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Does Your Doctor Charge Too Much?

by Dawn J. Lipthrott

Physicians' fees seem steep until you realize that they must cover increasing practice expenses
, especially staff payroll and medical malpractice insurance. For example, in Florida a solo surgical practice could require between $400,000 and $500,000 income just to meet expenses. More staff is required to stay on top of the increasing complexities of insurance. But while expenses increase, reimbursement from insurance has significantly decreased. What that creates is stressed physicians trying to see more patients to meet those demands. It means less time for individual patients, a weakening of the physician-patient relationship, an environment more conducive to mistakes, and demoralized physicians and patients.

Why do physicians charge so much? Why should I as a patient even care about their financial well-being, especially when I see what they bill me or my insurance?

There is more to the picture of physician charges than meets the eye. As you will see, what they are paid, by patients and by insurance, impacts the quality of our healthcare. . . not because they are greedy, but because today it takes so much more to keep their practices open -- and because there are issues of ethical relationship with insurance companies, physicians and patients.

woman surgeonA Personal Story:
In 2004, I had gallbladder surgery. My deductible was nearly met for the year prior to the surgery, so all I had to pay was $50 for an office visit to the surgeon. I had what we as patients dream of when it comes to medical care -- an exceptional surgeon who gave me outstanding care, before, during and after surgery. She had a great office staff, all of whom were friendly, efficient and went out of their way to help me with anything I needed. I had excellent care at the hospital outpatient surgery unit before and after my surgery.

A month or so later, I noticed that my insurance paid her less than 25% of her billed amount. After I did some research, I found out she was paid less than what Medicare would have paid her in 1996 for the same surgery! She charged $3650 and they paid $887. To me, that is unjust. When I later talked with my surgeon she told me that my insurance was actually better than many and that quite a few private insurance companies pay less than what Medicare pays today.

How can $887 be an injustice? As some of you read my comments, you will no doubt have a similar reaction as one of my friends . . . . "$3600! No wonder health costs are so high! I sure would like to make $887 for an hour and half of work!" (I would too!) According to Medical Fees in the United States, in the year 2000, 4 years prior to my surgery, the median fee charged in the country for the procedure I had was $2300. That was not the average, but the median. Median means that half of the physicians charged higher, and half charged lower. (I don't have the current book.)

I talked to an orthopedic surgeon recently who said that an arthroscopic procedure on the knee would be billed around $3500 5 years ago and he would receive $600 from insurance, 3-4 months after the surgery.) He wondered aloud, "do you go to a mechanic who charges $600 and expect them to accept $200? Or a roofer who charges $6000 and expect him to take $3000? Why should physicians be forced to accept arrangements like that?"

While on the surface the fee my surgeon billed seems high, there is more to the story that you and I don't usually see or hear. Many patients comment that physicians are rich and are just trying to get more. Perhaps that was true 20 years ago, but over the past 15-20 years, their income has declined. By far, the majority of physicians are not rich. I'm sure there are a few that are -- perhaps some plastic surgeons who do expensive procedures that are elective and therefore paid in cash by the patient instead of by insurance. Some are selling their practices and 'retire' at the peak of their performance, not because they want to, but because balancing finances, fighting insurance, and more, it has changed from something that gave them joy and satisfaction to constant hassle and stress. That is a huge loss for the physician, but even a bigger loss for patients who are losing some of the best and most experienced physicians.

As you think about the fees my surgeon or your physician charges, consider these factors that contribute to their costs and to what they receive:

Malpractice insurance premium rates:
Medical malpractice insurance premiums continue to increase, often 20% or more, annually. Specialists like surgeons and ob-gyns pay outrageous amounts. Here is what they are expected to pay in the state of Florida:

In South Florida, they pay $277,000 per year base rate for malpractice insurance.
Source: Medical Liability Monitor , the national independent reference of rates. & Medical Malpractice and Access to Health Care (and GAO-03-836)

*The largest insurer in Florida charges from $143,000 - $277,000 per year for the base rate.)

