Over Heard in the DOCTOR’S LOUNGE

On “Hard Working” HMO Physicians

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By Dr. David E. Marcinko MBA CMP®

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One of my favorite patients told me this anecdote as he recalled the story of the old man who spent a day watching his physician son treating HMO patients in the office. 

The doctor had been working at his usual feverish pace all morning, and although he was working hard, bitterly complained to his dad that he was not making as much money as he used to.

Finally, the old man interrupted him and said,

“Son, why don’t you just treat the sick patients?” 

The doctor-son looked annoyed at his father, and responded,

“Dad, can’t you see, I don’t have time to treat just the sick ones.”

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COMMENTS ARE APPRECIATED.

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Transformational Health 2.0 Business Skills for Doctors

THE BUSINESS OF MEDICAL PRACTICE

Textbook Review

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PODCAST: A Three Decade Long History of Employer-Sponsored Healthcare Costs

The History of Employer-Sponsored Healthcare Costs in the Last 30 Years Can Be Broken Down Into 3 Segments:

THREE VITAL SEGMENTS

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BY ERIC BRICKER MD

1) The 90s HMOs: Lower Premiums, Lower Out-of-Pocket Costs, Many Many Rules Restricting Care.

2) The 2000s PPOs: High and Even Higher Premiums, Lower Out-of-Pocket Costs, Fewer Rules Restricting Care.

3) The 2010s CDHPs: Lower Premiums, HIGH Out-of-Pocket Costs, Fewer Rules Restricting Care.

The Last 30 Years Have Taught Us that Employer-Sponsored Health Plans CANNOT Have All 3–Low Premiums, Low Out-of-Pocket Costs and Few Care Restrictions.

In the 2020s, Employers Are Moving More of Their Employee Healthcare OUTSIDE of the Traditional Healthcare and Health Insurance System with On-Site Clinics, Near-Site Clinics, Virtual Urgent Care, Virtual Primary Care and Bundled-Payment Centers-of-Excellence.

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Citation: https://www.r2library.com/Resource/Title/0826102549

MANAGED CARE HISTORY: https://medicalexecutivepost.com/2014/11/19/a-brief-history-of-managed-care/

YOUR THOUGHTS ARE APPRECIATED

THANK YOU

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PODCAST: “Real ACOs Haven’t Been Tried Yet!”

What is an Accountable Care Organization?

DEFINITION: ACOs are groups of doctors, hospitals, and other health care providers, who come together voluntarily to give coordinated high-quality care to their patients. The goal of coordinated care is to ensure that patients get the right care at the right time, while avoiding unnecessary duplication of services and preventing medical errors. When an ACO succeeds both in delivering high-quality care and spending health care dollars more wisely, the ACO will share in the savings.

Citation: https://www.r2library.com/Resource/Title/0826102549

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QUESTION: What happens when you’re a healthcare policy wonk and the pilot study for your pet program has failed miserably? 

ANSWER: You declare “Success!” in the editorial pages of the New England Journal of Medicine and demand that the program become nationwide and mandatory. I kid you not.  This is exactly what happens.

Thankfully, Anish Koka is vigilant and explains the blatant obfuscations and manipulations that the central planners engage in to have their way.

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And so, In this video, Anish and colleague Michel Accad, MD, will reveal the machinations, take the culprits to task, and discuss pertinent questions regarding health care organization: 

  • Does “capitation” reduce costs? 
  • Do employed physicians necessarily utilize fewer resources? 
  • What happens when a HMO and a traditional fee-for-service health system operate side-by-side in a community?
BMC and Accountable Care - Boston Medical Center

Enjoy!

PODCAST: http://alertandoriented.com/real-acos-havent-been-tried-yet/

Your thoughts are appreciated.

THANK YOU

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2014 Forecast of Medical Per Capita Claims

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Cost Increases by Plan Type

By www.MCOL.com

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Understanding Health Insurance Plan Coverage [A Video]

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Knowing Managed Care Terminology, too!

In this YouTube encore video presentation, Ricki Hasou from the MD Anderson Cancer Center talks about knowing your health insurance plan coverage and knowing the terminology behind managed care.

Link: http://www.youtube.com/watch?v=bDSm6vyHVVE&feature=related

Assessment

It is very important to understand how your health plan works when you sign up, before you begin making plans for cancer or any other type of medical treatment, and especially if you are leaving your designated healthcare service area.

Conclusion

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Understanding MCO-Medical Practice Contract Standards

The Conversion to Negotiated Managed Healthcare is Significant

Dr. David Edward Marcinko, MBA CMP™

Prof. Hope Rachel Hetico, RN MHA CPHQ CMP™

www.BusinessofMedicalPractice.com

The conversion to managed healthcare and capitation financing is a significant marketing force and not merely a temporary business trend. More than 60% of all physicians in the country are now employees of a MCO. Those that embrace these forces will thrive, while those opposed will not.

Developing an Attractive Practice

After you have evaluated the HMOs in your geographic area, you must then make your practice more attractive to them, since there are far too many physicians in most regions today. The following issues are considered by most MCO financial managers and business experts, as they decide whether or not to include you in their network:

