Healthcare Pricing for Leftist Dummies

[TheJPRD]

JPRD 11 June 2013

The topic of healthcare costs can be complicated to understand for those with no business experience. Healthcare is a business like any other, and the same principles of costing and pricing apply. Conservatives and many Libertarians point the “finger of guilt” for rising healthcare costs at Government regulations, excessive taxes, and the ever-present threat of lawsuits. Leftist Progressives prefer to blame what they perceive to be the excessive profits of healthcare businesses and healthcare-insurance Companies. As with most every other issue, the leftists are flamingly WRONG!

In order to get a grasp on the extent to which Government regulations, taxes, and malpractice-insurance costs effect healthcare costs, one must use a simple, uncomplicated case-study. In order to remove “profit” as a variable in the case study, the profit percentage must be constant in the “Before” and “After” case.

BEFORE: This case study considers a single-doctor business with a leased office building, one full-time nurse, one full-time receptionist, and a part-time accountant who charges for 5 hours each week. This case-study business applies 10-percent profit to its total cost. In this base-case, the business makes 10% profit while charging each patient $39.96 per-office visit.

AFTER: The case study then assumes the following changes: (1) Government regulations require the doctor to spend an additional 10 minutes with each patient he sees. (2) Government regulations and reporting requirements require an additional 8 hours each week of the part-time accountant’s time. (3) Malpractice insurance cost increases $700 per-month. (4) Federal taxes increase 5 points. (5) The business does not hire additional employees.

QUESTION: How much must each patient be charged per-visit now so the business still makes 10% profit?

 

[Cruella]

QUESTION: How much must each patient be charged per-visit now so the business still makes 10% profit?

More than Obamacare allows. It's estimated that 40% of doctors will retire or close their practices and go into a different type of medical practice, i.e., hospital run clinics.

Calif. already has their program set up. They estimate that in some cases medical insurance will increase up to 146% for some people. The four Obamacare plans that will be available are the bronze, silver, gold and platinum. They all have out of pocket expenses. Bronze out of pocket will be 40%, silver 30%, gold 20% and platinum 10%. That doesn't include the monthly premium payment. A family of four that makes $90k a year and buys the silver program (30% our of pocket) will have a premium of over a thousand a month without any offset.
Lower incomes will have an offset depending on how much they make.

They also said, that if you buy your insurance through the state exchanges (three companies have dropped out) that you will NOT be able to get the doctors you want, but will have to use their exchange doctors.

I don't know about other states, but have heard that Ohio's insurance will increase 88%.

 

[TheJPRD]

^ The case study I prepared resulted in only a 12.5% increase in the business's healthcare costs. That increase resulted solely because of the changes noted in assumptions #1 and #4. I made no attempt to consider Obamacare, which as you noted, would increase the business's employee-healthcare costs even more.

 

[Cruella]

^ The case study I prepared resulted in only a 12.5% increase in the business's healthcare costs. That increase resulted solely because of the changes noted in assumptions #1 and #4. I made no attempt to consider Obamacare, which as you noted, would increase the business's employee-healthcare costs even more.

Did you take into consideration what Obamacare is going to allow the doctors to charge? Take an office visit as an example. What is the insurance company going to pay him? I think Medicare only pays some ridiculously low amount for the visit and I'm thinking that the new exchanges aren't going to be any better than straight medicare is now.

 

[TheJPRD]

Did you take into consideration what Obamacare is going to allow the doctors to charge? Take an office visit as an example. What is the insurance company going to pay him? I think Medicare only pays some ridiculously low amount for the visit and I'm thinking that the new exchanges aren't going to be any better than straight medicare is now.

I didn't consider what Obamacare will pay for an office visit. That wasn't the objective of the analysis. The objective of the analysis was to determine how much the cost of an office visit would increase once the assumed regulations were directed, the tax was increased, and the cost of malpractice insurance was increased. Prior to those changes, the doctor could charge $39.96 for each visit, allowing the doctor to make a 10% profit. Without giving away the result of the analysis yet, I'll say this: If the doctor continued to charge $39.96 per office visit after the regulatory, tax, and malpractice-insurance changes, his business would LOSE money.

If nobody takes a shot at estimating the impact on cost, I suppose I'll soon give up the answer. At that point you could assess whether Obamacare might cover it or not. The cost-assumptions I made in the BEFORE case, however, were quite conservative, meaning that most similar medical businesses would have to charge more than $39.96 per-visit. The most-relevant result of this analysis is that it provides an excellent example of the percentage-increase in office-visit costs.

