Reed Tinsley, CPA

Aetna begins to deselect physicians (i.e. kick em out of their network)

Back in April Aetna informed 130 physicians in Texas that they were being deselected from the Aetna network effective July 1st, 2012. Apparently this action is singular to Texas - it's a program that's national in scope. Over a year ago Aetna warned these deslected physicians of its concern about billing practices primarily involving levels 4 and 5 E&M codes. If you ever receive this type of warning, you must take action immediately. Set up a meeting with your provider representative to discuss and review any and all coding issues raised by the insurer.

This action by Aetna has impact beyond one major insurer dropping a physician - It most likely represents a “sea change”. Aetna’s confidence in eliminating physicians due to researched billing practices is a dramatic escalation of data-based medical management capability, i.e., third party administration with a definite directive to lower expense. Also, the decision to state “billing patterns” as a causative reason for winnowing physician ranks raises questions as to the undisclosed analysis of quality outcomes. Even more important, it also causes anxiety about how other managed care plans will react when it becomes public information that a physician is excluded from medical panel participation by Aetna. Will there be an industry move in aggregate to exclude that physician from other managed care panels?

I wonder which insurer is next to take this action against its physicians.

Don't forget importance of quality & outcomes in managed care negotiations

To me the most powerful form of leverage in any managed care negotiation is utilization and outcomes data (i.e. quality). Practices and their physician owners who are progressive enough to obtain, assemble, and analyze outcomes data will have a significant amount of leverage against managed care plans. Why? Managed care plans usually pay most all doctors at the same rate schedule. If a practice can present data showing it is a lower cost provider than the other doctors of the same medical specialty on the panel, the managed care plan will usually consider giving the doctors some kind of an increase in reimbursement. If the managed care plan does not, it shows the employer community that is does not care about quality and reducing medical costs. Obviously they do not want something like this to be exposed.

The following are a few samples of some of the most common quality indicators:

 Cost per patient for a particular series of diagnosis codes
 Surgeries performed as a percent of patient encounters
 Usage of ancillary services
 Lengths of stay in the hospital
 Specialist referrals as a percent of patient encounters or by diagnosis codes (for primary care doctors)
 Number of repeat visits due to surgical complications

Keep in mind quality can also be defined by clinical outcomes as well as by hard figures. One example is asthma and allergy: What are the number of days missed from work for those patients the practice is treating? For Glaucoma specialists: How well was eyesight restored after glaucoma surgeries or are there complications?

It is important to remember that managed care plans do not on their own go out to doctors on their own volition and give them an increase in reimbursement rates. Doctors must be the ones to ask for such an increase. Medicine needs to become more efficient, but this is a process that is not going to happen overnight. However, it is the practices that do become efficient and cost effective that will most likely end up the true winners in the managed care reimbursement playing field.

Keep payer from cutting your physician negotiated fee schedule

Best Option: Attach fee schedule and require your consent to changes.

The best way to plug this loophole in your plan contracts is to attach the fee schedule to the contract, make it clear that the schedule is incorporated into the contract, and bar the plan from changing it during the contract without your consent. Many plans will agree to make this change if you raise the issue. Plans are most likely to agree if you have some negotiating leverage or if the plan needs your services. For instance, a plan may want to add you to its panel so that it can expand into your geographic area or so that your specialty will be represented on the panel.

Here is a sample contract language you can use:

Plan shall pay Provider for Covered Services rendered to Plan Members in accordance with Plan's fee schedule dated [insert date] attached hereto as Exhibit [insert #] and incorporated by reference herein. Changes to Exhibit [insert #] shall be made only upon mutual written consent of Plan and Provider.

If your contract has an automatic cost of living or other escalator clause, be sure to exempt that from the mutual consent. It would unnecessarily delay the increase's implementation. To exempt that type of clause, add a phrase to the last sentence of the model language above, such as "except for the annual cost of living increase, as provided in Exhibit [insert #]

Are you regulary evaluating payer performance?

Evaluate payer performance based on the insurance plans that account for the highest volume of revenue to the practice. Examine and compare their reimbursement rates for the top CPT codes utilized in the practice. This will identify under-performing contracts that compromise practice profits.

Other factors in evaluating payer performance include:

The level of cooperation and support the plan’s provider relations department gives;

How promptly claims are adjudicated;

The number of errors in paying claims; and

The number of denials that require the practice to fight for its money.

Messenger Model IPAs Must Always Keep Antitrust in Mind

As managed care reimbursement continues to decline, physicians are looking at any way possible to level the playing field. This includes merging medical practices, selling the physician practice to a hospital, and forming independent practice associations (IPAs). There are still “messenger model” IPAs out there trying to negotiate with managed care payers on behalf of its physician membership. However, will these negotiations run afoul of antitrust laws? Unfortunately many do, they just haven’t been caught yet.

