Surviving Managed Care© Newsletter
| Volume 1, Number 2 Summer, 1999 | Vision and Eyecare Business Information For The Millennium |
In This Issue:
Surviving Managed Care ©
Managed Care news and business information for eyecare professionals and administrators.
Gil Weber, MBA
www.gilweber.com
Objectives:
To examine and understand the ways in which included and excluded services affect capitated risk for solo practitioners, groups, and networks; to assist eyecare professionals, practice administrators, and network managers formulate and negotiate viable capitation agreements.
Included and Excluded Services in Capitation Contracting: How Much Risk Can You Take Before Saying "No"?
As managed care payors become more sophisticated, and markets more competitive, capitation contracting becomes increasingly challenging and problematic for physicians, administrators, and network managers. Payors may seek to off-load total risk, pushing everything eyecare-related onto a network's shoulders. Entities accepting such blanket responsibility soon find they've gotten more than they bargained for. Covering the full scope of ophthalmic services is costly.
Conversely, battle-wise groups and networks recognize that there are some services on which it makes little or no sense to take capitated risk. They'll bargain to push some share of the risk back on the payor. Striking a fine balance is always the aim and key to the game.
Some payors may use an interchangeability ploy to maximize bargaining leverage -- i.e., "If you won't take the deal there are plenty of other eyecare networks chomping at the bit." And with some providers almost desperate to preserve patient access no matter the reimbursements, that's certainly a strong bargaining point on the payor side.
On the other hand, assuming the payor is not without principle and honor, a network can bargain head to head if it brings to the table premier practices, geographic coverage and access, sophisticated information and administrative systems, and levelheaded leadership willing to walk away rather than capitulate.
When considering a capitated agreement it's crucial that both sides come to a meeting of the minds on which services are included in the capitation and which, if any, fall outside, under a separate arrangement. This newsletter provides guidelines and suggestions for both categories.
Each group or network will have different capabilities. For some, particularly those linked to a university or other tertiary facility, providing "full" services may be a logistical possibility. For others it may not.
A network's yes/no decision to take on capitated risk is profoundly impacted by its ability to influence the defined set of services included within the capitation rate(s). And its ability (or desire) to push risk down to the physicians depends on the scope of services each ophthalmologist can provide within finite funding while maintaining high quality standards and high levels of patient satisfaction. None of that is simple and straight forward under capitation.
First Rule Of Thumb
- A group or network should include as much in the contract as it can reasonably take on. Accept risk for those services which you can deliver internally or which you can cost-effectively farm out, preferably as sub-capitation. Include all services which have (relatively) predictable utilization and (relatively) low cost.
- Typically you'd include the professional component for general ophthalmology, anterior segment, cornea, medical retina, pediatrics and medical glaucoma.
- Consider taking facility fee risk if you have access to or own a surgical center, and if you can deliver the facilities component at a better price than community alternatives. Obviously, this assumes that the payor does not have a "sweetheart" deal with the local hospital.
Second Rule Of Thumb
- Exclude services which can't be provided in the group or network, or through a cost-effective sub-contract.
- Exclude those services which have very low and unpredictable utilization but very high cost per incidence (e.g., ophthalmic reconstructive surgery.)
- Consider excluding services for specific diseases (e.g., exclude CMV Retinitis and AIDS-related complications from otherwise included retina services).
Suggested Exclusions
The following services are suggested as possible exclusions from a capitated med/surg ophthalmology contract. This list is not cut in stone. The final list for any contract will depend on a network or group's abilities to serve a particular population's global needs, and the cost of any particular service. The list will differ slightly when a network is considering what risk to pass down to the physicians, and which services will be provided by general ophthalmologists or sub-specialists or both. And, of course, it will depend on the payor's aggressiveness and the network's perception of how much it needs the deal.
Deciding how and when to say "no" is crucial.
Always Should Be Excluded
In general I recommend you try to exclude the following from all capitated agreements:
- Out of area emergency and non-emergency services
- In area emergency or trauma services when patient is not transported to network's facility or to the contracted hospital
- Complications of any elective (non-covered) service (e.g., LASIK, PRK, etc.) delivered outside the network after network assumes the capitation contract
- Cosmetic reconstructive procedures
- Routine visioncare examinations, eyeglasses, and cosmetic contact lenses (unless separately funded)
- Cosmetic, investigative, or experimental procedures
- Non-ophthalmological treatment and consultation of orbital or ocular trauma
- Drugs not provided by the clinic
- Equipment and supplies used outside the clinic
- Non-physician hospital services
- Services not covered by Medicare
Excluded Based On Network Capabilities And Financial "Logic"
Consider trying to exclude these services if the dollars offered make no sense based on network capacity, sub-contracting opportunities, or individual service cost. (Pay particular attention, below, to "What To Do With Excluded Services.")
