Article Date: 3/1/2001

Eliminating Managed Care
How one practice arrived at the point of cutting themselves free.
By Marilee Blackwell, M.B.A., C.P.A., A.I.B.A., and Donna Suter



 Real-life cases of optometrists' practice dilemmas and how these seasoned consultants resolved them.

Donna Suter Marilee Blackwell

The word "insurance" once had positive connotations for optometrists. It meant being recognized as more than refractionists and being reimbursed for the treatment of primary care patients. To some, it meant reimbursement for treating disease with topical and oral medications. For others, it meant reimbursement for the co-management of tertiary care patients.

But say "insurance" today, and you're likely to hear laments about congested waiting rooms, a higher percentage of what used to be net being spent on the salaries of insurance clerks, and about opticals crowded with the lower-priced options vision plans require. How did a profession proud of its growth in primary eye care so radically change its opinion about third-party insurance plans? One word: reimbursement.

Professional outcry against low paying managed care plans has led to a search for alternatives. Practices are looking for smart ways to grow. Here's how we helped one doctor in need.

Call for help

In September 1998, the practice of Dr. John Johnson was experiencing the pain of managed care's growth. An analysis of his existing patients showed that 64% were covered by a single managed care plan and 30% by other managed care plans. Dr. Johnson's son Luke, a recent graduate of optometry school, wanted to join his father's practice. However, with managed care driving down his reimbursement rates, and his gross income below that of the average solo practitioner, Dr. Johnson feared that Luke might opt to practice in a more lucrative setting.

The practice, which Dr. Johnson had inherited from his father, was still located on the first floor of his mother's home in a small town in coastal Oregon. When Dr. Johnson and his father had decided to accept managed care insurance, it had made sense. The two-doctor practice had unfilled slots, and the practitioners viewed managed care as a good source of additional income.

After the elder Dr. Johnson retired, his now middle-aged son, Dr. John, became a victim of his own success. Soon word spread that the Johnsons treated participants of even the lowest reimbursement level plans in a warm, friendly fashion. Their kindness, proximity to enrollees and free parking across the street quickly multiplied their patients. A few once-welcomed additions turned into the lion's share of the practice's patient base.

The goals

When we first observed Dr. Johnson seeing patients, he performed the pretesting and examination in his combination office/ lane. Afterward, he walked the patient into the optical and assisted with frame selection and lens design. His wife, Mary, collected the patient's money and warmly said, "We'll see you next time." The computer was used only for billing insurance. They performed all other front office functions on paper. Mary and Dr. Johnson worked 10- and 12-hour days for less and less.

The goal of their consultation was for their practice to drop the low-paying managed care plan that accounted for 64% of their gross; for Mary to work part-time; Luke to work with his father and Mary and Dr. Johnson to have time for vacations.

The Johnsons couldn't automatically drop the plan with the lowest reimbursement rate because it was such a large part of their gross. The Johnsons needed to increase their income from other sources through "smart growth" tactics.

Smart growth

Smart growth occurs when a practice's gross and net increase proportionately. Participation in a managed care plan shouldn't cause practice net to dip below 30% of gross.

Smart growth also encompasses manpower availability, so you should consider physician capacity and staffing levels as they relate to net -- it takes just as much time to serve a patient for a reduced exam fee and $15 dispensing fee as it does to see a private-pay patient who purchases $300 worth of product from the optical.

On a broad scale, we began implementing smart growth tactics that preserved the 36% of the Johnson's existing patient base that was profitable while building a positive image in the community.

Smart growth encompassed a range of measures intended to encourage referrals by offering managed care patients the same options typically purchased by private-pay patients. The Johnsons zeroed in on strategies that preserved their existing, profitable patient base and revitalized their practice's prominence in the community.

With our three-part strategic plan, we intended to:

We carefully instituted smart growth changes that supported this plan with a view to sound fiscal sense and protect the Johnson's net. Here's how we approached our plan.

The solutions included:

When the doctor and Mary began to treat every patient alike, referrals multiplied and the average fee collected increased.

Other steps

We also encouraged the Johnsons to do other things to boost their practice.

We then compared these numbers to accepted norms and made specific recommendations for improving deficiencies in each of these critical areas in the practice.

About 1 year into the consultation, we shopped the competition again and had the Johnsons again raise selected fees. Our attention then turned to modernizing the clinic portion of the office.

Now equipped with two modern lanes and a contact lens training room as well, the practice was ready for Dr. Luke to join his father.

Good future outlook

As of year-end 2000, only 18% of their now-tripled gross is provided by plans with reimbursement rates that don't cover chair costs. They plan on re-evaluating their participation in all of their managed care plans in 2001. Mary works part-time unless needed, and she and Dr. Johnson are enjoying more frequent vacations.

Dr. Luke splits his time between the practice and an ophthalmologist's office. He plans on joining the practice full-time when he and his parents feel that the patient load will keep two optometrists busy full-time.

All parts of the practice now work together to fulfill the spoken and unspoken needs and desires of the patients. Based on our observations of this and other vibrant practices, we find a commonality among those with large managed care populations.

They use the same protocols and procedures for private-pay and insurance patients. This means that feeling rushed and knowing that the insurance patient in the optical might select from dated-looking, budget frames and old-technology lenses isn't a valid reason for staff or doctor to skip protocol or procedures that feature high-quality eyewear that meets the patient's visual and lifestyle needs. Nor is it a reason for speaking in a condescending tone to the patient.

Smart growth isn't something mysterious. It's many small remedies that equal the solution to a big problem. It's acknowledging and working on the practice's faults. It takes lots of hard work and the determination to complete all the action steps that lead to the solution.

It forced the Johnsons to integrate their managed care and private-pay philosophies. It's smart growth that, as modernist architect Le Courbusier said in a different context, makes the good easy and the bad difficult. And in doing so, it may reconcile the modern eyecare practitioner to the managed care growth that has become inevitable. 

Marilee Blackwell, M.B.A., C.P.A., A..I.B.A., senior consultant for Hayes Consulting (904-273-1115), and Donna Suter, president, Suter Consulting Group (423-892-3638) team up to offer financial guidance and on-site consulting services.

Optometric Management, Issue: March 2001