High Premiums Force Veteran Surgeon to Hang Up His Scalpel
Medical Economics Feature -- May 2003
By Walt Borges
There's wry irony in the sign that hangs over the door of Dr. Bohn Allen's office. "This is the office of an experienced and dedicated Golfer-Doctor," the sign says. "Unfortunately, only one of the two titles pays a darn."
Bohn Dixon Allen, MD, an experienced general surgeon, dedicated recreational golfer, and president-elect of the Texas Medical Association, is no longer sure either job pays a darn.
No stranger to the vagaries of medical economics (he has chaired TMA's Council on Socioeconomics and sits on the Board of Trustees), Dr. Allen lost money in his solo general surgery practice during the last two years. (See " Physicians' Income Takes a Dive.")
Dr. Allen struggled because of falling reimbursements from health insurers. To pay his nurse and receptionist, he dipped into his personal accounts on occasion or drew no paycheck. Rents and other overhead costs were increasing, but the biggest hit to practice finances was his medical liability insurance.
In March, faced with paying $36,000 to renew his coverage for another year, Dr. Allen ended his surgical practice after 32 years. At 67, he plans to develop a new office practice, using his surgical knowledge to provide second opinions and surgical consultations to other physicians. He expects to pay a $7,000 premium for a standard $200,000/$600,000 insurance policy covering the new practice.
What makes his story compelling to physicians is that his story is their story: Rising costs and overhead meet falling reimbursements, creating a disastrous financial downdraft for medical practices.
"I hate to end my surgical practice on terms that are not my own," Dr. Allen said. "If someone told me 10 years ago that this was how it would end, I would have told them they were crazy, but they would have been right.
"If I'm saddest about stopping on someone else's terms," he continued, "I am also sad that there are no young surgeons who are likely to take my place. It's not just me; it's every Texas physician facing these pressures. And there are few younger physicians willing to enter the high-risk specialties. Access to quality physicians is a real issue in medicine these days, and the solution is not just in tort reform. Something has to give in reimbursement as well."
The Last Day
On Tuesday morning, March 18, Dr. Allen has scheduled three surgeries. His surgeries run the gamut of abdominal procedures and include operations involving colon, stomach, and pancreatic cancers. Today, he is repairing two hernias and performing a breast biopsy, just three days before his surgical insurance lapses.
These are not his last surgeries. On March 20, the final day of his surgical insurance policy, he was scheduled to remove the gallbladder of his surgical assistant, Pat Richesin. "I wouldn't have anyone else do it," Ms. Richesin said.
In the operating room on that Tuesday morning at Arlington Memorial Hospital, where Dr. Allen has been a board member and chief of medical staff, Ms. Richesin's boom box is quietly playing a jazzy CD as the surgery gets under way. Appropriately, as Dr. Allen opens the patient's abdomen, Rosemary Clooney sings "Sentimental Journey," then shifts into the upbeat swing of "I've Got You Under My Skin."
The surgical team doesn't notice. Dr. Allen and Ms. Richesin are engaged in a silent ballet of latex-sheathed hands and surgical tools. Little is said. As Dr. Allen explains later, "After 32 years, you know what each other is thinking, what needs to be done, and how to do it."
Dr. Allen estimates he has repaired some 10,000 hernias and removed a few more gallbladders. It takes a little more than 30 minutes to finish his last hernia procedure, a simple and straightforward repair.
Later that day, the surgical staff throws a luncheon for Dr. Allen in the surgeons lounge. More than 25 staff members take dishes and desserts, and there is the obligatory cake honoring Dr. Allen.
His short farewell speech is a message of respect for all those with whom he has worked. "You have done the right things for the right reasons," he tells his colleagues, promising to be an advocate for them as a TMA leader.
Then, good-byes are said. Handshakes and hugs, a few tears, and many laughs are shared.
"Some guys will do anything to get out of doing a HIPAA privacy statement for their office," one doctor quips.
