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3 MLR Questions Payers, Providers Should be Asking

Karen Minich-Pourshadi, for HealthLeaders Media, January 17, 2011
  1. Where will payers look to find ways to cut costs to compensate for the losses from MLR?
    They’ll have to review areas where there are administrative functions that can be cut, as opposed to medical expenses. This could possibly be their call centers or their claims adjudications areas. Also, they’ll need to look at how they spend in those areas and determine if these are areas of core competency or can they improve them through automation, such as creating patient portals so patients can better manage their own care. Lastly, the payers are really going to need to make a paradigm shift regarding how they manage patient’s care—instead of managing chronic care, now they need to focus on wellness and preventative care.

  2. What are the broader implications of this policy for providers?
    Payers are going to need people with different skill sets to work with patients on preventative care, such as life coaches and nutritionists. For insurers this hasn’t traditionally been something they offered as member care—but they’ll need to now. Also, payers are also going to have to work with patients and providers to improve the quality of care and try to prevent illnesses or disease. 

    The potential ripple effect of this for providers is if the payers are using more funds toward member care then ideally over the long-term it should result in members being healthier. That in turn would result in a loss of inpatient admissions … in theory hospitals should see a decline in those, and it would directly impact their volumes.
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2 comments on "3 MLR Questions Payers, Providers Should be Asking"


bob (1/18/2011 at 2:48 PM)
MLR requirements call for a new approach to billing and collections. A great deal of money [and headaches as well] can be saved with the simplest approach to partnering between the provider and a competitive third party payer. This approach involves the provider contracting out the entire billing and collection processes, including all claims processing, to a single, competitive third party payer. The contracting third party payer negotiates a collaborative strategic plan and annual budget with the contracting provider, and guarantees monthly payment to the contracting provider of all of the budgeted income, eliminating any involvement of the provider in payment and collection of bills for services to individual patients. The contracting third party payer takes over the management and staffing of the provider's billing and collection processes, maintaining the staff at the hospital, working in close collaboration with the hospital's staff that provides care and information. This approach of course requires a high degree of mutual trust, as well as processes to deal with any issues in achieving agreement on the annual budgets, and on how to handle unforeseen income and expense developments during the budget year and at the end of the budget year. Probably some arrangement for arbitration may be required. But the advantage to the provider of [1] guaranteed income and [2] being relieved of all responsibility for billing and collections may be sufficiently great to overcome any reservations. For the contracting third party payer, this arrangement assures a relevant role in the years ahead as coverage becomes universal. This approach shifts the interaction between provider and payer from a focus on individual patients to a much more effective, broader bundled perspective that has tremendous implications for greater effectiveness and efficiency than when the focus is on individual patients. As important as the reduction in costs of claims processing and collections is the fantastic reform impact of the collaborative strategic plans and budgets, prepared by professionals increasingly improving their understanding the interaction of the necessary patient care focus with the equally necessary population care focus. For more information, see my web site sigmondpapers.org or call at 215-561-5730.

Ken Peach (1/17/2011 at 1:49 PM)
With artifical limits placed on what the insurance company gets to keep out of the premium dollar (15-20%), the goal now is to reduce operating expenses, not to change how care is delivered. The biggest impact of this law has not been on patient care - it has been on insurance agents and consumer choice. Agents have seen their commissions cut as much as 40%. Many are leaving the business. Entire lines of insurance products that were available to consumers a year ago have been pulled from the marketplace because they are no longer financially viable. Consumers now will have less product choice and fewer agents to explain those products that remain.