Taking On Managed Care



Originally published in Modern Physician

AS A PHYSICIAN, I NEVER EXPECTED THE TROUBLE I'd have when managed care hit my town. But I got a jolt of reality when I glanced at the return address on a white manila envelope 1 nearly tossed into my stack of junk mail.

It was from Kimball International, the largest employer in Jasper, Ind., the town where I live and work. A Fortune 500 company, it is a leading furniture manufacturer and em-ploys more than 3,000 workers locally and another 1,000 in the surrounding areas. Four thousand laborers and their families depend on Kimball for their livelihoods and benefits, including health insurance. In a town blessed with a strong work ethic, good companies and near full employment, Kimball is numero uno. And when it talks, everyone here, doctors included, listens. I opened the envelope.

Like other rural areas, Jasper, a town of 10,000, had been insulated from the upheaval of managed care. Until recently, that is. In 1992 Kimball brought in the region's first managed-care company, Minneapolis-based Health Risk Management. HRM, with Kimball's blessings, bent over backward to show the medical community it had nothing to fear. It held meetings with the Memorial Hospital medical staff, sent representatives to each doctor's office to discuss fee schedules and was willing to negotiate. There were discounts, but they were minor. The first taste of managed care had not been particularly painful.

Two years later, in response to concerns raised by employers over the ever-increasing costs of healthcare, a coalition, or "co-operative," was formed. This consisted of local employers, the two community hospitals and area physicians, and became known as the Pakota Valley Cooperative. It was an unusual gathering of rivals, but in a small, friendly town like ours, it was feasible. The main focus was on keeping patients local; the idea being that local care was more efficient and less costly. The net-work forged alliances with tertiary-care centers for referrals. A system of incentives was de-signed to keep patients "in-network." There were discounts, but again, the cuts were super- ficial. Kimball remained aloof and did not join the cooperative.

Along the way, other, more aggressive managed-care entities attempted to break into the market, but Kimball and the cooperative held their ground. With the major players in town content, the cold chill of managed care felt elsewhere in the country was noticeably more temperate by the time it reached us.

I was surprised that the letter, received at the end of 1996, indicated Kimball had decided to ditch HARM and go with United HealthCare Corp. of Minneapolis, a huge managed-care conglomerate.

I reviewed the contract. II was the usual managed-care gibberish about credentialing, co-pays, utilization, precertification and the like. Coming from Kimball, I thought it should be all right and was ready to sign. Why not? I hesitated for a moment. I scribbled a note on a sticky pad instead, asking for the HMO's fee schedule. I placed the note on the contract and laid it on my office manager's desk.

A few days later, I received a generic fee schedule. It was useless. Most of the procedures listed were irrelevant to my area of expertise. There were rates given for breast biopsy, hip replacement, angioplasty and the like, but almost nothing that an otolaryngologist like myself could use. For the one or two procedures listed that pertained to my specialty, the fees were half what HRM paid. I didn't know what to make of it, but it didn't look good. I asked my office manager to send United HealthCare's representatives my 50 most common billing codes. They responded by sending back the same worthless schedule.

I decided to call them myself. I spoke to a physician liaison, who told me the fee schedule I had already received was usually all the I IMO sent. As a favor, though, he agreed to look at 20 of my most common codes. I told him that for a procedure-oriented discipline like otolaryngology, 20 codes covered only a small fraction of what I did. He replied that he didn't have time to deal with each doctor's fee schedule and that I was lucky to get my top 20. For good measure, he added that this was how United I HealthCare had always dealt with doctors.

The managed-care horror stories I'd heard about from other parts of the country were beginning to resonate more loudly in my mind. But I didn't want a major confrontation"yet. I agreed to send him the 20 codes. I remembered how easily I was able to get HRM to review my entire computer printout of more than 650 codes.

A week later, I received the HMO's allowances for the 20 codes. The numbers were not sobering; they were scary. Often, the fees were at or below the level of Medicare, which generally ran between 35% and 50% of my usual fees. How did they expect me to keep my doors open at Medicare rates? I worked those numbers for the elderly and poor, but for everyone? There was no way I, nor any solopractitioner, could survive.