General Standards

  • Is there a local or community need for your practice, with a sound patient base that is not too small or large? Remember, practices that already have a significant number of patients have some form of leverage since MCOs know that patients do not like switching their primary care doctors or pediatricians, and women do not want to be forced to change their OB/GYN specialist. If the group leaves the plan, members may complain to their employers and give a negative impression of the plan.
  • A positive return on investment (ROI) from your economically sound practice is important to MCOs because they wish to continue their relationship with you. Often, this means it is difficult for younger practitioners to enter a plan, since plan actuaries realize that there is a high attrition rate among new practitioners. They also realize that more established practices have high overhead costs and may tend to enter into less lucrative contract offerings just to pay the bills.
  • A merger or acquisition is a strategy for the MCO internal business plan that affords a seamless union should a practice decide to sell out or consolidate at a later date. Therefore, a strategy should include things such as: strong managerial and cost accounting principles, a group identity rather than individual mindset, profitability, transferable systems and processes, a corporate form of business, and a vertically integrated organization if the practice is a multi-specialty group.
  • Human resources, capital, and IT service should complement the existing management information system (MIS) framework. This is often difficult for the solo or small group practice and may indicate the need to consolidate with similar groups to achieve needed economies of scale and capital, especially in areas of high MCO penetration.
  • Consolidated financial statements should conform to Generally Accepted Accounting Principles (GAAP), Internal Revenue Code (IRC), Office of the Inspector General (OIG), and other appraisal standards.
  • Strong and respected MD leadership in the medical and business community is an asset. MCOs prefer to deal with physician executives with advanced degrees. You may not need a MBA or CPA, but you should be familiar with basic business, managerial, and financial principles. This includes a conceptual understanding of horizontal and vertical integration, cost principles, cost volume analysis, financial ratio analysis, and cost behavior.
  • The doctors on staff should be willing to treat all conditions and types of patients. The adage “more risk equates to more reward” is still applicable and most groups should take all the full risk contracting they can handle, providing they are not pooled contracts.
  • Are you a team player or solo act? The former personality type might do better in a group or MCO-driven practice, while a fee-for-service market is still possible and may be better suited to the latter personality type.
  • Each member of a physician group, or a solo doctor, should have a valid license, DEA narcotics license, continuing medical education, adequate malpractice insurance, board qualification or certification, hospital privileges, agree with the managed care philosophy, and have partners in a group practice that meet all the same participation criteria. Be available for periodic MCO review by a company representative.

Specific Medical Office Standards

MCOs may require that the following standards are maintained in the medical office setting:

  • It is clean and presentable with a professional appearance.
  • It is readily accessible and has a barrier-free design (see OSHA requirements).
  • There is appropriate medical emergency and resuscitation equipment.
  • The waiting room can accommodate 5 – 7 patients with private changing areas.
  • There is an adequate capacity (e.g., 5,000 – 10,000 member minimum), business plan, and office assistants for the plan.
  • There is an office hour minimum (e.g., 20 hours/week).
  • 24/7 on-call coverage is available, with electronic tracking and eMRs.
  • There are MCO-approved sub-contractors.

Assessment

What have we missed?

Front Matter Link: Front Matter BoMP – 3

 

Conclusion

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Useful Managed Care Patterns and Procedural Utilization Trends

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Part One of Two

By Dr. David Edward Marcinko MBA

[Publisher-in-Chief]

If you read this ME-P regularly or have read my earlier blogs, you know that I am writing a book on practice management for the private medical practitioner.

The Business of Medical Practice [Transformational Health 2.0 Skills for Doctors]; third edition: www.BusinessofMedicalPractice.com

Link: Front Matter BoMP – 3

And, a recent story in the Chicago Tribune on the difficult business life of private practitioners today reminds me that I need to keep my nose to the grindstone.

For example, knowing your medical contract negotiation objectives, gathering information on the choices of contracts and discount payment systems, and understanding the pitfalls to watch for when evaluating a contract are the keys to any successful negotiation process.

Reimbursement Contract Negotiations

According to the sanofi-aventis Pharmaceutical Company Managed Care Digest Series, for 2008-10, the following pattern and trend comparative information has been empirically determined and may provide a basic starting point for practitioners to share business management, facilities, personnel, and other records for enhanced contract negotiation success.

www.managedcaredigest.com

hos

Procedural Utilization Trends

  • Among all physicians in a single-specialty group practice, invasive cardiologists averaged the most encounters with total hospital inpatient admissions down from the prior year. However, encounters rose for cardiologists in multispeciality group practices.
  • Echocardiography was the most commonly performed procedure on HMO seniors, followed by coronary artery bypass graft surgery. Group practices performed cardiovascular stress tests for circulatory problems most often.
  • CT studies of the brain and chest were the most common studies for HMO seniors, while MRI head studies were the most common diagnostic test on commercial HMO members.
  • Colonoscopy was the most common digestive system procedure on senior HMO members, while barium enemas were more common on commercial members.
  • Hospital admission volume decreased for allergists, family practitioners, internists, OB/GYNs, pediatricians, and general surgeons.
  • Internists ordered more in-hospital laboratory procedures than any other physicians in single-specialty groups.
  • Non-hospital MD/DOs used in-hospital radiology services most frequently, continuing a three-year upward trend.
  • Pediatricians averaged the most ambulatory encounters, down from the prior year.
  • Non-hospitalist internists ordered a higher number of in-hospital laboratory procedures than any other single medical specialty group, but allergists and immunologists increased their laboratory usage.
  • The number of ambulatory encounters increased for general surgeons, while group surgeons had the most cases. Capitated surgeons, of all types, had a lower mean number of surgical cases than surgeons in groups without capitation. Surgeons in internal medical groups also had more cases than those in multi-specialty groups.
  • The average number of total office visits per commercial and senior HMO visits fell, along with the number of institutional visits for both commercial and senior HMO members.
  • The average length of hospital stay for all commercial HMO members increased to 3.6 days but decreased to 6 days for all HMO members.
  • The total number of births increased for commercial HMO members served by medical group practices, and decreased for solo practitioners.
  • More than one-third of all medical groups use treatment protocols, rising from the year before. Multi-specialty groups were more likely to use them than single-specialty groups, who often develop their own protocols. The use of industry benchmarks to judge the quality of healthcare delivery also increased.
  • Outcome studies are most common at larger medical groups, and multi-specialty groups pursue quality assurance activities more often than single-specialty groups.
  • Provider interaction during office visits is increasingly coming under scrutiny. Patients approve of cardiologists more frequently than allergists and ophthalmologists.

Assessment

Obviously, the above information is only a gauge since regional differences, and certain medical sub-specialty practices and carve-outs, do exist.