 

[Centrehalf]

JPRD 11 June 2013

The topic of healthcare costs can be complicated to understand for those with no business experience. Healthcare is a business like any other, and the same principles of costing and pricing apply. Conservatives and many Libertarians point the “finger of guilt” for rising healthcare costs at Government regulations, excessive taxes, and the ever-present threat of lawsuits. Leftist Progressives prefer to blame what they perceive to be the excessive profits of healthcare businesses and healthcare-insurance Companies. As with most every other issue, the leftists are flamingly WRONG!

In order to get a grasp on the extent to which Government regulations, taxes, and malpractice-insurance costs effect healthcare costs, one must use a simple, uncomplicated case-study. In order to remove “profit” as a variable in the case study, the profit percentage must be constant in the “Before” and “After” case.

BEFORE: This case study considers a single-doctor business with a leased office building, one full-time nurse, one full-time receptionist, and a part-time accountant who charges for 5 hours each week. This case-study business applies 10-percent profit to its total cost. In this base-case, the business makes 10% profit while charging each patient $39.96 per-office visit.

AFTER: The case study then assumes the following changes: (1) Government regulations require the doctor to spend an additional 10 minutes with each patient he sees. (2) Government regulations and reporting requirements require an additional 8 hours each week of the part-time accountant’s time. (3) Malpractice insurance cost increases $700 per-month. (4) Federal taxes increase 5 points. (5) The business does not hire additional employees.

QUESTION: How much must each patient be charged per-visit now so the business still makes 10% profit?

Hmmm.....where to begin? I guess I'll begin with a question: Did you even bother to go out on the Internet and check yourself before you posted this? After I read your OP I went out on Google and found several sites within 5 minutes addressing cost breakdowns for medical practices. Figures varied depending upon several factors but what they all agreed on was the number one cost to medical practices, and number one by far, which is full-time personnel and costs related to them. You didn't address this at all in your "case study" and for that reason it's a failure from the very beginning.

If you want to refer to people as "Leftist Dummies" then go right ahead if you wish but once you start implying that you have some level of business acumen I expect you to at least sound like a businessman. Every business owner I know, without exception, factors unit costs. I'm not a doctor so I don't know how they break it down, I used to figure unit cost per man hour per week, but the reason every business owner does this is because you can identify patterns and schedule accordingly and that can save a lot of money in the long run. You didn't mention total overhead, total revenue, or cost, revenue, and profit per unit.

Your five changes address a relatively small percentage of overhead and in my opinion two of them make unwarranted assumptions. When limiting yourself to just the area of overhead you wish to in order to magnify the impact of any increase you're not speaking like a businessman, you're exposing yourself to be just as much a political creature as the people you insulted in your OP. Without a discussion of impact on total overhead and unit cost your "case study" is worthless.

F...do it again!

 

[TheJPRD]

Hmmm.....where to begin? I guess I'll begin with a question: Did you even bother to go out on the Internet and check yourself before you posted this? After I read your OP I went out on Google and found several sites within 5 minutes addressing cost breakdowns for medical practices. Figures varied depending upon several factors but what they all agreed on was the number one cost to medical practices, and number one by far, which is full-time personnel and costs related to them. You didn't address this at all in your "case study" and for that reason it's a failure from the very beginning.

Why don't you begin by taking a semester or two of Business & Operations-Analysis courses! Since you didn't understand the clearly-stated assumptions I detailed in the analysis, then you too could be a leftist! Assumption #4 stated that, "The business does not hire additional employees." Why do you suppose I assumed that? Could it be that the SOLE purpose of the analysis was to assess the impact of Government regulations, taxes, and malpractice insurance on healthcare costs?? To accomplish that objective, ALL other costs had to remain constant in both the BEFORE and AFTER cases. Full-time personnel costs WERE included in the analysis. Those costs were considered as "salaries", with the doctor receiving $156,000 annually, the nurse receiving $52,000 annually, and the receptionist receiving $29,120 annually. The part-time accountant was included at an hourly rate of $30.

If you want to refer to people as "Leftist Dummies" then go right ahead if you wish but once you start implying that you have some level of business acumen I expect you to at least sound like a businessman. Every business owner I know, without exception, factors unit costs. I'm not a doctor so I don't know how they break it down, I used to figure unit cost per man hour per week, but the reason every business owner does this is because you can identify patterns and schedule accordingly and that can save a lot of money in the long run. You didn't mention total overhead, total revenue, or cost, revenue, and profit per unit.