Office Expenses:

 $227,000 - $336,000
(includes office expenses and staff salaries)

($18,916--$28,000 per month)

The lowest average for surgeon's office expense that I found was $227,000 in 2003 according to Statistics: Medical & Dental Income and Expense Averages 2004 Report. One estimate of average physician monthly cost for planning for a solo practice is $25,000 per month ( Medical Economics). A few physicians I spoke with in Central Florida say their expenses run $28,000 with current staff requirements in 2004.

With NO SALARY or BENEFITS for the physician, a surgeon in Florida (excluding Dade County) has to earn:

$401,000 - $510,000
 $33,416- $42,500 per month
 $7,711 -$9,807 per week This assumes he or she NEVER takes a week off for vacation or to get continuing education!

A surgeon does not do surgery all day. In fact, more time is spent in the office, than in the operating room. They also have to share operating room time with other surgeons in the community. Surgeons have one day or two partial days per week for surgery. They see a patient for an initial visit, probably send out for a test or imaging, another visit to go over the results and recommendations, a follow-up visit after the surgery. In between, they have to dictate step by step notes of every operation and visit, read test reports, make telephone calls and do some administrative tasks for that patient while seeing other patients.

What if the surgeon actually wants to earn a SALARY for his or her work?
Assuming she should make at least as much as her malpractice premium, I'll add in a salary of $174,000 for her work and risk.

With malpractice insurance, office expense and a salary of $174,000 the surgeon would need to earn:

 $575,500 - $684,000
 $57,916 - $57,000 per month
 $11,057 -$13,153 per week Again, this assumes she NEVER takes a week off for vacation or to get continuing education!

Since their payment has no bearing to what they charge, a charge of $3000 is irrelevant -- unless you are paying your deductible. Even if hypothetically a surgeon could do 10 surgeries per week that would be reimbursed at $800 each (many surgeries like biopsies are much less) for one full year with NO weeks off, she or he would bring in $416,000 for those surgeries. . . .barely making expenses and still not receiving any income.

On top of that, some powers that be decided that they would package surgical services and pay reimbursement for the 'global surgical package'. What this means is that Medicare and private insurance tell a surgeon that an evaluation the day before surgery, all the procedures associated with the actual surgery, the time to talk with the family, dictate notes, recovery evaluation, and follow-up visits -- even if the patient has complications up to 90 days for major surgery -- are just part of that package. So whether a surgeon spends 3 hours or 30 hours in a complicated case, they will be reimbursed the same. (You can find out more about this at Spanning the Global Surgical Package by Kent J. Moore at Medscape

Hospitals now adding to the problem :
A growing trend is for hospitals to hire their own surgeons, ob-gyns, etc. to capture revenue and referrals and thereby reduce volume of patients to independent physicians, adding to the pressure. For example, Florida Hospital in the Orlando area has hired about 15 plus surgeons of its own, even though they are not needed in the area, and uses its massive multi-hospital system to steer patients to its own doctors. They have also hired family physicians to funnel patients to their own specialists and services. They entice recruits with promises of paid malpractice (which as I said is a LOT of money), signing bonus, relocation, set them up in an office, with staff, with expensive equipment, with marketing services and central billing. In the case of Adventist Health here, they intentionally present these practices all over Central Florida as if they are independent physicians, when in fact they are owned by Adventist Health. Patients don't know. Probably some physicians don't know who is part of that network. Their imaging centers are gates to surgeons and now they own the radiology group that staffs them. Although there were laws enacted to protect patients from self interest and to promote fair competition among physicians, those laws are circumvented. How does an independent physician compete with that? How do they maintain patient flow and income? How do we attract new independent physicians? They are damaging practices of good physicians and adding to the financial pressure.

Stress and liability:
If you, the reader, earn a salary of $30,000 to $150,000, imagine what it would be like to have to know you have to bring in over half a million dollars, $50, $100, at a time, with a few surgeries at $800, a few at $300, that you may have to do hours of work for nothing. That seems like a lot of stress for one physician to try to keep a practice going. And then you have the hospital that you have supported, pull your potential patients out from under you by steering unaware patients for its own self interest and completely changes the patterns of referral, the flow of volume and income while independent physician expenses increase.