Part Two: Useful Managed Care Provider, Staffing, Activity and Financial Trends

Conclusion

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On Dr. Enthoven’s “Managed Competition” in Healthcare

A Historical Essay Review for all Stakeholders

By Hope Rachel Hetico RN, MHA, CPHQ, CMP™

[Managing Editor]

www.BusinessofMedicalPractice.com

Princeton PhD economist Alain Enthoven’s 1993 paper in Health Affairs on managed competition is almost two decades old (health care markets have changed greatly since then), but not in his prescription for change.

Still Relevant Today

Of course, some ideas are outdated, but many expressed ideas are still very relevant today and embodied in several provisions espoused by advocates for additional contemporary healthcare reform.

In fact, we have mentioned the “Father of Managed Care” in all three versions of our textbook; including the newest third edition for 2011: The Business of Medical Practice [Transformational Health 2.0 Skills for Doctors]  www.BusinessofMedicalPractice.com

Assessment  

We therefore recommend that every healthcare stakeholder read the paper entirely; and then decide for your-self.  

Link: Managed Competition

Conclusion

And so, your thoughts and comments on this ME-P are appreciated. What are the advantages and disadvantages of Dr. Enthoven’s thoughts? Are they relevant today; why or why not? Feel free to review our top-left column, and top-right sidebar materials, links, URLs and related websites, too. Then, subscribe to the ME-P. It is fast, free and secure.

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How to Evaluate a Managed Care Contract Proposal?

ASK AN ADVISOR

To Join -or- Not to Join is the Question

By Staff Reporters

www.HealthcareFinancials.com

A new-wave West-Coast managed care organization (MCO) wanted a multi-specialty medical group to contract with them to provide medical services to all subscribers. Compensation would be in the form of a fixed-rate capitated payment system, a.k.a. per member / per month (PM/PM).

Ask an Advisor

The medical group practice administrator reviewed their request for proposal (RFP) very carefully, but is still not sure what to do. So, allow us to “crowd-source” as we ask ME-P readers, advisors and management consultants for a solution.

Key Issues

Facts to know for an informed PM/PM capitated reimbursement decision:

  • annual frequency or service-rate per 1,000 patients
  • unit cost of medical services per unit-patient
  • co-payment dollar amount per patient
  • co-payment frequency rate per 1,000 patients
  • variable cost per patient
  • under-capacity medical group office utilization rates, and
  • fixed overhead office-cost coverage [+/-].

Assessment

Visit: www.CertifiedMedicalPlanner.com

More case models: https://medicalexecutivepost.com/2010/03/12/healthcare-case-models-cd-rom/

Conclusion

And so, your thoughts and comments on this ME-P are appreciated. What is your solution; accept or reject the contract proposal? Feel free to review our top-left column, and top-right sidebar materials, links, URLs and related websites, too. Then, be sure to subscribe. It is fast, free and secure.

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On Physician Bonuses

Money and Incentive Pools 

By Brent A. Metfessel; MD, MSbiz-book

Some Managed Care Organizations [MCOs] use medical provider profiles to allocate funds to the top-performing physicians. The MCO may give additional bonuses or preferential allocation of incentive pool funds to providers that perform well on particular cost-effectiveness and quality indices. 

Incentive Pools

Incentive pools are often built based on a certain percentage or “withhold” of dollars that are taken from the providers’ usual reimbursement and placed in a pool.  Top performers would be allocated the greatest percentage.

Example:

One mid-sized health plan in the Southeast paid a 20% bonus to providers with a case-mix adjusted performance ratio (actual/expected cost) of less than 1.3. Although such allocation schemes might incent providers to practice efficiently and with high quality, the MCO should attempt provider education as to the most appropriate practice patterns for the first one to two years after new profiles are introduced. This education should occur prior to introducing monetary incentives, since otherwise the relationship between providers and MCOs may ultimately become strained. 

Assessment

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Unfortunately, money can become a major point of contention between providers and between providers and the health plan.

Conclusion

And so, your thoughts and comments on this Medical Executive-Post are appreciated. How do your bonus pools work; or should work? Feel free to review our top-left column, and top-right sidebar materials, links, URLs and related websites, too. Then, be sure to subscribe to the ME-P. It is fast, free and secure.

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Take the Lost Managed Care Contract Challenge!

Illustrative Case Model – Are You CMP™ Worthy?

By Staff Reporterscmp-logo

The Hope Outreach Medical Clinic (HOMC) is a private, for-profit, single specialty medical clinic in a south-eastern state. It submitted its bi-annual Request for Proposal (RFP) to continue its current managed care fixed-rate contract. Upon review of the RFP, however, Sunshine Indemnity Insurance Company, the managed care organization (MCO), denied the contract request for the upcoming year.

Seeing Economic Estimates

In shock, the clinic’s CEO asked the clinic’s administrator to work with its legal team to develop a defensible estimate of economic damages that would occur as a result of the lost contract. The clinic intended to bring suit against the MCO for breach-of-contract. However, the administrator is not an attorney and is loathe to-enter the fray. After consideration however, he decided to assist in filing the Statement of Claim (SOC) because he realized that changes in patient services (unit) volume would be a valid economic surrogate. He then requested the following information from his controller, in order to develop a change in economic profit [damages] estimate.

Change in patient visits (unit) volume

  1. Fees (price) per patient (unit)
  2. Marginal (incremental) cost per patient (unit)
  3. Change in current fees (prices)
  4. Patient volume (units) affected

Key Issues:

  1. Fee (price) per patient (units) may be obtained from the fee schedule used by the MCO to pay HOMC.
  2. Marginal (incremental) costs per patient (unit) are approximated using variable costs.
  3. Higher cost payors exist because lower patient volumes raise the average cost per patient (unit) due to existing fixed costs.

Assessment

Medical management consultants, are you up to answering this challenge? We dare you to respond!

