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Follow the Money

One doctor uses the price of a slice to set his fees, but for most in the growing fee-for-service world, setting the cost of a visit is a weird alchemy of patient demand, experience, and real estate.

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When, as part of his psychiatric training, Richard Rabkin underwent therapy several decades ago, the fee for each session was $25. Coincidentally, Rabkin happened to take note that the going rate then for a slice of pizza was 25 cents. "As time went on, I noticed there was a consistency about this," he says. "My colleagues always seemed to be charging 100 times the price of pizza, and I would always know when to raise my rates—when the price of a slice went up. That was the index—a slice of plain cheese, not with pepperoni or pineapple."

No one needs to be told that the cost of health care is going up and up—faster, in fact, than a slice of pizza. And as more and more doctors are finding managed care less and less manageable, they're starting to sing in the key of fee for service. No more five- or ten-buck co-pay. It's the full freight, payment often expected before you hit the street.

But how exactly do physicians who don't rely on the pizza index—or navigate the shoals of managed care—settle on the bill that's placed into your trembling hands? It seems rather more art than science. Of course, they weigh their skill and reputation (this explains the superstar surgeons who charge $25,000 for a craniotomy, a procedure more routinely billed at $15,000). They factor in their overhead, their malpractice coverage—and their address: "If you have a choice of going to a breast center on Delancey Street as opposed to on Park Avenue, I think your expectation is that you're going to get a higher level of service on Park Avenue," says radiologist Mark Novick, whose East 84th Street office is between Lexington and Third. He charges $375 for a digital mammogram, $25 more than the redoubtable Julie Mitnick at Murray Hill Radiology, on First Avenue between 37th and 38th streets.

Doctors will do a self-assessment: "You place a value on yourself in relation to other doctors," says plastic surgeon Richard Skolnik. They'll probably figure their snazzy waiting room into the equation (especially if they have commissioned a high-end decorator who specializes in knowing the difference between an inviting OB/GYN office and an inviting urology office).

They also take into account what their colleagues are charging for the same service. "It's illegal for us to discuss fees with each other," says one doctor. "So it's either done in a whisper or you have your secretary pose as a patient and call around." And they consider just how much patients value peace of mind. "I think people will pay extra for a top gastroenterologist if they're having a colonoscopy," says one physician. That could mean a fee ranging from $1,200 to $1,800 at Albert Knapp's Upper East Side office, or $1,500 to $2,000 for Peter Rubin's services. "And I think men will pay anything," adds this doctor, "to the urologist who will save their sexual potency."

You also are paying for the extended reach of a particular practitioner. If, for example, he or she is on staff or affiliated with a well-respected institution, says Michael Gruber, a neuro-oncologist at NYU Medical Center, "you're getting the excellence of the laboratory and the input of your doctor's colleagues."

"Men will pay anything to the urologist who will save their sexual potency."

In setting their fee schedules, many doctors take their cue from what's known in the insurance trade as "usual and customary," in other words the basis by which health insurers decide what they'll reimburse for a particular procedure in a particular geographic location. Los Angeles trumps Cleveland. Cleveland trumps Seattle. Manhattan trumps pretty much everything. Indeed, a plastic surgeon tells of colleagues in the outer boroughs who maintain a Manhattan mailing address to take advantage of higher reimbursement rates.

"A lot of doctors will charge a bit more than what's considered usual and customary," says Ramon Murphy, a pediatrician on the Upper East Side. "A reasonable guess in primary care is 30 percent above the better-paying HMOs. And some charge what the traffic will bear."

Some, however, charge more than the traffic will bear—or so it seems—specifically in order to cut down on traffic. A New Jersey OB/GYN, pole-axed by the astronomical cost of malpractice insurance, the risks and headaches of delivering babies, and plenty busy enough with gynecological procedures, raised her obstetrical rates from $3,000 to $5,000, figuring it would turn off prospective patients. Instead, "her practice exploded," says a colleague. "It raised the bar for every other OB/GYN in town." Similarly, when Richard Skolnik was in med school, "one mentor told me he raised his rates so he could slow down and do research, but when he raised his fees, he got busier because people thought he must be really good if he charged so much."

Only in New York? Well, maybe. "The city is full of itself, and here more than anywhere else, people will buy into the fact that expensive is better," says a dermatologist who, like several other doctors in this story, asked that his name not be used. "If a doctor charges an insane amount, some will question it but others will say, 'Oh, he's on Park Avenue—that's what I'd expect, and he must really be good if he charges that.' "

Two branches of medicine—dermatology and plastic surgery—are domains of elective procedures, where fees (rarely covered by insurance) are set at the intersection of a doctor's ego and a patient's vanity. Dermatologist Patricia Wexler, for example, whose practice is restricted to cosmetic procedures, charges $500 just for a consultation. One Upper East Side plastic surgeon, himself no slouch in the fee department, expresses shock, shock at what nip-and-tuck panjandrums like scalpels-to-the-rich-and-famous Dan Baker and Sherrell Aston charge for their handiwork. "I think it's outrageous what they charge, and I can't believe people pay," he says.

He's not alone. A pediatrician tells of the patient with a wound "beyond what I felt comfortable stitching up. And because it was the face, I felt cosmetically it would be better to have a plastic surgeon do it," she recalls. "It was $10,000 for a two-inch laceration, and I almost threw up. Here I am worried about the extra $30 I charge for a throat culture," she adds. "The work was beautifully done, the doctor is great, and the parents weren't upset, but . . . " Her voice trails off.

Plastic surgeons and dermatologists aside, many doctors view fee-setting as something of a balancing act. "I don't want to be the most expensive, the one who's seen as overcharging," says one practitioner. "But I don't want to be the schmuck who's the cheapest. Would I charge more if I could? There are some patients you'd rather not charge at all and some you couldn't charge enough for the aggravation."

In fact, high fees cut two ways: One obstetrician who recently joined a fee-for-service practice on Park Avenue, where office visits run $175, believes that a large price tag seems to make for a more respectful patient base. "When people call, they say, 'I know you're busy. I'm sorry to bother you,' " he says. "I never got that or very rarely got that when I was doing $5 co-pay work."

Yet doctors who charge high fees tend to attract patients with high expectations of extra service. Physicians in so-called boutique practices, of course, use the cachet of that special attention as a selling point, but at what cost? "Sometimes it's a defensive maneuver because the insurance companies drive them crazy," says an Upper East Side pediatrician. "But if you see a certain clientele like the well-known and the well-to-do, I think you overidentify with them. It's a seductive quality, and it's not particularly good for a physician because it's not what medicine is about. It's about helping everyone, not just about taking care of the patients who are nice to you."

And besides, says psychiatrist Richard Rabkin, "you can't charge too high a fee, because people will think you're only in this for the money."


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