Progressive Focus©

Progressive Focus© Newsletter


Volume 5, Number 1 Spring, 2004
Helping You Manage the Expectations of Managed Vision Care

In This Issue:

Consumer-Driven Health Plans: Can They Effectively Control Rising Health Care Costs?

These days the TV, radio, and print media are filled with dire news about health care costs spiraling out of control. The traditional, alphabet soup programs (HMOs, PPOs, EPOs, etc.) no longer seem able to reduce costs. In fact, most plans are now well into a pattern of annual, double-digit premium increases.

This failure to effectively control costs is creating dire circumstances for employers and employees. Both are facing some very tough decisions as to who will have health care benefits in the future and who will pay the costs. Clearly, something has to change, especially when more and more employers are stating in no uncertain terms that they may not be able to subsidize some or, perhaps, provide any health care benefits in coming years

Spend, Spend, Spend – Something's Got to Give

Patients demand services, doctors provide them, and insurance companies pay the bills. And while the insurers get into often-nasty wars of words and action with practitioners over the amounts paid for such services, it's clear that insurers are facing some enormous challenges holding down costs.

For example, all plans want to look good on their HEDIS scores. Yet if a plan actively moves to get all its diabetics checked with annual dilated fundus exams that will mean encouraging utilization, thereby driving up costs. And so we can have two, powerful forces at work in direct opposition.

Practice variation is a second cost-factor that seems to drive the numbers inexorably in the wrong direction. Consider that recent Medicare data indicates per-capita spending in the Miami area is roughly two and a half times that in Minneapolis, even after the data is "massaged" to factor age, sex, and race. How can that be? How can practice patterns be so different across the country? It's enough to drive health plan managers crazy.


Practice variation is one of the greatest problems we face in controlling costs.

Dwayne David, MD
Medical Director, Geisinger Health Care

We used to spend a lot of time and resources communicating with physicians about the standards of pharmaceutical care they were delivering. But we didn't see much change in behavior. So for the last three years we've concentrated on influencing consumer behavior.

William Fleming, PharmD
Vice President, Humana

Consumer-Driven -- Searching for an Elusive Miracle

Today's "buzz " in health care cost containment is the consumer-driven health plan. It's offered up as the Holy Grail, the Fountain of Youth, a pot of gold at the end of the rainbow. This is "it," experts tell us.

We're told that with patients in control of how, when, and where their health care dollars are spent this new variant for controlling rising health care costs is a cure for the system's ills since it puts financial responsibility squarely on the shoulders of the end-users – the patients. And given greater control and information (for example, access to cost guides for hospitals, physician charges, and prescription medications), patients are supposed to become smarter.


We developed our Self Directed Health Plan in response to increasing demand from consumers for greater information, flexibility, choice, and control in how they spend their health care dollars.

Mike Clark, Vice President of Sales and Marketing,
Pacificare Health Plans (Desert Region)

Privatized Medicare?

Throughout 2003 the word out of Washington D.C. was privatized Medicare. The President's message to Congress was to create a system within which private health insurers could compete with traditional Medicare. Driving this proposal was the basic precept of patient choice (consumer-driven) as a means to reduce Medicare spending. And the House and Senate both tackled the problem and created their own versions.

But many critics see this idea of private health plans competing with Medicare as a false promise of meaningful cost-containment. They opine, perhaps with significant evidence on their side, that healthier seniors will gravitate to privatized plans, leaving the less healthy (and obviously greater consumers of health care services) to traditional Medicare. That would almost inevitably drive-up costs and premiums rather than reduce Medicare spending.

Insurance Companies Weigh-In

Advisors to the health insurance industry trade association HIAA (Health Insurance Association of America) are starting to weigh-in on the fundamental question of whether or not consumer-driven health care is the answer to runaway spending. Consumers were surveyed to measure whether or not it would be possible to promote and persuade acceptance of individually owned, tax-preferred, high deductible policies that would be portable and offer significant flexibility to the end-user (for example, allowing choices of multiple co-payment, deductible, and co-insurance levels, and access to tiered networks).

To date the public has been a bit slow jumping on the bandwagon and embracing these plans that typically are offered by employers as one of many health plan options. And so employers are taking a different approach to the offering – one that wraps "consumer-driven" in the aura of an increased benefit that frees the employee and his/her family from the generally poor public perception of traditional managed care.

And that's a very interesting development, this new approach to the offering. Previously, managed care programs such as HMOs and PPOs had been described only in terms of a cost-savings strategy. But that strategy could only wring-out so much before it was clear that cost-savings came with a wagonload full of unwieldy baggage. But if end users can be convinced to perceive these consumer-driven plans as an enhanced benefit of employment, then that might create a quite different health care financial and administrative environment than was seen in the 1980s and 1990s.

Perception vs. Reality

The success in selling consumer-driven health insurance to end-users ultimately will depend on managing the fine balance between perception and reality. Consumerism has been all the rage for at least two decades, and given the current situation with double-digit premium increases, anything to stem that trend likely would look better. And so employers started to offer their employees fixed amounts of money (sometimes called "flexible spending accounts") with which to purchase health insurance or, sometimes, individual health care services.

And that seemed like a great idea – putting the patients in charge and forcing them to think about health care just as they would any other purchase. It comes down to cost vs. benefits – something everyone understands.

But as this is written at the end of 2003 and into early 2004 these plans have not been a rousing success with employers or consumers. The consulting firm Mercer reports that only about 2% of employers offered them in 2002 (the percentage is higher for very large employers), and the promised, significant cost-savings and anticipated benefits are still to be seen.

