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Physician contracting in managed care


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Overview of physician contracting in managed care

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Physician contracting in managed care

  1. 1. Physician Contracting in Managed Care Brian A. Wells University of Florida November 13, 2003
  2. 2. What is Physician Contracting? <ul><li>Physician or physician groups entering into a contract with a MCO to provide medical services for its members. </li></ul><ul><li>Can have various reimbursement schemes for the provider including </li></ul><ul><ul><li>Discounted fee-for-service </li></ul></ul><ul><ul><li>Capitation </li></ul></ul><ul><ul><li>Bonuses and/or withholding </li></ul></ul>
  3. 3. Statistics and Trends <ul><li>In California, the state where risk-based, capitated contracts have the longest history, doctors receive monthly fees ranging between $35-$50 for each patient they see who is covered by a commercial plan. They must manage the total care of that patient for that amount. If a patient needs extensive care, that patient becomes a money-loser for the physician's practice. </li></ul><ul><li>Source: Peter Bowland – The Capitation Sourcebook </li></ul>
  4. 4. Statistics and Trends <ul><li>According to PriceWaterhouseCoopers, 10 percent of the medical groups in California are operating under Chapter 11 protection, while one-third of the medical groups are at or near bankruptcy. </li></ul><ul><li>The cause: Doctors are not able to cover the operating costs of their practices based on the reimbursement rates of these risk arrangements. </li></ul><ul><li>Source: Peter Bowland – The Capitation Sourcebook </li></ul>
  5. 5. Statistics and Trends <ul><li>The number of patients doctors have in capitated, risk-bearing contracts varies from practice to practice. However, when as little as 25 percent of a doctor's patient pool is capitated, that provider will generally treat all patients as capitated, meaning he or she will become cost-conscious indiscriminate of the fact that many are covered by traditional indemnity health plans. </li></ul><ul><li>Source: Peter Bowland – The Capitation Sourcebook </li></ul>
  6. 6. Physician Contracting Strengths <ul><li>Creates a cohesive network for the members of the MCO. </li></ul><ul><li>Enables greater access to care for the members. </li></ul><ul><li>In some situations, it can reduce the cost of care to the member through the use of utilization review and cost-effective practices. </li></ul><ul><li>If the patient’s family physician has contracted with the MCO, the patient can continue to see his or her physician and enjoy the benefits of MCO membership simultaneously. </li></ul>
  7. 7. Physician Contracting Weaknesses <ul><li>Can tie the hands of the physician. </li></ul><ul><li>Could encourage the practice of “Cookbook medicine” or “Office Manager” medicine </li></ul><ul><li>Certain reimbursement schemes place the physician at great financial risk and could impact the quality of care received. </li></ul><ul><li>Physicians may become disgruntled by restrictive contract terms and/or “all-or-nothing” clauses. </li></ul>Source: Doctors Struggle to Balance Professionalism with the Pressures of Everyday Practice. Retrieved April 25, 2003, from the American College of Physicians web site:
  8. 8. Is this Ethical? <ul><li>It may be difficult for physicians to remain objective about treatment decisions if a monetary reward or penalty is associated with a particular course of action. </li></ul><ul><li>&quot;Bed side rationing.&quot; In situations requiring them to balance the interests of a particular patient with those of other patients, physicians are prevented from carrying out their fundamental obligation of individual patient advocacy. </li></ul><ul><li>Source: 1997 Report from AMA Council on Ethical and Judicial Affairs </li></ul>
  9. 9. Is this Ethical? <ul><li>If the patient thinks that the doctor is making treatment decisions based on his or her own financial interest, the relationship of trust between patient and doctor is eroded. </li></ul><ul><li>Doctors may become resentful of patients who require the most care and resources. </li></ul><ul><li>Source: 1997 Report from AMA Council on Ethical and Judicial Affairs </li></ul>
  10. 10. Physician Contracting Weaknesses <ul><li>Ethical and QOC Implications </li></ul><ul><ul><li>Is it ethical to give physicians bonuses for lower utilization rates? </li></ul></ul><ul><ul><li>Is this impacting the quality of care that the physician’s patients are receiving? </li></ul></ul><ul><ul><li>Is this damaging to the Physician-Patient relationship in that it is a conflict of interest? </li></ul></ul><ul><ul><li>Does it interfere with the physician’s primary duty of individual patient advocacy? </li></ul></ul>
  11. 11. Case Study of McDuffie <ul><li>Four physicians at McDuffie Medical Associates in Thomson, GA struggled to care for patients from an HMO that paid less than Medicare and hadn't raised its rates in four years. </li></ul><ul><li>It was an ethical dilemma,&quot; said Jacqueline W. Fincher, FACP, a general internist with the group. &quot;We were running patients through like cattle, practicing medicine in a way that did not feel comfortable.&quot; </li></ul><ul><li>After some serious deliberation, the group decided to terminate the contract—even though the plan covered almost 20% of its patients. The physicians took a 5% pay cut for two quarters to offset the resulting shortfall. </li></ul>