You didn't understand this aspect of the analysis either. Why do you suppose I quantified the cost increase in terms of "Cost Charged Per-Visit"?? Could it be because that IS the means of factoring Unit Costs! Overhead WAS included in the costs, but as in the case of personnel costs, overhead costs were kept Constant in both cases. Total revenue and Profit Per-Unit are OUTPUTS of each case, NOT INPUTS. If it interests you so much, total revenues increased 8% in the AFTER case, as did Profit Per-Unit. By the way, I referred to leftists as "Dummies" because they ARE. As for my "business acumen", I was a Certified Cost Analyst throughout my career. My job was to do the analyses that many business owners couldn't do for themselves.

Your five changes address a relatively small percentage of overhead and in my opinion two of them make unwarranted assumptions. When limiting yourself to just the area of overhead you wish to in order to magnify the impact of any increase you're not speaking like a businessman, you're exposing yourself to be just as much a political creature as the people you insulted in your OP. Without a discussion of impact on total overhead and unit cost your "case study" is worthless. F...do it again!

Tell us what assumptions were unwarranted. Read my above explanations, and try to brain-up for us, please? Your assessment may have sounded knowledgeable to some, but to anyone with an understanding of cost-price analysis, your assessment was juvenile and WORTHLESS! Next time you want to play at looking intelligent, choose your opponent more carefully.

 

[Centrehalf]

First things first, when it comes to health care reform I am what many would consider to be to the left...in fact very far to the left. I admit this and calling me a leftist isn't the insult you seem to think it is.

I'm not impressed by Internet cred. You can imply education and experience on your part as much as you want but the only thing I'm going to judge you by is by what you post. You failed. Your "case study" was flawed and I already pointed out why. You had no valid response to my criticism.

As for continuing to engage you in any way regarding your assumptions or anything else, why should I? Would you? The only thing I'm going to get from you is more insults and more political sophistry poorly disguised by an Internet resume which is obviously false to anyone who really does understand economics and how a small-business runs so pardon me if I choose to pass on that opportunity.

I'm not going to bother posting links but anyone reading this can easily Google for medical office cost breakdowns, read several sites of their choosing, not mine, and then decide if I misinterpreted the data. In doing so they will also begin to understand how many inputs you ignored.

 

[Cruella]

This morning on Fox and Friends, they interviewed a doctor re; Obamacare. He said the new system they have to use is very complicated. cumbersome and time consuming. Instead of filling out paperwork during your visit, they now enter everything into a data base. He said the system has been very expensive and has limited how many patients he can see in an hour, as most of his time is spent trying to find the right diagnostic number that applies to his findings and treatment.

He said he will no longer be able to take any new patients, as he is not able to service the one's that he has.


For this exercise, I don't know how you would build in the added expense of using this new diagnostic system and the reduction of patients it's going to create in the overall profit margins.

 

[dogtowner]

Personel costs always represent a high % of operating expenses in any service based business. cant point at that as much of a problem without making a claim that those costs are somehow out of proportion. That calls for an analysis as to why.and that would apoear to extend past the boundries of the premise.

 

[dogtowner]

This morning on Fox and Friends, they interviewed a doctor re; Obamacare. He said the new system they have to use is very complicated. cumbersome and time consuming. Instead of filling out paperwork during your visit, they now enter everything into a data base. He said the system has been very expensive and has limited how many patients he can see in an hour, as most of his time is spent trying to find the right diagnostic number that applies to his findings and treatment.

He said he will no longer be able to take any new patients, as he is not able to service the one's that he has.


For this exercise, I don't know how you would build in the added expense of using this new diagnostic system and the reduction of patients it's going to create in the overall profit margins.

there is a lot of misinformation in the interview you describe.

this is normal whenever the govt starts talking about monkeying with payments.

as an example, the codes referenced have been in use for decades so if he doesnt understand them by now he has other problems.

that being said, the industry is moving to a new generation of codes wjich greatly expands them and will have an impact if a doc wants to see the benefit of them. but this was coming independent of obamacare soshame on him for conflating the two (google ICD10 for more on this).

there is a reasom AMA got on board with obamacare just remember that.

 

[Centrehalf]

This morning on Fox and Friends, they interviewed a doctor re; Obamacare. He said the new system they have to use is very complicated. cumbersome and time consuming. Instead of filling out paperwork during your visit, they now enter everything into a data base. He said the system has been very expensive and has limited how many patients he can see in an hour, as most of his time is spent trying to find the right diagnostic number that applies to his findings and treatment.

He said he will no longer be able to take any new patients, as he is not able to service the one's that he has.


For this exercise, I don't know how you would build in the added expense of using this new diagnostic system and the reduction of patients it's going to create in the overall profit margins.

