Dump a health plan? How to decide

Bailing out of bad managed care contracts can boost your bottom line and eliminate headaches. But choose carefully, says this expert.

By Michael J. Wiley

The leader of a three-doctor practice on the East Coast phoned me with what seemed to be a problem most physicians would envy. In spite of having recently hired an associate, they were still too busy.

But they weren't the "right" kind of busy. New patients had to wait about three weeks to get an appointment. Office staffers were spending countless hours jumping through managed care hoops: Some of the health plans they'd contracted with had office staffers ready to pull out their hair in frustration. A few of those plans were chronically slow to pay, and when they did, they reimbursed significantly less than others. The staff was constantly on the phone trying to secure authorizations or tracking down late payments. When one assistant muttered, "This plan is more trouble than it's worth," the doctors wondered if she might be right.

"Which ones should we drop?" they asked. It isn't an easy choice. The doctors had never dropped a plan before, and it can be a bit frightening and counterintuitive to voluntarily turn away people who want to do business with you.

But many doctors are now realizing it can be just as dangerous not to drop a plan that sends you more patients than you can handle, and at paltry reimbursement rates. The doctors in this group were concerned that keeping up with a stream of patients from poorly paying plans was forcing them to spend less time with patients overall, potentially impinging on quality. And unless they acted soon, they worried that some staffers might mutiny rather than play telephone tag with certain plans' representatives.

Tempting as it may be, though, to simply drop the lowest paying plan, doing so may not be the best choice, especially if that plan represents 30 percent of your income. Turning away that much business will create too many open slots in your appointment schedule and disrupt continuity of care for patients in the dropped plan. You may just have to put up with the plan until you can diversify your payer mix.

Evaluating which plans to stay with must be methodical and ongoing. Here are some questions you should ask yourself when deciding whether to keep a plan or toss it aside. (While this example concerns a gastroenterology group, the analysis applies to primary care as well.)

How reliant are you on each plan? Do a receipt-by-payer analysis to determine how much of your income derives from each plan. Ideally, you should be able to do this for both your fees and actual payments.

We found that 9 percent of the gastroenterology practice's total charges were with Plan A. But that plan represented only 3 percent of total receipts. This indicated that the plan wasn't paying as well as others. If a poor-paying carrier doesn't represent a significant portion of your total income, and you're able to drop it without creating open slots, why stay with it? You'll make more money by dropping it.

Make sure, though, that you don't become too reliant on any one plan—even if it pays well. In today's economic climate, you wouldn't invest 30 percent of your retirement fund in any one stock, regardless of how hot that stock might be. The same applies to health plans.

Who pays the most? The least? When plans seek your business, they may boast, "We pay the highest 99215 in town," and perhaps they do. But what they don't tell you is that they rarely authorize such a code. The high-paying code is a loss leader to draw you in; only later, you'll find that the other codes that you're likely to use don't pay well at all.

That's why you need to evaluate the codes you bill most often, and how much each plan reimburses. Use a spreadsheet program like Microsoft Excel or Lotus 1-2-3 to compare what the plans pay for your top 15 or 20 services by CPT code. Don't use the plan's published fee schedule; compare amounts shown on explanation-of-benefits forms instead—because withholds, unannounced fee reductions, and other insurer tricks may distort the real reimbursement numbers. With the EOB, you're using real data instead of promises.

Create a grid. In column 1, list the CPT codes you most commonly perform. In the next column, indicate how often you do them each year. Set up columns for each payer. What does Medicare pay for a 99213? How about Aetna and Oxford? What's your actual fee?

Once you've got the grid set up, calculate how much you'd earn in a year if all of your business was from Medicare, based on your top procedures, how often you do them, and Medicare's actual reimbursement. Do that for each plan and you'll be able to compare them using a weighted average based on how often you do each procedure.

How quickly do they pay? Do they drive your staff crazy? Practice management programs easily let you compare the timeliness of payments from different plans. Keeping a plan with the highest fees may make less business sense if it's notoriously late in paying.

Staff time needs to be considered as well. One plan the gastroenterology group decided to drop was an average payer. But it chewed up the most staff time for authorizations and referrals. The staff hated calling the plan, knowing they'd spend hours on the phone getting the runaround. Since the group wasn't that reliant on this plan, it decided to do the staff a favor and drop it.

Can one doctor stay with a plan while another leaves? Deselecting a plan doesn't have to be a one-size-fits-all proposition. The senior doctor in the gastroenterology practice is looking to retire in a couple of years and has signed on with only one plan. He has few open slots and isn't worried about the future. His partner, who's in his 40s, is on the panel of six plans, having recently dropped two. A junior associate is on the list for about 10 plans. The practice wanted the younger doctor to keep his schedule full and to help take care of patients who'd been referred by loyal primary care physicians. He can always drop one or more later if the circumstances dictate.

Call coverage isn't usually a problem in primary care practices. A doctor who doesn't contract with a plan can easily cover for his colleague on occasion. Of course, new patients must be directed to the appropriate physician.

Have you considered all the factors? After doing the spreadsheet evaluation and talking with staff about the hassle factor, the gastroenterology group had to make a decision. Payments for a 99214, for example, ranged from $32 to $69. But it wasn't the $32 plan that was the first to go. Another plan caused more problems. It paid about 15 to 20 percent less than average, was slow to pay, and made the office staff apoplectic. Cutting it loose wasn't a difficult decision.

The group decided not to drop another of the lower paying plans, however. Many of its referring physicians were involved with that plan, and might have objected to their patients being forced to pay more or go elsewhere. The plan also provided greater access to interesting clinical cases—something the group didn't want to give up, regardless of payment levels.

Interestingly, the doctors didn't lose as many patients as they had first feared. Many patients were willing to pay more out of pocket to continue with the practice.

How often should you evaluate your payers? This systematic review should be done at least semiannually. Study the numbers well before a contract comes up for renewal. If it expires on Dec. 31 and you're required to give 90 days' notice that you're opting out, your analysis should begin July 1.

Some periodic spot-checking may be warranted, too, because good plans can suddenly go bad.

At the end of this evaluation process, any practice should know how much of its business comes from each carrier, how reimbursement levels compare, how fast carriers pay, and what your staff says about the hassle factor. With that data, it's easier to make a decision about dropping a plan.

Once the decision is made, start talking. Plans have been known to negotiate, so it's worth telling the plans' administrators that you're thinking of canceling your contract. If they won't do anything, then you can go through with your threat.

The author is a certified health care business consultant with Berdon Healthcare Consulting in Jericho, NY.

 

Michael Wiley. Dump a health plan? How to decide. Medical Economics 2002;6:29.