Dipping your toes into managed care waters
How one group entered capitation slowly
Anyone who has learned how to swim knows you start out in shallow waters before venturing out to the deep end. The same can be said for Kansas City, KS-based Women's Healthcare Network's approach to managed care.
While some groups advocate advanced strategies like global risk, many Physician's Managed Care Report readers struggle with how to prime the pump for capitation strategies down the road. If you're in that boat, the story of Womens' Health Center offers some good tips for venturing into capitation contracting.
Easing into managed care by using it primarily as a financing mechanism can help sell the concept to physicians, says Gary Stanton, MBA, chief executive officer of Kansas Women's Healthcare Network. "This way, groups can see the benefit before they commit to an unknown," he says.
Stanton's organization formed a messenger model independent practice association (IPA) in late 1995 as a strategy to ease affiliated physicians into a comfort zone with capitation. The group has since evolved into a management services organization with greater managed care contracting capabilities.
"The messenger model is not considered a structure for long-term success, but it is an attractive starting point to give groups that haven't worked together before a sense of the benefits of working together," Stanton explains.
Although the group's primary mission is to improve patient care by working collaboratively with managed care organizations, Women's Healthcare Network initially focused on financing strategies, Stanton says. Not only was the financial side of most participating practices seen as a weak link, but it offered an opportunity to produce visible results.
"We wanted a single voice working on the financing piece of patient care," Stanton explains. "We have roughly 300,000 OB/GYNs in our market, which can be construed as an oversupply when you look at the economics of supply and demand. The thing we felt we needed to do was to find economies of scale and bring groups together to show that you don't need 30 different ways of doing something. These groups still compete for patients, but we're trying to bring a single voice to the market for financing so that physicians can afford to stay in practice."
By forming a messenger model IPA, Kansas City Women's Healthcare Network basically served as an information resource for opportunities such as managed care contracts or billing services. Each member practice had the ability to accept or reject an opportunity, and even contract independently of the MSO.
Rather than initially focusing on contracting, however, Kansas City Women's Center chose to attack medical malpractice, long seen as an extraordinarily expensive item among OB/GYNs in the market. By purchasing medical malpractice coverage through a central source, the IPA managed to cut the group's total medical malpractice insurance premium from over $2 million in 1996 to under $1.5 million.
After success in this arena and through a group purchasing operation created to save money on office supplies, the organization moved to an MSO model in fall 1997. The MSO's primary strategy is to operate a single-specialty network of OB/GYNs and accept capitated contracts, Stanton says. Women's Healthcare Network has closed on one managed care contract, and three more agreements are three-quarters of the way complete. Stanton has no doubt that the group's early beginnings as an IPA paved a way for these contracts.
"By being aggressive early on in our marketplace, this gave us some market penetration and leverage with managed care companies," he says. "It gave us demonstrated experience in capitation, and an interest displayed by our physicians to work in a managed care environment."
The upside of that proactive stance is also a minor disadvantage: namely, blazing your own trail means there are no established marketplace standards or road maps to guide you. "We have to use a lot of due diligence and have had to make some decisions based on a lack of experience," says Stanton, adding that the group has leaned on consultants, attorneys, and accountants for advice.
The next piece of the puzzle is to consolidate administrative operations such as billing services and getting all participating groups on the same computer hardware and software system, Stanton says. An immediate goal to tackle is to reduce outstanding accounts receivable payments from an average of 90 days to 52 days - a common complaint among practices dealing with managed care organizations. "By going to MCOs [to follow up on payments due] as one voice rather than 15 different voices, and allocating resources to the function of monitoring results and payment, we are projecting close to $750,000 in savings," Stanton says.
Although the arena of global capitation is probably two to three years down the road given marketplace conditions in Kansas City, the groundwork laid by Women's Healthcare Network is allowing the 12 participating groups to become a force to be reckoned with among local managed care organizations. The group hopes to have between 200,000 to 400,000 covered lives through various managed care contracts by the end of 1998, Stanton says.
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