Visit: www.CertifiedMedicalPlanner.com

Conclusion

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Janis Oshensky Lobbies Congress – Not Dentists

Show Me the Math

By Darrell K. Pruitt; DDSpruitt 

I have noted here far too many times how it disappoints me that Delta Dental Plans Association vice president Janis Oshensky repeatedly chooses to turn to politicians rather than discuss Delta Dental’s arguably egregious and harmful policies with me, a dentist. I intend to put a stop to such disrespect one PR expert at a time if necessary.

Long ago I warned Oshensky that if she didn’t talk to me, she should probably just shut up in order to preserve what’s left of her Internet reputation. Since by posting her Letter to the Editor on POLITICO.com today, she obviously ignored my advice, this highly critical comment will reliably join three others of mine on her first page soon enough. Her employer is sacrificing her like a pawn.

The following comment is the one I posted on POLITICO.com in response to Oshensky’s letter. It might just help the vice president to finally come to a decision on this issue one way or the other. Either way, marketplace conversation like this cannot help but lead to safer air for the community … My pleasure.

http://www.politico.com/news/stories/0709/24873.html

Dear POLITICO.com Editor:

This comment and subsequent invitation to Janis Oshensky is in response to the Delta Dental Plans Association vice president’s July 14, 2009 letter to you. Her letter is the most recent message she successfully sent Congress using a political news Website. Even though Ms. Oshensky holds the position of VP of dental relations as well as public policy, she has avoided answering this dentist’s questions about Delta Dental’s policies for months. If Ms. Oshensky is willing to do so, I would love for her to join me in discussion of Delta Dental’s taxation subsidy right here on POLITICO.com so that our lawmakers can witness a more balanced view of the issues.

Hello – It’s Me

Hello. My name is D. Kellus; Pruitt DDS, and I’m a practicing dentist in Fort Worth, Texas. It is my professional opinion that my patients are harmed by the policies of managed care dental plans like that sold by DDPA because there is no accountability to their clients or dentists. There is barely any accountability to those who select and pay for Delta’s products – dental patients’ naive bosses.

Like virtually every US citizen, your readers probably couldn’t care less about the dental industry. It is precisely because dentistry has been uninteresting for decades that make the microcosm of health care incredibly interesting to me. Let me uncover for your appreciation the event horizon in dental history. You could learn about more than just dentistry.

If left to natural forces of human nature, what happens to value when there is no accountability? For example, what do the 1975 East German Trabant and the 1979 Ford Pinto have in common? By popular vote, those products not only represent the two worst automobiles ever made, but the state shielded both manufacturers from accountability to consumers. Poor quality happens.

Oshensky argues against the taxation of managed care dental benefits like those sold to employers by Delta Dental. Let me offer that if Delta’s product were taxed like income, its value would quickly dive below the market threshold that attracts purchasers’ consideration.

Allow Me to Show-You the Math

Recently, Delta Dental of Michigan lost the accounts of thousands of GM retirees when their group dental benefits were cut in bankruptcy negotiations with UAW. Suddenly, Delta found itself forced to market their product to individuals who for once have the choice to keep their money. Faced with true competition for healthcare dollars, Delta leaders desperately cobbled together individual policies for the retirees who want to continue with their coverage. Even though Delta did everything possible to lower the cost of their coverage, the cheapest of the plans they offered still runs about $30 per person per month, and covers only 50% of everything, including preventive. So for premiums of $360 per year plus half the preferred providers’ 20% to 30% discounted fees, is this a bargain for Michigan retirees?

Free Markets 

In my free-market, fee-for-service practice, if a patient comes in for two cleanings and routine x-rays during a year, 100% of my bill is $208. This is the market price in my neighborhood that is continually challenged by lively competition with other dentists for new patients who may not even have dental benefits. Those customers pay in full at the time of visit, just like most people whose bosses purchased Delta Dental Plans.

Value Comparisons

So let’s compare value of Delta Dental’s product with cash. If I were a Delta Dental preferred provider, my fee of $208, less Delta’s 25% discount would be $156. Never mind that my wife has problems with my 70% cut in pay, let’s move on. 

The patient’s half of the $156 I earned is $78. $360 + $78 = $438. So for one uneventful year of discounted dental services with a dentist chosen from a list of names, a patient can expect to spend more than twice as much than if they paid the free-market price at the point of service.

Assessment

Not only is that hardly a bargain, but it is my opinion that managed care dentistry is dentistry by the lowest bidder with no quality control. That should be enough meat to get this conversation rolling. Now it’s your turn Ms. Oshensky. I think you have to admit that you’ve got holes to mend in the dental relations part of your job.

Conclusion

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The Need to Protect Accounts Receivable [ARs]

Understanding Liability and Stewardship Issues

By Dr. David Edward Marcinko; MBA, CMP™

By Dr. Gary L. Bode; MSA, CPA, CMP™

HOFMSAll hospitals, clinics, healthcare entities and doctors are aware that accounts receivable (ARs) represent money that is owed to them, usually by a patient, insurance company, health maintenance organization (HMO), Medicare, Medicaid, or other third party payer. In the reimbursement climate that exists today, it is not unusual for ARs to represent 75% of a hospital’s investments in current assets. ARs are a major source of cash flow, and cash flow is the life-blood of any healthcare entity. It pays bills, meets office payroll, and satisfies operational obligations.

Medical ARS are Different

A feature of ARs in healthcare organizations that differentiates them from ARs in other types of business is that they are often settled for less than the billed amounts. These allowances include four categories that are used to restate ARs to realizable expected values:

  • professional or courtesy allowances;
  • charity (pro bono care) allowances;
  • doubtful account allowances; and
  • HMO and managed care organization (MCO) contractual and prospective payment allowances.

