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E-Mail Bulletin #2, June 1998

Healthplan Consolidation = Provider Deselection: Are You At High Risk?

Unless you've recently emerged from a cryogenic sleep it should be no surprise that over the past four or five years we've seen a phenomenal increase in the number of healthplans and healthcare delivery systems being merged, bought, or sold. The action includes some of the largest, oldest, most aggressive, and successful plans and systems. Pacificare, MetLife, Travellers, Family Health Plan, Healthnet, Healthsource, Aetna, US Healthcare, TakeCare, FHP, BC/BS, MedPartners, United Healthcare, Humana, and QualMed are just a few of many. At times it seems frantic, almost irrational (and sometimes the results have been disastrous).

The frenzy has accelerated during the past two years with United Healthcare leading an especially aggressive move to position itself as the dominant force in many of the major managed care markets. United's recent announcement (subject to final approval) that it has purchased Humana is one doctors and administrators should watch closely. The direct fallout and industry-wide collateral damage will be important to practices of all types, but particularly to the solos and small groups. They are most at-risk when a merger starts the process of collapsing two or more networks into one that's typically smaller than its parts.

Here's a typical scenario resulting from a merger/acquisition. Plan B buys Plan A. Plan A's eyecare network includes 60 physicians and 85 optometrists. Plan B's includes 45 physicians and 90 optometrists. Both plans serve essentially the same geographic service area but quite different sized enrollments. Of the 60 physicians in Plan A, 20 are also participants in Plan B. Of the 85 ODs in Plan A, 35 are in Plan B. So there is some but not a lot of overlap.

You would expect Plan B to be "loyal" to all (certainly most) of its current providers and keep them on board. The increased membership gained through the acquisition will benefit the existing panel. But what is Plan B to do with the providers it acquires from Plan A? If Plan B adds all the physicians and ODs unique to Plan A to its existing network the result will be 85 physicians (an increase of 40) and 140 ODs (an increase of 50).

That's probably more than it really needs to provide appropriate geographic coverage. And adding all these new providers acquired from Plan A would mean additional costs for credentialing, contract assignment/resigning, in-service staff training, computer re-programming, etc. In today's increasingly tough times those costs are not something the plan will bear unless there is a demonstrable benefit to keeping the doctors on board. Absent that, there's going to be some blood-letting. (And please note that a similar scenario can occur even without an acquisition. Sometimes plan management simply decides to reduce the panel size.)

Commonly that means the acquiring plan begins a rapid, sometimes rapacious downsizing. The managed care term is deselection, or "Thanks, doctor, but we no longer require your services."

For a sense of the risk if your practice ends up in the middle of one of these major acquisitions, I suggest you check out a recent article from the Orlando Business Journal (June 8, 1998). It discusses United Healthcare's recent acquisition of Humana's Florida plans. You can find the story on the internet at: http://www.amcity.com:80/orlando/stories/060898/story3.html

In some cities United will be such a market-dominant force that its actions could rewrite all the rules by which we play this most challenging game. I'll mention a few brief highlights from the article to give a sense of the power shift when an 800 lb. gorilla comes to town. And then I'll discuss some things you can do to become/remain the gorilla's friend.

Now, if United achieves such market dominance and vows to cut costs, what is the only trade-off for its providers? Increased volume -- assuming, of course, the restructured fee schedules aren't off the survival scale. And how can United drive significantly more volume to each of its doctors as the trade off? Only by reducing the number of panel providers.

It's a scene played out many times before. Newly added enrollees are driven to the acquiring plan's doctors and some/many of the acquired plan's doctors are left out in the cold. They're deselected. And, incredibly, as the number of covered lives goes up, some of the acquiring plan's long-time providers are also dropped in the downsizing process! Now that's a rude surprise.

So when one of these significant marketplace shakeouts occurs what can doctors and administrators do to improve the chances of being kept on (or added to) the acquiring plan's panel?

There are numerous tactics you can employ, and I offer four in this bulletin. Understand that there is no magic bullet, no magic fix that will work for every practice or in every situation. But each of my suggested tactics has worked at various time, and has kept practices in consolidated provider panels after the deselection letters had gone out and others had gotten the bad news.

Strategy #1

To reduce your vulnerability be part of a medium to large sized, well capitalized, and sophisticated group or network. Solo and small group practices have relatively little or no leverage. And healthplans know from experience that they can easily "slice and dice" some one or two doctor practices without any meaningful disruption to the overall healthplan population.

