Surviving Managed Care: ED Practice Groups Must Adopt New Strategies
Squeezed by shrinking reimbursement rates, declining patient volumes, and competition from freestanding urgent care centers, many ED contract groups are finding that increasing managed care penetration is threatening their survival.
"Have I run into problems with the managed care organization or the at-risk provider groupand that’s everything from an IPA to a PHO to an IDOall of these different organizations coming to the emergency physician group and ratcheting down our rates and forcing us to take really low rates? Yes," states Myron Wacholder, MD, FACEP, a partner in California Emergency Physicians (CEP), a California-based emergency medical practice group, and CEO of MedAmerica, CEP’s physician practice management group.
"I’ve seen that all over California, or I’ve seen them attempt to do so," he adds. "It depends on how much power they have, the relationship that the emergency physician group has to the managed care organization, and the language of the contract the group has with their hospital."
In many California cities, where approximately 50% of the insured are covered by HMOs, it is not uncommon for the MCO to offer specialistswhich includes emergency physiciansonly 80% of the Medicare allowable as the contracted rate, Wacholder notes.
Though that might work for a cardiologist who is below capacity and needs the additional managed care patients, it doesn’t fit into the way the ED operates, he says.
"We can’t expect growth in volume. To the contrary, utilizing appropriate primary care incentives and policies and procedures will drive down the total number of visits. If we had an exclusive regional contract and/or an after-hours urgent care contract, we might be able to realize some same-store growth," he says.
The EDs role as "society’s safety net" also puts it at a disadvantage when negotiating with managed care, says Ron Hellstern, MD, FACEP, President of Metroplex Emergency Physicians in Dallas.
Because they lose money treating indigent patients, hospitals have traditionally shifted the cost of their care to third-party payers, Hellstern says. MCOs want to move their members out of the ED and avoid paying the higher charges.
This has spawned the development of telephone triage and advice lines and urgent care centers that now compete with EDs for after-hours, unscheduled care.
"Ultimately, their strategy will fail because the ED is, by and large, essential," he says. MCOs must still rely on the ED to treat major trauma and cardiac cases, he says. He predicts that the cost of delivering this care will go up to offset the revenue lost to urgent care centers.
In the meantime, ED physician groups must develop careful strategies to fit into the managed care environment.
Contracting with MCOs
Above all, the ED groups have to become proactively involved in the development of systems to deliver at-risk managed care. They also must not make the mistake of allowing the hospital to negotiate their reimbursement with the MCO, warns Wacholder.
"Hospitals don’t know how to evaluate professional reimbursement, and they make unintended mistakes," he says. "We can be equally valuable in addressing the hospital’s emergency department analysis of resource utilization and pricing."
The ED can help the MCOs reduce costs through reductions in level of service, reduction of ancillary services of marginal benefit, and reduction of admissions, he says.
The hospital’s desire to reach an agreement with a particular payer may also get in the way of reaching an adequate agreement, claims Thom Mayer, MD, Chairman of the Department of Emergency Medicine at Fairfax Hospital in Fairfax, VA.
"The hospital wants very much to participate with that plan, but they don’t have that much understanding of emergency medicine."
Even when ED groups negotiate with the MCO themselves, it is important to involve hospital administrators on the front end, Mayer says.
"It’s very important to lay out a strategy with your administrators ahead of time," he says.
This may give the group some leverage in the negotiations if a deal can’t be made.
"Most of the time, they [the MCO] will work with you," he remarks. "Occasionally, you will have some say, Take it or leave it,’ and you’ll have to leave it."
This is where it helps to have the hospital on your side.
"Several friends of mine have called me and said they no longer had jobs because the hospital administration perceived them as not wanting to deal with managed care," he says.
"Have as tight a contract as possible," says Hellstern.
"Put fences around" the most common complaints and what fees the ED will get for those workups, he advises.
Different ways to get paid
A certain amount of convenience care is unavoidable in the ED, and managed care payers know this, Mayer says.