In addition to the financial expenses of running a practice, any surgeon has the stress of surgery, and the realization that our litigious society, almost any patient could become a lawsuit. On an average, surgeons can expect to be sued 3 times or more in their career even if they do nothing wrong. Imagine what it might be like to work every hour of every work day with expectations of complete perfection in everything you do -- because your patient's well-being and sometimes his or her life depends on it -- and with the fear that if you aren't absolutely perfect or a patient thinks you might be, you could be sued?

So what does all this have to do with patients like you and me?
When physicians have patients who do not pay their bills, when they have insurance companies paying them less than 1/4 of what they bill for the most common surgeries, when they have malpractice rates increasing double digit percentages every year, what happens to healthcare and to the doctor-patient relationship?

1. Physicians have to squeeze in more patients to bring in more income (and sometimes because they are required to see a certain number of patients per day or week by insurance companies). When hospitals re-route patients to physicians it owns, even this dries up.

What that means is:
* Less time with each of their patients:
They are rushed. Patients don't get to say all that we need to say. We don't have the time to ask important questions we need to ask. We believe they don't care at all about us. We are dissatisfied and so are they. I was talking to a retired physician who had an Internal Medicine practice for many years and finally left in frustration. He loved practicing medicine and still works a few hours a week at an addiction rehabilitation facility. He said, " when insurance plans required that I see a total of 40 patients a day, how could I do that and give good care? "Patients grew unhappy and so did I."

* Weakens the doctor - patient relationship:
How can you form and sustain any kind of relationship when you see them for 10 minutes and have only the most cursory of conversations? The message it gives patients is that they don't care (even when they really do.) They can't get to know the patient and the patient can't really know much of them. When patients see the charges and don't have a sense of what it costs to maintain a practice, and have no sense of relationship with their physician, they view the physicians as greedy and only caring about money. That view damages the relationship even more. In all professions, there are some people who care only about money. Medicine is no exception. But by far, most physicians who continue to practice today care deeply about their patients. Insurance companies and sometimes government leaders also seek to avoid addressing the real drivers of health care costs (because they are more difficult to control) and imply that doctors are the cause of high costs which fuels the patients' view.

* Less patient involvement in decisions and treatment
If a physician only has 8-10 minutes to see each patient, they will need to work in the quickest and most efficient way possible. More and more physicians cut patients off mid-sentence, or sometimes get up and leave the room while the patient is still talking or asking a question. There may be some that don't care, but in my experience, and with physicians I talk with, they are just as frustrated with the lack of time to spend with patients and to consider their input.

* Increased chance of error and adverse events:
If a physician is rushing from one patient to the next, they have to filter information and make quick decisions. The chance of missing something important increases with less time spent, and with the higher stress levels. The chance of making a mistake in diagnosis, treatment increases.

I know a person that was referred by her physician to an orthopedic clinic. A physician's assistant went over the referring doctor's x-rays and looked at her knee (about 8 minutes total). The physician came in, glanced at the knee, did nothing to move her leg, looked at her as an elderly woman, and said she had arthritis (which she already knew from the x-ray) and said one day she would need knee replacement and rushed on to his next patient. A different physician later discovered that she had arterial blockage behind her knee, most likely had had a blood clot and had an atrial fibrillation that put her at risk for stroke. With Coumadin, she has had absolutely no further knee pain.

It would be easy to claim that the clinic physician is incompetent, but that is not true. He is well known in the area as a knee specialist. The group practice has a good reputation. People have had very positive experiences with him in knee replacement surgery. But rushing from patient to patient with only cursory consideration of symptoms, pre-deciding based only on an x-ray and age and his narrow focus on knee replacement, and failure to take time to investigate thoroughly, led to a dangerous assumption. That pace puts you and me, and the physicians themselves, at higher risk.

* Loss of some of our best physicians at the peak of their knowledge and experience.

