Health 411: Medical group imposes fee for administrative costs

I just received a letter from my cardiologist’s medical group saying they will be charging a $350 annual fee for administrative costs. This is the first time I’ve seen a medical group charging an annual fee to its patients. Is this what the bad economy has come to? The fee appears exorbitant and discriminatory against less wealthy individuals.

Though charging for administrative services isn’t yet widely common, the practice is growing, says James Doherty, an attorney who works with physician practices in Columbia, Md.

There are a variety of reasons why, adds Dr. Glen Stream, president of the American Academy of Family Physicians: the bad economy, a downward trend in physician reimbursement and a growing list of administrative tasks heaped onto physician practices by insurance companies.

A 2009 study published in the journal Health Affairs found that when time spent interacting with insurance companies was converted into dollars, practices spent on average $68,274 per doctor per year.

Meanwhile, the cost of operating a practice has increased by 50% over the last decade, according to the Medical Group Management Assn., a national trade group representing nearly 15,000 physician practices. Reimbursement for physician services has failed to keep pace.

“There isn’t a practice I go to that isn’t trying to figure how to keep costs down,” says Ken Hertz, a principal with the Medical Group Management Assn.’s Healthcare Consulting Group.

Under the current system, insurance companies pay only for medical services provided: a physical, say, or a blood draw. But doctors and their staff are increasingly asked to spend time doing other things too: calling insurers to get approval to prescribe a particular medication or filling out forms patients need to qualify for disability or to confirm their child is healthy enough to play sports.

Insurance companies don’t pick up the tab for these tasks, and so doctors go uncompensated even as the number of regulatory and administrative burdens placed on them is growing.

Five years ago, if a patient needed assistance obtaining pre-authorization from an insurance company for medical care, the doctor’s office could just pick up the phone and get it approved, explains Nancy Davenport-Ennis, chief executive and founder of Patient Advocate Foundation, a national nonprofit based in Hampton, Va. The same process today could require multiple letters with supporting documentation and multiple telephone conversations.

Under the terms of their contracts with insurers and Medicare, physicians cannot charge patients for services for which they are already being paid — they can’t double dip, in other words. But the lines dividing what is and what isn’t covered by insurers and Medicare can get fuzzy.

If your health plan, for example, won’t pick up the tab for your MRI without medical justification, your doctor’s office needs to call your insurer before you get the procedure. But that call can take 45 minutes of the office staff’s time on the phone, with no compensation.

We took a close look at the letter your doctor’s practice, Medical Group of Southern California, sent to its patients. It clearly states that access to care is not dependent upon participation in the new program.

What will be lost for those who opt out is automatic access to some services, such as completing various forms, emailing or faxing records to additional physicians, coordinating specialist referrals, assistance getting insurance coverage for ancillary services and filling prescriptions (as is medically appropriate) without an appointment after multiple refills have been granted.

Those who choose not to pay the annual fee can gain access to administrative assistance on an à la carte basis.

Although the extra charges understandably enrage some patients, others are fine with it once they understand what they’re paying for, says Dr. Steven Tabak, a cardiologist and partner in the Medical Group of Southern California.

We also shared the letter’s contents with some of our experts.

Davenport-Ennis says that charging an administrative fee causes a problem for certain patients who are financially disadvantaged. “If you add that level of cost-shifting to the care, they’ll be out of the practice,” she says. She adds that the effects are mitigated as long as there are alternatives for those who cannot afford it.

Charges like these place an added burden on patients already dealing with rising healthcare costs, says Anthony Wright, executive director of Health Access California, a statewide healthcare consumer advocacy coalition. If doctors are struggling financially because insurers are failing to pay for a growing list of administrative requirements, they need to take the issue up with insurers — not impose higher costs on patients.

“No one will be dismissed from the practice or get second-rate care because they don’t sign up for this,” Tabak says. The needs of those who are unable to afford even a nominal à la carte fee for individual administrative tasks will not be ignored, he adds.

The larger issue, Stream says, is that extra fees aimed at keeping a physician practice in the black highlights the need for significant reforms in our healthcare system, including its financing. “I think that it shows the distress in our healthcare delivery system that the services [needed] aren’t being paid for,” he says.

When it comes to health reform, you should explain to your readers that every state has the freedom to opt out of the Affordable Care Act.

Not so. States opposed to the Patient Protection and Affordable Care Act cannot choose not to participate. “There really is no opportunity to opt out of this law,” says Michael Cannon, director of health policy studies at the Cato Institute, a public policy research organization based in Washington, D.C.

States do have some leeway, though.

Starting in 2017, they can request a waiver from parts of the law if they satisfy certain requirements. They’d have to propose an alternative health insurance system that would cover the same number of people and offer comparable benefits, as well as maintain elements of the law that make insurance coverage affordable, says Marc Steinberg, deputy director of health policy with Families USA, a national organization for healthcare consumers based in Washington, D.C.

In other words, they can bypass aspects of the law only if they’re able to achieve the law’s major goals.

“This is not a ‘We don’t want to do it’ option. It’s a ‘We want to do it a different way’ option,” explains Alan Weil, executive director of the Washington D.C.-based National Academy for State Health Policy, a nonprofit healthcare think tank.

There’s another way in which states have flexibility — although again, this is not an opt-out of healthcare reform. Starting in 2014, all states are required to have a state-based, online insurance marketplace up and running where people who don’t get health coverage through their jobs will buy an insurance plan. States can choose not to build the marketplace on their own and instead ask the federal government to do it for them.

Also, the government announced on Friday that states will be allowed greater flexibility to decide what healthcare services insurers selling health plans in these state-based marketplaces must pay for.

The only way to truly opt out of the law is to strike it down through the courts, Cannon says. And indeed, the law is being challenged on several fronts.

On Nov. 14, the Supreme Court agreed to review constitutional challenges to the law.

It will hear oral arguments on a ruling by the U.S. 11th Circuit Court of Appeals that found it unconstitutional to require everyone to have health insurance (the so-called individual mandate). But it will have to decide whether it can make a decision yet about this requirement because people who fail to buy health insurance (as the law requires) won’t have to pay penalties until 2015.

The Supreme Court will also hear arguments regarding the Affordable Care Act’s requirement that states expand Medicaid, the government-run health program for people of low income, by 2014.

Opponents claim this is unconstitutional because it coerces states to expand their Medicaid programs and requires that eventually (although not immediately) they shoulder 10% of the cost of doing so or lose federal funding for Medicaid.

The Supreme Court is expected to hear arguments in early spring of 2012 and to make a final ruling on all counts at the end of June 2012.

Zamosky has been writing about how to access and pay for healthcare for more than 10 years.

Got a healthcare dilemma? Email health411@latimes.com or write to Health 411, Los Angeles Times Health, 202 W. 1st St., Los Angeles, CA 90012.