Identifier Number [NPI], saying the company is “CMS compliant”. – (The company keeps all the monies; this surely must be restraint of trade, as doctors who do not bill electronically are not required by CMS to have such a number. Any licensed physician may write a prescription that by law is allowed to be filled; it will not be paid for by the CMS-compliant healthcare company. The patient must pay the entire fee, eroding the doctor-patient relationship, or even resulting in the departure of this patient.)


Insurance Practices that Cause Additional Healthcare Costs to the Patient and Physician


  • In Illinois, “An Insurance Company must pay or deny in 30 days; it is the law.” But making a complaint to the Illinois Insurance Commissioner is ineffective. Each time I have had to file a complaint I have received a letter back from IIC saying my complaint was an “inappropriate” use of the State Insurance Commissioner’s office. Is not the Commissioner to enforce the law?
  • Insurance companies run monopolies across the country. In several adjoining states, only one company provides healthcare coverage unchallenged by competition. Is the healthcare industry exempted from laws blocking monopolies? These companies then have no incentives to offer competitive premiums.
  • Loss of customized policies. Patients are forced to pay for maternity coverage even if they are past the age for childbearing, or choose to, or cannot bear children. Package policies include elements they would like to exclude from the contract, such as outpatient coverage or medication coverage. – (Insurance never pays on these required but unused covered services which cost the patient more.)
  • Insurance companies put “pre-existing riders” on the contract so they do not have to pay for an illness you did have, even if you no longer have it. – (Should you again have the illness, there is no payment and no appeal.)
  • Patients may be completely denied coverage by all companies for preexisting conditions, at times even if the patient has had only two visits to a psychiatrist. They can be rendered uninsurable at an early age for the remainder of their lives.
  • Based on insurance-compiled statistics, if you are of a certain age, gender, or family history your contract premium may become catastrophically high.
  • Illness: Companies can and do increase premium coverage if you contract an illness. Some older patients pay $10,000 or more each year.
  • “Usual and Customary Rates”: when benefits are explained, the patient is told that his doctor charges more than other doctors in his region. Listings of these rates are unobtainable and unverifiable, and may differ from other companies servicing the same regions. – (Jim added that these lists are often two to four years out of date. Telling the patient his doctor charges more than anyone else in his region erodes confidence and hurts the doctor-patient relationship, and may drive an angry policy holder out of the doctor’s practice.)
  • Physicians run an unreimbursed overhead by doing their own claim filing due to required costs. – (This may run $80,000 or more each year. With the many ways insurance payments are delayed, the doctor may lose 40% or more of his collectible money. The average physician has an astounding 45% accounts receivable. Who can run any business with this much uncollected money? So, the doctor raises his rates, works longer hours, and sees more patients for shorter times. After hours he writes letters of medical necessity to justify his prescription or length of service. I once calculated the actual income my doctor earned, including this extra work. It came to $10/hour. My doctor asked me to stop doing this.)
  • In some group practices, individual practitioners are pressured to spend less time with each patient; and should they not see more patients per week, the doctor can be dropped from the group. – (Loss of a member escalates the overhead costs for the whole group. Because of delays in payment the group collections are little or no better than individual physician collections.)

The methods listed above have the net effect of causing healthcare costs to soar, because the patient does not get well and stays in the system longer, and by raising the doctor’s overhead by repeated refiling. These delays are imposed on physicians and on patients, by an insurance company physician or nurse in another state, who make medical decisions on patients they have never seen. This raises medical risks, and malpractice costs escalate to cover the risks. Healthcare costs increase as a direct result of these questionable insurance practices. In the meantime, there is no delay of payment for doctors’ monthly bills. Rent, malpractice insurance, payroll, quarterly taxes, and personal expenses of mortgage, and payments on the enormous education debt nearly every physician now carries.

            These horrors are caused, not by the doctor struggling to make ends meet – the accepted story run by the media – but by the greed of the insurance companies using these methods. I have indicated precisely how the insurance companies alone are responsible for high healthcare costs and inaccessibility to many.

