Carveouts: A specialist’s dream, or a nightmare?
Carveouts: A specialist’s dream, or a nightmare?
By Elizabeth Gallup, MD, JD, MBA
Being a specialist in a managed care world doesn’t mean you have to miss out on some of the advantages traditionally available to multispecialty independent practice associations (IPAs). A relatively new breed of opportunity available to specialists in some markets is the single-specialty IPA. If your practice is considering capitalizing on this trend, the information below should provide an outline of the pros and cons of this type of venture.
Single-specialty carveouts have many advantages. They benefit the payer, because the payer can transfer the risk to the IPA. It is often much easier to negotiate a single-specialty carveout with a payer than a global capitation contract.
Single-specialty carveouts also can boost the participating physicians’ patient volume. In these days of specialty oversupply, participating in a single-specialty IPA that gets an exclusive contract with a payer can be a significant practice enhancer if the reimbursement is adequate. Those specialists not participating in the IPA often see long-term contracts terminated by a payer in favor of an exclusive relationship with an IPA for single-specialty services.
Site of service makes a difference in cost
Single-specialty carveouts force the physician to look closely at his or her practice efficiency. This includes not only the type and number of tests and procedures ordered and done, but also where these services are performed. Physicians participating in many single-specialty carveouts try to perform as many tests and procedures as possible in an office setting or an outpatient surgery center to capture the facility fee from the hospital, and to keep expenses down (see article on p. 9 for information about the growing trend of physician-owned outpatient surgery centers).
Being the first in your market with a single-specialty carveout can be a significant advantage. You become known to the payers, and if you assist the payers in successfully reducing costs, you have made significant strides toward cementing a long-term relationship.
In addition, as multispecialty IPAs organize and seek global risk, your single-specialty IPA can negotiate and contract with the multispecialty group. This allows the single-specialty IPA to get access to more of the dollar, and if your group of physicians has a demonstrated track record with payers in town assists the multispecialty IPA in its negotiations with the payer.
It’s not all a bed of roses
Before you go running off to sign a contract, however, keep these pointers in mind:
1. Clearly define covered services. When negotiating a capitated single-specialty carveout with a payer, you must be absolutely certain to ascertain and delineate what is covered and what is excluded from the capitation payment. Many single-specialty IPAs have gotten into financial trouble because they thought the cap rate excluded certain services when it did not. The contract should specifically spell out what is covered and what is not.
2. Don’t cheapen your act. One common problem, especially when groups are asked to submit a bid for carveout services, is to negotiate a payment that is too low. You still must cover your costs, and if the cap rate is not enough to cover your costs, the increase in patient volume will not make up the difference.
3. Know whom you’re bidding on. If you were in the market for a new car, you’d probably be willing to spend more for a Mercedes than for a Chevy Capri. Along the same lines, negotiating an appropriate capitation payment means knowing what type of patients you’ll be caring for. Certain groups of people, like it or not, are high utilizers. Groups that historically fall into this category include health care professionals, teachers, lawyers, and union members.
4. Don’t let other physicians confuse your office with a trash receptacle. Single-specialty capitation can also encourage "patient dumping" among physician specialties, who may over-refer problem patients or high utilizers to your office. Obviously, the incentive is to do less for the patient, and if a physician can get another physician to perform a test, she can turn her costs into your costs. Don’t let it happen. Many practices are arriving at referral guidelines for this very reason.
Here is my take on this phenomenon: Single-specialty carveouts which seek to manage the part of the medical expense dollar designated to cover services performed in a specific specialty area can be a great way for physicians to get together as an organization and try to manage risk. In some markets, it may be just the first step for physician groups on their way to managing global risks; in other markets, it may be the desired endpoint of a relationship with a payer. However, as with any other contract, physicians need to evaluate the contract language and the covered population in question very carefully before signing the bottom line.
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