Tight control of finances brings capitation success
Monitoring contracts, claims is the key
By carefully monitoring its contracts and its expenditures, Alton (IL) MultiSpecialists has flourished in a heavily managed care environment. The 20-physician practice realizes nearly half of its revenue from capitated payer sources and treats about 10,000 patients under fully capitated arrangements.
"We actually do a very good financially. We make a profit every month on our capitated contracts," says Virginia L. Drone, CEO for Alton Multispecialists.
The practice has three commercial contracts and two Medicare contracts with three payers. It has 100% responsibility for all professional services, and because of that, it maintains a mini-insurance function through which it pays claims through a network of about 60 to 70 specialists in the greater metropolitan area, Drone says.
The practice maintains contracts with specialists to provide services that physicians in the practice do not cover. Specialties within the practice include obstetrics and gynecology, general and vascular surgery, orthopedic surgery, neurology, gastroenterology, pulmonology and otolaryngology.
"We insist that if we have a capitated arrangement, we have full control over claims payments. Most physician practices with full risk do not pay their own claims. In those cases, if there are differences between the payer and the practice it comes after the fact," Drone says.
In most of these cases, the payer has paid for services that the capitated group has not approved. "We feel we can do it better than the payers," she adds.
The practice computes an income and expenses statement each month for each of its managed care products. "We convert all our payments to per member per month by specialty so we can compare our expenditures and benchmark them with national data," Drone says.
If the analysis shows that the practice is spending more than what is spent nationally by other commercial or Medicare products, Drone conducts a review. "I evaluate our products on a monthly basis to make sure we are not inconsistent with national benchmarks," she says.
Part of the group’s success is in negotiating contracts that will pay off, she says. A committee that includes Drone, the organizations chief financial officer, and managed care coordinator conducts negotiations.
The practice has been treating patients under capitation arrangements since 1985 and has 15 years of data analysis the committee uses in negotiating with managed care contracts.
"In the negotiation phase, I use the data on what our costs are and fold in the overhead. I believe you have to go in armed with the reality of what your experience is and argue that you need to have sufficient coverage, plus your expenses and a decent profit," she says.
Staying in the black
Keeping a handle on claims and making sure they are accurate and the treatment is appropriate helps keep the practice in the black, Drone says. The practice has invested in hardware and software that allows it to automatically evaluate the claims. The software itself processes the claims for accuracy and appropriateness and for bundling and unbundling.
"It gives us a response to the adjudication of that claim. Then we can ask for office notes or operating room notes to evaluate whether the process has been billed as documented in the records," Drone says.
All claims for which the practice has total financial responsibility go through the software, whether they are from members of the practice or outside specialists. If the claims do not meet the practice’s standards, they are denied and must be appealed.
"We will deny the claims from both internal and external physicians. It is up to the practice to appeal it," Drone says. This sometimes puts the practice in the position of appealing denied claims from its own physician to its own organization.
"But, in this marketplace, we have to treat ourselves the same way we do the outside providers. We don’t discriminate or give our physicians any better break than any others," she adds.
The appeals are reviewed by the medical director and by Drone. If the appeal is denied, the compensation is withheld. "It gives the physicians an incentive to be very accurate." When the practice is audited by its payers, its claims accuracy always exceeds 95%, she points out.
Proper coding is the key to accurate claims, Drone asserts. "We stress that both the accuracy and the appropriateness of how a physician codes is important." Physicians can play a key role in preventing coding errors or correcting them when they occur, and not days or weeks later, she adds.
The practice requires new physicians to go through significant training in ICD-9 and CPT coding. The organization’s corporate compliance committee regularly reviews the provider billing and coding techniques.
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