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The Jungle

The Adjustment Bureau

On how medical billing works.


I often say that I briefly tried to earn an honest living. In fact, this period of my life lasted exactly one year to the day. The prospects as I approached the end of my master’s program were slim; I was getting married, and it seemed unlikely that I would finish rewriting my novel by graduation, let alone sell it. So I sniffed around and found through an old college friend a health-care services startup—let us call it “Palladium,” near enough in spirit to its real name—with an opening in my native Maryland. My title was “regional coordinator,” a phrase of impressive vagueness. When I set out, I thought I was embarking on a life of mild tedium, becoming the sort of person who sends emails for a living and so mysteriously keeps the world afloat—one of those indescribable, professionally boring people who fill interstices between skilled trades and capital. This was not what happened. The year—the exact year—that I worked, June 2019 to June 2020, saw the greatest upheavals this century has yet produced, and the medical industry was the hot, glowing center of the great cataclysm that even now, three years on, we struggle to understand.

First, I should explain a little bit about the medical industry: how it works, and especially how money is made. The historical model for the practice of medicine is very simple. You become sick, you go to the doctor, he does something—an “intervention”—to cure or ameliorate your condition, and you give him money. You probably recognize here some gripes that various cranks and uncles have been making about the medical profession at least since the time of Plato. The doctor is only making money when you’re sick. Hence, in purely business terms, his preference for your condition is that you are something short of well, since healthy people don’t need interventions, but something better than dead, since the dead don’t need interventions and also don’t pay their bills.

As with the cranks and uncles, the U.S. government regards this as a perverse incentive and a hazard. While doctors may prefer you sick but not dead, insurers prefer you to be the very image of health—healthy people pay premiums but draw no services. And, thanks to the exertions of Lyndon B. Johnson and Barack Obama, Uncle Sam is the largest insurance interest in the country. As such, he’s been tapping his clipboard and staring over his spectacles at the assembled doctors, practice administrators, and billing professionals of this great nation with a skeptical glare. This is why, in the late Obama and early Trump administrations, the great minds in the medical bureaucracy of the American leviathan dreamed up “value-based care.” Under this model, the doctor is incentivized to keep you healthy. Uncle Sam decreed a suite of preventive services that doctors can now charge to Medicare; if a given doctor hits certain preventive targets, Uncle Sam will give him a bonus at the end of the year.

Let’s consider as an example diabetes, a disease that afflicts about ten percent of Americans. Traditionally, the doctor makes money only when the diabetic needs an adjustment to his treatment—which is to say, when he is not well and requires an intervention. But now we live in the enlightened times of value-based care. If a doc has a hundred diabetics on Medicare attributed to his practice, he gets so many dollars a pop for hauling them into his office and telling them to lay off the donuts (“diabetic education”). If he gets, say, fifty percent of those diabetics’ A1C levels down below 6.5, Medicare will write him a check at the end of the year.

It sounds like a good system. The problem is arithmetic. The preventive services are significantly less remunerative per instance than interventions are; the end-of-term bonuses aren’t good enough to make up for spending the doctor’s time on stuff that pays (relative) peanuts. At best, the conscientious doctor is now getting paid for stuff he was already doing gratis; but it is the unconscientious, profit-driven doctor with whom the government is concerned. For, as it happens, medical professionals other than doctors can perform these vital preventive services. A registered nurse or a physician’s assistant or some other camp-follower of the medical profession can be tasked with exhorting the diabetic to eat kale and skip rope, while the M.D. glides around the office scribbling prescriptions and stitching up high-dollar-value gashes.

The problem, of course, is that hiring people, even nurses and physician’s assistants, is expensive. A practice may not have the budget to hire someone to spend all day on preventive services. Who then will harangue the diabetics? Enter Palladium and its intrepid regional coordinator. Palladium employed clinicians who could handle the preventive services on the doctors’ behalf. It would then charge the doctors an hourly rate for the clinicians that was something less than what the insurance paid for the services—it had to be an hourly rate, as directly splitting Medicare fees is extremely illegal for reasons lost to the mists of time—and, in theory, everyone would happily cash checks and Uncle Sam would smile benevolently at all the value-based care that was being doled out. It was a great idea on paper. In reality, things were much more difficult.

