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Special E-Mail Bulletin
November 2000
Know When to Say "No"

Special E-Mail Bulletin

Hi, everyone

For years I've been writing and lecturing that you must have strength and courage when dealing with third party payors. When a deal doesn't make sense you must have determination to say "No," and you can't "cave" simply to preserve access to patients. After all, you can't take market share to the bank. You can only take profitable patients to the bank.

I wrote about one physician's positive experience saying "No" in Ophthalmology Management (October 1999). You can read that on my website at http://www.gilweber.com/gw_pro04.htm

Now here's more news from around the country on groups fighting back -- saying "No" and, in some cases, coming out with better deals.

This is from the AMNews and appears on the Internet today. I'm sure you'll find it interesting.

Gil Weber

Doctors find bargaining clout with HMO contracts

Some doctors aren't afraid to walk away from managed care contracts -- and are winning big concessions.

By Leigh Page, AMNews staff. Nov. 20, 2000. Additional information

To repair money-losing reimbursements and win a share of hefty premium increases, physicians seem to be bargaining harder than ever with health plans.

Across the nation -- in states as diverse as Florida, North Carolina and Washington -- practices are quite willing to terminate big contracts if necessary.

Some practices find they're better off financially by not contracting with the dominant HMO in their area, or they're able to get concessions from the health plan.

Doctors may not know it, but they have negotiating clout because "we provide the service," said Robert L. Howisey, MD, president of Surgical Associates of Washington in Seattle, which won concessions from Regence BlueShield.

"When the service is markedly affected, that's where the negotiating power shows up," he said.

Clifford R. Frank, a Jacksonville, Fla., practice consultant, said two factors had contributed to less physician fear of losing HMO deals. One, reimbursements have gotten so low that doctors can actually save money by dropping a contract and losing the patients. Two, doctors often can replace the lost patients with Medicare beneficiaries and PPO enrollees, who have grown from about 32 million to 100 million during the past five years.

"Something has happened that is really big that the payers don't get," Frank said. "When the plan says, 'Take it or leave it,' the group says, 'Leave it.' "

Success stories

When Dr. Howisey's Seattle group asked for contract changes last year, Regence said it was not its policy to negotiate with doctors, and "we basically had to force them to do it" by terminating the contract at the end of the year, Dr. Howisey recalled.

In addition to the 29 members of Dr. Howisey's group, more than 100 other surgeons dropped their contracts with Regence. They contacted patients, reporters and employers to explain their case.

Dr. Howisey said Regence was beginning to lose several large employers, and workers at Boeing, one of Seattle's largest employers, were making complaints.

The surgeons lacked a contract for six months, but the rebellion "was not as hard as it should have been," he said. Although Regence made up 30% of his group's business, many of those patients chose to remain with the practice despite higher personal costs for choosing out-of-network doctors.

In June, Regence raised its rates for all physicians, with increases for office visits and for surgery. The surgeons signed up again. Another contractual victory was scored this year by Cornerstone Healthcare, an 80-member multispecialty practice in High Point, N.C.

The group had given notice to the North Carolina Blues that it would drop its contract in September but settled before then, according to Grace Terrell, MD, the group's president. She said the contract took a year to negotiate and Blue Cross "waited to the last minute" to make concessions, which cannot be discussed because of a confidentiality clause.

Dr. Terrell ascribes the group's success to detailed analysis of contract offers, using computers to simulate what payments would be for every ICD-9 payment code the group uses. "If a contract does not meet our parameters," she said, "we reject it."

Facing a tough foe

But insurers still are hanging tough in contract talks. Analysts say plans have earmarked this year's high premium increases for depleted reserves and to meet higher utilization, especially in nonphysician services like pharmaceuticals. A hefty raise for doctors would force them to hike premiums more and risk losing employer contracts.

When Piedmont HealthCare, a 70-doctor group practice in Statesville, N.C., handed in its termination notice to the North Carolina Blues, the plan issued a news release saying the group wanted an "unprecedented" $1 million yearly raise that would mean a 16% hike in premiums for local businesses. "We could not, in good conscience, agree to it," according to the Blues, which added that it had an ample network without Piedmont.

Edward Campbell, MD, chair of the managed care committee at Piedmont, said the plan's estimate of the increase was "exaggerated." He added that no one could pinpoint the exact raise Piedmont wanted because it involved thousands of different fee-for-service rates.

But he did say that the insurer -- like many other Blues plans -- often paid the lowest rate in the state. The plan had not given the group a fee increase in three years, and its negotiating posture was "take it or leave it."

Piedmont left it. It terminated its contract on Nov. 1 and is now in a battle for the hearts and minds of its patients and the local employers.

Piedmont told patients in letters that "quite frankly, we did it to stay in business." It said they could stay with the group as an out-of-network provider but would have to pay a higher portion of their bill, which is usually the case when contracts end.

To alleviate the financial burdens on patients, Piedmont is asking local employers to switch to other plans it contracts with. Piedmont Brokerage and Consultants in Jamestown, N.C., reports that two or three of the 148 local employers it represents have dropped Blues contracts.

In Tallahassee, Fla., 26-member Anesthesiology Associates is further along in its termination with Blue Cross and Blue Shield of Florida. The contract, representing 14% to 15% of the group's business, ended in July.

Because the group represents all but one anesthesiologist in town, it still treats Blues patients on an out-of-network basis. It bills them directly and can charge its full rates, said John O'Day, a consultant with the group.

The group is "doing better off-network than on," O'Day said, noting that the Florida Blues had not given the group a rate increase in 10 years and actually had cut rates twice in that time.

The Florida Blues has announced a national recruitment campaign for anesthesiologists to break the group's local dominance. But Alan Klochany, MD, the group's president, is determined not to give in to the Blues as it did a few years ago, when it terminated its contract because the Blues planned to cut rates, then signed back on after a few months for a slightly smaller cut.

"We came back because we're nice guys," Dr. Klochany said. This time, he hinted, the anesthesiologists might not be so nice.

Down to the wire

Increasingly, contract negotiations seem to end up with termination notices and bitter campaigns to win over employers, patients and the media. Some examples:

Why the fierce negotiations?

Insiders to current managed care contract negotiations cite the reasons why both physicians and plans are hanging tough.

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