What to ask about new contracts

Here are five questions you should ask before you sign on with an HMO:

1. Who are your patients, and are they likely to be part of the HMO? For instance, if half of your patients come from one big employer that is about to sign up with an HMO, it probably would be advisable for you to participate.

2. How many patients are you likely to gain from the plan? Remember that if you accept a lower reimbursement rate, you’ve got to be able to make up for it in volume. Consider how many patients the plan already has and how likely the plan is to succeed in your market. Calculate whether the new patients you are likely to get from the plan will make up for the reduction in rates.

3. What is the plan’s marketing strategy? Many MCOs come into an area and get their members by signing up physicians and taking over their patients. If the plan isn’t doing any additional marketing to sign up new members, you aren’t likely to get any new patients by signing with them, points out Jay Williams, principal of Arista Associates, a health care strategy consulting firm based in Northbrook, IL.

4. What will you have to do from a business standpoint to participate in the plan? Your staff’s time should be a big consideration, particularly if you are already dealing with 12 to 15 plans. Even if you get only a few patients or no patients at all from a managed care plan, your employees still have to learn all the plan’s policies and procedures. Consider how this will affect your staff and the number of employees you’ll have to hire to handle it.

"You’ll need people to deal with follow-up, with referrals from the HMO, and to make sure you get paid. Focus on whether it’s worth it from that angle," says Marc Benoff, MBA, director of Dan Grauman Associates, a Bala Cynwyd, PA, management and data consulting firm.

5. What does the plan require for you to get paid? If you have to call to verify that the member is covered and call again to get preapproval for treatment, participating in that plan could put a burden on your staff time.

Williams tells of a five-physician practice that contracted with 17 managed care plans, all of which require verification by phone for new patients and precertification for anything other than routine care. The practice had to hire three people to do nothing but certification, verification, billing, and reconciliation for those plans. The additional employees increased the office overhead by 35%.

Benoff notes that while some physician practices handle their managed care contracts with 1.5 to two full-time-equivalent staff members, most practices need more staff than that.