Senior plans get riskier, but don't give up just yet
Senior plans get riskier, but don’t give up just yet
Physicians battle with contract complexity
Medicare managed care was once touted as the new frontier in senior health plans. But physicians and health maintenance organizations (HMOs) have been reeling from an apparent reversal by the Clinton administration on the future of Medicare risk programs.
After supporting efforts to find new ways for the Health Care Financing Administration (HCFA) to lower federal health care expenditures, the government’s plan to reduce its stake in managed care has suddenly raised the element of risk in Medicare risk.
The Clinton budget for fiscal year 1998 calls for savings of $46 billion in Medicare risk programs over the next six years. And many industry observers believe the cutbacks will sharply reduce the attractiveness of these capitated programs for both payers and providers.
Sticking with these programs has become extremely problematic, but that’s no reason to abandon Medicare managed care, observes Neill Fishman, MHA, executive director of The Vancouver (WA) Clinic, a 67-physician multispecialty practice. Medicare risk still is a formidable source of income if properly managed by physicians, Fishman says.
And others agree, although lingering uncertainty over how the insurance industry will react to the cuts clouds the outlook for providers. Weaker financial support from Washington could end up costing physicians in lower capitation income and fewer covered services.
But for now, Medicare risk programs represent strong opportunities for enrollment growth and good operating margins from the Medicare side, Fishman says. (See chart on p. 38 depicting statistics on Medicare risk growth.)
However, there are caveats for practice managers. "These contracts are far more complex than commercial managed care, and in many cases they involve sicker, older patients," Fishman notes. Therefore, watch the road signs, Fishman adds. For example:
• Don’t jump into senior health plans without a strong track record in commercial risk programs.
Effective management of utilization, specialist referrals, and hospital bed days is crucial to dealing with a senior population. Medicare patients generally use resources at a rate five times that of non-Medicare commercial enrollees under capitated plans, according to Fishman’s data.
Although HCFA statistics are inconclusive, these patients tend to be older and more infirm than those on Medicare fee-for-service plans, Fishman says. One reason for these demographics may be the breadth of benefits, such as prescription drugs typically offered by risk plans that attract more resource-dependent seniors.
Administrators should therefore carefully monitor the effect of the risk plan on the practice, and compare the financial performance of their Medicare and non-Medicare business. The information might reveal that Medicare capitation isn’t working for you.
• Develop a critical mass before evaluating your success.
"You need at least 8,000 to 10,000 enrollees to make this thing work," says Jeff B. Milburn, vice president of finance at Colorado Springs (CO) Health Partners (CSHP), a 65-member multispecialty group. "You make money on the management of these patients, which is no small task," he adds.
Give yourself time, at least a year, to weigh your effectiveness financially. It will take patients time to wend their way through the system and run up bills in a set pattern, Milburn says. CSHP, which in 1995 contracted with Santa Ana, CA-based FHP Health Care’s senior risk plan, did well financially in its first year. But "1996 numbers aren’t in yet, and I’ll reserve judgment until later," Milburn adds.
• Protect your practice from adverse selection.
Patient age is another factor. You don’t want patients who are too old, so watch your enrollment demographics, Fishman warns. There is a tendency toward adverse selection in Medicare risk plans compared with straight Medicare fee for service.
Controlling patient demographics may be impossible. But in negotiating the risk contract, practice managers can insist on carve-outs and risk corridors to level the playing field, Fishman says. Insist that the payer include a provision that will protect the practice against adverse selection by raising the capitation rate according to age ranges or severity indexes.
Severity-of-illness indexing is an excellent way to utilize your practice’s experience with certain high-cost CPT-4 and ICD-9-CM codes, Fishman says. Run a database review of the diagnostic codes that expose your capitation dollars the most. Usually, these codes will turn up cases of geriatric oncology, congestive heart failure, and diabetes. Then negotiate carve-outs or higher capitation rates based on these high-risk diagnoses.
The "information is in your billing database. Use it to negotiate," Fishman says.
Payers often change the rules
• Keep a close eye on the contract.
Even with government-sponsored programs such as Medicare, payers are apt to suddenly change the ground rules without notifying providers. This happens all the time under commercial plans, says Linda M. Hansing, president of L.M. Hansing and Associates, a practice management consulting firm in Englewood, CO.
Payers conveniently adjust the conversion factors underlying the contracted relative value scale, or lower rates outright on certain high-cost procedures such as cardiac surgery. They also cut back on benefits that cover pharmacy or certain lab services, Hansing says.
Carefully review the contract. Insist on the right to review any fee changes prior to implementation. Or, "shy away from contracts that don’t require payers or independent practice associations [IPAs] to disclose reimbursement changes," Hansing says. IPAs and management services organizations are equally guilty of leaving practices out of the loop, she adds.
• Stay informed about risk pools and incentives.
Cautionary tales about physician incentive plans apply to Medicare risk as well, Hansing notes. Although these aren’t necessarily the domain of insurers, they are common practice under capitation plans, and therefore should concern Medicare risk providers.
Work with the IPA administrator and request detailed monthly or quarterly reports specifically concerning the risk pools or withholds related to the Medicare risk contract. Don’t rely solely on the network’s management to safeguard the reserve. Some practices have lost large sums by feeling overly confident about the state of their contributions, Hansing says.
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