  12. 12. Opportunities for Physician Contracting <ul><li>Can create better working relationships between MCOs and physicians </li></ul><ul><li>Provides a structure for care delivery and allows the MCO to have a defined network available to its members. </li></ul><ul><li>Have to be careful to make the contracts fair – physicians may become disgruntled by contracts that place an undue amount of risk upon them </li></ul><ul><li>Allow practice guidelines to be developed by physicians and specialists in the fields that are applicable to the guidelines. </li></ul>
  13. 13. Threats to Physician Contracting <ul><li>Direct Contracting </li></ul><ul><ul><li>Some companies are contracting directly with large physician groups and leaving the MCO out of the loop </li></ul></ul><ul><ul><li>Boeing direct contracting example </li></ul></ul><ul><ul><ul><li>1994 - contracted with Medalia in Seattle for 150,000 potential patients </li></ul></ul></ul><ul><ul><ul><li>“ Instead of being passive recipients of insurance contracts and having to play by the insurers’ rules, we would be in control…This was a very exciting challenge for us” Peter McGough, MD, Medalia’s medical director </li></ul></ul></ul>Source: Dolan, K. How to make direct contracting work. Medical Economics, October 27, 1994.
  14. 14. Threats to Physician Contracting <ul><li>Direct Contracting </li></ul><ul><ul><li>Direct contracting offer greater control of the premium dollar and larger profit margins for doctors (if done properly) </li></ul></ul><ul><ul><li>In the Boeing example, physicians kept 85% of charges compared to 65% - 70% of charges that insurers reimbursed. </li></ul></ul><ul><ul><li>However, this requires the physician group to take on the role of the administrator and manage the risk (could be good or bad) </li></ul></ul><ul><ul><li>Physicians typically do not have the business training to manage the complicated contracts and balance the risks involved </li></ul></ul><ul><ul><li>Poor management could lead to financial insolvency of the medical group thus affecting the group’s ability to continue to provide quality medical care </li></ul></ul>
  15. 15. Threats to Physician Contracting <ul><li>U.S. Medical Liability System </li></ul><ul><ul><li>Some physicians are increasing the practice of defensive medicine in an effort to reduce litigation. </li></ul></ul><ul><ul><li>This “malpractice pressure” has led to increased use of diagnostic tests and thus increased health care costs. </li></ul></ul><ul><ul><li>MCOs have taken notice of this trend </li></ul></ul><ul><ul><li>There is the potential to create tension between the MCO and the provider and this may cause the provider to seek out less restrictive contracts. </li></ul></ul>Source: Feldstein, P.J. Health Policy Issues: An Economic Perspective: Second Edition. Chicago: Health Administration Press; 1999.
  16. 16. Physician Contracting with Aetna <ul><li>April 24, 2000 </li></ul><ul><ul><li>Background: Aetna is the nation’s leading provider with 19M health care, 14M dental, and 11M group insurance members. </li></ul></ul><ul><ul><li>Aetna Healthcare settles with Texas for breaking consumer laws and giving patients misleading information regarding emergency coverage, referrals, and prescription drug coverage. </li></ul></ul><ul><ul><li>Physicians complained about “all-or-nothing” clauses that forced capitation agreements. </li></ul></ul><ul><ul><li>Settlement forced Aetna to allow physicians to opt out of “all-or-nothing” clauses. </li></ul></ul>Source: AMNews – 4/24/2000 - Aetna consents to physician contracting principles in Texas -
  17. 17. Physician Contracting with Aetna <ul><li>The settlement also forced Aetna to: </li></ul><ul><ul><li>Offer physicians with <100 Aetna members the option of being paid on FFS instead of capitation </li></ul></ul><ul><ul><li>Prohibit penalties for exceeding certain budgets or provide bonuses for staying under budget when care provided is medically necessary </li></ul></ul><ul><ul><li>Restrict Aetna from unilaterally amending its contract with individual physicians (except as related to fees) </li></ul></ul><ul><ul><li>Require that practice guidelines be developed by physicians </li></ul></ul><ul><ul><li>Ban economic profiling of physicians and patients </li></ul></ul><ul><ul><li>Require Aetna to pay for emergency department services without prior authorization from Aetna or its physicians. </li></ul></ul>
  18. 18. Physician Contracting with Aetna <ul><li>December 19, 2000 </li></ul><ul><ul><li>Aetna President and CEO John W. Rowe, MD, announced that physicians contracting with Aetna will have greater choice in health plan participation. </li></ul></ul><ul><ul><li>“Creating a more flexible contracting policy is one example of changes we’re making to reduce the ‘hassle factor’…we recognize that local needs should be addressed” </li></ul></ul>Source: Aetna President CEO John W. Rowe, MD, Announces National Implementation of More Flexible Physician Contracting Strategy –
  19. 19. Recommendations and Conclusion <ul><li>Physician contracting in managed care has advantages and disadvantages for both parties </li></ul><ul><li>Physician contracts should emphasize use of preventive techniques to help keep patients health and to keep costs low </li></ul><ul><li>Have to be careful to provide an equitable contract that can be financially sound and still allow the physician to practice quality medicine </li></ul>
  20. 20. Recommendations and Conclusion <ul><li>The contract should allow “the physician to provide the best possible medical treatment without jeopardizing the passion for caring and the compassion for people that makes people want to practice medicine in the first place” </li></ul><ul><li>Quality health care can be cost-effective – contracts should keep this in mind </li></ul>Source: Grazier, Kyle L. Managed Care and Physician Contracting. Journal of Healthcare Management, Jan 1999, v44, i1, pg. 11
  21. 21. Questions?