The Solution: 


Stop blaming physicians for the high cost of healthcare delivery and look to the real cause. We must pass a law implementing Report Cards for every Health Insurance Company, issued by on-site federal or state inspectors. I suggest under-cover “claims processors” report on training abuses that teach the premeditated delay of payment on physicians’ claims. I suggest these practices be made illegal, and companies engaging in such abuses be prosecuted and fined.

            Laws requiring prompt payment are already in place in many states. In Illinois the insurance company must pay or deny a claim within thirty days. This is rarely observed or enforced.

            Now the physician’s accounts receivable will drop to a healthier 10 to 15 %, and his desperate measures to pay his bills should be alleviated. He then can lower his overhead necessitated by extensive refiling of rejected claims. There would less after-hours documentation of medical necessity and preauthorization to produce, allowing time to read medical journals, attend continuing education conferences, and even to relax. He can lower his fees to be more competitive. He will become a more-rested physician for his patients. The most effective intervention for lowering healthcare costs is a healed patient who then exits the system.


What is a Fair Charge for a Visit to the Doctor?


I was asked this question. Consider these costs:

  • Fixing a broken garage door will cost $90/hour excluding trip costs (payment due at the time of service.)
  • Taking a pet to the veterinarian for a well-pet check is $80/ten minutes, or about $480/hour. Should x-rays, scans, blood tests, or surgery be required, the fees become enormous (payment is due at the time of service.)
  • Shopping for a week’s groceries for a family of four may cost $300/week (payment due at the time of service.)
  • Having an automobile engine overhauled can cost thousands of dollars (payment due at the time of service.)
  • Going on a once-yearly vacation can cost $2000 or more (payment due up front.)

All of these services require payment at the time of service. None requires huge malpractice insurance premiums though some require insurance or bonding; none carry the risk compared to holding a patient’s life in one’s hands. Malpractice costs run $15,000 to $500,000 per year. To determine a fee, a physician must cover all of his expenses and take enough money home to feed his family. Every time I pay a repair bill or pay the electrician or plumber, I realize the doctor does not charge enough for his services and the risks taken every day, twenty-four hours a day.


Recommendations to FIX the System


            A cleaned-up healthcare system must include:

  • Elimination of delay of payment longer than 30 days by use of insurance report cards and undercover Federal employees and inspectors, and by doctors and patients making use of HIPPA policy officer complaints to the Department of Human Services; the law is in place.
  • Eliminate letters of medical necessity.
  • Eliminate denial of coverage for pre-existing conditions, i.e., companies accept all comers.
  • Eliminate policy riders which deny what might happen.
  • Break monopolies to promote competition between insurance companies to secure more affordable premiums.
  • Implement customized insurance policies so persons can buy the coverage they desire and need.
  • Make “dumping” disabled patients who purchased disability policies illegal and punishable by law; the company should honor all policies for the life of the patient.
  • Make health insurance policies uncancellable except for fraud or other illegalities.
  • Specify exactly what is covered by the policy, so that the purchaser can know what is covered or not to eliminate the “hidden” true policy obfuscated by pages of fine print.
  • Pass a law requiring accessibility to Insurance Report Cards public for all consumers.
  • Eliminate lower reimbursement for out-of-network doctors or specialists.
  • Eliminate separate deductibles for out-of-network doctors or specialists, which discourage patients from seeing needed specialist care, or forces the family physician to treat an unfamiliar illness.

The HIPPA law allows a patient or physician to challenge any infraction occurring in a doctor’s office or at a pharmacy or any other medical facility. The Privacy Officer must present a report which is sent to the Department of Human Services for investigation. At the completion of the investigation, if the complaint is found valid, the institution’s policy must be altered, and the new policy require retraining of the entire staff, along with proof of the policy change and retraining. If the infraction is not alleviated in this manner, the facility is subject to a fine. I recommend that this HIPPA law be extended to include insurance companies so that any doctor or any patient can eliminate special exceptions to payment even if the insurance company should be out of state.

