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First, determine how your practice will benefit
If you’re considering signing up with a managed care plan, the experts have some advice for you: Take a little time to think it through.
"Too many physicians sign almost anything that comes through the door. It pays to take a step back and think about all the ramifications signing with a plan could have on a practice," says Marc Benoff, MBA, director of Dan Grauman Associates, a Bala Cynwyd, PA, management and data consulting firm specializing in the health care industry.
Instead, Benoff advises physician practices to take a cold, hard look at the managed care plan, what it offers, what it requires, and how signing up or not signing up would affect the practice.
"We see a lot of examples of physicians being squeezed by managed care plans. In some areas, payment rates are at Medicare level or less. In other areas, they’re not that low, but they’re below where they have been, and physicians have to work hard to make the same," Benoff says.
"Before signing a contract, physicians should look at each plan as it comes, investigate it, evaluate it, and make a decision on an informed basis," adds Jay Williams, principal of Arista Associates, a health care strategy consulting firm based in Northbrook, IL.
"Physicians as a whole must be more analytical about signing up for managed care. So many people automatically think they must get into it to stay in business, but that reasoning is absolutely incorrect. They need to know what it means," he adds.
Benoff says he knows doctors who regularly turn down managed care contracts and remain successful. For instance, he tells of one physician who won’t sign if reimbursement is less than a certain amount, based on Medicare reimbursement.
Benoff doesn’t recommend such hard-and-fast rules to his clients, but he does urge them to think twice before signing contracts — and to seek expertise among their own staff or through outside consultants before making a decision.
Williams adds, "Physicians need to have someone on their staff who makes sure they’ve got the wheels on their car before they start to drive. This must be someone who understands managed care — not just contract management, but negotiating." He advises examining what has happened to your practice in the past when you contracted with managed care and looking at what might have happened if you hadn’t signed up.
"Physicians could be hurt in the long run if they don’t consider the contracts in the overall context of their practice and the health care environment," Benoff says.
Williams tells of one practice that did an analysis of what had happened since it began participating in a major HMO two years earlier. The analysis showed that if they had said "no" to the plan, their patient load would have been down a little, but their revenue still would have increased because most of the growth in the practice had come from outside the managed care plan.
"They had no idea what effect their decision had had until they did the analysis. As a result, they decided not to participate in another managed care plan," Williams says.
However, there are two scenarios when it’s almost always advisable for physicians to participate in a managed care plan, Williams says. They are:
• if a company is likely to dominate your marketplace, particularly in your specialty;
• if you are losing patients rapidly because they are going with a competitor who signed up with the plan.
Many physicians fear that if they don’t sign up with managed care plans immediately, they will be shut out of the network and won’t have a chance to participate later, Williams says. Deci ding whether to participate on that basis is a difficult decision that requires research, he adds.
"The real decision comes when a new player comes to town, threatens to play hardball, and says they are going to enroll half a million members and if you’re not in the network, you’ll never be in there," Williams says. This is when you need to look into what will happen if you don’t get in the network a few years down the road, Benoff points out. If they don’t let you into the network in a few years and the plan really does attract a lot of members, you could be worse off.
But, if you hold out now and you can get in the network in a few years, you won’t be any worse off, he adds.
"It’s not like the first physicians in the plan are going to have higher reimbursement rates in perpetuity. That’s not what we’ve seen. HMOs have managed to drive rates down, but it’s been across the board," Benoff says. Williams and Benoff recommend that instead of accepting the first contract the managed care company offers, you should negotiate. Whether you’ll be successful may depend on your market.
"In certain markets, physicians have to contract with everyone and take what they can get. In others, they can fight to get better rates or turn down managed care contracts," Benoff says.
Generally speaking, if you are in a market with high managed care penetration and domination by only a few plans, you may not be very successful in your negotiations. But in markets where managed care penetration is still low or fragmented with no plans dominating the market, physicians have been more successful in negotiating with managed care plans, Benoff reports.
"If there is a plan coming to town and they need to build a network, if a physician group has an important piece of that network, it gives them some leverage in negotiating their contracts," he adds.
It’s possible to renegotiate your contract with a managed care plan, but it’s not likely that payers will agree to negotiate in your favor unless your practice is critical to their business, Williams says.
However, he adds, if you decide to drop out of the plan, the managed care company may propose renegotiating.
While there’s no doubt that managed care coming to the area can have a dramatic effect on your practice, physicians also can affect what happens to managed care companies, the experts say. For instance, if you have a large physician group with a strong role, you can make it difficult for the managed care plan to penetrate your market, Benoff points out.
"Sometimes companies move into a market and sign up half a million members, and sometimes it’s much fewer. If you sign up, you are contributing to the provider’s marketing strategy," Williams adds.