Some critics voice an interesting concern that once patients are put "at risk" for their health care dollars they'll tend to neglect getting care except when they can't put it off any longer. This could lead to a generally less healthy population that depends more on interventional care and less on preventive care. Certainly that would cost the health care system more in the long term if such a scenario did play-out.

It's clear that health plans understand this dilemma, and it concerns them.


Our physicians are concerned that some patients will find this to be a burden and that it might affect their ability to have the right visits and have the right tests and get the right medicines... Using cost sharing to get people thinking about their own health care needs is probably a sound idea for someone who makes $200,000 a year. It is a challenging and complex proposition for someone with two children earning $10 an hour.

Arthur Southam, MD
Senior Vice President
Kaiser Foundation Health Plan

There's also a feeling in some quarters that practitioners are not fully on-board with this idea that consumerism really is the best way to solve runaway costs while also maintaining quality care.


There's physician resistance to the idea of involving patients in decision making. After all, they're trained to treat, not talk to patients.

John Wennberg, MD
Director, Center for Evaluative Clinical Sciences
Dartmouth Medical School

How Can Optometrists Prepare Their Practices for Consumer-Driven Health Plans?

Whether these plans light the health insurance world on fire remains to be seen. What's clear is that some of these plans will come to your town sooner or later, so you might as well be prepared.

Collecting the Cash

While patients will have greater flexibility to choose their health care providers (a good thing), and you'll be entitled to a larger portion of a generally higher fee up-front from the patient (also a good thing), there's considerable risk that if your staff doesn't collect those monies on the date of service you'll then have a harder time collecting all you're owed later (a really bad thing).

Practices that do not do a good job collecting at the front end could find that they are saddled with all sorts of bad debt that they did not face when insurance companies paid most of the bill and patients only had to come up with a nominal co-payment. Clearly you'll want to conduct a complete re-think of how the practice asks for and collects patient-owed amounts. This means new rules for managing and minimizing Accounts Receivable.

Communication, Communication

When patients can choose to go to any provider you'll suddenly find yourself placed into a much larger competitive pool than under traditional managed care plans. This means you'll have to do a different and more effective job promoting yourself and your practice.

Patients will want to know why they should come to you rather than to Drs. "X, Y" or "Z." They'll want to know how/why your treatment will differ from that they'd receive elsewhere. What do you offer newer or better or different that should cause them to hand over their now-budgeted health care dollars? If you can't provide convincing answers then these patients are likely to go elsewhere, and to spend their discretionary dollars at a practice that can provide convincing answers.

Consumer-driven plans will incentivize patients to become better managers of their health -- for example, learning how to manage diabetes. In theory, if patients become better educated about their own health conditions they'll spend more wisely from their health care spending accounts. In the past patients did not have such a clear-cut (financial) incentive to become educated, and to ask questions of their doctors. Now they will be motivated, and you'll have to devote more time to educating increasingly demanding patients.

Patients will want to know more about you – your clinical education, your specialty. And they'll want to know more about your staff, your facility, your equipment. What differentiates your optometric practice from every other in town?

Patients will be much less tolerant of what they perceive to be disinterested or rude staff, or poor customer service on billing issues, or when making appointments. And so you'll want to evaluate your practice and determine if your level of customer service is the optometric equivalent of Nordstroms?

Ask yourself: How do I/we compare to my peers?

Finally, don't be surprised if the health plans start asking for more data than ever before. Patients will be looking for data on which to make their provider selection decisions, and so the plans likely will be looking to supply some sort of comparative data to those patients. Thus, you should expect increased reporting responsibilities in the years ahead.

Rethinking Your Fees

In the past when you agreed to accept discounted fees from an HMO or PPO it was on the assumption that you were trading off discounted fees for certain expected increases in patient volume driven by the health plan. And the assumption was that you'd receive the largest slice of the fee from the plan which, of course, had an absolute stranglehold on the fees paid for services. With consumer-driven health care much of that changes, and the plans should no longer have dictatorial control over what you have to accept as payment for services.

You won't be part of a closed panel, and so the idea of "steerage" essentially goes out the door. Increased volume will come about through your own efforts, not through actions or efforts of the payer. And so you may want to rethink your fee schedule and the amounts you'll accept from payers and patients.

Many practices will raise their fees – finally freed of the crushing reductions forced upon them by third party payers. But will patients pay these amounts after years of getting everything essentially for "free"? That's the $64,000 question.

There's certainly reason to believe that at least for these consumer-driven plans fees can be raised from the levels offered by traditional managed care. Clearly, though, each practice will have to convince patients that the quality of services it offers justifies the price. So you'll have to be in the ballpark, and to do this you'll need to know how your fees compare to those offered elsewhere in the community.

On the other hand, there's always the chance that optometrists could find themselves in an even more cutthroat pricing environment if everyone in town starts playing the pricing game as a means of attracting new patients. Hopefully we won't see that play-out (e.g., with ridiculous eyeglass pricing by some of the retail chains), but it's a worrisome possibility.

It's All in the Presentation

In the end it will all come down to the presentation – to convincing choosy patients that you should be their optometrist. Present your practice, your staff, and yourself in a way that demonstrates clearly superior patient care and customer service. Whether you do that face-to-face, on the telephone, on your practice website, in a newsletter, or in office handouts, say it loud and say it proud, and believe in yourself.

I think it's the Marines who have a motto "It's hard to be humble when you're the best." That's how you need to approach this new era of consumer-driven healthcare.

Education is what you get when you read the fine print.

Experience is what you get when you don't.

Copyright © 2004-2007, Gil Weber, MBA. No part of this newsletter may be reproduced or distributed in any form whatsoever without the author’s prior written authorization.

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.

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