Article Date: 5/1/2010

Critical Issues In Managed Care
managed care

Critical Issues In Managed Care

How optometrists fit into an ever-evolving system that stresses both cost containment and quality care.

DAVID A. COCKRELL, O.D., F.A.A.O., Stillwater, Okla.

hen “managed care” was first introduced, I heard the comment, “I am not sure what ‘managed care” is, but I am pretty sure it is neither!” In the ensuing years, managed care has become a way of life for healthcare providers, for purchasers of healthcare insurance and certainly for patients.

Does managed care mean the same thing today that it did when we first heard the term, and are the goals of managed care the same as they were? Although multiple parties are involved with overlapping and often conflicting objectives, the answers to these questions may still be the same. Patients desire ready access to providers, excellent care and affordable cost, both with out-of-pocket and premium costs. Managed Care Organizations (MCOs) desire expanded access to enrollees, a select pool of providers, excellent outcomes in clinical care (they are now developing tools to measure the outcomes) and certainly, controlled costs. Finally, as providers, we desire access to patients, unshackled decision making in providing diagnostic testing and treatment plans and equitable, reasonable, timely reimbursement for the care we provide.

Central elements of care

However you choose to define managed care (see the sidebar, “Managed Care: Varying Definitions,” below), it is unmistakable that quality of care and cost containment — often two competing values — are central elements. How do MCO's achieve improved quality of care? How do the MCO's achieve cost control? And central to this article, how do we, as providers, fit into this picture?

Managed care will continue to evolve as the needs of the MCOs and patients change. With the passage of Health Care Reform legislation in 2010, that evolution will occur rapidly, requiring that we stay informed of the strategies and initiatives being implemented by all parties, including payers, purchasers, the federal and state governments, public health organizations and communities. Every one of us is involved, either as patient, provider, administrator or MCO.

Managed Care: Varying Definitions

Wikipedia defines managed care as “a variety of techniques intended to reduce the cost of providing health benefits and improve the quality.”

Medhealth Insurance defines it as “comprehensive health care which is provided to participating members of an organized health care organization through the use of a network of healthcare providers and facilities; it uses a delivery system that secures cost effective health care.”

And American Contractors Insurance Group (ACIG) defines managed care as the “use of a planned and coordinated approach to providing health care with the goal of quality care at a lower cost. Usually emphasizes preventive care and is often associated with an HMO or PPO. Under managed care, the financial risk is shifted from the patient and payer to the provider.”

Healthcare reform will impact managed care

Because the United States currently spends 16% of its GDP on health care — and that level of spending is projected to be 20% or more by 2018 — gaining control of that spending has taken on a level of seriousness that rises to the level of national economic security.

In developing strategies to slow rising costs, numerous governmental reports include the term “bending the curve” in reference to healthcare spending. Specific concerns are Medicare and Medicaid. State healthcare exchanges, offering healthcare coverage to small businesses and individuals, will become a reality under Health Care Reform. These 50 new governmental entities will be tasked with providing care at a controllable cost. And because we, the providers of health care, are considered a “cost,” payers are more keenly interested than ever in ensuring that those payments buy quality care. Clearly the notion of “value-driven healthcare” has implications for all providers.

It's not simply that cost must be controlled, the emphasis is on value. Stated simply, are payers getting the quality care for which they are paying?

The Federal Government's Physician Quality Reporting Initiative (PQRI) is an example of a quality control mechanism that requires reporting of all care rendered to the patient population covered by the entity. Currently, PQRI bonus payments are scheduled to continue through 2014 for those who comply with its requirements. The penalty phase starts in 2015 for providers who do not participate.

The new Health Care Reform legislation requires, for the first time, additional “credentials” beyond a provider's license in the required discipline. Adding to PQRI, it establishes an incentive payment in 2011 through 2014 for “reporting quality measures through the use of a maintenance of certification program” that includes “a formalized, secure examination.” This again clearly demonstrates the “evolution” of a healthcare entity/MCO responding to a request to change. In this case, it is an effort to improve quality of care.

Along with other healthcare entities (IPA's, PPO's, HMO's, etc.) Health Care Reform legislation also created a new entity, the Accountable Care Organization, which will group independent providers, physicians, hospitals and nursing homes together. The legislation unfortunately uses restrictive language that excludes optometrists and other non-M.D./D.O. providers from joining an ACO.

So, what are the critical issues for you, the optometrist, with respect to managed care and other healthcare entities in this changing environment? Actually, they are still the same as they always have been: access to patients, freedom in decision making and equitable, timely payment. Keep these in mind when considering participation in specific managed care plans.

