Managed care strategy changes lead to success

Research, relationship building key

Talk about a makeover. Atlanta-based Emory Healthcare Inc. has switched its reputation from "not very managed care-friendly," in the words of S. Patrick Hammond, its associate director for managed care, to a managed care portfolio that would make just about any health system or group practice jealous: 150 contracts and access to more than 3 million lives.

The keys to this success: research, a focus on long-term relationship building, and a willingness to be flexible when working with payers.

But the transformation clearly didn’t happen overnight. One of the first things Emory did when starting its managed care department four years ago was to research the market, Hammond says. "We realized that the market is being dictated by employers and how much they’re willing to pay for services," he says.

To figure out just what this figure was, Emory did two things:

1. They looked at historical payment rates within the Emory system, particularly looking for rates that Emory had turned down — and to which payers had responded by taking their business elsewhere.

2. They also worked with consulting firm Towers Perrin to develop a capitation model based on historical data in the Atlanta market, using figures compiled from other contracts that collectively represented about 5 million member months.

The organization then determined its pricing goals based on the size of potential contracts — the amount of business they represented, how many physicians and hospitals were in each payer’s current provider panel, benefit differentials, and other determining factors. Emory also ranked potential contracting relationships into three to four different tiers, based on how much business various payers would drive, and set pricing floors for each tier, Hammond explains.

Initially, Emory’s managed care office signed a lot of contracts — "We had to do some things to change the perception of Emory," Hammond says — but today, about eight payers represent 90% of the organization’s managed care business.

Although the research and rate-setting phase sounds very methodical, Emory’s approach to potential payer clients was much more fluid. In fact, in initial meetings with potential clients, the subject of rates and contracting didn’t even come up.

"A lot of it is sitting down and meeting with them to see what their philosophy is," Hammond says. The initial meeting could be with a provider relations representative or by hearing a company executive speak at an industry conference. The goal: to pick up nuggets about the managed care organization’s operating philosophy.

Take the case of Emory’s relationship with one national payer, which Hammond declines to name for competitive reasons. "We heard discussions in the community that they were thinking of having a cardiology specialty network and were looking for a network manager," he says. "Over a year’s period, we met on a quarterly basis to talk with them, not just about actual rates or contract terms but about some of our thoughts on performing cardiology services — how we were managed care-friendly, how we used case maps, and how we had reduced our length of stay."

A year and a half later, the payer asked Emory to bid on a cardiology contract. The cardiology relationship expanded, and over a three-year period, Emory went "from having little or no business with the MCO to having them as one of our largest contracts," Hammond says.

Remember to stay flexible

He attributes this success to having the outcomes and organizational results to demonstrate an ability to succeed in a managed care environment — such as critical path programs and length of stay data for patients by disease — but also a willingness to be flexible. "You have to show a willingness to learn from a managed care company. You can’t say it’s my way or the highway," he says.

Hammond says that extends to service after the contract is signed. Emory’s managed care office employs two staff members who handle calls from payers, Emory network providers, and operations people to resolve problems and answer questions. The two employees field a combined 100 calls a day on average, Hammonds says.

"Once you sign a contract, you’d better be able to deliver what you’re saying," he explains. "Your reputation will get out in the community. That’s our biggest challenge. If you have problems, you’d better get them resolved."

The strategy has obviously paid off. Today, Emory gets about 40 proposals a month to review. Last year, the company signed 40 contracts and rejected 80 proposals sent to them.