The scan scam? How fee-for-service fails patients
Wednesday, July 30th, 2008
By Staff
NEW YORK - The longstanding push-pull between Medicare and Congress has erupted again. Congress, overriding a presidential veto, recently canceled Medicare's scheduled 10.6 percent cut in payment rates for doctors and instead raised the rates 1.1 percent. But this action fails to address the problem with the Medicare payment system, which is not the amounts doctors are paid but the way their payments are calculated.
Medicare pays doctors for specific services. If a patient has a checkup that includes an X-ray, a urine analysis and a physical, Medicare pays the doctor three separate fees.
Each fee is meant to reimburse the doctor for the time and skill he or she devotes to the patient. But it is also supposed to pay for overhead, and this is where the problem begins. To Medicare, a doctor's overhead (or "practice expense") includes such items as rent, staff salaries and the cost of high-tech medical equipment. When the agency pays a fee to a doctor who has performed a CT scan, it is meant to cover some of the cost of buying or leasing the scanner itself. Services using more expensive equipment generate higher fees.
Any first-year business school student can see the profit opportunity here. The cost of a CT scanner is fixed, but a doctor earns fees each time it is used. This means that a scanner becomes highly profitable as soon as it's paid for. (more…)
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