How to negotiate a plan

Can you negotiate a plan with a managed care organization? Yes. In many cases you can — sometimes you cannot. The best approach is to view the opportunity to participate as a provider in a particular plan as a negotiation. As opposed to viewing the contract as a “yes” or “no” proposition, use it as a starting point for negotiation. And rather than viewing the negotiating process as adversarial, approach negotiations as though you are developing a partnership. To achieve this, offer to share selected utilization and financial information about your practice, and ask for information about the plan prior to the start of the negotiations. Request information including:

► the number of covered lives in the plan and specifically, in the your service area (geographical area), along with demographic profiles of the plan's membership.
► a list of current providers so that you may assess the MCO's reputation with patients and current contracted providers.
► at least three years of historical data from the MCO. With this information, you can determine whether the MCO's population of enrollees has stayed constant, grown or decreased; this is one measure of the MCO's financial viability. Are the patients' (enrollee's) responsibilities clearly stated and easily understood? What are the specific requirements of you, the provider?

From the list of current providers, you can also determine whether the MCO pays providers on time and as specified under the contract. Typically MCOs do not want to provide cost data, however request the information nonetheless, and confirm as much as possible with current providers. One final important point to review: Does the contract limit the number of visits by the patient or the procedures supplied by the provider? The more information you obtain, the better your final decision.

A contract between a provider and MCO includes the specific details which define and govern the relationship between the two parties. The details of the contract include provisions affecting:

► payment
► practices and procedures
► confidential record information
► (in some cases) clinical decision making.

I cannot overemphasize the following statement: You must read and understand the managed care contract completely.

Negotiating beyond fees

Negotiations should not focus exclusively on fee reimbursement. Numerous contract terms can affect the degree of legal, strategic and financial risk you bear. Various factors can result in substantially more risk to you than a seemingly low-fee structure might, such as a misunderstanding of the services covered under a capitation contract, utilization management expectations or the conditions that trigger contract renegotiation.

You should also read the contract critically from the managed care plan's perspective. This role reversal will help you identify potential loopholes, inappropriate incentives or unclear statements that might give the payer an opportunity to shift excessive financial risk to you.

Identify your desired position on each of the non-reimbursement issues before negotiations begin, and establish minimum acceptable terms. The final issue that should be agreed on is reimbursement.

It is critical to accurately assess each potential plan you are considering prior to signing, as well as to continually analyze your cost of doing business to be certain any new or existing contracts are financially viable for you.

In a competitive environment, the market establishes the general reimbursement levels for provider services. Effective negotiations with managed care plans require that you enhance your relationships with payers and look beyond fees alone. You must determine in advance under what terms the contract can be accepted and what alternatives to an agreement are available. Following these negotiation fundamentals will help you minimize the potential risks and maximize the benefits of a managed care contract.

Analyzing financial viability

To accurately analyze the financial viability of a managed care contract, it is essential to know your cost of doing business. An excellent tool to use is a “chair-cost calculator.” These tools are available from many sources. For example, American Optometric Association members can access a chair-cost calculator on the AOA website ( If you have your practice financial data compiled, you can enter the data into the appropriate location, and the calculator will tabulate and auto-populate the answer.

Remember that you should continuously monitor and evaluate current contracted plans. You will frequently find that a plan has fallen below the minimum acceptable terms. This can occur due to increased chair costs or a variety of other financial considerations, such as late payment or increased administrative fees (on the part of your office). Do not hesitate to drop a non-viable plan. If you are losing money or spending a great deal of staff administrative time for a very few patients, it is not good business to stay as a provider. As a provider, you won't be pleased with the plan, and your staff won't be skilled at administering the plan.

Consider practice logistics

Beyond the financial considerations noted above, consider your office's ability to absorb the patient flow and administer the details of the plan for the patient and for the office. In our office, we keep the specifics of every plan with which we participate in a desktop reference on each computer to ensure the details are available at all times to each staff member. This reference is reviewed and updated on a monthly basis or as plans are renegotiated. The most profitable plan in the world can be a disaster if your office administrative procedures are not well prepared. Our office has a weekly staff meeting, and these procedures are reviewed on a frequent basis at those meetings.

Optometrists frequently ask, “In how many plans should I participate?” The answer is determined by several factors, including but not limited to, the number and or demographic information of the enrollees in each plan within your practice's capture area, the unfilled schedule time for your practice, the ease of plan administration, and the office staffing requirements for administration.

The reimbursement picture

What is happening in reimbursement with MCOs? It has been flat or nearly flat for the past several years. As Health Care Reform takes place through the next several years, the one constant point upon which commentators agree seems to be an anticipation of decreased reimbursements to providers or at least strictly controlled increases in reimbursements to providers. This picture clearly dictates that to best achieve our potential and provide continuous, measurable quality care, we must continue to increase the efficiency of every area of the office. We (the docs in our office) believe that the best way to do this is to increase staffing, with an emphasis in training in every area of the office, to handle increased patient flow.

In conclusion, when looking at a managed care contract, move slowly, perform due diligence and most importantly, when contracting with anyone for anything, remember the adage; A good understanding makes for a good ending. OM

Dr. Cockrell is a member of the Board of Trustees of the American Optometric Association. A graduate of the Southern College of Optometry, Dr. Cockrell is in private practice in Stillwater, Okla.

Optometric Management, Issue: May 2010