Physiatry Practice Management Resources

Too often, physicians see themselves as pawns of managed care. True, you probably can't call all the shots in a managed-care-dominated world. Utilization review, preauthorizations and capitation will probably remain facts of life for the foreseeable future. But you can develop a strategy that at least gets managed care working for you, rather than against you.

Whether you are about to sign up with new plans or are taking a second look at plans you already contract with, the first step is to consider reimbursement, experts note. Which plans can you afford to work with and which ones are likely to set you back?

Ask plans with whom you are considering a relationship to give you information up front on capitation rates or whatever fees they offer. Also, ask them to share demographic and utilization data on their patients. If one group of patients is sicker than normal, it could eat through your entire capitation fee before you know it.

A plan may not want to share this information, notes Donald L. DeMuth of Donald L. DeMuth Professional Management Consulting, with offices in Wayne and Camp Hill, Pa. But, he says, "you want to know as much as you can about who their patients are and what services they're providing."

As a general rule, he says, a primary-care physician should expect a capitation rate of $10 to $20 per member per month for younger, healthier patients, including co-payments of $2 to $5. A Medicare managed-care plan with high-need patients should offer a higher capitation rate.

Jeff Freeman, senior managed-care consultant at RCFA Healthcare Management Services in Atlanta, notes that some HMOs allow a phase-in of capitation to ease the financial burden of patients who are frequent visitors. Regular fees are paid until a certain number of patients are seen -- usually 50 to 100 per physician -- and then capitation kicks in.

Next, you want to compare what you can expect to make for each service under the new plan with what you normally receive from other plans. Experts recommend concentrating on the top 20 procedures done in your office by CPT code, which likely generate about 80 percent of your revenue.

"You need to know what it costs to deliver care," says Darrell Schryver, a consultant with the Medical Group Management Association's Consulting Group and co-author of Managed Care Contract Performance and Review (MGMA, 1995). "If you're receiving $15 per service, but it truly costs you $25 for that service, you'll be in trouble."

He recalls one solo gastroenterologist who saw his income drop from $400,000 to $32,000 in one year because he felt competitively compelled to sign up with every plan, no matter what reimbursement rates they were offering. "After he filed for bankruptcy," notes Mr. Schryver, "auditors found he was getting paid 30 percent of his total costs."

If you already contract with several plans, make an ongoing comparison to weed out those that aren't performing up to expectations. Keep track of utilization and reimbursement rates. Stephen Liebow, a practice management consultant in Somerville, N.J., suggests dividing the total collections for a plan by the number of patient encounters for that plan. Repeat for each plan. That gives you the amount made per encounter by plan. A more scientific way is to multiply relative value units for each procedure code by the number of times it occurred.

If one plan yields significantly lower rates than the others, you may want to drop it, he suggests. If it is a particularly large plan in your area or it represents a significant proportion of your patient base, dropping out may be hard. Try negotiating a better reimbursement rate, experts say.

However, if a plan won't come to the table, you may have to terminate your contract, experts note.

Nor does such a move always spell disaster. Mr. Schryver remembers one practice that was losing money with a Blue Cross/Blue Shield plan, which represented 52 percent of its patients. When the practice finally dropped out, it actually ended up losing only 12 patients. The rest of them switched to other plans to stay with the doctors in the practice.

Mr. Schryver recommends keeping participation with any one plan at 20 to 25 percent of your total practice. "You don't want to let any plan grow to 30 or 40 percent," he notes.

As for the number of plans to contract with, that depends on your practice type and geographic location. Experts generally advise limiting participation to 10 plans or fewer.

Remember, too, that even if a plan pays well, the higher income may be offset by onerous utilization review policies, referral difficulties and other hassle factors that make working with it hard for you and your staff.

Most important is the plan's reputation for quality. Who are the other physicians on the panel? Are they doctors you know and trust? What's the plan's quality record when it comes to patient care?

Mr. DeMuth recalls one HMO that authorized ophthalmologists to only schedule cataract surgery on their days off or not be paid, presumably to keep the number of cataract surgeries down. "You have to consider how easy it is for you to provide your patients with appropriate care," he insists.

Watch Out For...

• Indemnification clauses. Some contracts state that if there's a malpractice claim, the doctor has to indemnify the managed-care plan. In other words, if you think a patient should have a chest X-ray, but you don't order one because the plan hasn't approved it, you may be liable for the full amount of the malpractice award if a patient sues, says Jeff Freeman, a consultant with RCFA Healthcare Management Services in Atlanta. In fact, he adds, some malpractice carriers, such as those in South Carolina, don't even cover doctors with indemnification clauses.
• Provisions that allow a plan to change fee schedules, policies or protocols unilaterally without consulting you.
• Lengthy wait times for terminating or re-negotiating contracts, such as once a year or only with 90-days notice. "You may be stuck with something you don't like for awhile," says Donald DeMuth, of Donald L. DeMuth Professional Management Consulting, with offices in Wayne and Camp Hill, Pa.
• Provisions that require you to comply with and obey every current and future policy of the plan. Mr. Freeman recommends amending such provisions to say that you will "make a good faith effort to comply."

What You Want...

• Stop-loss provisions. This allows your fee to go up after a certain number of services are provided or a certain dollar amount is exceeded in the care of particularly sick patients.
  
• A satisfactory definition of "medically necessary." Make sure you also negotiate a process by which you can challenge a plan when you don't agree on what care should be provided.
• Provisions that hold plans accountable for their contractual obligations. "You have every right to terminate your contract if they're not living up to the provisions, just as they can terminate it with you," notes Darrell Schryver, a consultant with MGMA Consulting Group.

Written by: Sidney Stevens