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As medical reimbursements continue to dwindle, the value proposition for participating in insurance plans becomes increasingly weak. Why not break with tradition and contract directly with employers? Here's how to get started.
With another round of health insurance payment cuts rolling out in New York and New Jersey from two of the major payers - UnitedHealthcare and Aetna - the value proposition is dwindling for many practices to continue participating in these networks. At this point, many providers in primary care in the Northeast are being paid 65 percent to 80 percent of current Medicare rates for office visits - and rarely much more than that for other services. This has resulted in a situation where the only way for practices to remain profitable is to increase patient volume, which may weaken the quality of care that physicians are able to provide their patients.
The insurance companies' answer to a weakened physician care delivery system has been to build (or acquire) their own well-care and disease-management teams and/or companies. Would you take medical advice from UnitedHealthcare? If the ads currently running on public television are to be believed, UHC's nurses provide diabetes care and cancer support that is far superior to what any doctor ever could.
That ad started me wondering: Is follow-up care for say, cancer or diabetes, better delivered by companies like UHC, or through traditional means such as a patient's own family physician? My personal preference would be to have my own physician take care of me, but maybe that may no longer be possible given all that we have tasked our physicians to do. Right now it would seem that concierge medicine is the alternative - where I might pay an annual fee, healthcare premiums, and out-of-pocket costs to have ready access to a physician.
I think there has to be a better way. Perhaps it's time we cut out the middlemen - the for-profit payers that have come between patients and physicians, and the ones who created this situation in the first place in order to benefit their shareholders, not patient members. Many employers, and not just larger ones, are now "self-funded" when it comes to providing health benefits for their employees. “Self-funded” means that an employer sets aside money to directly pay for the medical expenses of its workers and their families, or pays employee medical expenses out of current cash flow as claims arise. Employers usually contract with payers to administer and process their claims by applying their rates and policy rules. The payers get paid an administrative fee for their trouble.
It is my belief that employers could pay physicians directly for the medical care of their employees. It would be more cost effective, and would allow physicians the opportunity to develop better models of care. That's a critical point. The process of inventing better models of care at the private practice level has been virtually non-existent with profit flowing to shareholders rather than being reinvested in the healthcare system. A direct-pay system could change all that.
Let's think about this for a moment. Say there is a big employer in your town, and they are self-funded. Further, let's say you are a pediatrician and decide to calculate exactly how much time and cost is involved in providing the best age-specific well-care (incorporating the sort of care you think is appropriate to provide, rather than the care a 15-minute visit might facilitate) for your patients. Sharing this data with the employer could result in an agreement between the two of you that accomplishes three things - reduced healthcare costs for the employer; improved cash flow and lower costs for your practice; and better care for patients.
Given all the money that employers are sinking into non-physician wellness programs that try to hold the line on costs, it is likely they may also be interested in "sponsoring" such health improvement programs as childhood obesity management, asthma education, prenatal classes, and so on. Who do you think they would prefer to entrust their employees care to, financially-focused insurance companies or the physician who is in a position to actually improve patient outcomes?
It's not just larger employers who are self-funded. According to recent PricewaterhouseCoopers data, the percentage of self-insured employers with fewer than 1,000 people in their healthcare programs almost doubled in 2010, from 29 percent in 2008 to 48 percent in 2010. And as risk-adjusted insurance becomes ever more expensive, the numbers just continue to grow.
So don't wait for the next payment cut to roll through. Drop the plan and implement the following steps instead:
1. Start collecting employer data on your patients to find out which companies employ a substantial number of your patients.
2. Determine how much it costs you to provide well-care, sick-care and/or follow-up care to your patients (age-specific, diagnosis-specific, and so on.)
3. Call the companies you've identified and ask to speak with their HR department or whoever may be in charge of healthcare benefits. Ask if they are self-funded or thinking about a self-funded option. (Even if they aren't, your conversation may help move things in that direction.)
4. Offer the employer a care plan, clearly identifying the costs and benefits of such a plan. Identify where there are areas of risk and what the employer may be liable for in addition to the care-plan rates (most self-funded companies carry stop-loss insurance too).
5. Make sure your plans include specific provisions such as clearly identifying the scope of the program offered, the amount of care that each covered "life" will receive under the plans, and so forth. And yes, it's a good idea to have either a consultant or lawyer work with you on this.
6. Lastly, truly partner with the employer. Show them the value of contracting directly with the physician rather than paying an insurance company to process and pay claims for their employees' care. Share data regularly in terms of successful outcomes and show how you are keeping costs down.
Your reward? Decreased costs - no claims to submit or insurer red tape to deal with. Increased revenue - better rates and population payments made monthly. Better relations with your patients. And more time spent delivering the quality of care you want to deliver. Your patients and community will thank you for it.
Susanne Madden, MBA, is founder and CEO of The Verden Group, a consulting and business intelligence firm that specializes in practice management, physician education, and healthcare policy. She can be reached at firstname.lastname@example.org or by visiting www.theverdengroup.com.