I called the physician liaison and told him his rates were outrageous. He asked me to make a counteroffer. I sent him my HRM fees discounted 5%. It didn't help. He sent me rates that were between 30% and 50% below my reduced fees. If United Health-Care paid such horrible rates with my top 20, what atrocities awaited codes I was not allowed to inspect?

I was in shock. I could not believe Kimball would sign on with so hostile a firm. A Jasper company, their founders were born and raised here. Their executives sat on the hospital board. Some of them lived in my neighborhood. I had operated on their kids.

I also worried about the other employers in town. In this small town, there were no secrets, and everyone knew about United HealthCare's ultra-aggressive tactics. Maybe the other employers would expect the same treatment. If everyone demanded these rates, the entire commercial pay base that I, and the town's other doctors, depended on would disappear.

My concerns were prophetic. At the next medical staff meeting, the physician representative for the cooperative announced that the employers of the cooperative, as the town's largest employer aggregate, were insisting on "most favored nation status." This meant, simply, that as a group with the largest number of "covered lives," they expected the best deal. Aware of the arrangements United HealthCare was attempting to achieve for Kimball, they were demanding a piece of the action, too.

I called United HealthCare's physician liaison again and asked for 100 codes. He was resolute in his position. Enough was enough. I decided it was time to make a direct appeal to Kimball.

They needed a network of doctors for their 4,000 employees and dependents, and the first of the year was approaching. It was common knowledge around town that most of the doctors were dissatisfied with United HealthCare's strong-arm tactics and had not signed. The employees were beginning to grumble they didn't want to lose their doctors, and they didn't want to travel 50 miles to see someone else.

I spoke to Kimball's human resources person. I explained to her that I wanted to work with the company, appreciated it business and didn't want to lose it, but I needed better rates and more codes. I added that in a specialty like mine, 20 codes barely scratched the surface of all that I did. She was receptive. Making no promises, she agreed to look into it.

The next day United HealthCare's liaison called. Amazingly, he agreed to look at 125 of my most common codes the first crack in the fortress wall. He responded quickly, but the rates were terrible. All I had accomplished was to find out how bad it would be in more detail.

I called Kimball again. I explained, in earnest, how much its business meant to my practice and that I didn't want to disrupt the relationships I already had with my many Kimball patients. The human re-sources representative made no promises but agreed to investigate. I waited a few days before sending United HealthCare's liaison my fee schedule again. When I got it back, I noticed the numbers had climbed, although only marginally. I was making progress. After several rounds, we were arguing over specific codes instead of the whole schedule. The liaison acted irritated, even outraged. I didn't care. A few days later, after a process that had taken months, I received a fee schedule I could live with.

I had no illusions about what had occurred. United HealthCare had not suddenly changed into a benevolent angel, intent on fairness and charity. On the contrary, if it could have gotten by with Medicare rates, it would have done so, and gladly. It didn't anticipate my calling Kimball or Kimball's being sympathetic.

In urban areas, where the competition is more fierce, doctors less cohesive and everyone so fearful of losing market share, physicians must sign or risk losing large numbers of patients to their colleagues down the block. In rural areas, hospitals and doctors can resist cutthroat tactics.

That's true for a variety of reasons. To be-gin with, there are fewer relative monopolies. Small-town hospitals are often a vital economic center for the community and the only vehicle for attracting needed physicians to an area. And everyone in the community appreciates that essential role. Small-town doctors, also, enjoy a similar prominence and singularity. Ruthless poaching by large managed-care systems threatens these hospitals, their medical staffs and, ultimately, the communities they serve. Businesses as well as the general public realize that.

There must be a balance between giving discounts and allowing doctors and hospitals to survive. If it's not possible to communicate this to the managed-care company, then consider calling the employer. It might be an unexpected ally. Be reasonable, respect its position, and figure out a way to do business. It's in every-one's best interests.


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