On the other hand, it's less likely (though not impossible) for a plan to drop a larger group of general ophthalmologists, or a multiple sub-specialty group, or an integrated (three Os) system. It's even less likely if that entity serves a significant portion of the local managed care population. It would probability be highly disruptive for the plan to deselect such a group and might, in the case of an exclusive carve-out, mean rebuilding the entire eyecare delivery network.

That could leave the entire population subject to the hassles and confusion of transitioning from one network to another. Plan managers have "been there, done that," and they don't like it. So, in many situations there is some measure of safety in numbers when you're part of a city, county, or regional eyecare delivery system. At least you can't be picked-off one by one.

Strategy #2

To reduce your vulnerability raise and then and maintain your profile in the community, and make certain the healthplan knows it. Recognize that deselection decisions and termination letters often go to doctors and practices with little or no community presence or identity. Typically that means the solo practitioner who's quietly and conscientiously served the patient population for years but who has not done much or anything to promote the practice (particularly to the healthplans). It's rarer that a practice or facility with a "name" and market presence is cast off.

I suggest that if you can demonstrate and document superior outcomes and patient satisfaction surveys, then make certain that summary reports are sent to the plan and follow up with a phone call. If you group provides unique or specialized services not typically available at other local practices, or if you're better positioned to serve a particular constituency (e.g., you and/or your staff speak multiple languages), let the plan decision-makers know. You must not remain invisible.

Strategy #3

To reduce your vulnerability maintain a high profile within the healthplan's physician and administrative leadership. You've probably wondered who writes all the utilization, quality assurance, and cost-containment protocols that you're supposed to follow. Who makes the decisions to approve/deny surgical requests? Who is making the decisions on compensation and withhold policies? The answer in a surprising number of instances is committees staffed, in part, by doctors selected from the plan's provider panels.

There's probably no better way to make your practice or group known and important to a plan than to serve on a key committee or work group. It's a simple way to get the "inside track" on what's going on within the plan's administrative structure.

So I suggest you contact the plan, either through the medical director or head of quality assurance/utilization management, and volunteer to staff a committee or work group. You might offer to help the plan develop and review its data collection system for HEDIS scores, or patient satisfaction, or anything else that might interest you. The important thing is to get into the plan's inner circle and become a valuable resource.

Strategy #4

To reduce your vulnerability get "tight" with the healthplan's staff. You must have a personal connection to the folks within the plan who manage your contract (and who make the selection/deselection decisions). This is another instance where you can't afford to be invisible.

Take this little test. Go to your managed care contract file and pull five provider agreements at random. Without looking at the documents:

Is your piece of paper mostly blank or full of incorrect answers? That's probably because you and your staff never talk to anyone at the plan except when there is a payment or eligibility problem. As a result plan management probably doesn't know you from Adam (or Eve).

Now, imagine a plan decides it needs to cut 20 physicians or ODs from the panel, and the plan staff is looking at a list trying to decide who's going to be chopped. Everything else being equal, what are your chances compared to other doctors (and practice administrators) who have maintained friendly relationships with key plan staffers and/or executives? Why would you expect your practice to be included among the survivors if nobody at the plan recognizes your name or has anything positive about you filed away in their memories?

It's essential that you maintain a regular contact relationship with plan staffers. At a minimum you or your administrator should be known to the plan's:

And remember that managed care at the healthplan staff level is typically a game of musical chairs. The people who worked there last year may not be there next week. So you need to maintain regular contact to avoid a situation where the deselection decisions are being made by new staffers who don't know you. (And you were not aware that your "friend" at the plan is now gone.)

Is all of this a hassle -- one more managed care annoyance you don't have time to deal with? Yes, it's a hassle, but you must make time. Ignoring the issues and downside risks is not an option unless you're prepared to abandon all managed care business.

Please contact me if you'd like to discuss ways I can help you deal with the reshuffling of provider panels.

That's all for this second managed care e-mail bulletin. I hope you find it interesting and utilize the resources and suggestions I've described. Please don't hesitate to contact me if I can provide any assistance on this or other managed care and practice management issues.

Please also tell your friends and colleagues about my website so that they can visit and sign-up for the bulletins.

Your comments and questions are always welcome, as are inquiries about specific projects or issues involving your practice, group, or network. Look for the next bulletin in July.

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