            By law, insurance companies must increase the compensation to all contracted physicians by 7% to pay for the cost of filing the claim. The average fee charged by outsource billing services is 7%. Insurance has offered this perquisite – i.e., the doctor will file your claim for you for free. The physician absorbs 100% of all of claim filing costs. Theoretically he is willing to do this in exchange for a steady flow of patients the insurance company sends his way, i.e., by being on a Preferred Provider list. The patient believes that free filing is a benefit provided by his insurance company; the company actually has passed on this expense to the doctor, while at the same time the doctor’s reimbursement is being curtailed by insurance fee-setting.

            This last arrangement is one of the big lies intrinsic in “managed care”. It reminds me of the coup performed by McDonald’s restaurants the day they convinced all their customers to clear their own trash, saving the McDonald’s chain millions of dollars. This coup spear-headed a cultural change in America: we now pump our own gas, and we self-checkout at the grocers. The health insurance companies have followed suit, and the doctor clears up their financial trash for free and without protest. It is time to make insurance companies pay for claim filing.


What Have We Gotten Ourselves Into?


            “Third party payor” means there are three people in the doctor-patient relationship. The two-person doctor-patient relationship is hallowed by millennia of tradition. The two-person contract between patient and insurance company is also valid, so long as both parties are aware of every aspect of the contract. When a doctor contracts with an insurance company and the patient, the three-party agreement enters; this is valid so long as each party is aware of all complexities of the contract. Any change introduced by the insurance company, doctor, or patient, in any aspect of the contract, must be renegotiated by the two other parties. Currently insurance companies, including Medicare and Medicaid, unilaterally make changes, do not bother to inform the doctor or the patient, and – importantly – do not require the consents of the doctor and patient to make these changes. This practice must stop immediately. All changes made must be investigated and, if found to have been implemented without consent, the company should be fined and/or prosecuted. I propose that the contract between the doctor and the patient ought not to include a third person at all. In particular one whose only interest is financial.

            How could this work? Under the doctor-patient contract, the doctor is paid his fee in full by the patient at the time of service (or ahead of time for surgery). The patient is given a fully-coded bill which he renders to his contracted insurance provider, after which he receives the agreed-upon reimbursement. When the patient elects to file the bill himself, he quickly will become aware of the shenanigans that the insurance company may use, i.e., delay of payment. The patient may then freely choose between providers based on honest competition free of fears of preexisting conditions and other qualms. There should be no questions such as, “Have you ever been turned down for insurance coverage?” Patients who find the claim-filing process too complicated or intimidating may choose to outsource their own claim filing. Billing services are open and eager to offer these services to patients. Using either method, health costs come crashing down. No more claims-filing overhead for physicians, and no more unnecessary reimbursement delays to doctors or to patients.


The Stakeholder’s Promise:


            Recently, executives from the American Medical Association, purporting to represent the physicians of America, met with President Barak Obama in the Oval Office. They promised the President of the United States that the American physicians would make an effort to make their offices more efficient and cost-effective. Though I do not agree that the high cost of healthcare reform is the doctor’s fault, I do agree that with insurance reform, doctors can and may:

  • Outsource all billing.
  • Send the entire group of former outpatient and hospital claims filers to get employment at claim-filing companies. This way no one loses a job.
  • Send all office managers to work at outsourcing companies, or encourage them to start their own companies. These talented and credentialed experts can lower the 40% collection loss by correcting bundling-unbundling errors and by effectively dealing with insurance manipulations.

These options are desirable and effective. No one loses a job; the doctor gets paid at the time of service, and his accounts receivable drops to a healthy range as does the overhead, by $80,000 or more per year. Physicians can now lower their rates to compete with other physicians. Overall costs of healthcare will drop because of the now increased efficiency of claims filings. Any increased cost to the insurance companies falls on unsympathetic ears in light of their billions in profit. I invite you to investigate the salary and bonuses of one CEO of one insurance company each year. Compare this to the salary of one CEO of a hospital consortium. I do not have this data, but I suggest the difference is in the millions of dollars. I believe that the net result of these changes in business practices will result in happier and healthier physicians and healthier patients, with fewer encumbrances from insurance companies.


