Rapid managed care growth presents challenges
Rapid managed care growth presents challenges
Mergers, falling payment among changes
Consolidation among payers and intense market competition for employer business, coupled with double-digit HMO market penetration growth during the last two years, have left practice managers in the Raleigh/Durham/Chapel Hill, NC, marketplace with plenty of challenges. The consensus among practice managers and industry leaders interviewed by Physician’s Managed Care Report: Collaborate with good partners and choose your contracts carefully.The market characterized by one multispecialty practice leader as "essentially asleep at the wheel with regard to managed care as recently as early as 1993" now has a 42% penetration rate in terms of combined HMO and point-of-service enrollment, according to health care publisher Harkey and Associates. Statistics from InterStudy Publications, which show HMO-enrollment only at 21.1% as of January 1996, report an annual HMO growth rate of 21.6% between 1994 and 1996 (see chart on p. 57). This rapid market growth has created a number of changes that have affected physician practices in the Raleigh/ Durham/Chapel Hill Triangle area:
1. Failures of exclusive-model HMO networks have led to more opportunities for local practices.
Both Kaiser Foundation Health Plan of North Carolina and Prudential HealthCare’s Raleigh/ Durham operation drastically revised their original tightly managed network models for the Triangle market. In 1996, both carriers expanded their physician networks to begin contracting with community-based physicians when it became apparent that Triangle-area consumers wanted greater freedom of choice, says Dave Garbrick, principal and health care practice leader of Towers Perrin’s Charlotte office.
This created contracting opportunities for practices such as Cardinal Healthcare P.A., a local multispecialty group affiliated with MedPartners, a physician partnership management company in Birmingham, AL. Cardinal became part of Kaiser’s Community Choice network of community-based physicians last year. That move, along with other growth mechanisms, has allowed the practice to grow by 1,000 new HMO patients a month, says H. Parker Eales, Cardinal’s former CEO, who is shifting into a role as vice president for development for MedPartners’ North Carolina office. (See related story above for more on Cardinal’s strategy.)
2. Capitation is catching on at some practices, although many are still operating primarily in discounted fee-for-service. What’s the state of capitation in the Triangle market? It depends on whom you talk to. Eales estimates about 20% of Cardinal’s patient mix comes from capitated contracts that primarily are reimbursed through a percentage-of-premium arrangement. Another practice, Raleigh Medical Group P.A., has only one capitated contract (the remainder is discounted fee-for-service), says Donna Shearer, administrator for the group.
"They [payers] are saying, This is our capitated plan, but if you don’t like it, we can go back to fee-for-service,’" Shearer says. Garbrick of Towers Perrin says that although risk contracting in the Triangle is a mixed bag in terms of physician group participation, he predicts that the majority of the market’s contracts will be reimbursed through capitation within the next two years. However, the overall market will probably never become 100% capitated because North Carolina law requires an HMO license in order to provide capitated arrangements, which shuts out large companies that self-insure. Garbrick says many self-insured employers likely will contract directly with physicians and employ non-capitation incentives.
3. An adjusted RBRVS is an increasingly popular managed care payment mechanism. Even further down the road, payers who write self-insured business will reimburse managed care contracts through Medicare’s RBRVS (the Resource-Based Relative Value Scale HCFA uses to reimburse for Medicare patients), Garbrick says. Healthsource, a managed care organization with a presence in the Triangle market, currently is offering a reimbursement mechanism that is a variation on RBRVS. The norm would be between 125% to 135% of RBRVS, varying by procedure or by specialty, Garbrick says.
Raleigh Hematology/Oncology Associates signed a contract with Healthsource under these new terms, according to practice manager Carol Burns. Burns says because the practice’s computer system accommodates this new billing method, the main adjustment was on the front-end calculations she made before going into the negotiations with Healthsource. "It’s a matter of knowing what your costs are and converting the RBRVS dollar figure to the procedure dollar figure so you know what your reimbursement would be for each line-item procedure," she explains.
4. Some practices are feeling a reimbursement squeeze. Both Burns of Raleigh Hematology and Shearer of Raleigh Medical Group are getting more pressure from payers to cut costs, although Eales says his practice has not felt this pressure. Shearer says they have one relationship in which the payer has cut primary care reimbursement by 6%, while Burns says some payers who have consolidated or been purchased are sending new management in to negotiate contract renewals for discounts up to 50%. Shearer’s tactic: renegotiating her own vendor contracts in light of their potential changes. For example, she recently renegotiated an 11% cut with her practice’s payroll vendor.
5. There is no single dominant hospital system in the market, which has created several systems of integrated health care. Both Raleigh and Durham have several strong hospital systems, which gives practices the potential to participate in health systems sponsored by one or more of the competing hospitals. Duke University, for example, is operating Wellpath Community Health Plan, a managed care organization, as a joint venture with New York Life Insurance Co., although the plan contracts with Durham Regional Hospital and Rex Hospital in addition to Duke. Some practices have built collaborative relationships with other physician practices — Raleigh Medical Group through participation in an IPA, and Cardinal through formation of a 500-physician IPA that affiliated with MedPartners in November.
6. Practices are dealing with a patient population confused by a plethora of consolidations in the managed care industry. CIGNA is acquiring Healthsource, United purchased Personal Care Plan of North Carolina, U.S. Healthcare was acquired by Aetna . . . and the list goes on and on. "We have John Doe walking in saying he works for Westinghouse and is covered by Blue Cross and Blue Shield, but even within Blue Cross and Blue Shield there are many different plans, some of which we may or may not participate in," Shearer says.
Some practices in the area spend time providing counseling up front, while others direct patients to communicate with their insurer to make sure they are visiting an in-network physician and won’t be stuck with huge out-of-pocket costs. Eales points out that all these mergers make it even more essential for a practice to form collaborative arrangements with other practices or even a practice management company.
[Editor’s note: Please let us know if you found this month’s market profile interesting, and if there are other geographic markets you would like us to cover. Contact Francine Wilson at (800) 688-2421.]
Subscribe Now for Access
You have reached your article limit for the month. We hope you found our articles both enjoyable and insightful. For information on new subscriptions, product trials, alternative billing arrangements or group and site discounts please call 800-688-2421. We look forward to having you as a long-term member of the Relias Media community.