Physician survival in a world of payer mergers
Merger mania is sweeping the nation; indeed, it is a global phenomenon. So goes the health care industry, especially in the area of the large insurers and HMOs.
Where there used to be Aetna, Metropolitan, Travelers, US Healthcare, and NYLcare, there is now only one company, Aetna US HealthCare. Coventry and Principal have merged, and only recently another mega-merger between Humana and United was called off. What implications do all these mergers have for physicians and their practices? The answer is that, as always, it depends.
Positive aspects of mergers for physicians
Many physicians are involved with several different health plans. In Kansas City alone, where I practice, there are over 10 different HMOs. Each plan has different authorization requirements, referral forms, formularies, practice guidelines, and disease state management guidelines.
It is virtually impossible for practicing physicians to keep track of all the different requirements. This results in a plethora of paperwork, lots of time lost waiting on the phone while requesting information and approval, calls from pharmacists because a drug is not on a formulary that the physician was not even aware of, and many other headaches that can take much of the pleasure out of the practice of medicine. This is known in the industry as "the hassle factor."
With the mergers of the large national managed care organizations, physicians are dealing with a smaller number of payers and policies across a larger number of patients. Many health care experts predict that in all major metropolitan areas, there will soon be only three to four managed care organizations. This should assist in streamlining and reducing the variations in paperwork and other prerequisites that the practicing physician is required to follow.
A second potential positive aspect of the merger of managed care organizations is that the volume of patients from any one organization probably will increase. This is positive because the larger the volume of patients a physician has from any one managed care organization, the more potential influence that physician has. This influence can be used as leverage when it comes to contract renewal time, adding or deleting pharmaceuticals from the formulary, and changing medical management guidelines.
The downside of merger mania
Just as the increase in the volume of patients from any single managed care organization can be viewed as positive for the practicing physician, it also can have a potential downside. If a physician only has a small volume of patients from any one payer, and if that payer offers the physician a contract that is considered unsignable, then the physician loses very little by walking away from the contract.
However, if the payer has a large volume of patients in the practice and offers the physician an onerous contract, then the physician will have to carefully evaluate the potential losses if he or she chooses to not sign the contract or accept the contract terms. The physician may face a large loss of patient volume, which can have a significant impact on his or her revenue stream.
In a case such as this, the following approach may be helpful. First try to decipher how much leverage the physician or practice has with the MCO. A high volume of patients does mean more leverage. Why? Because if the physician walks away from the contract, the MCO will have to find a new physician to care for the patients. This may result in patients complaining to their benefits manager, and the benefits manager in turn complaining to the MCO. In addition, the patients may elect to stay with the physician by changing their health care insurer, resulting in a loss of business for the MCO.
If your evaluation concludes that your clout with the MCO in question is large enough, the first thing to do is to try to improve the reimbursement terms. If this is impossible, then the physician will have to weigh the negative consequences of leaving. Remember, if a practice does not receive enough in compensation to cover the costs of caring for the patient, this shortfall cannot be made up by volume. So even if a practice faces a large loss in volume, this has to be weighed against taking care of patients that cost the practice money.
Also, remember that the managed care organization will almost always threaten to terminate the physician if he or she does not sign the contract. But a threat is not an action. I have seen MCOs fail to carry through with their threats countless times. Know when to call their bluff by knowing the parties you are dealing with.
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