The Interview

Saturday, May 30, 2009
I ran into Corky and Lenny's to grab a quick lunch to take back to my office. I ordered a pint of chicken soup, broth only, and .20 of pickled tongue, no bread. A waitress overheard my order and whispered to the deli man "He must be a doctor". So he asked me ".20? Are you a doctor?" "No", I replied. "I'm an insurance agent, but somewhere in California my mother is smiling."

OK, I'm not a doctor, but I recently had the opportunity to spend a half an hour with a high ranking manager at the Cleveland Clinic. The gentleman was familiar with Medicare reimbursements. He asked not to be identified and I will, of course, comply. Our interest is to collect information.

My first question centered on patient demographics. I was told that the Cleveland Clinic's patients were approximately:
* Private Insurance - 50%
* Medicare - 40%
* Medicaid, self-pay, and charity - 10%

Those numbers are important. Even though the government paid care accounted for less than half of all patients, I was advised that the Cleveland Clinic spent 215 million dollars last year in charity care, Medicare and Medicaid subsidies.

The Wall Street Journal reported on May 1, 2009 that the federal government planned "to keep Medicare payments to hospitals essentially flat". There is even talk that doctor's payments may be reduced. Those were two topics my new friend wouldn't touch. Even an unidentified Cleveland Clinic employee wouldn't want to appear too negative. We could discuss the general concepts of Medicare payments.

I wanted to know how the Centers of Medicare and Medicaid Services (CMS) decided how much a particular service or procedure was worth. More importantly, why wasn't it enough?

What he explained is that CMS determines a cost for a region. Though a teaching hospital is paid slightly higher, but not nearly enough to cover the extra expenses, CMS doesn't recognize the "difference between Bedford Community Hospital and the Cleveland Clinic". And there is a difference. Doctors, training, technology - someone has to pay for all of that. Those costs are shifted to the patients with private insurance.

There is a hierarchy of payments:
* Private Insurance pays more than
* Medicare Advantage pays more than
* Medicare pays more than
* Medicaid.

Medicare Advantage, which provides better care,is reimbursed at a higher rate. Medicare pays less than 50 cents on the dollar. Again, where does the money come from?

My last question, as his secretary was dragging him to his next meeting, was "Who pays if there isn't private insurance to cover the balance?"

We're meeting at P F Chang's this week to discuss this further.

DAVE
www.bogartcunix.com