Physicians feel fallout as hospitals nix HMO contracts
Physicians feel fallout as hospitals nix HMO contracts
Get-tough policy can hurt practices
Increasingly aggressive in their contract negotiations with managed care plans, more hospitals are now opting to cancel their HMO agreements when they don’t get the payment rates they want. Increasingly caught in the middle of this get-tough policy are the physicians affiliated with the hospital.
According to New York City-based Deloitte & Touche, poor financials have prompted about one-third of hospital chief executives to cancel managed care contracts. The statistics are significantly greater for larger hospitals — 60% of those facilities have terminated HMO deals this year.
California’s St. Joseph Health System, for instance, Orange County’s largest hospital-based system, plans to slash the number of its managed care contracts from 17 to three over the next 18 months to plug up the $45 million a year in loses those HMO deals are costing it.
"Right now, we’re losing money on every patient," says Joe Randolph, St. Joseph’s CFO. Given the recent trend where insurers are getting employers to accept major rate hikes, "there’s no way physicians and hospitals are going to sit back and not insist a share of this be passed down to providers."
Lost referrals
In the short-run, however, canceling HMO contracts can cause a major disruption among providers as a key source of patient referrals and cash flow is lost.
Most often, specialists and surgeons are first affected when a hospital terminates its relationship with an HMO. The impact may even mean those hospital-based physicians will need to find another facility or organization to affiliate with, note experts. Meanwhile, physician groups working with a particular HMO might be forced to establish relationships with other facilities still working with the plan.
"When a hospital cancels a major managed care contract, there’s an immediate downside for the physicians connected to that hospital," notes Maria E. Minon, MD, vice president of medical affairs at the Children’s Hospital of Orange County. "The impact can be especially hard on younger providers just starting their practice who don’t have a large number of long-time patients."
There’s also an upside, she says. "If they are part of an IPA [independent practice association] that is not getting adequate compensation, it will cost money for the physicians to treat patients," notes Minon. "In the long run, I can see why the hospitals are doing this and how it will benefit the physicians. But in the short term, it’s affecting the physicians by decreasing their referral sources."
Still, many insiders says those hardball tactics are necessary. "The bottom line is these HMOs have to start paying for the cost of care," stresses Randolph.
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