Medicine is one of the best compensated professions in the United States, but perhaps one of the most misunderstood when it comes to how people get paid.
Traditionally, doctors are paid under what we call the fee-for-service model. The more visits, the more tasks, the more procedures, the more they earn.
And that’s still very much the basis for healthcare in the United States. The problem is that rewards volume, not necessarily better outcomes.
The problem has evolved over time as doctors move away from being business owners. Decades ago, most doctors owned their own practices, and they would use the money that they were reimbursed for the care they provided to collect a salary and then for the operations of their business, said Katie Gilfillan, policy director for the Healthcare Financial Management Association. Physician owners were responsible for renting space, paying nurses, paying their medical staff and their billing staff and ordering supplies for the practice.
Today, more physicians are employed by large group practices, hospitals or health systems, and this shift changes how they’re paid. Some physicians are paid a straight salary, like many who work for large health systems. Others are paid on productivity, meaning the more visits they do, the more tests they do, the more procedures they perform, the more they earn.
Physician incentives change
And increasingly, doctors are being paid on things like patient satisfaction, patient outcomes and how well they manage chronic conditions. In many cases, physicians are paid on a hybrid model, which would blend salary plus productivity plus some sort of a quality bonus.
For example, a doctor might receive a bonus if their patients with diabetes have better blood sugar control or if patients avoid preventable hospital stays.
So patients should care because this model encourages doctors to focus on quality coordination and prevention. Patients may notice their doctor reaches out and encourages them to come in for screenings or vaccines. They may also spend more time on health education and ensuring that you were taking your medications.
But that change has contributed to a change in how insurers and patients pay for care.
How doctors collect for care
A whole process runs behind the scenes at the doctor’s office runs in what is called the revenue cycle or a billing cycle, which starts when you make your appointment or register. The office will collect your insurance information and verify your coverage. After your visit, the doctor documents what was done in the medical record, and then the staff turn that into billing codes.
A claim is then sent to your insurer. The insurer reviews the claim, determines the allowed amount, and pays the practice according to a negotiated rate or an agreed upon rate if the physician is in the insurer’s network. You might be responsible for a coinsurance or a co-pay as well as for the deductible.
“However, if you use an out of network provider, you also may then be responsible for the difference between what the insurer paid and what the doctor’s hybrid charge was,” Gilfillan said.