The first hurdle was that the doctors regarded the value-based care model as a negative comment on their doctoring. They were by and large unreceptive to the idea that anyone had anything to tell them about the practice of medicine, particularly anyone who didn’t have an M.D. from a medical school of equal or greater value to their own. Any difference of opinion between Palladium’s regional coordinator and the doctor was almost immediately escalated to stormy appeals to authority.

The worse the doctor, the more immediate and stormy the appeals. One sawbones, whom I will call Karthik, was exemplary. Doctor Karthik had two M.D.s and an M.B.A.—a fearsome thing, until you looked closer. The first M.D. was from a for-profit medical school in the West Indies. Unsurprisingly, the government and the institutions of the American medical profession take a fairly dim view of such degrees; Karthik must have learned this at some point and gotten a second M.D., this time at a Midwestern state university that you probably didn’t even know has a medical school. (I certainly didn’t.) With the extra study time he had from having already taken the Caribbean renditions of endocrinology or Sutures 101, I guess, he picked up the business degree.

The M.D./M.D./M.B.A. is the silverback highland gorilla of arrogance. Karthik was a titan of condescension. He regularly insisted that he alone knew more about business, medicine, and the business of medicine than did the employees of Palladium or the other doctors in his practice. He would talk about workflows and data and protocols; any meeting with him rarely lasted less than an hour, and rarely started anywhere but first principles, the foremost of which was Karthik’s infallibility. I would sit in silence, looking at the list of his sixty or seventy attributed diabetic patients, more than half of whom were poorly controlled or uncontrolled. A real world-historical clinician.

Let’s say you cleared that hurdle, persuading your target doctor that value-based care was medically desirable, indeed, perhaps something he was already doing. The next hurdle was to convince him that it was worth figuring out how to integrate Palladium’s employees into his practice. The thing about American medical schools is that, while they turn out worldbeater clinicians, they leave the medico more or less wholly untutored in the art of making money. Most doctors have only a vague idea of how they get paid; they practice the art of medical billing the way most people use computers or the English language, bashing buttons and hoping everything turns out mostly okay.

The doctor sends off to a patient’s medical insurance company a list of charges with “encounter codes”—basically menu numbers for the kinds of thing that can be done to you. These encounter codes are justified by diagnosis codes—menu numbers for the types of thing that can be wrong with you—and the documentation associated to show the correctness of the diagnosis and the correctness and proportionality of the procedure. The insurance company’s adjuster looks at the packet that the doctor has sent and compares it to his big list of encounter codes and the volumes of arcane documentation that goes with them.

There are basically five options for what happens next:

  1. The adjuster can decide that the doctor has done everything correctly and send him a check in the mail for the specified amount.
  2. The adjuster can decide that all the encounter coding and documentation is correct, but that the charge is greater than what the doctor’s contract with the insurer allows, in which case he will adjust the charge down and send the doc a check for the corrected amount.
  3. The adjuster can decide that the procedure is not covered in the insurer’s contract with the doctor and send a claim rejection.
  4. The adjuster can decide that the encounter code does not correctly describe the procedure detailed in the clinical documentation, and send back the rejected claim with more or less detail about how to resubmit.
  5. The adjuster can decide that the procedure is correctly described, but that it was simply not the correct procedure to conduct based on the diagnosis codes and clinical documentation, and send back the rejected claim.

In a well-run practice, ninety percent or more of the claims submitted will hit No. One or No. Two—the doctor will get paid for services rendered. (This is an “adjudication rate” of ninety percent.) Not all practices, however, are well run. The medical schools, as mentioned, are too busy stuffing their students’ brains with the loop of Henle and the difference between systolic and diastolic to bother telling them how they’re going to make money. Some docs never get the hang of it. Others contract the billing side of things to third-party services. Third-party billers are generally less concerned about your money than you are, though, and have the adjudication rates to show it.

