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Physicians Need New Approach to Managed Care Contracts

HealthLeaders Media Staff, for HealthLeaders Media, June 27, 2012

"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."

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