"It’s not our fault," he says. "We don’t stand in the street and tell these people to come in. But you can say, we understand that we have to discount more deeply to compete with urgent care centers. We’re willing to give on the 99281s and -282s. But we have to get reimbursed properly for the 99283s, -4s, and -5s."
One alternative is negotiating a global rate for a particular level of service, says Wacholder, a concept that many MCOs are more receptive to.
"First, define exactly what constitutes urgent care. Next, analyze what services are provided; then, negotiate an all-inclusive rate," says Wacholder.
The department may want to consider defining more than one level of urgent care and negotiate a global rate for both levels that will include both physician and hospital services, he says.
"Whether you do a lab test or you don’t, or you do an x-ray or you don’t, or you suture a laceration or you don’t, you’re not going to be paid any more," Wacholder says.
A main problem with managed care now is that there is no incentive for ED physicians to save money, Hellstern says.
"Most emergency physicians I know are not capitated and aren’t part of a utilization risk pool of any kind, so there is no incentive in the ED for them to be cost-effective."
Risk pools and capitation
Though capitation is a method frequently used for specialists and primary care physicians, it has not fit emergency medicine well, Wacholder notes.
"It’s difficult to control visit-utilization and difficult to administer. For example, is out-of-plan, in-area ED utilization part of the capitation rate, or is it excluded?" he says.
Like Hellstern, he thinks some method of shared savings would help EDs function more effectively with managed care.
"In most areas of California, we are not capitated for emergency medicine," he says.
The concept of shared savings from the facility/ancillary services pool and ED admissions makes sense to everyone, because emergency physicians control expenditures in these two areas. The problem is in measuring the impact the department has and aligning incentives between the MCO, the hospital, and the emergency physicians, Wacholder notes.
"The easiest area to measure historic performance as a benchmark against future performance is emergency admissions. The emergency admission rate for commercial patients is roughly 10% and 40% for senior patients," he explains. "Establishing a shared savings pool by reducing those rates can be a win for everyone provided you have in place the means to ensure against adverse outcomes."
If an ED group is going to negotiate a capitated contract, it must make sure the rate addresses different populations, Wacholder advises. In fact, he advises groups to negotiate separate rates for commercial, senior, and Medicaid. For example, senior utilization rates are about three times greater than commercial; seniors are admitted more frequently and use more nursing and ancillary services.
"You’d be very foolish to take a single capitation rate, or even a blended capitation rate, unless there is an agreement to change the rate based on the changes in the ratio between those three populationsMedicaid, senior, and commercial."
Expanding services
Many ED contract groups are examining their departments’ unique abilities to offer other services to managed care.
In Wacholder’s case, his group has set up emergency room authorization teams in some of its EDs.
"In concert with the on-duty emergency physician, a nurse works to repatriate patients to an in-plan facility when they are able to be transferred. CEP’s experience and Kaiser’s is that the vast majority [of patients] are stable for transport," Wacholder says.
The group has a contract to operate this service for the hospital and one of their capitated contracts.
"In this situation, we are working with the hospital and the managed care organization, both of whom are capitated and both of whom benefit from getting the patient back to the primary hospital," he says. "Because we’re there 24 hours a day, and this is our level of expertise; that is, who needs to be seen, where, and at what level. We’ve assumed that responsibility and get paid to manage it."
Other EDs are developing telephone advice lines and hospital-based or satellite urgent care centers and fast-track lines to compete with outside urgent care facilities.
Controlling costs
All of these things may help ED groups minimize losses due to managed care, but until they have more control over the costs, EDs will still get the short shrift, Hellstern believes.
"You also have the issue of hospital politics involved," he says. "In many hospitals, the radiologists charges more to over-read the x-ray than the physician charges to see the patient. You have a lot of other areas with economic interests with their finger in the pie . . . I could give my services away for free and not be able to compete with urgent care centers because of hospital pricing structures."
ED physicians are going to have to work with other hospital staffers to manage down the costs together, he predicts, and it won’t be easy.
"With hospitals there is no relationship between the charges and what the actual cost of what the procedure is," he says.
"Until the hospitals get that under control, I don’t see how we can compete in a managed care environment."
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