This was how Palladium ended up getting into the sideline of doing billing. The doctors would come and yell at us about how we were charging them more than they were making; thus we discovered that doctor’s offices billing for the preventive services our clinicians provided were frequently messing up and getting stiffed. We preferred getting paid to getting yelled at, so we started managing doctors’ billing ourselves.

One office we worked in—the first client site I visited ex officio regional coordinator—had, at Palladium’s arrival, an adjudication rate of sixty percent. This was characteristic of Doctor de Coverly’s practice. De Coverly worked in a dire Maryland suburb of Washington, D.C., that was nationally prominent for only two reasons: Gordon Liddy lived there, and the first widely reported stabbing over a Popeyes chicken sandwich occurred there. She was habitually, invariably even, at least a month in arrears to Palladium; she would settle a month here, a month and a half there, always writing checks to round thousand-dollar amounts, irrespective of the number on her invoice. Settling the small change across invoices drove Palladium’s managing partner, a small, venomous Britisher, almost to distraction. Little did he (or the rest of us) know that we would soon pine for the days of de Coverly’s irrational payments.

My central task in all this was tracking what our clinicians were doing—monitoring what times they were arriving at practices, how many and what types of encounters they were performing, how much we were supposed to be paying them. We were a startup, which, in our case, was a word for a company with no money; our clinicians were 1099 contractors with a tiered pay scale based on how many encounters they performed. The managing partner was constantly fiddling with this scale to make sure we never had to pay anyone the top tier.

Why were our clinicians willing to put up with this? Because prospects were worse in the wider industry. Most of our staff were pharmacists. Pharmacy was once an excellent path to a sure six-figure salary that was shorter and less expensive, if less prestigious and less potentially high-earning, than medicine. (There are also more pharmacy school openings than med school openings.) Naturally, a large number of people rushed into pharmacy school, causing a glut in the supply of pharmacists. This coincided with the ongoing consolidation of the pharmacy industry and, of especial importance, the C.V.S.–Aetna merger in 2018, which was followed by mass “rationalizations” in the staffing of the nation’s largest chain drugstore. Early-career pharmacists who could stand a little higher and see a little further were inclined to roll the dice on new types of opportunity.

Technically ancillary to my tasks managing and tracking our clinical staff—but soon the most time-consuming part of my job—was what we called euphemistically “account management.” This meant pacifying doctors who were angry at us for any one of an array of complaints—from scaring patients to charging too much to (literally) taking up too much space—and extracting money from them, especially de Coverly, whose practice was our largest by dollar amount.

Her clientele was large, poor, and disease-prone, and very loyal to her. She was a pillar of her community, in her way—but only her community. De Coverly was Southern—from North Carolina—and had the Southern ways of dealing with people she didn’t like. I regularly spent three or four hours a week just sitting in her lobby waiting for her to see me so I could ask her to pay her invoices. Some weeks, I wouldn’t get to see her even after waiting. If I made it into her office, she’d be polite in that Southern way that lets you know your interlocutor wouldn’t spit on you if you were on fire; sometimes she’d write one of her round-number checks, sometimes she wouldn’t. I was not very effective.

Finally, I was more or less a salesman. The partners or their freelance sales cronies would scare up prospects and I would go, either accompanied or alone, to present Palladium’s suite of services to medicos and practice managers. In this, I was an abject failure. I did not close a single sale in my year at Palladium.

There is one sales call I’ll never forget. The doctor was an older West African man in sharp brown slacks and an orange turtleneck; his office was the color of tobacco stain. His records were still paper and lined the place from floor to ceiling. I explained to him the possible margins of our clinical pharmacist services and the ways Palladium could help him digitize his records until he held up his hand.

“I am seventy-two,” he said. “I do not want to change the way I run my practice.”

Fair enough, I replied.

“Do you do anything with the cannabis?” he asked.

I beg your pardon, I said.

“I have the green prescription pad,” he said. “Every prescription I write, one hundred twenty dollars, cash.” He laughed. “That’s the kind of business I like. I am old.”