- Orbital and intraocular tumors (including retinoblastoma, choroidal melanoma, lacrimal gland tumors, etc.)
- Radiation oncology associated with tumors (beta radiation, proton beam, etc.)
- AIDS-related ocular disease (including ganciclovir, vitrasert)
- Baerveldt/moltino implants
- Optic nerve sheath fenestration
- Stage V retinopathy of prematurity
- Facial/cranial abnormalities
- Anesthesia
- Cost of donor cornea in corneal transplants and refractive surgery
- Radiographic, ultrasonographic, and resonance imaging techniques
- Clinical pathology services including hematology, microbiology, chemistry
- Histopathology services including surgical pathology
Other Miscellaneous Exclusions
Exclude the following unless funded in the capitation.
- Low vision evaluations
- Prosthesis and orthoptics
- Laser facility fees
Please understand that there is no magic bullet for successfully negotiating exclusions. Some payors are adamant that med/surg cap will include everything, and if you're not prepared to take and manage that risk you'll need to reconsider your position and viability in the marketplace. On the other hand, some payors appreciate that they can't "cookie-cutter" eyecare cap contracts. Ophthalmology is different.
Negotiation "Must-Haves"
Managed care is like Chess... Know the rules, plan ahead, prepare for the unexpected.
That said, unless you negotiate the following protections into the cap agreement limiting risk and costs I suggest saying "no" to the deal. These are for your protection.
All included and excluded services must be detailed by CPT code in the contract and in any capitation bid. Avoid using ranges of CPT codes, especially on the included services. There is a danger (remote, but real) that if you use ranges a new CPT could be created within one during the term of your contract. The payor could oblige you to provide the added service(s) at no added compensation. That's not a pleasant prospect if the new service is costly in physician time and/or technology.
If you're forced to use documents with ranges of CPT codes, the capitated bid and contract should have language which ties those ranges to a standard reference. For example, you could accept responsibility for ranges of services ...as described in the 1999 edition of the AMA CPT guide for ophthalmology. Anything added mid-contract falls outside that anchor reference and is not included in the capitation.
Ranges of codes are less of a problem for excluded services. Here is an example of how a group or physician might selectively exclude certain ranges of codes from within subspecialty capitation.
Ranges of codes are less of a problem for excluded services. Here is an example of how a group or physician might selectively exclude certain ranges of codes from within subspecialty capitation.
The following CPT-4 codes for tertiary care services are excluded:
- 65235--65265 trauma (selected foreign body removals),
- 65280--65290 trauma (selected repairs of lacerations),
- 67400--67450 orbit (exploration, excision, decompression),
- 68540--68550 lacrimal system (excisions),
In this example the network (or individual physician) accepts responsibility for certain trauma, orbit, and lacrimal system services but excludes these procedures that will be done at the contracted tertiary center.
What To Do With Excluded Services
It's very important to understand that even if certain services are excluded from a network cap agreement you're not saying "no" to providing those services or seeing the patients. You're only saying the services need a separate funding mechanism.
If you try to avoid responsibility for those services and patients it leaves your group, network, or practice vulnerable to another which offers to care for the entire population and, with that convenience offered to the payor, could take away the contract. (Obviously you'd have serious problems if you tried to avoid certain types of patients, e.g., refusing to treat AIDS-HIV patients, or if you tried to impose lots of exclusions for pre-existing conditions.)
To keep control of the entire population it's wise to propose an attractive, discounted fee-for-service schedule for certain costly, tertiary services, or for AIDS‑related services, etc. The payor will probably balk if the list of capitation exclusions is too long, so be careful only to include those most problematic.
Assuming you have the expertise within the network to provide the excluded services, this assures that payor that you can care for all its members' needs and that it does not need to go elsewhere to sign other providers. But it also clarifies that some risk just can't be accepted under the cap. As always, define these special services by CPT code.
Passing Risk Down To Individual Physicians -- How Much Is Appropriate?
An interesting challenge for network managers and panel physicians is figuring how much risk can be passed down to individual providers. What services can or should be included/excluded at the physician level? The issues are complex, and they may be different for general ophthalmologists and sub-specialists.
For example, assume the general ophthalmologists are sub-capitated. To assure that the capitation is fairly allocated each physician should be responsible for an identical set of services. That's not as easy as it sounds, however.
One general ophthalmologist might fit contact lenses for keratoconus while many others might not. If physician "B" sends his/her problem fits (expensive fits) to physician "A" but both are paid the same amount it creates an inequity. Or if physician "C" does Filters but physician "D" does not, it's not fair for physician "C" to incur the surgical costs of referrals from other general ophthalmologists.
Another example... Let's say that your network sub-capitates the retinologists. Will you expect them to provide ERG (electro-retinogram) and EOG (electro-oculogram) services? Is it likely that some or most or any of the retinologists will have the instruments in their offices to do these tests? It may be necessary to "carve-out" and pay these separately to the local tertiary center.