AR Stewardship Issues

Good stewardship of assets requires that one must be concerned not only with significant economic losses due to professional conduct (professional malpractice liability concerns, and issues raised by the Equal Employment Opportunity Commission (EEOC), Office of Civil Rights (OCR), Occupational Safety and Health Administration (OSHA), and so on); but that of physician partner(s) and even the financial failure of contracted private insurers, payers, MCOs, HMOs, etc. ARs are often the biggest asset to protect against creditors or adverse legal judgments. It is not unusual to have ARs in the range of a hundred thousand dollars for a group practice or medical clinic; and in the millions of dollars for a hospital. Yet, since they can easily be attached, ARs are known as exposed assets to creditors.

Assessment

A judgment creditor pursuing a doctor for a claim may pursue the assets of the clinic, and ARs and cash are the most vulnerable assets. ARs are as good as cash to a creditor, who usually has to do no more than seize them and wait a few months to collect them. If a creditor seizes ARs, the clinic or health entity may be hard pressed to pay its bills as they become due. One must therefore be vigilant to protect AR assets from lawsuit creditors.

More: www.CertifiedMedicalPlanner.org

FACTORING: ARs 1

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Proactive Medical Accounts Receivable Monitoring

Forewarned is Forearmed

Dr. David E. Marcinko MBA CMP™

By Dr. Gary L. Bode; MSA, CPA, CMP™

http://www.CertifiedMedicalPlanner.org

All hospitals, medical clinics, healthcare entities, and doctors are aware that accounts receivable (ARs) represent money that is owed to them, usually by a patient, insurance company, health maintenance organization (HMO), Medicare, Medicaid, or other third party payor. In the reimbursement climate that exists today, it is not unusual for ARs to represent 75% of a hospital’s investments in current assets. And, a medical practice may have ARs in the range of several hundred thousand dollars. ARs are a major source of cash flow, and cash flow is the life-blood of any healthcare entity. It pays bills, meets office payroll, and satisfies operational obligations.

Avoidance Management

The best way to manage AR problems is to avoid them in the first place by implementing a good system of AR control. Answering the following questions may help upgrade a system of AR control:

  • Is an AR policy in place for the collection of self-pay accounts (de minimus and maximus amounts, annual percentage rate (APR), terms, penalties, etc.)?
  • Do employees receive proper AR, bad debt, and follow-up training within legal guidelines?
  • Are AR exceptions approved by the doctor, office manager, or accounting department, or require individual scrutiny?
  • Are AR policies in place for dealing with hardship cases, pro bono work, co-pay waivers, discounts, or no-charges?
  • Are collection procedures within legal guidelines?
  • Are AR policies in place for dealing with past due notices, telephone calls, dunning messages, collection agencies, small claims court, and other collection methods?
  • Are guidelines in place for handling hospital, clinic, or medical practice consultations, unpaid claims, refilling of claims, and appealing claims?
  • Are office AR policies periodically revised and reviewed, with employee input?
  • Does the doctor, hospital, or clinic agree with and support the guidelines?

Assessment

It is  typical that poor control occurs because the doctor and/or hospital is too busy treating patients, or the front office or administrative staff does not have, or follow a good system of AR control.

www.MedicalBusinessAdvisors.combiz-book1

Conclusion

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On Growing Tensions in Healthcare Services Markets

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Stressors Affecting all Stakeholders

[By Robert James Cimsai; MHA, AVA, ASA, CMP™]

http://www.HealthCapital.com

The changes in reimbursement for Medicare services through the introduction of prospective payment systems and physician reimbursement cuts for professional services, as well as the increased focus on patient quality and transparency initiatives and health 2.0 collaboration have forced healthcare providers to look for more efficient ways to provide services, as well as additional sources of revenue and margin-producing business.

Additionally, with the rise of corporate healthcare provider networks and health systems, together with rising healthcare costs, competition among providers has become prevalent in the healthcare industry.

Assessment

Strict control of reimbursement costs from payers and consistent decreases in physician professional component fee reimbursement yields; reduction in traditional hospital inpatient use; and higher costs of capital have all contributed to the trend of physician investment in outpatient (and inpatient) specialty provider enterprises [ASCs, specialty hospitals and clinics, etc] , which often compete with general acute care community hospital providers.

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Understanding Periodic or New Employee Practice Compliance Audits

Perform and Improve as Needed

By Patricia Trites MPA, CHBC; with Staff Reporters 

www.HealthcareFinancials.comho-journal12

There are several types of compliance audits that a medical practice, clinic or healthcare organization might need to perform. The starting point, discussed elsewhere on this ME-P, is to obtain a baseline audit. The next step is periodic audits or reviews that are performed after information is obtained from the baseline audit.

Periodic Audits

Periodic audits are performed on an on-going basis. Depending on the volume of billing, these may occur weekly for a large multi-specialty ambulatory clinic to quarterly for a small medical practice. These periodic audits can be random or scheduled. Sometimes in the process of seeing how things run, a surprise review can be informative to staff and practitioners.

New Employee Audits

New employees require regular training and reviews until there is confidence in their capabilities. Background checks are often helpful to find out whether there are any potential conflicts. In hospitals, health plan offices, surgery centers, and other regulated facilities, background checks are a normal part of the credentialing process. This process typically includes Medicare violations, which would show up on the National Practitioner Data Bank report. However, independent medical practices do not have access to this type of information and may have to rely on other organizations to obtain the information. The OIG and the General Services Administration both maintain a database of excluded persons and entities that can be accessed through the Internet. As part of the organization’s initial and periodic audits, queries of these two databases should be performed for all employees and independent contractors (like locum tenens physicians). Failure to do so can put the practice at risk of large civil money penalties ($10,000 for each occurrence) and liability for refunds of all claims the excluded individual had part in providing or billing.

Assessment

Additional audits can be performed whenever new employees are added, or if there are complaints or issues that arise in the course of business; prn.

