The million dollar managed care question
How important is it to your future?
Is it too late for your agency to become a player in the current managed care market? That’s a question many agencies are now asking themselves. While some providers are proving quite effective at expanding their market share through managed care contracts, many still are on the outside looking in. If you’re not already participating in managed care, is it too late to start? If you are a participant, how can you expand further?
In the first of a two-part series, Home Infusion Therapy Management speaks with a pair of home infusion providers who are among the nation’s leaders in pursuing managed care contracts: Jack Rosen, president and chief executive officer of Englewood Cliffs, NJ-based Infu-Tech and Joyce Nelson, RN, Chief Operating Officer of Y Medical Associates of Dallas. Although both have succeeded in acquiring managed care contracts, the similarities end there. This month, we’ll look at how these two companies have taken distinctly different routes to enter the managed care market. Next month, Rosen and Nelson share their thoughts on taking part in managed care contracts and the future of home infusion.
Moving to a managed care focus
At the end of 1996, Infu-Tech was providing home infusion in 26 states, with eyes on further expansion. The company has 55 total managed care contracts, including its first capitated contract signed just recently and has expanded the number of health plan enrollees it serves from two million to more than 15 million. Its reason for expanding into managed care was quite simple.
"Managed care has been our focus for the past three years," Rosen tells HITM. "We saw the trend of managed care increasing its membership and saw the need to find effective means of controlling health costs in the private sector, and managed care was the only solution on anyone’s radar screen."
The change of focus hasn’t come without its problems. For two years, the company watched revenues drop as a result of the focus change before rebounding with a record year in 1996.
"[The early switch to managed care] was a gutsy call on our part, but I think it was necessary," says Rosen. "Companies have got to have some risk strategy for fast growth. We took that and I think showed everyone it was successful."
The most difficult part was switching the company focus from getting physician referrals to acquiring contracts, what Rosen terms a cultural change. He notes that the two-year speed bump may have been anticipated, but many aspects of the current market weren’t.
For example, Rosen says the speed with which conservative markets such as New York, Chicago, and Boston bought into managed care was unexpected, as has been the federal government’s willingness to put Medicare enrollees in managed care.
"In fact, in a recent discussion with Donna Shalala, she informed me that she would like to see Medicare enrollees move into managed care much more rapidly than being anticipated," notes Rosen.
The majority of Y Medical’s patients are in Texas, although it also has patients in Oklahoma, Iowa, and Nebraska and has served patients in New Mexico and Louisiana. The agency services the Dallas-Ft. Worth area itself but relies heavily on subcontracts to reach patients elsewhere. The agency does most of its own drop-and-ship pharmacy services, although it has arrangements with first-dose pharmacies nationwide.
The agency began pursuing discounted fee-for-service managed care contracts four years ago. Such contracts now account for about 15% of the agency’s revenue. It entered managed care for two reasons: to add business and to increase referrals.
"We have physicians who want to refer to us and they want to give us a Prudential patient, but if Coram is the exclusive provider, no matter how much the physician wants to give us the referral, we aren’t able to service that patient," says Nelson. "In order to maintain our referral base, we have to have managed care contracts. Getting Blue Cross/Blue Shield has been a big benefit to us because now a number of doctors are able to refer to us again."
Getting capitated contracts has proven difficult, however.
"Our limitation in looking at capitated arrangements is we’re looking at a relatively small geographic area that we can provide nursing to in [the Dallas-Ft. Worth area]," says Nelson.
Subcontracting allows Y Medical to serve a wider geographical area, but capitated contracts prefer bundled services. Establishing the number and variety of subcontracts necessary to provide such a wide range of services in each rural setting would simply prove too cumbersome.
Nelson says savvy, targeted marketing has allowed Y Medical to participate in managed care, despite its relatively small size. The agency has made a habit of going where larger infusion companies don’t.
"Urban areas tend to be pretty saturated with the larger infusion companies, so we felt that there has been multiple rationale for us to be in the rural areas," she says. They are:
• Rural areas are underserved.
Because a contract to provide care in a rural area doesn’t dramatically increase volume, it may not be worth a large infusion company’s efforts to serve rural areas. That’s where Y Medical comes in.
Its service also can help a rural hospital retain its patient base.
"A small hospital will refer a patient to a specialist in Dallas, and that specialist then wants the patient to come in every time," notes Nelson. "When the patient comes in, they’re admitted to the Dallas facility, and the local rural hospital loses the patient."
• Experience.
Y Medical began in 1988 by specializing in intradialytic parenteral nutrition (IDPN) and gained experience providing nationwide service that often included rural settings.
"Some of the dialysis centers were in New Mexico out in the middle of nowhere," says Nelson. "Our history lends us to serving some of these rural and remote locations."
Serving remote locations and subcontracting with rural agencies that lack experience in home infusion can present problems. To overcome this, Y Medical provides extensive training to its subcontracted agencies.
"We have a two-part training program that reviews marketing strategies and implementation plans for the facility from an administration, reimbursement, and marketing perspective," says Nelson. "Then the second phase focuses on clinical competency and the clinical skills necessary to manage a patient. We bring that to them, and other companies don’t."
The agency also has a highly developed drop shipment service that can provide drugs to rural areas on a timely basis. For example, Y Medical may send a package counter-to-counter using American or Southwest Airlines. A courier or employee of the subcontracted agency will then pick up the medications, hand-deliver the package to the patient’s home, unpack the supplies, and review the pump operations with the patient.
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