Dr. Allen's Double Whammy
Bohn Allen knew early on that he was destined for surgery, working for a surgeon in high school and college. A 1961 graduate of The University of Texas Medical Branch in Galveston, he spent 11 years in the U.S. Army during the Vietnam era. He served as director of the burn unit for the Far Eastern Command and headed air evacuation operations from Vietnam during a tour of duty that took him to the Philippines and Thailand on frequent visits. Leaving the Army in 1971, he set up practice in Arlington.
For 32 years, his skill as a surgeon was supported by the patient base in the growing Dallas-Fort Worth suburb. But rising costs and falling reimbursement began to provide a double financial whammy in the past several years.
"In any other business, when overhead goes up, the business passes along the overhead to its customers as an increase in the price of widgets," Dr. Allen said. "But not in medicine. We have had what amounts to wage and price controls since 1986, and there is no way to pass on additional costs. When everything is tied to Medicare rates, you cannot raise the price of widgets in medicine."
In 2000, understanding that his profit margin was shrinking, Dr. Allen carefully negotiated new contracts with managed care companies and health insurers. "Because I have a solo practice, I have little leverage with health insurers, but I managed to negotiate fairly good contracts," Dr. Allen recalls. "Shortly thereafter, almost all of the insurance companies I contracted with sent me letters informing me they had changed the contract to pay 110 percent of Medicare rates. I thought, 'Surely this letter doesn't apply to me.' But it did."
It wasn't just the reimbursement rates that were a problem. Denial and delay had become the watchwords of claims adjusters for health insurers. Dr. Allen and his staff tell many stories of frustration in dealing with health insurers. First among them is the tale of the male patient who had painful enlargement of the breast. When Dr. Allen recommended he have a mastectomy, the insurer denied precertification on the basis that it was cosmetic.
Dr. Allen says he has devised a new tactic for dealing with authorization denial and the accompanying disparagement of his medical judgment by lay claims adjusters.
"I ask for the medical director, and if he doesn't agree, I ask him where his office is," Dr. Allen said. "I tell him I want to know so I can send the patient to him for treatment."
The point is usually made and the approval granted, Dr. Allen says.
Paul Handel, MD, Dr. Allen's successor as chair of the TMA Council on Socioeconomics, says that while all physicians are locked into the health care system, they are not its only victims.
"The patients -- our customers -- are likewise trapped in this system. Insurers want to pay for the least costly but equally efficient treatment," Dr. Handel said. "What that means is that if I am treating a man for prostate cancer, and I can give him injections or remove his testicles, insurers will favor the removal because it is efficient and less costly. But would the patient make the same choice? No."
For Dr. Allen, for several years, insurers were authorizing less treatment and making reduced reimbursement while overhead was rising.
"Overhead accounted for 35 percent of the income five years ago, but last year it was 63 percent," Dr. Allen said. "I've lost money for the last two years."
The biggest jumps in overhead were attributable to the rising cost of medical liability insurance, Dr. Allen says.
To pay his premiums on a policy providing coverage of $500,000 per incident and $1 million per year in 2001 and 2002, Dr. Allen borrowed money from a bank. The first year he took out a loan, he made enough to pay it off. But in 2002, he borrowed $20,000 toward the $23,000 premium, but could not pay off the loan from the practice's income.
"In 2002, there was not enough cash flow to retire the loan," he said.
Dr. Allen dipped into personal savings to pay his staff, delaying or foregoing his own paychecks on some occasions.
"If you look at our TMA surveys, you find that 71 percent of physicians report cash flow problems, 46 percent have used personal funds in their practices, and 33 percent have taken out commercial loans," Dr. Allen said. "I fall within all those categories."
Dr. Handel says Dr. Allen was in essence providing a subsidy for his patients' health care.
"Bohn Allen has dedicated a lifetime to caring for patients and to medicine," Dr. Handel said. "It shines through that he wants to care for people. To help cover office overhead, he was dipping into his own pocket. In effect, he was subsidizing the health care of everyone who walked into his office."