Conclusion

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Advisor’s Checklist for Physicians Seeking Insurance

Background, Education, and Certifications

By Dr. David Edward Marcinko; MBA, CMP™

Publisher-in-Chiefdem22

The following are sample questions and information gathered for Professional Liability Coverage

The Checklist

**Medical specialty information by percentage of practice.

**Information on medical education, including information on medical school, internship information, residency information, and fellowship information, if any.

**Information on medical experience, including information on military discharge (DD214), public health service, moonlighting, ‘locum tenens’, and private practice information. Have dates and locations available. Other information includes:

  • Information on completed continuing education hours in the past two years.
  • Publications, speeches, instruction, etc.
  • Information on medical licenses, including state, license number, expiration dates, and current status.
  • Information on board certifications.
  • The above information may be contained in a Curriculum Vita, if you have one.
  • On an “as applicable” basis:
  • Complete details including dates and outcomes of any board certification revocations or suspensions, license revocations or suspensions, alcohol or drug addictions and treatments, criminal or sexual misconduct charges, or Medicare or Medicaid charges.
  • Previous Insurance Information
  • Insurance history, including the name, policy number, whether the coverage form was occurrence or claims made, policy period, limits of liability, deductible amount, and prior acts date, for your current carrier, and your first, second, third, and fourth prior carrier, if applicable.
  • Information on any insurance company cancellations or non-renewals.
  • If your current policy is a claims-made policy, whether you are obtaining tail coverage from your current insurance company.
  • Copies of prior policies, if available.

Current Medical Practice Information

  • Information on supervision and employment of residents, physician assistants, nurse practitioners, CRNAs, nurse midwives and other physicians;
  • Information on networks or managed care organizations associated with (IPA, PHO, MSO, etc.), including group name, type of organization, and relationship;
  • Information on other contractual relationships other than PPOs, HMOs, IPA, etc;
  • Full information on all hospital privileges, including hospital name, location, and type of privilege.
  • Information on any suspension, denial, revocation, restriction, or other sanctioning of hospital privileges.

Classification and Specialty Identification

Full information on procedures performed, including details of surgeries, average number of patients seen weekly, specialty practice areas, etc.

Prior Claims History (if any)

For each claim, patient’s name; date of occurrence; insurance carrier; location of occurrence; date claim was reported; date claim was closed (if applicable); copies of subpoenas, pleadings, or judgments; amount reserved on your behalf; and amount paid on your behalf.  Provide as complete a description of the allegations as possible.

insurance-book2

Important Note

This checklist is provided as a guide to assist the Healthcare Professional in gathering the information that insurance companies typically request.  Discuss this checklist with your agent to identify additional information as needed.

Assessment

The author has been an expert medical witness in both state and federal court. He is also a former licensed insurance agent and certified financial planner.

Conclusion

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Paradigm Shift to “Defined Health Contributions” from “Defined Health Benefits” Plans

What it is – How it Works

By Staff Reporters

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In the past, according to Robert James Cimasi MHA AVA CMP™ of Health Capital Consultants LLC in St. Louis MO, many employers had defined retirement benefits for employees. Today, most retirement benefits are in the form of 401K plans where companies make defined contributions, effectively shifting the financial risk of paying for retirement to employees.

Defined Health Contributions

Defined health contributions are similar to employer-funded defined retirement contributions like 401K plans. Currently, employers pay for some portion of about half of Americans’ health insurance. Traditional employer-funded plans are those for which the employee simply fills out a form; that is, an employer will offer one or possibly two health insurance plans, and the employee fills out application paperwork. The employer administers the plan and may charge the employee a portion of the monthly premium or pay the entire premium themselves. A defined contribution plan allows companies to shift the financial risk of paying for rising health insurance costs.

Defined Health Benefits

Although part of the “benefit” of a health benefit plan is that the employer also takes care of all the administrative paperwork related to the insurance, companies are increasingly uninvolved in the administration process, opting instead to let the employee decide which plan out of many choices suits them best. For example, if an employer typically spends about $5,000 per employee per year on health benefits, the employer would use that money as a “defined contribution.” The employee then has $5,000 to spend per year on benefits, but instead of using the employer-defined health plan, the employee may choose from a variety of HMOs, preferred provider organizations PPOs, or other health plans. If the insurance premiums rise above this amount, the employee must make up the difference.

dhimc-book24Defined Contribution Package

Many employers are currently offering a defined contribution package to their employees. The definition of “defined contributions,” however, can range from one in which employers are completely uninvolved in the administration of benefits and simply give their employees cash or vouchers for the amount contributed that they can use to buy coverage, to a more “defined choice model” where employers offer a variety of health options at differing price levels along with a premium dollar contribution, and a variety of other options in between.

Risk Shifting

Thus, defined contributions shift the financial risk from the employer to the employee. Defined care is not a replacement for managed care, but will probably cause managed care to adapt under these new systems. That is, HMOs, PPOs and other managed care plans still appear to be the main choices in a defined care environment, so they are in fact a part of the system.

Assessment

Another challenge with a defined health benefit program is that the concept of risk-pooling becomes more difficult. In traditional employer-sponsored plans, rates are usually based on the pool of employees; a chronically ill employee who tries to find insurance independently may face rates drastically higher than if they had participated in an employer-sponsored plan.

MORE: www.CertifiedMedicalPlanner.org

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Understanding Modern Health Plan Delivery Models

By Defining Terms and Concepts

Staff Writers

www.HealthcareFinancials.comho-journal10

Here are four important health care delivery models that should be understood by all financial advisors, their clients, patients and the public:

1. PHYSICIAN ORGANIZATION (PO)

A PO is a group of physicians banding together, usually for the purpose of contracting with managed care entities, or to represent the physician component in a Physician Hospital Organization. The PO is a managed care contracting entity owned by and composed exclusively of physicians. The PO tends to be more tightly controlled in terms of members and adherence to treatment protocols than an Independent Physician Association. POs typically share information systems, claims-processing procedures, financial data, medical records, and other technical support functions.