2. Physicians are moving to states where they pay lower malpractice premiums or closing their practices.
My best friend was in a lab this past summer having some blood drawn. The technician was talking with another woman who was talking about getting ready to move to Georgia. The technician was surprised and said something like "but your husband has his medical practice here in Orlando . . . why are you moving?" The woman replied that Georgia had lower malpractice premiums and it was more financially feasible to sustain a practice there. Her husband had already left to set up the new practice and she was selling her home here.

Two gynecologists I have had have retired in their 50's, not because they don't like medicine, but because of the combination of low reimbursement and increasing malpractice premiums. They loved medicine and enjoyed caring for their patients, but could no longer afford to stay in practice and left discouraged and frustrated. I spoke with a colorectal surgeon who sold his practice, not because he really wanted to, but because it was becoming too difficult to stay in practice with hospital competition and declining reimbursement.

In Central Florida, women wait approximately 3 months for a mammogram, even when a doctor orders one after finding something suspicious during an examination. (However, the hospital owned system will refer you to its own surgeon who can do your diagnostic mammogram and all needed surgery. In fact, instead of fixing the problem at their centers, they use the delay to market their own surgeon and make it sound like the problem is with other independent surgeons.

The governor's office has determined that the Orlando area should have a second trauma center, but they cannot get neurosurgeons and other high risk specialty physicians because of the malpractice premium rates in Florida.

3. Physicians sometimes stop providing procedures or services that take a lot of time, carry increased liability risk, and are poorly reimbursed by insurance. Over Thanksgiving, I spoke with the orthopedic surgeon I mentioned earlier. He completely stopped doing surgery about 6 or 7 years ago. When asked why, he replied that it was primarily due to the decreasing reimbursement by insurance. His income was decreasing significantly in surgical procedures while his risk (and his malpractice insurance) was going up. He said it just wasn't worth it. He gets paid more doing other evaluations. And, instead of paying $80,000 in malpractice (which was his rate 7 years ago), he pays under $20,000.

As patients we are looking at decreased availability of physicians, both in time and in service, and at increased chance of error -- Not because we have bad doctors, but as costs of being in practice go up and reimbursement by insurance decreases, physicians are being pushed into survival mode.

So next time you think your physician charges too much, or that fair reimbursement by insurance companies is not an important issue for patients, remember the big picture. Then speak up for more ethical and just treatment of both your physician and yourself and your family as patients.

See also
Reform Insurance

Courts Rule Against Insurance Companies for Treatment of Physicians

Putting Physician Salaries into Perspective with a Few Others:
Your average family practitioner in 2003 earned $150,000 and the average surgeon earns $175,000. (Family practitioners, surgeons, and others in solo practice earn less than those in group practices.) Physicians earn more where HMO's have lowest enrollment. Men tend to earn more than women who are physicians ($70,000 more for specialists, $30,000 for general practitioners.) Source: Medical Economics, September, 2004

Insurance Company CEOs:

The Firemark Group found that salaries vary according to the line of insurance sold. CEOs of life and health insurers (companies such as Aetna, Metropolitan Life, and Prudential) made, on average, $1,818,349 salary (not including other financial benefits), while those running property and casualty companies(these are the ones that write medical malpractice policies) made an average of $1,172,533.

Here are some of the full salaries of health insurance executives totals with salary, bonus, stock options, etc. for 2004:

William McGuire, MD CEO of UnitedHealth $94,180,531
Larry Glasscock CEO of Anthem $24,969,719
Leonard Schaeffer CEO of WellPoint  $21,767,532
John Rowe, MD CEO of Aetna $18,227,653

Source: which obtained it from company SEC filings.

A study on attorney salaries in 2003 showed that the average salary of a partner in a law firm was about $593,758. Attorneys who are not partners earn less. This does not include bonuses and other commissions from contingency fees.

A top retail bank executive in Florida earns a median of $240,000.

Basketball player in the NBA:
The guaranteed minimum wage for 2004 for a new player with no NBA experience (who may just sit on the bench) is $385,277. The minimum wage for a player with 10 or more years experience is $1,100,000.

As always, I welcome your constructive comments and suggestions about the material on this website and how we can all be most effective in co-creating the kind of healthcare system we all want.
E-mail me at
© Dawn Lipthrott, Ethical Health Partnerships, 2004

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