Monday, March 28, 2005

Not Quite David v. Goliath

We all like to hear stories of an underdog overcoming adversity or a small business socking it to Corporate America. In today's Oregonian, there's an article, "Skip the Insurance: 2-Doctor Practice Takes Pre-Paid Patients", that on first-blush sounds like a classic David v. Goliath story. However, when you think about it a little more closely and figure out the math involved, it turns out to be something altogether different.

Here's the basic story line: Two doctors, who grow tired of the hassle in dealing with the medical insurance industry, decide to practice their trade by accepting pre-payments of $1,100 per month from patients. In exchange for the monthly fee, patients "receive unlimited doctor's visits, house calls and around-the-clock medical advice".

At this juncture, I found myself saying, "Good for you"! I mean, anyone who can thumb their nose at the likes of the Kaiser Permenentes of this world is a-okay in my book.

But I got to thinking about the $1,100 monthly payments. Who could possibly afford that much EXCEPT the rich?

Beyond that, one of the doctors said that he and his partner were going to limit themselves to only 100 patients each in order to provide more personal services. He stated that he had currently signed up 40 patients per day, "about 10 more than he needs to break even".

At this point, I grabbed my trusty calculator and began to compute what this all means. The total amount paid in 1 year by each patient is 12 x $1,100 = $13,200. [Note: Surgery and specialized care cost EXTRA.] If he needs 30 patients to break even, then he's calculating his overhead to equal about $396,000. If he winds up with 100 patients, he will gross ($13,200 x 100) $1.32 million per year. Subtract his expected expenses from this total and he would wind up with a profit of $924,000!!

Consequently, I don't think the underlying theme is accurate. These doctors aren't THAT upset about the hassles with insurance carriers -- It seems to me that they simply want to make more money, A LOT more. In the end, the whole story looks more like a tug of war between 2 greedy doctors and several greedy insurance companies.

So much for the David v. Goliath analogy!

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