Organized Medicine Profits by Discounting Physician Fees?

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Writing in the winter issue of the Journal of American Physicians and Surgeons, California physician Susan R. Hansen, M.D., asks whether some medical societies may be acting contrary to the interests of their members through their relationships with Preferred Provider Organizations (PPOs).

“A PPO is not an insurance company,” Hansen explains. “A PPO sells products to insurance companies (and other payers) that typically include ‘access’ to a group of physicians at discounted prices. A PPO may also sell rationing programs that incorporate medical ‘necessity’ reviews.”

PPOs in a network called the Foundations for Medical Care (FMCs), which operates under the umbrella PPO California Foundation for Medical Care (CFMC), are related to county medical societies chartered by the California Medical Association (CMA). As is typical, these PPOs get physicians to agree to accept discounted payments, and then sell these discounts to their clients.

There is evidence that some medical societies or their affiliated foundations receive “access fees” based on the amount of money not paid to physicians, Hansen states.

This situation, Hansen writes, may be akin to the hypothetical situation in which a baseball hero lets an agent who is a baseball Hall-of-Famer negotiate his contract with the ball club. Unbeknownst to the player, the agent’s finder’s fee is higher when the negotiated payment is lower. But the player never suspects that the agent would act contrary to the interest of a fellow baseball star.

CFMC’s own website advertises an average 36% “savings” (non-payments) to primary care physicians for inpatient services, and an average 32% “savings” (non-payments) to specialists for outpatient services. A 6% access fee would bring in $1 million from just one of CFMC/FMCs’ many clients, Hansen calculates.

Explanations of benefits typically do not report access fees, medical reviews, and other processing fees to physicians or to consumers. There is no way to follow the money, Hansen notes. But many county medical societies still make a huge non-dues revenue stream out of their foundations,

Physicians may spend many hours of uncompensated time battling with PPOs to get patients the care that they need. Many physicians—and consumers—might be shocked to learn that insurers can buy “Dr. No” medical “necessity” reviews from a company related to a county medical association.

Hansen asks whether organized medicine should be in the PPO business, and whether any part of organized medicine that runs a PPO should receive any more trust or respect from practicing physicians than other insurance middlemen.

The Journal is an official publication of the Association of American Physicians and Surgeons (AAPS), a national organization representing physicians in all specialties.

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