How I stopped an HMO from cutting our capitation rate

When the health plan asked him to work for less pay, the author did some digging. What he found helped preserve his income.

Paul M. Winick, MD
Pediatrician/Hollywood, FL

Everyone knows about negotiating a managed care contract: It's a David vs Goliath battle—and Goliath has all the facts and figures.

But negotiations needn't be a struggle, not if you're persistent and arm yourself with relevant information. I know this from first-hand experience.

My education began when the HMO's representative, a young woman, walked into our office and announced that our capitation rates for the next year would be cut in half.

That didn't make sense. Why had the plan been willing to pay us a higher rate for the past three years? I asked myself. And then it occurred to me: It was because somehow the nine doctors in our pediatric group were saving them money. Of course, that wasn't what I heard from the HMO representative.

"Why should we continue to pay you twice as much as any other pediatricians in the area?" she asked. "You'd have to agree that it's not very cost-effective," she said, answering her own question.

"But we provide good patient care," I replied. "Good enough so that you probably haven't heard many complaints from patients about our group."

"Very true," she said. "But there are a number of pediatricians on our panel who provide the same quality of care as your group does, and they're getting about half the rate you are. That's why, in your next contract, your cap rate will have to be half of what it is now."

"That's not fair," I argued. "We provided you with good service and excellent patient care when you were having trouble filling your panel. Is this how you reward us?"

I knew my plea was falling on deaf ears. The only thing that was important to the company, I understood, was the bottom line.

"I'm sorry, but that's what I've been instructed to offer you," she responded.

I wasn't ready to sign the contract—not before I checked with the woman's supervisor and not before I could confirm what she was telling me about the capitation rate of other pediatricians in the area.

"I'm sorry," I countered. "I can't sign this today. You'll have to give me 30 days to think about it."

The representative wasn't smiling. "Well, I really wanted to get this signed today, since there are other pediatricians who want to join our HMO," she said. "We've been stalling them until we could renegotiate our existing provider contracts."

"I understand, but I'll need some time," I replied. "I have to run it by my partners, and you know how busy doctors are. It will be at least several weeks before we can all get together. If it's okay with you, I'll call to set up another meeting in about a month."