2. PHYSICIAN PRACTICE MANAGEMENT CORPORATION (PPMC)

A firm that purchases physicians’ practices in exchange for a percentage of the gross receivables. The PPMC leases the office back to the doctor or employs the doctor on a salaried basis. The PPMC then contracts with the areas MCOs.

3. POINT OF SERVICE PLAN (POSP)

A type of managed care plan that allows members to choose whether to seek medical care within the plan’s network or seek medical care out of network at the point of service (i.e., at the time services are rendered). It allows members to pay little or nothing, if they stay within the established HMO delivery system. But, it also permits members to choose and receive services from an outside doctor, any time, if they are willing to pay higher co-payments, deductibles and possibly monthly premiums. It is also called an “open-ended” plan.

4. PREFERRED PROVIDER ORGANIZATION (PPO)

A PPO is a select, approved panel of physicians, hospitals, and other providers who agree to accept a discounted fee schedule for patients and to follow utilization review and pre-authorization protocols for certain treatments. It is a system in which a payer negotiates lower prices with certain doctors and hospitals. Patients who go to a preferred provider get a higher benefit — for example, 90% or 100% coverage of their costs — than patients who go outside the network.

Assessmentdhimc-book20

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Conclusion

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Sherlock Expense Evaluation Report [SEER]

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Plan Management Navigator

By Marco Georeno

Ph:  215-628-228956372274      

Please find attached the April 2009 edition of Plan Management Navigator. In it we provide an update on the timing of the Blue Cross Blue Shield universe and the Independent / Provider-Sponsored editions of the Sherlock Expense Evaluation Report (SEER). In addition, we expect to circulate the benchmarking surveys for the Medicaid and Medicare universes on or about June 1st, for completion by July 20th, 2009.

Benchmarking Studies

If you are interested in participating in our benchmarking studies please contact us as soon as possible. Additional information about SEER is available at www.sherlockco.com/seer.shtml or by contacting Doug Sherlock (sherlock@sherlockco.com).

Best Practices for the Healthcare Enterprise

We also endeavor to provide an enterprise view of best practice. Best practice is typically considered to be the most efficient way of achieving a desired outcome. We believe that the best way of determining the best practice in its most practical application is to start with an overall objective and weigh all particular practices in light of how they contribute to that overall objective.

In that vein, over the next several months, Sherlock Company will be offering web conferences focused on best practices. The first conference will address activities within Customer Services, as well as activities or effects in other functional areas. This web conference will be held on Wednesday May 20th at 2:30 PM, Eastern Time. The costs will be $225. Participation is free of charge to health plans participating in our 2009 benchmarking studies. If you are interested in participating, please email Erin Sawchuk (erinsawchuk@sherlockco.com) or call at 215-628-2289.

Assessment

This edition of Navigator also discusses the latest private health plan Dashboard results for the trailing three months ended January 31, 2009.

Link: navigator

Sincerely,
Sherlock Company

Marco Georeno – Analyst
mgeoreno@sherlockco.com

Fax: 215-542-0690

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Understanding the Health Maintenance Organization Delivery Model

ho-journal8Defining Terms and Concepts

By Staff Writers

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An HMO is a legal corporation that offers health insurance and medical care. It is a health care delivery system that provides comprehensive services for subscribing members in a particular geographic area. Most HMO care is provided through a managed network made up of MD/DOs, hospitals, and other allopathic/osteopathic professionals selected by the HMO. HMO enrollees are required to obtain care from this network of providers in order for their care to be covered, except in cases of emergency. All the care the members may need is paid for by the single monthly fee, plus nominal co-payments. HMOs typically offer a range of health care services at a fixed price (capitation).

Different Types

The types of HMOs are:

1. STAFF MODEL: Organization owns its clinics and employs its doctors.

2. GROUP MODEL: Contract with medical groups for services.

3. INDEPENDENT PHYSICIAN ASSOCIATION (IPA) MODEL: IPA contract that in turn contracts with individual physicians.

4. DIRECT CONTRACT or NETWORK MODEL: Contracts directly with individual physicians.

5. MIXED MODEL: Members get options ranging from staff to IPA models.

6. OPEN-PANEL MODEL: A managed care plan or HMO where members can see any provider for an extra premium cost.

Assessmentdhimc-book18

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Sample HMO Disenrollment Appeal Letter

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Templates Best When Customized

By Dr. David Edward Marcinko; MBA, CPHQ, CMP™

By Hope Rachel Hetico; RN, MHA, CPHQ, CMP™

[Publisher-in-Chief and Managing Editor]dave-and-hope7

Dear Medical Director,

As a current non-member of your managed car plan, I would like to take this opportunity to inform you of the activities we have pursued during this past year in order to gain acceptance into your plan.

For example, I have received X hours of clinical continuing education, which is X more than the state requires. Topics included recently developed techniques for pain control, non-hospital and non-surgical based therapy, more effective drug utilization, and a host of other methods of practice to reduce costs and increase patient welfare and mobility. Moreover:

  • I have received  X hours of medical business management training aimed at reducing office overhead expenses, increasing office efficiency and capacity, and improving patient flow and communications.  For example, our computerized call-back system is designed to ensure the continuity of patient care.
  • We have completed a patient survey that demonstrates that the average patient can receive a regular appointment within X days and urgent appointment within X days. Of course, we are fully staffed for immediate care of the emergent patients.  Our patient satisfaction rating is high. Most patients spend less than X minutes in the waiting room and are discharged in a timely fashion, with appropriate instructions in order to return them to work efficiently and comfortably.
  • We have expanded our office hours to improve access and enhanced the barrier free design of our office infrastructure. We are OSHA, CLIA, MSDS, PA, Sar-Box and HIPAA compliant, etc.
  • Since we believe in preventative care, our diabetic patients are continually screened and evaluated to reduce the potential for infections and other complications. This includes the liberal use of random accu-check blood sugar readings, with neurologic and circulatory assessment, with prompt reporting of aberrant values and findings to their primary care physicians or endocrinologists.
  • I will be taking my specialty board certification examination on X 2010. Of course, my results will be forwarded to you immediately.
  • I will become ABQAUR (American Board of Quality Assurance and Utilization Review) certified and/or a Certified Physician in Healthcare Quality (CPHQ) this year, after successful completion of all educational requirements and examinations.