To give you an example let’s take a look two consent orders The Federal Trade Commission (FTC) entered in to with two separate physicians groups settling charges they each carried out agreements among their members that amounted to unlawful price fixing. These consent orders barred each group from engaging in future anticompetitive conduct.

The first complaint involved Independent Practice Associates Medical Group, Inc., doing business as AllCare IPA (AllCare), which had approximately 500 physicians in the Modesto, California, area. According to the FTC, between 2005 and 2006, AllCare acted to restrain competition on fee-for-service contracts by facilitating, entering into, and implementing agreements to fix the prices and other contract terms with preferred provider organization payers; to engage in collective negotiations over the terms and conditions of dealing with such payers; and to have members refrain from negotiating with such payers on terms other than those approved by the group.

The second complaint involved Boulder Valley Independent Practice Association (BVIPA), which had roughly 365 physicians in the Boulder County, Colorado, area. According to the Commission’s complaint, between 2001 and 2006, BVIPA, negotiated and signed agreements with approximately 17 payers and conducted periodic renegotiations of its contracts with large payers to increase rates. The FTC alleged BVIPA threatened payers facing rate increases with contract termination if they refused to negotiate with the group or to otherwise respond to BVIPA’s demands and actively discouraged members from contracting directly with payers.

Product watch - medical practice credentialing software

CACTUS Software is a credentialing software package for provider and physician management. CACTUS Software has been the industry leader in credentialing software design and development since 1985. For more information, click here:

http://cactussoftware.com/

Managed Care Do’s and Don’ts

If medical practices want patients and therefore a cash flow revenue stream, then you are more than likely going to have to participate in managed care plans. However, when dealing with managed care, always remember these key points: 

• Never sign a managed care contract without carefully review the terms of the contract and its reimbursement rates.
• Always negotiate contract issues you do not like. You never know if you can change the contract unless you try first!
• Constantly monitor financial performance.
• Annually grade your managed care relationships and create an overall hassle factor or grade factor (again, using the sample worksheet above).
• Don’t be scared. If you need to terminate a managed care contract, do so.
• If a decision is made to terminate, make sure both patients and colleagues are notified.

Before any contract is terminated, always make sure that you create a strategy on how any potential revenue lost as a result of the termination will be replaced.

Are you monitoring managed care reimbursements?

How does a practice really know for sure it is receiving the correct reimbursement from its managed care payors? According to an informal polling of practitioners at a recent health care conference, over 50% of the participants indicated errors have been  found with regard to what the medical practice was contracted to receive as payment and what the managed care company actually paid for the service. For example, the practice was contracted to receive $44 for visit code 99213 from ABC Managed Care Company but the Explanation of Benefit (EOB) indicated only $38 was paid. This type of situation seems to be occurring with increasing frequency.

 

Managed care companies do make mistakes and it is up to the practice to catch these mistakes and file an appeal for the additional reimbursement. Catching reimbursement errors can be extremely difficult for many practices, especially smaller ones. Small practices often do not have the time nor the personnel to pay attention to this type of activity, as important as it is. A software system such as the one described above can help.

 

At a minimum, a practice should have a system in place to spot check managed care reimbursements. The easiest is a manual system whereby each week a sample of managed care reimbursements are reviewed. Here is the process for a manual system:

 

1.    Obtain reimbursement rates for the top 25 revenue producing CPT codes of the practice. Place them in a spreadsheet for easy access. These should be obtained from the top 10 to 15 managed care plans the practice generates revenues from.

2.    Each week, take a sample of reimbursements from these plans (the practice can decide which ones) and compare the reimbursement per the EOB to the spreadsheet.

3.    If an error is found, file an appeal immediately.

4.    If errors continue to be consistent for a particular payor, meet with payor representatives if possible to discuss why such mistakes are occurring and how they can get corrected.

 

A manual system of this type can be cumbersome so each practice will decide how to implement such a system. The point to be made is that managed care payors are making mistakes and practices must have a way to detect the errors so as to get paid correctly. Hopefully instead of a manual system, the practice's computer system will be able to detect the errors.

 

Has your physician practice fallen victim to the Silent PPO?

Physician practices are often deceived by a billing practice that creates payment discounts for payors who are not entitled to them. Under these arrangements, indemnity (i.e. commercial insurance) payors obtain PPO-type discounts without the health care provider’s consent. This is known as the “Silent PPO." Depending on patient volume, health care providers such as physicians and hospitals could be losing a significant amount of revenue dollars due to these inappropriately applied discounts.

