This article appears in the July 2012 issue of Managed Care Contracting and Reimbursement Advisor
With all the changes in the healthcare industry, physician practices may need to reassess how they evaluate managed care contracts and reimbursement strategies, say some experts. What worked in past years may not be your best approach for the future.
The changing face of healthcare is resulting in more creative interaction between payers and providers, says C. Frederick Geilfuss II, JD, a partner with the law firm of Foley & Lardner, LLP, in Milwaukee. There is more talk about narrow networks, risk sharing, and information sharing, he says.
"That is somewhat unusual and I think it's attributable to the focus on accountable care," he says. "Some of the bigger systems are saying to providers that they should put together a narrow network product and take some of the risk on it, then they can go out to targeted audiences with the narrow network."
Smaller physician practices may not be a part of those narrow networks, Geilfuss says. That could have a detrimental effect on acquiring optimal managed care contracts.
"Physicians not in these networks may see some steerage in some programs or networks against them. You could lose out on some business," Geilfuss says. "The bigger systems are doing these networks, so if you get wind that these are coming together, you may want to be connected in some fashion so that you can be a player in that network."
Medical homes also are gaining more attention, though there is still some question as to how the infrastructure will be funded. The use of medical homes could increase the role of physicians as gatekeepers whose permission would be required for specialty care or hospital admission, Geilfuss says.
"There has been less of that role lately for physicians, but the rise of the medical home brings it back to the physician to play the gatekeeper," he says. "That can make the physician an important player in the medical home system."
Smaller physician practices have always faced a challenge when seeking and evaluating managed care contracts because the bigger systems have all the leverage. Geilfuss expects that challenge to become even greater in the future.
"Things like having a reasonable definition of medical necessity in the contract become a bigger issue as providers are pressed for justifying the type of care they're billing for," he says. "Also, another thing to look at is having the ability to change terms and conditions of the contract, including reimbursement and even in mid-contract term. When a big payer has control, they like to have the most flexibility they can build in."
Geilfuss is hearing more complaints from smaller providers who feel they are being squeezed by vague definitions of medical necessity, or no definition at all, in their contracts.
"I think it's important to have a definition, not just to say it is determined by the payer," he says. "Try to get as many objective criteria into the definition as you possibly can so it is not a subjective decision. A lot of providers think the payer uses that lack of definition as a way to avoid paying, when the treatment is common in their community."
Volume not primary goal any longer
Changes in healthcare are prompting providers to move away from the strategy of recent years in which physicians sought to maximize volume in order to compensate for meager reimbursement rates, says Taylor Moorehead, a partner in billing operations with healthcare billing consultants Zotec Partners and also their corporate compliance officer. Rates may have been low, but until recent years the process was relatively straightforward.
Not so much anymore, he says. Increasingly, managed care companies are requiring more of providers before approving payment, and some of the data collection provisions in healthcare reform will increase that burden further, he says.
"Now it's a cash play from the carriers in terms of how they're directing business," Moorehead says. "Contracting has changed as well. Rather than seeking more and more patients, you're seeking the right contract from the right carrier."
Moorehead gives the example of a physician practice offered contracts from two managed care companies. They both have about the same number of patients to offer, but one has bad payment practices, taking 45 days to pay, denying 15% of claims, and requiring you to jump through a lot of hoops for payment.
The other group has a denial rate of 5% and is easier to work with, but its reimbursement rates are slightly lower.
"You don't necessarily want to go for every extra dollar in reimbursement rates," Moorehead says. "It's all about the other ancillary activities that the payer makes you go through and that cost you money. Those things were never looked at before."
In the past, Moorehead says, a physician practice might have looked at an offer and determined that the carrier could bring 100,000 lives, offered 90% of Medicare reimbursement, and therefore the contract value would be about $1 million.
"That's not the case anymore," he says. "It might be worth $1 million, but it's going to cost you $1.2 million in salaries, people, and process because of all the work that goes along with that. So it's not really a $1 million deal anymore."
Denials are increasing as payers are seeking ways to improve their bottom lines in a tough economy, says Moorehead. As always, they hope some percentage of the denials will never be challenged. Combine that with the changes in CPT codes that will increase the work required to submit claims, and you have to consider more than just dollars when evaluating a managed care contract, he says.
Too often, Moorehead says, physicians simply accept what is offered without looking at the true cost of a contract. It's not just about reimbursement anymore, he says. It's about process engineering.
"A carrier comes out with a fee schedule and the reimbursement is down. Well, bad enough, but then they're also implementing these processes that will increase your workload and increase the denials from 5% to 15%," Moorehead says. "Most people just say 'yes' and 'thank you.' You have to look at this from a completely different angle in today's world. Times have changed. Wake up."
This article appears in the July 2012 issue of Managed Care Contracting and Reimbursement Advisor