When Dr. Allen's premium renewal notice for 2003 arrived, he was looking at a 57-percent increase, from $23,000 in 2002 to $36,000 in 2003, despite never having a claims-paid loss.
Dr. Allen investigated his options. "The $7,000 premium for a $200,000/$600,000 policy for consulting is manageable," Dr. Allen explained. "I also asked about adding minor surgery to the policy and that was another $10,000. If I acted as a first assistant to other surgeons, the premium was $18,000 if I assisted on my own patients, and $21,000 if I assisted with other physicians' patients."
He was faced with the hardest choice of his career. He made what he considered the only sensible choice, though he does not like the implications for the medical profession or for patient care.
Neither does his staff.
"I've got a real concern about health care," said Ms. Richesin, who has been Dr. Allen's surgical assistant since 1971. "Now that I'm reaching my senior status, I'm wondering who's going to take care of me."
Ms. Richesin's daughter, Nicki Fisher, has been the receptionist for eight years, since the day she filled in at her mother's request. Ms. Fisher has a 3-month-old infant, Rachael, whose presence has led to temporary office decor changes. Toys and baby furniture are scattered around the office suite, and Dr. Allen's office contains a play mobile for the baby.
The two women represent the human cost of terminating a practice. Ms. Fisher will be laid off at the end of the month, and her mother will retire in July.
Ms. Fisher has two concerns. The first is that medical liability insurance increases mean that fewer quality doctors will stay in high-risk specialties.
"As a new mother, I'm afraid for the quality of physicians who are going to be there for me and my daughter," she said.
The second is that insurers are undermining health care by providing insufficient payment for doctors.
"When I came here, I was so unaware of the payment fee schedule," she says. "I am in total shock how little the doctors are paid. When costs increase, doctors can't pass it along, and they can't even write off their losses."
Ms. Fisher wonders where the money is going if physicians are being asked to work so cheaply.
"When the health insurance CEO's bonus is in the millions of dollars, where do you think that health care dollar is going?" she asks.
The Road Goes Ever On
For Dr. Allen, there are new, if unknown, paths to tread in medicine.
One familiar path is his work for TMA, which he says will contain a strong component of advocacy for physicians and patient access. He plans to continue to be an active spokesperson -- and a visible example -- of the effect of rising medical liability premiums and falling reimbursement. He hopes legislation imposing medical liability damage caps and ensuring prompt pay will pass, making him an anomaly rather than an augury of things to come.
Then there's his new path in medicine, that of a surgical consultant.
"I just sent out a letter to primary care doctors explaining what I want to do next," he said. "So far, I've gotten a good response. They think there is a market for surgical second opinions. They think that I can give an unbiased opinion because I will not be doing any surgery."
For more information on medical liability reform, see TMA's Health Care Lawsuit Reform Resource Center.
Physicians' Income Takes a Dive
The latter half of the 1990s may have seen sharp rises in the wages and salaries of many Americans, but for physicians -- especially primary care doctors -- it was a period of falling income, according to a study by a nonpartisan health care research group released in March.
The Center for Studying Health System Change found that between 1995 and 1999, wages and salaries for professional, specialty, and technical occupations rose 3.5 percent after being adjusted for inflation. Average net physician income fell 5 percent in the same period, with primary care physicians seeing a 6.4-percent drop, compared with a 4-percent drop for specialists.
"These trends . . . represent a dramatic shift from 1991 to 1995, when physicians' income growth exceeded inflation, and income for other professional occupations lagged the cost of living," center researchers wrote.
Still, in 1999, physicians earned an average of $187,000, with primary care physicians earning an average of $138,000 and specialists earning an average of $219,000, the center found.
One implication of the report, the center concluded, is that Medicare payment policy may have to change. "Physicians' incomes have never been an explicit consideration in setting Medicare payment policy," the report said. "To the extent that trends in income influence physicians' willingness to serve Medicaid patients, then income may play a more prominent role in policy."
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