Contracting with MCOs: How EDs Can Find a Place at the Table

Editor’s Note: Issues related to managed care and emergency medicine affect every aspect of the operation of the emergency department and the work of its personnel. With the following article, The Managed Care Emergency Department begins a multi-part series on negotiating with managed care, covering issues ranging from the negotiating role to determining the proper payment structure for your department. In this article, six key steps for the assessment and positioning of managed care contracting are detailed.

ED physicians and nurses may know what they need from contracts with managed care—agreement on the definition of an emergency, payment for medical screening exams, auto-authorization. But, when it comes time to put those wishes in writing, many emergency medicine groups are finding they have been left out of the loop.

"Many providers have become frustrated because they can’t get the payers’ attention and they can’t get the hospital’s attention because they are just one player in the overall scheme of things," says Michael Williams, president of The Abaris Group, an emergency medical consulting firm in Walnut Creek, CA. "There might be a sense that they are behind the eight ball and all of these decisions have already been made."

But, there are ways for EDs managers to become part of the negotiating process, educating payers and the hospital and improving the contractual arrangements for everyone. Once that is accomplished, ED groups can branch out and, rather than just adapting to cope with managed care, actually expand and grow, developing new services that will be in demand in the new health care market.

The situation is similar to one faced by Samuel Kiehl, MD, FACEP, medical director of the ED at Riverside Methodist Hospital in Columbus, OH. The physician group that manages the ED now negotiates its contracts with third-party payers independent of the hospital’s contract.

"For the most part, we do it independently," says Kiehl. "What we found [previously] in several contracts was that the hospital was used to blackmail the ED physicians into signing contracts."

Some payers would stipulate in their contracts with the hospital that the facility must get every physician group to agree to contract with that organization, Kiehl says. The result was several contracts that were very unfavorable because the department had no leverage, he notes.

After the group took its concerns to hospital administrators, the hospital stopped agreeing to those types of contracts, says Kiehl.

Step one: "Have data, will travel"

Before you can hope to persuade anyone that you have a stake in negotiating a payer contract, you have to be keenly aware of what is going on in your department—which contracts are working, which aren’t, and why. And, you need the data to back it up, says Williams.

"Data is power. And, with managed care, data is absolute power," he emphasizes. "If you believe there is an unmet need or if you believe there is a problem, and if you can quantify it, you can get their attention."

This doesn’t necessarily mean a huge effort, says Williams. Some small but significant data can be very useful in illustrating the specific concerns EDs have with managed care.

Using limited tracer groups and focus studies, or just keeping logs of patients who were denied authorization in the ED can be the tool to get your foot in the door, says Williams. (See related story.)

At Riverside, using data obtained from its billing system, Kiehl was able to put together a picture of the number of visits, levels of service provided in the department, the number of x-rays and lab tests ordered, and ECGs read and interpreted.

Specifically, ED managers need to know how well they are doing under each existing contract, says Williams. The typical deal now is a per diem rate for hospital services and a percentage of charges for outpatient services, including ED services, that is usually around 80%, he says.

But retrospective denials and downcodings may reduce the amount actually paid to the department.

"You need to go back and look at the accounts and see how you’re doing," Williams says. "[The hospital] negotiated an 80% deal, but what are you really getting paid? Because of the downcodings and denials, your net dollars may not be anywhere near what you thought they were because the payer is using very aggressive tactics."

Step two: Helping the hospital negotiator

Hospitals may have hundreds of managed care contracts, each negotiated separately, and each coming up for renewal at a different time, Williams notes. Becoming aware of which contracts are about to expire, or have expired already, is key to beginning the process.

"Become aware of what the process is and who’s doing it, and what the timetable is," he says. "It’s amazing to me how hospitals [and physician groups] will let contracts expire and they don’t realize it."

Just informing the hospital that they took a deal that isn’t working out well and that it has recently expired can be very helpful.

Once you have the information, you can make contact with the person designated by the hospital to handle negotiating managed care contracts.

When you talk to him or her, use the data you’ve gathered to paint a picture of what is going on in the department, Williams advises.

"It always helps to have a solution and a few proposals when you go," he notes. "You say, ‘This particular payer is a problem—they make people wait, we have people on the phone for 45 minutes, and we don’t hear from the PCPs.’"

In what he calls the "color piece" behind the data, Williams suggests giving the negotiator 10 examples of patients who have waited more than one hour for service because of delays in authorization.