I Conclude:


            I assert that medical care is not a right, it is a choice. Thomas Jefferson stated that we have three inalienable rights: to life, to liberty, and to the pursuit of happiness (i.e., the fruits of our labors). One right by its nature must not encroach on another’s right: if it does, it is no longer a right, but is license.

            At present the United States has a hybrid system of medical care using both capitalism and socialism. Under capitalism, physicians express our rights to liberty and to pursuit of happiness. They acquiesce to the socialist nature of Medicare and Medicaid out of benevolence, typical of American generosity. In doing this they choose to extend a hand to the poor and to the fixed income elderly. And this should extend to those groups.

            Socialism destroys the spirit to move forward, it curtails the elements of capitalism which move each of us to provide a better service at the lowest price. Instead, the doctor becomes an employee of the state and the patient a victim, with little recourse to complaint.

            At present all physicians give away free care every day to patients who cannot pay. The single payor system says medical care will be free for all. This is a lie. To fund single payor medicine, the community must endure taxes that will increase until it becomes the major national expense, even 70 to 80%, as has occurred in every other nation of the world with the single payor system.

            If we allow this to occur, we will bring down our overall standard of living, see entrepreneurism drastically curtailed, witness the destruction of the human spirit. There will be higher rates of suicide and alcoholism, and demoralization will set in. Why? Socialism takes away liberty, and makes the pursuit of happiness nearly impossible. Government-run institutions are outside modification by the consumer. Our right to bring suit dwindles in the face of the government team of tax-paid lawyers.

             Socialism was a failure in Russia by 1930, only thirteen years after its forced inception. England now struggles to explain what happened to thousands of patients who went blind from lack of access to treatment or from treatment rationing. Currently in America we have the most successful system of medical care in the world, despite the felonious acts of third-party payers.

            OUR SYSTEM IS NOT BROKEN. That idea suggests that the present system should be discarded and completely recreated. What is going wrong is the shared greed of insurance companies, delaying payment by artifice, stealing millions of dollars in member payment benefits, raising costs, and making healthcare inaccessible. Instead, fix the insurance system, and free American medicine to become healthier, to spring forward and heal itself, which is in the nature of capitalism. Our healthcare system will then continue to be the envy of every other nation in the world.

            There – the cost of healthcare is affordable and everyone is covered – CASE CLOSED!

1 Comment
  1. Chris Hayes October 8, 2009

    Very well written, Jon. The only question I have is this: If all medical expenses are to be paid up front, what happens when they cost more than a person has? I assume, since we are filing these expenses to our insurance for reimbursement, that we are still paying some sort of premium out of our paychecks. I also have to assume that the daily expenses of running something like a family of four are going to be consistent and not necessarily affected by this change. I agree that the practice of delay-of-payment is unethical and should be changed, however I’m not certain I understand how this practice of up-front payment could be feasible in this country today. How much should each individual save to cover this? What if there are four members of your family? Or more? Should we assume it’s some number like $2,000? For each member? Okay, so I’ve saved $8,000 in my medical expense account… and my wife is diagnosed with cancer. My first visit will start to chip away at that sum… her next visit may be for several very costly tests… and then she needs another visit… Oh, and then during all of this, my son gets a 104 degree temperature at 1:00 in the morning and has to be rushed to the emergency room. “I’m sorry, but my medical expense account doesn’t have enough to pay you. Please help my son. Please….” Is this really the American Capitalist life you want to live? And what if the current economic state made me lose my job last week?…

    I think that a mix of both worlds would be a better solution. We still pay our premiums, the health insurance companies are forced to pay the bills on time as they are expected to. I’m paying for a service with my insurance. My contract says “I will pay you money every month, and you will pay the doctors and hospitals if I ever get sick enough to need them”. If I don’t go to those doctors (and since I was without health insurance for most of my “professional” life, I rarely go to any doctors), then you, the Insurance Company, get to keep my money. If I do go to those doctors, then you are obligated by contract and by law to pay them. Again, I agree that the enforcement of that last piece has been the biggest missing link in this equation.

    I thank you for your insightful article, and I look forward to reading more.



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