 

A Silent PPO works this way: First, a PPO makes its roster of preferred providers and contracted rates available to other payors and brokers the list for a fee. The discounts typically are applied to patients who are covered by an employer or payor that has not contracted with the PPO. Next, let us suppose a patient is in a traditional indemnity plan that pays 80% of the usual and customary of a doctor’s fee. The patient visits the doctor for treatment and the office verifies the patient’s indemnity coverage. The office then submits a bill to the patient’s insurance company. At this point, the payor is obligated to pay 80% of the usual and customary fee with no discount. The payor would like to receive some sort of discount so it seeks one from a PPO or a broker. If the physician has signed a contract with any PPO, the indemnity payor will likely have gained access to this information. The payor usually pays a fee to the PPO for access to its physician roster and related discounted rates. If the indemnity payor has access to this information, it could then reprice the doctor’s billing, taking the discount the physician has agreed to with the PPO, and simply disclose the PPO discount (which the patient does not belong to) on the payor’s EOB form that accompanies the payment.

 

Once the Explanation of Benefit (EOB) has been received by the doctor’s office from the indemnity payor referencing the PPO discount, one of several things usually happen. First, the office staff may overlook the discrepancy, especially if the doctor has a contract with the PPO that is mentioned. Secondly, the staff may actually notice the discount and appeal directly with the indemnity carrier. This is when the indemnity payor may tell the staff it is “affiliated” with the PPO in question, and that it received a discount if one of its indemnity enrollees visits a doctor under contract with the PPO. Unless the doctor’s PPO contract states such, the doctor (or any other health care provider for that matter) is due back the incorrectly applied discount.

 

All health care providers should be on the look out for these types of illegal discounts. EOBs obviously should be scrutinized very carefully from this point forward. Finally, the American Hospital Association suggests the following clauses be in or added to managed care contracts: (1) That any discounts will be extended only to enrollees of the PPO who have cards identifying them as such; (2) That types of entities that can be added to the network are identified in advance, and that providers receive timely notice when payors or employers are added, and (3) That the sale or other unauthorized use of contract rate information is specifically prohibited.

The importance of measuring utilization and outcomes

In order to compete in a market that is moving toward managed care, doctors must be able to show that they are more effective clinically than their peers. In other words, mature managed care markets will reward doctors based upon cost effectiveness, rather than mere utilization under the old fee for service system. As such, the challenge for many medical practices will be to gather the information necessary to prove to a third party payer the practice is indeed cost effective. In other words, a practice must somehow gather utilization and outcomes data, usually by clinical episode or diagnosis code. This type of information will be critical when competing for contracts and can also be extremely valuable in the negotiation and renegotiation of managed care rates. Let us look at a simple example.

 

An Ob/Gyn group wants to negotiate rates with Aetna. It gathers and assembles the following limited practice data: (1) C-section rates, (2) VBAC rates, (3) Average length of stay in the hospital, (4) Rate of surgical complications, and (5) Length of stay and complication rates for laparscopic hysterectomies. At the same time, the group was able to obtain national utilization data for its specialty. It beat the national average in every category named above. Obviously this is an enviable situation for a medical practice since it can demonstrate with actual statistics that it is a cost effective provider. In this situation, Aetna will probably listen to proposed changes to its reimbursement schedule for this particular group. This is because payors want cost effective doctors in their network in order to contain related health care costs over a long period of time; They certainly do not want their economics hindered by doctors who overutilize services.

 

The problem encountered by most doctor offices is that most computer systems are incapable of providing utilization and outcomes information. These medical billing systems were designed for a traditional fee for service environment and not for a managed care environment. While many systems have come a long way towards adapting to a managed care environment, most have yet to progress to this level of output. Practices need to keep this issue in mind when selecting a new computer system, otherwise the practice runs the risk of having to replace the system within a relatively few number of years should managed care gain a strong foothold in a particular community and as such, the information needs of the practice change.

 

If the current software system cannot provide utilization and outcomes data, there are other ways to obtain it. Hospitals may have this information gathering capability; Other third party entities such as managed care plans may have this capability; or the practice may just have to track and accumulate this information manually. However, as the need for this information increases, most practices will have to commit to purchasing a much more expansive computer system. This is one reason why doctors are continuing their affiliation activities so they may have access to this type of data in the future. Large delivery systems have the capital to acquire and implement these systems.

 

The point should be clear: Either start thinking about tracking utilization and outcomes now or risk losing out in the future. Practices that fail to do this will not be able to compete for contracts nor convince a payor to increase its reimbursement payments to the practice. The end result will be a decline in practice revenues.