Bedeviled by details? Heed these dos and don’ts
Avoid capitated pitfalls, increase efficiencies
Creating a risk contract is like walking through a financial mine field. One wrong step and KABOOM!! greenbacks destined for the net profit line on the income statement suddenly become confetti. Following is a list of tips that will help you not only stealthily avoid the danger areas but also generate the efficiencies needed to keep profits intact.
• Cover specific services.
Be as specific as possible about exactly which services are covered when negotiating a capitated contract, says Constance Thomas, MHS, vice president of integrated delivery systems for Healthcare Management Advisors, in Alpharetta, GA.
"I’ve seen providers say, Yeah, I know this,’ but then they end up getting burned anyway," Thomas says. Examples to look out for include:
For hospitals: Does the hospital pay the radiologists, pathologists, and anesthesiologists out of its capitation rate or do these physicians negotiate a separate contract with the payer?
For physicians: Does the capitation rate include X-ray and lab? Pediatricians are particularly vulnerable with immunizations. "Make sure you have specific language that says if the immunizations are included in the capitation rate or if they are paid separately," Thomas says.
• Do your own credentialing.
Filling out the physician credentialing paperwork for every payer that comes along takes a lot of time, thus money. The solution: Negotiate with the managed care payer to delegate all credentialing functions to the health system, says Colleen Dowd, MHS, vice president of Baptist St. Thomas Health Associates in Nashville, TN. This way, you do it once and simply maintain and update the records thereafter.
"You really don’t want to fill out applications on 100 doctors every time you sign with a plan," Dowd says. "What we go for is to get the health plans to delegate the credentialing function to us." So far Dowd says about 60% of the plans that sign with Baptist St. Thomas have agreed to this time-, money-, and tree-saving arrangement.
The key: "You have to do a better job at credentialing more effectively, more efficiently, and more completely than the payers could themselves," she says.
This process is built on trust and an open records policy that allows the payer to come in and audit the credentialing process as well as the actual records. "It’s a dynamic process," she adds. Payers "have identified things they wanted changed and we changed them."
Dowd recently credentialed 100 doctors, which took about a month. "It’s a lot of work up front, but once those files are in place, we’re looking at about one-fifth of a FTE [full-time equivalency position] to maintain them compared to a full FTE to fill out the applications every time we sign a new contract," she says.
• Build a capitation bridge.
When dealing with a new managed care plan or payer, consider working up to capitation rather than accepting the risk from the beginning. "You might want to set up a bridge rate that starts off on a fee [for service] schedule and then changes to capitation," Thomas says. A common trigger for the capitated rate to kick in is usually a specific number of covered lives. This way, the risk is less severe and it’s easier to absorb the cost of treating one or two very sick patients, she says.
• Beware of percent of premium.
Agreeing to a contract that pays providers a percent of the premium is not without special risk. If the insurance market gets extremely competitive and the payer cuts premium rates to attract business who loses? That’s right, the hospital or physician group. "I always recommend that you put in a floor," Thomas says. "Something like, if the premium drops, say, 5%, then you have the right to renegotiate the contract."
Baptist St. Thomas had several percent-of- premium commercial contracts that were put in place by Dowd’s predecessor. She is currently in the process of trying to switch these to capitation because of the risk of falling premiums.
• Avoid new member roll-ins.
Insurers often have multiple plans, including a PPO, an HMO, or a POS plan. Develop a contract for each of these plans based on the demographics of the covered population, Thomas advises. This will prevent the insurer from rolling in a plan serving a Medicare population under a contract configured for a commercial population.
Another way to keep this from happening is to include contract language that gives the provider the right to evaluate and then accept or reject any new plan before implementation. "Some payers will try to pay the same capitation rate for Medicare patients as they do for commercial payments," Thomas says. "You want to retain the ability to evaluate any new plan and then accept it or reject it."
• Beware of phantom exhibits.
Virtually all managed care contracts make references to exhibits that are not physically attached to contracts or proposals. When this happens, ask to see the documents in question, Dowd advises.
"A contract may make reference 10 times to so-and-so plan, but when you ask for the plan, you find that it doesn’t exist," she says.
Unfortunately, there’s not much providers can do when they run across these phantom exhibits in proposed contracts except store away this information and use it as a factor in deciding if you really want to contract with the specific payer. "This is just part of the reality. It makes risk really hard to assess," she adds.
• Know your must-haves.’
Before sitting down at the negotiating table, identify the "must have" items and those where you can be flexible, Thomas says. "In any negotiation, prioritize the points you are not going to budge on," she says. One technique she recommends is to put forward more of these points than you may actually want. "That way, when you give in on those points that weren’t at the top of the list, you’re perceived as giving up something. Use this to get a bigger point that you really do not want to budge on."
• Find creative solutions.
Inevitably, some capitated patients will be higher utilizers of resources than others. They often need this additional level of care. Other times, however, they don’t. This is where creative solutions are necessary.
Thomas tells of one patient who was gobbling up physician time by using office visits simply to socialize. "What that doctor’s office finally did was give her a volunteer position greeting people as they entered the office," Thomas says.
In another instance, a patient wasn’t filling her prescriptions, which resulted in repeated visits to the doctor’s office to essentially treat the same condition. "Instead of continually having this person make office visits, the doctor’s office decided it would be cheaper if they just purchased the prescription and gave it to her," Thomas says. "In situations like these, a little creativity can go a long way.
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