Court ruling gives physicians a peek into HMO rate-setting methodology
September 1, 2000 2 minutes read
Court ruling gives physicians a peek into HMO rate-setting methodology
Decision will help practices determine if proposed cap fees are fair
In a court decision that could have a substantial impact on how practitioners and managed care companies negotiate future contracts, a Georgia appeals panel has ruled that an HMO, Blue Cross/Blue Shield (BCBS) of Georgia, must reveal to the doctors it contracts with its internal reimbursement rates and what methodology it uses to calculate those rates.
The net effect of the decision is that instead of being given a "take-it-or-leave-it" cap rate, Georgia doctors must be given access to the data and the formula used to calculate the rate.
"It’s hard for anyone in any business to provide a service without knowing what they are getting paid," notes Paul L. Shanor, executive director of the Medical Association of Georgia. "A plumber wouldn’t do it, an electrician wouldn’t do it, and now the court says physicians don’t have to do it, either."
Exactly what kind of information BCBS must reveal and how, will now be decided by the original trial court. Meanwhile, experts expect
it to appeal the judgment.
In handing down its decision, the appeal court wrote: "A promise of future compensation must be for an exact amount or based on a formula or method for determining the exact amount. Without such information, there is no way for doctors to calculate for themselves whether they have been fully paid for a particular service under the plan."
Despite their best efforts, the reality is most practices only have at best a well-educated guess as to whether the cap rate being offered them is right. That’s because while the final cap rate may be specified in a proposed contract, health plans also always refuse to reveal the methodology they use to calculate rates. HMOs argue this is proprietary information.
But without knowing the recipe used to calculate a proposed cap rate, there’s no way to tell if it’s right or if you will be able at least to cover costs, much less make a profit.
A similar case involving Metropolitan Life Insurance is being played out in a New York federal court. California physicians are also addressing the rate-making issue, pressing the state legislature there for passage of a bill that would require HMOs to substantiate that the capitated rates they offer providers are adequate.
Many experts hope the Georgia court decision will prompt more judges to force managed care plans to be more open about their reimbursement and rate-making procedures.
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