"The managed care negotiators are not going to know about this unless you tell them," Williams states. "It’s not the kind of thing that shows up in [their] data."

After presenting the argument, you can then present the solution, he explains.

"You can further say, ‘But, I have an idea. In some of our contracts, we have a 30-minute turnaround time for the PCP. If they don’t respond within 30 minutes, we consider that auto-authorized. These contracts are working well.’"

Then, you have presented the issue with the data to support it, proposed a solution, and gotten it to the right person.

Even though his group negotiates contracts separately from the hospital itself, Kiehl says they work closely with administrators to get the best deal.

"We do cooperate," he says. "We have periodic hospital-based physician committee meetings. We meet with the top management at the hospital and we talk about the various contracts that are pending and what all is involved in that."

Step three: Developing opportunities

The next step in establishing contracts with MCOs is to develop opportunities for the department outside of those in the traditional hospital setting.

If there is an unmet need in a particular market, the ED can develop products and services to meet that need and then market them to area payers, Williams says.

An example of this is the number of emergency medical providers that are developing after-hours urgent care centers. This is a hybrid model that has evolved from the providers’ experience with 12- and 14-hour urgent care centers, Williams says. But, the new centers are designed to complement primary care instead of compete with it.

"They know the payers want the patients to use the PCPs during regular business hours," he says. "OK, nothing special about that, but they are probably not being seen after hours, or there may be some access needs that the payer may be interested in."

Similar efforts have been made in developing emergency medicine advice lines and contracting to coordinate destination decisions with ambulance services.

Again, department managers are going to have to do some research in order to come up with the data to sell the idea to managed care.

"That could be a challenge because the payer may not know they have unmet needs, or they aren’t interested in spending any more money," Williams says. "What you are going to be asking them to pay for may have to come out of somebody else’s pocket."

To gain leverage, ED managers need to gather as much information as possible about a health plan member’s needs and the payer’s needs.

Williams recommends talking to patients when they are in the ED, conducting focus groups and exit interviews to talk about their concerns.

The HEDIS 3.0 performance standards for managed care are also a good source of information, he says. The data set includes some very specific parameters on turnaround times and overall patient satisfaction. There is also a Medicaid HEDIS, notes Williams. The information is published by the National Committee for Quality Assurance (NCQA). (Editor’s Note: To reach the NCQA, call 1-800-839-6487 or visit their Web site at http:\ \

"If you can come to the table helping them meet some of these benchmarks and knowing what their specialized performance standards are, you can gain leverage," he says.

Step five: Make the right contacts

Most payers are divided into two sections: provider relations people and member relations people, Williams says.

"Your typical contact with provider relations is not [the one] you want to talk to," he advises.

The ED group’s "ammunition" lies in what the members’ needs are, he says, and most payers are going to need help when they begin transitioning from a cost-cutting focus to a more modern focus on balancing cost and quality.

Mature plans are already trying to respond to HEDIS issues and open up their policies.

"For example, in some plans, you don’t need a PCP’s permission to go to your OB/GYN," Williams says. "You need to get to the members and the member piece of it."

But, it won’t be easy.

Plan officials may not understand what your group is trying to do, and it will take strong communication skills to make things happen.

"You can invite them to a luncheon with other payers, tell them you are doing market research, or use a global way of doing that through a professional organization."

Step six: Developing products positioned for the future

In the long term, ED groups should focus on breaking out of the "emergency department cocoon," says Williams. "You have to get away from [the idea] that ‘We’re an emergency care provider, we can only provide emergency medical services,’ and offer more services."

Two large groups in California recently put together an emergency medical carve-out (EMCO) by merging a portion of their businesses to go statewide and offer a global deal to payers to do more than just emergency services, he says.

Though the deal is no longer active, it was an attempt by ED group managers to think outside the traditional scheme of things and try to capture a larger part of the market, says Williams.

Reaching across traditional boundaries to form new alliances can also offer an emergency physician group new opportunities and provide new leverage to negotiations with managed care.

The emergency physicians at Riverside are part of a larger physician organization called the Medical Group of Ohio (MGO), says Kiehl. Made up of more than 1000 member physicians, the organization recently went into a partnership with the hospital to form a physician hospital organization (PHO), he says. The PHO recently formed a Medicare HMO.

"The hospital and MGO have been close partners in a lot of things. I think that’s why the hospital has been very sensitive [about] putting us in an awkward position relative to negotiating," he says. "They realize it doesn’t put them in the best position in terms of partnering."