And time and technology might even change services from exclusions to inclusions. Perhaps you've had a retina contract in place for a few years and it excluded HIV cases. In particular, protease inhibitors were excluded, deemed a systemic drug treatment cost borne by the infectious disease specialists.
But times change, and perhaps the severity of your HIV cases has now diminished. Perhaps the number of implants and retinal detachments in this population is dropping to the point that you no longer need to consider these as exclusions? You might be able to rebundle some or all HIV-related treatments back into the master capitation agreement. (Obviously, you'd monitor on-going utilization to watch for any reversal.)
Closing Thoughts On Included And Excluded Services: How Much Risk?
Finally, remember that two factors exert the greatest influence on capitation profitability and at-risk management for either the physician or group/network. The first is the Law of Large Numbers.
The larger the population captured in an risk contract the less pronounced the impact of rare, but costly cases. If a group is managing care for 100,000 lives, the bottom-line financial "hit" of a tumor is quite a bit less than to an individual physician sub-capitated for 1,500 lives. It may be viable for the network with a large patient base to accept risk for tumors; it makes no sense for the physician. Therefore, make your decisions considering both the "macro" and "micro."
Second, an entity's ability to make ends meet on cap rates lower than projected is a function of its ability to pass some share of the risk to others. That may be back to the payor in the form of additional excluded services (perhaps as a tradeoff for a slightly lower cap rate). Or it may take the form of stop loss insurance (reinsurance) on a per-case and/or aggregate basis.
The key concept is "insulation." Can you appropriately distance or shield yourself from the expenses of high cost cases without losing touch with the patients or isolating yourself from the payor? It's a difficult challenge to master, and many have singed fingers from the effort.
Utilization Surprises: Are You Protected?
Capitation rates development and expense projections can only be made with a measure of confidence if based on reliable historical data. And capitation profitability is possible if your assumptions and calculations are sound, and if no unanticipated or contract-tipping "gremlins" are thrown into the mix. Unfortunately, healthplans have a nasty propensity for raining gremlins down upon hapless providers and groups.
Your utilization reality may not reflect that indicated by the plan's data. Often, it's not your fault, for the plan has artificially "spiked" utilization. It may not be the plan's intention to adversely impact your bottom line, but that ends up the result. Let's look at two examples.
1) Your network is capitated for routine, annual vision exams. The plan's data showed "X"/1000 encounters over the prior 18 months. But then, during your contract term, the healthplan starts a new, high profile marketing campaign on TV, radio, and in print, promoting no-copay, annual eye exams as an inducement to attract new Medicare members.
If you were contracted under fee-for-service you would be pleased to have the plan creating demand in the Seniors' minds. But if you're capitated and the plan is artificially driving up utilization by promoting this highly perceived, "freebie" benefit, it could cause a serious negative hit to the bottom line.
2) You're capitated for med/surg. The plan announces (as we've seen with Oxford, Prudential, and others) that it will reimburse the copayment to any member who sees his/her eye doctor for a diabetic retinal exam.
Again, if your contract is fee-for-service this could be a nice windfall of increased business. The plan promotes your services and, further, induces utilization with a financial incentive. But if you're capitated your utilization and cost projections could be seriously impacted, particularly if the population has any significant number of Hispanics, Native Americans, or others predisposed to Diabetes.
Of course you're interested in promoting preventive care and in giving the patients the best possible service. And if the plan wants to increase its HEDIS report card scores by increasing the number of members receiving the fundus exam, that's fine. You're prepared to help.
But all that must be factored into the capitation bid and utilization estimates. It's certainly not fair or reasonable that the physicians should take a financial "hit" if the healthplan artificially spikes utilization.
Be certain that you discuss preventive medicine programs and marketing campaigns with payors during the negotiations. If there is any indication that advertising is in the works, or that patient-focused incentives will be offered, raise your bid (and/or have a provision in the contract allowing you to revisit the rate in such event).
These materials are intended to provide useful information about the subject matter covered. The author believes that the information is as authoritative and accurate as is reasonably possible and that the sources of information used in preparation of the materials are reliable, but no assurance or warranty of completeness or accuracy is intended or given, and all warranties of any type are disclaimed.
The materials are not intended as legal advice, nor is the author engaged in rendering legal services. The materials are not intended as a replacement for individual legal or professional advice. Information contained herein is presented only for illustrative purposes, and it should not be used to establish any fees or fee schedules, nor is it intended and it should not be construed as encouraging any user of the materials to take any actions that would violate any state or federal antitrust laws, tax laws, or Medicare or Medicaid laws.
Copyright © 1997, Gil Weber, MBA. No part of this newsletter may be reproduced or distributed in any form whatsoever without the author's prior written authorization.
