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Rates drop dramatically as managed care moves in
As managed care penetration increases, physician practices that reduce inpatient utilization are likely to do well, given managed care’s insistence on cutting costs. Now a study has shown that the presence of managed care definitely affects inpatient lengths of stay in a given area.
Research from the Sachs Group, a research organization in Evanston, IL, shows that markets with high managed care penetration have 58% fewer days in the hospital and 34% fewer discharges than markets with little or no managed care penetration. (For details of the Sachs Group research, see charts, this page and p. 45.)
"There is pressure from MCOs to get patients out faster and to avoid admissions altogether," says Paul Presken, product manager for research and development at the Sachs Group.
On the positive side, if physicians can document their length of stay for each diagnosis they treat and can prove they have a better length of stay than their colleagues, they often can use that information as justification for getting exclusive arrangements under managed care contracts, points out Michael Fleischman, CHC, of Gates Moore, an Atlanta-based health care consulting and accounting firm that specializes in medical practice management issues.
In addition, some managed care companies may offer additional compensation at the end of the year to practices that cut their average length of stay to below the norms for that diagnosis-related group, Fleischman adds. (For tips on how you can shorten your lengths of stay, see related article on p. 45.)
Managing cost and length of stay is becoming necessary to get any kind of insurance contract, says Vance Chunn, FACHE, executive director of Cardiology Associates in Mobile, AL, where managed care accounts for only about 10% health care reimbursement in the area.
"We are taking steps to make sure we will benefit by making our profiles as attractive as possible. It’s a hot topic for us right now," Chunn says.
For instance, Blue Cross, the largest insurer in Alabama, is looking at inclusion and exclusion of physicians in its Preferred Medical Doctor program based on the practice profile, including how well physicians manage cost and length of stay, he says.
"Length of stay is extremely important when you are in a risk contract. Even if you are paid under a per diem contract, if you exceed the average length of stay, it will be costly at some point," says Barbara Gunder, MA, practice administrator for the Salem (OR) Clinic, in an area with one of the highest managed care penetrations in the country.
She adds that practices should monitor length of stay not only from a monetary standpoint but also from a quality perspective.
"If we are an outlier in an area, it concerns us because we may not be providing the type of interventions we need to," she adds.
Unless your physician practice has a sophisticated relational database to manage its medical records, determining your length of stay for each diagnosis may be a matter of going through the medical records one at a time, Fleischman says.
However, information on national trends is available from national health care statistical tracking firms, published Medicare reports, and some professional organizations whose members participate in national outcomes studies. The hospital where you practice may have information available on average length of stay for its patients.
Cardiology Associates has begun monitoring length of stay using data from local hospitals and insurance companies, Chunn says.
"We can compare ourselves as far as cost and length of stay are concerned to each other in the group as well as to other cardiologists in the area. We can also compare our group to the other major cardiology group in the area," Chunn says.
The Sachs Group has created inpatient benchmarks to help physicians predict the effect of managed care on their market. These statistics can help you prepare for the future as managed care moves into your market.
Sachs statistics are based on 10 million actual discharge records from 1996 state databases in 45 markets in 15 states all over the United States. These records represent about 25% of all discharges in the United States, Presken says.