I can’t really blame him, or any of the other doctors who put me off. Most doctors are in fact doctors first, not businessmen; they want to treat patients as they see fit. They do not want to sell their patients on new third-party services, or figure out how to host those services in their offices, or work out whether they’re getting ripped off. Their business ambitions are to draw three hundred large a year without really thinking about it too hard until they hit retirement. I believe they will do so forever—at declining margins, sure—until, under the pressure of rising costs and an aging population, the government really steps in to make them work. Then the gentleman doctor who golfs on the weekends will become as much a figure of the past as the planter or the stocking spinner.

So my days passed—harangues from Karthik, watching the paint peel in de Coverly’s office, haplessly explaining services to doctors who weren’t interested—until the pandemic. You would think that the doctors, having been thrust into the world limelight as civilization’s protagonists, would have been pulling big money during the pandemic. At least at first, this was far from the case. The ban on “elective procedures” kinked the hose; for some specialties, such as pain management, revenue stopped almost completely. A period of gloom set in at Palladium; our pharmacists sat idle at home. Haranguing diabetics and checking drug lists was not “essential.”

Then the federal government announced a great loosening of telehealth regulation. Not only were practitioners allowed to consult over the phone, as opposed to through special H.I.P.A.A.-compliant video conference programs; there was an emergency suspension of state licensing exclusions. A doctor or pharmacist licensed in Maryland could now consult patients in Nebraska or New Mexico.

What everyone remembers from the pandemic, more than the masking or the wiping grocery bags or “social distancing,” is the really weird, unsettled feeling of not really knowing what was going on. In my experience, this was actually worse for the alleged medical experts than for most people. Most people got calls from their bosses telling them whether to come in to work or not, whether to wear a mask or not. The reasons might have been opaque, but the instructions were clear. Nothing was so simple in the medical establishment. Doctors as a group hardly understand how their businesses work in their ordinary state. The pandemic emergency changes, haphazardly communicated by the medical bureaucracy, made no more sense than usual. The median doctor whose revenue was cut and whose survival depended on being on top of radical changes to the way he was allowed to run his practice didn’t have much of a chance. No wonder some eight percent of medical practices closed in 2020.

Palladium’s staff found out about changes because it was our job to keep an eye on these things, and we knew where to look. Not that we always got things right. An ambiguously worded release from the Centers for Medicare and Medicaid Services led us to believe that non-clinical staff could perform certain low-level encounters, including “advanced care planning.” This is bureaucratese for asking and recording how a patient wants to go about dying. Going over “do not resuscitate” orders, emergency contacts, and power of attorney arrangements, the range of care from none to palliative to no-holds-barred tooth-and-nail no-quarter-given direct medical combat with death—this was the essence of an A.C.P. encounter. We thought you could do one of these in fifteen minutes.

It had always been a mystery to us on the administrative side why our pharmacists recorded so few A.C.P.s; it seemed like an easy way to boost the value of time spent with a patient. The managing partner had delivered several high-volume lectures on the subject during company calls. With the advent of telehealth, he for a brief season came into his own; he subscribed to a power-dialer service, had our data man pull lists of un-A.C.P.’d patients, and turned to as the telemarketing slave-driver he always was at heart. The junior administrative staff, myself included, were forcefully encouraged, if not quite ordered, to take a crack at the A.C.P.s ourselves.

My wife was pregnant, and I had, simply put, no money. I was pretty willing to put my hand to whatever would keep the checks from bouncing. I duly posted up in my in-laws’ home office one spring Saturday while my gravid wife looked at gardening catalogs with my mother-in-law. I opened a list and turned on the power-dialer.

The first gentleman I spoke to was, I am afraid, the high point of the morning. He was receptive enough to talking about the gory details in re his preferred manner of shuffling off the mortal coil, and we had a pleasant little chat about death. A challenge first manifested, though: He wanted to know what the diagnostic symptoms for Covid-19 were. As a non-clinician, it had been impressed on me at length by all three partners, I was very much not allowed to give medical advice. Upon hearing this, my patient became annoyed, and, panicking slightly, I told him that the newspapers said a fever was the gold-standard symptom. (This was in the period when the reported effects of Covid-19 were changing every day, and included things like toe blisters.) We parted amicably, and I hoped I hadn’t committed a federal crime.