Dogtowner beat me to it but I'll repeat what he said; the coding is something he should know how to deal with and I seriously doubt he does his own. Poor excuse for a doctor to use.

Any small business whether it be a medical practice or an auto parts store is going to have some extra work to do due to new regulation. The question is how much. Compared to the workload and financial obligations which already exist it's really not that much. It's not small business that's going to take it in the shorts because of the ACA, it's individuals who are going to bear the brunt and we're already beginning to see in real life how bad this law is.

 

[Cruella]

The doctor has been in business for decades. It has nothing to do with him not knowing the codes. It's the new system and the new codes he was talking about. The coding system has now increased a thousand fold. Instead of 200 codes for billing that he has in his head, he now has to use a computer to find the correct code out 200 thousand. He said that is what is taking all of his time.

The same thing happened to me on my last Dr. visit, so I understand perfectly what this F&F doctor was talking about. I was in the exam room three times longer than normal while the doctor was dickering around on his laptop. I've also heard that hospitals and insurance companies, etc. are having a terrible time training their personnel on the new system.

Since when has the government ever done anything efficiently? I used to do DOD billing. The invoices where three pages long on legal sized paper. You would have to make nine copies to send off to different addresses, and some of them had to include the damned contract. Then you were lucky to see a payment from the government in 6-9 months.

 

[TheJPRD]

First things first, when it comes to health care reform I am what many would consider to be to the left...in fact very far to the left. I admit this and calling me a leftist isn't the insult you seem to think it is.

Being a leftist, it makes sense that you’d consider the term to be a compliment. I used the term because it seemed accurate, not as an insult.

I'm not impressed by Internet cred. You can imply education and experience on your part as much as you want but the only thing I'm going to judge you by is by what you post. You failed. Your "case study" was flawed and I already pointed out why. You had no valid response to my criticism.

I didn't perform the study to impress lefties. They're incapable of understanding , so what would be the point? You listed several items that you claimed I hadn’t considered in the study. You failed to remind folks, however, that I then detailed to you that I HAD considered those items. Are all leftists incapable of understanding plain English?

As for continuing to engage you in any way regarding your assumptions or anything else, why should I? Would you? The only thing I'm going to get from you is more insults and more political sophistry poorly disguised by an Internet resume which is obviously false to anyone who really does understand economics and how a small-business runs so pardon me if I choose to pass on that opportunity.

You shouldn’t continue to engage me, for you’re apparently incapable of understanding the concept. Remember what I said about leftists? Dead-on, wasn’t it!

I'm not going to bother posting links but anyone reading this can easily Google for medical office cost breakdowns, read several sites of their choosing, not mine, and then decide if I misinterpreted the data. In doing so they will also begin to understand how many inputs you ignored.

Alright, I’ll give you one last chance to brain-up. I’ll try to use little-baby terms in hopes you can grasp what you’re being told. You’re speaking of links related to your earlier claim that personnel costs are one of the biggest drivers of healthcare costs. That is true. I included identical personnel costs in both the Before and After cases. Had I adjusted personnel costs in the After case, it would have driven-up the cost per-visit even higher than resulted in the case-study. However, the increase in personnel costs would not have resulted from employees getting raises. Those costs would increase because the doctor would have to hire ANOTHER doctor just to maintain the same rate of patient service. Are you beginning to understand???

The purpose of the study was to quantify ONLY the impact of the variables I identified. Prior to those changes, the doctor could charge patients $39.96 per office visit. After the changes, the doctor would have to charge patients $86.00 per office visit. Additionally, the doctor could only service half of the patients he saw before the changes. The government regulations, Federal taxes, and the change in cost of malpractice insurance increased each patient’s cost per office visit by 115%! Additionally, the doctor could no longer handle the same number of patients. The outcome of the case study was totally consistent with what conservatives have been saying; i.e., increased costs AND decreased service AND a critical shortfall in the number of doctors. Get it now, lefty?

 

[dogtowner]

Dogtowner beat me to it but I'll repeat what he said; the coding is something he should know how to deal with and I seriously doubt he does his own. Poor excuse for a doctor to use.

Any small business whether it be a medical practice or an auto parts store is going to have some extra work to do due to new regulation. The question is how much. Compared to the workload and financial obligations which already exist it's really not that much. It's not small business that's going to take it in the shorts because of the ACA, it's individuals who are going to bear the brunt and we're already beginning to see in real life how bad this law is.

of course patients will take the brunt as they pay for it all anyway butits the small practices and practitioners who suffer the most as they have no economy of scale to provide tools (software/hardware) to deal with it..