The next several calls were less successful. Patients were suspicious that I was calling on behalf of doctors from a phone number that was not that of the practice. It turns out, they did not especially want to talk about how much care they wanted if they ended up in a coma. A couple of them softened up enough that I was able to eke out the barest amount of documentation to justify an A.C.P. A couple more of them asked me about Covid-19, and I committed a few more not-crimes. Some wanted to speak to the doctor, and were not very happy when I looked around the home office, said the doctor was not there, and promised he would call back. It was rough going.

Soon it was almost noon. An older woman with a quavering voice picked up the phone, and I rolled out my patter, such as it was—I was calling from Doctor Karthik’s office, we just wanted to see how you were doing with the pandemic stress, just wanted to make sure you were healthy. She answered cautiously; she was scared stiff. I continued, telling her that we here at Karthik’s practice noticed she didn’t have an advance directive on file, we were trying to get everyone’s advance directives on file, it was very important to make sure we knew what her wishes were because of the possibility of something happening in the pandemic. (This was while the press was still reporting bodies being stacked like cordwood in the streets of New York.)

She started screaming.

“Oh my God,” she said. “Oh my God. Is something going to happen to me?”

“This is just a precaution—”

“Oh my God. Am I going to die? Are you telling me I’m going to die?”


“Oh my God.”

I do not remember the rest of the conversation well in its particulars—just the feeling of my throat closing and a desperate desire to get off the phone. I think I told her I’d have the doctor call her. I turned off the power-dialer and sat back in my chair. I was shaking slightly.

I looked at my encounter-tracking spreadsheet. Four A.C.P.s. Eight was what I needed to break even on my wages for the day. I closed my computer and went to watch T.V.

Some weeks passed. The C.M.S. issued clarified guidance: non-clinicians were in fact not eligible to bill A.C.P. encounters. I had spent a Saturday morning asking old people how they’d like to die for free.

I was a little gentler with the pharmacists about how frankly bad they were at remote work after that. (I had become the de facto therapist for one pharmacist in particular, who was taking the lockdowns very hard. “Regional coordinator” is a profession that contains multitudes.) But things were still dire. We were spending more money than we had; telehealth had failed to save us. (De Coverly, despite a massive infusion of federal stimulus funds, simply stopped paying the bills, in round numbers or otherwise.) Since we were all contractors, getting Paycheck Protection funds was complicated. The partners held our hands through applying as individuals; I can’t speak for anyone else, but I got something less than a month’s salary. That was fine; I had been sending out resumes since January.

I suppose I learned a lot. It is a blow to the psyche to learn that there are systems that cannot be fixed. The American health-care industry is like the late Soviet economy; it is neither socialized nor market-based, and, because of its patchwork heterogeneity of different government organs, private companies, and semi-public professional organizations, there is no way to reform it “at root” without destroying all existing structures and starting from scratch. American health care will be dysfunctional as long as any of us are alive, and amelioration of this or that aspect of the shaggy beast is the best we can hope for.

Any ameliorations will necessarily involve changes that somebody, mostly individual doctors and patients, won’t like. The practice of medicine is a thing that wants to be basically private and personal. People don’t choose their doctors based on who is good at medicine, and certainly not based on who is good at making money. People don’t like talking about death with strangers on the phone. Yet the business of medicine is a thing that wants to be public and group-based. Insurance pools; attributed patients; shoeboxes of human flesh with easily manipulable, clean data sheets; procedures that are the same every time; a minimum of chit-chat. You can think of it as the country doctor versus the call center. After eight decades of fitful, incomplete efforts at centralization of the medical industry on the one hand, and on the other the death of local America thanks to deindustrialization and urban concentration, the country doctor has little going for him. The call center will win.

Doctors aren’t by and large good at business. At the statistical level, they may not even be very good at medicine—it doesn’t much matter, statistically, if you cure one patient but have five sick ones who never darken your office door. So the call center model might even be an improvement, in some way. But you may find yourself wondering, as you tell the nameless intake nurse over the phone how you’d like to die, whether something has been lost.