Assessment

Although I realize that this is a challenging time for all concerned, we strive to make every patient’s visit to our office a medically and socially positive one. More specific suggestions regarding our practice would be appreciated. Therefore, we hope you will consider the probationary inclusion of our practice into your managed care plan, for the coming enrollment period.

Fraternally,

Joseph A. Smith; MD/DO  

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INSURANCE: Risk Management and Insurance Strategies for Physicians and Advisors

 

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Appealing HMO Disenrollment Decisions

Physician Pro-Activity May Help

By Hope Rachel Hetico; RN, MHA, CPHQ, CMP™

[Managing Editor]hetico

The decision by an HMO to not include you – the medical provider – in their plan or network; or disenroll you if already included; is not irrevocable. You may not have been included, or rejected, because of a number of reasons, including: clinical or economic re-credentialing, malpractice history, unfavorable patient survey, certification, or a host of other tangible or intangible reasons.

Appeal Guidelines

Therefore, in order for you to appeal the decision, the following guidelines are suggested in any request for a reconsideration process.

1. First, get a letter of explanation from the medical or clinical executive director.

2. Ensure your initial application went through the proper channels of consideration.

3. Contact your local plan representative, in person, if possible.

4. Make sure your state and national medical afflictions are current, as well as hospital and surgical center staffing applications and credentials.

5. Write a letter to the medical director and send it return receipt (US mail) or by private carrier. Inform the director of the actions you are taking to become more attractive to the plan or what you have done to correct the deficiencies that caused your non- inclusion initially.

6. Keep current if you have an “Any-Willing-Provider-Law” in your State.

7. Remember; once dropped by one plan, it will be easier to be dropped again by another. Fight hard to prevent this from happening.  Hire a professional consultant to champion your cause.biz-book8

Assessment

A sample letter will be provider later on this ME-P. Be honest and do not lie, but do try to cast your practice in a favorable light. Adjust for your practice specialty.

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Understanding HMO Negotiation Tactics

Tricks Often Used Against Doctors

By Dr. David Edward Marcinko; MBA, CPHQ, CMP™

By Hope Rachel Hetico; RN, MHA, CPHQ, CMP™

[Publisher-in-Chief and Managing Editor]dave-and-hope6

It is well known that stakeholders of the healthcare industrial complex often have different, and divergent, interests. Intra-as well as inter-stakeholder competition occurs; as well.

The Friends-Enemies [“Frenemies”]

For example, several decades ago, the authors were often at odds at the payer negotiation table.

He was managing partner of a large private medical practice, ASC and later PPMC. First, she was the representative of a national DME vendor, healthcare system and later, private insurance payer.

The Tactics

The following trick negotiating tactics can be used to gain an advantage over your opponent, or they can be used against you to your disadvantage. The key is to recognize them immediately:

1. Deliberate deception with phony facts about contracts, providers, patients, venues, demographics, prices, utilization rates or services.  Some MCO’s may even offer a fee-for-service fee schedule as enticement into the plan. Then, fees are dramatically reduced once the initial enrollment period has elapsed.

2. Ambiguous authority regarding negotiating intentions or power. One the deal is done and a firm agreement has been made, the other side announces that they must take the agenda to a higher authority for final approval and another shot at your resistance. 

3. Avoid stressful personal situations before beginning the negotiating process. Don’t negotiate when sick, your personal life in shambles, your children or spouse is sick or when you feel too mentally exhausted or “psyched out”.

4. Personal attacks can be in the form of verbal abuse or simply loud talking, avoidance of eye contact or asking you to repeat yourself, endlessly. Extremely offensive to most physicians, and increasingly used today, is the phrase “remember doctor, you are an over supplied commodity”.  Now ask yourself, do you really want to be on a plan that doesn’t respect your profession?  

5. The “good guy-bad guy” routine is a psychological tactic where one partner appears to be hard nosed and the other appears more yielding. Small concessions result which, upon repetition, become larger in aggregate.

6. The “take it or leave it” tactic can be easily avoided by knowing your BANTA [Best Alternative to a Negotiated Agreement]. More formally, this is known as a unilateral contract of adhesion.

7. Escalating or increasing demands occur when the opponent increases his demands or reopens old demands. Call their bluff on this one by pointing it out to them and replying that you are aware of its use.

Assessment

Always remember, today’s enemy – may be tomorrow’s ally.

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Conclusion

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Understanding MD/DO HMO Contracts

Pitfalls Physicians Must Avoid

By Dr. David Edward Marcinko; MBA, CPHQ, CMP™

By Hope Rachel Hetico; RN, MHA, CPHQ, CMP™

[Publisher-in-Chief and Managing Editor]dave-and-hope5

It is well known that stakeholders of the healthcare industrial complex often have different, and divergent, interests. Intra-as well as inter-stakeholder competition occurs; as well.

The Friends-Enemies [“Frenemies”]

For example, several decades ago, the authors were often at odds at the payer negotiation table.

He was managing partner of a large private medical practice, ASC and later PPMC. First, she was the representative of a national DME vendor, healthcare system and later, private insurance payer.

Key Pit Falls to Avoid

There are seven key pitfalls to watch out for when evaluating an MCO contract.

1.  Profitability: Less than 52% of all senior physician executives know whether their managed care contracts are profitable. “Many simply sign up and hope for the best”.

2. Financial Data:  90% of all executives said the ability to obtain financial information was valuable, “yet only 50% could obtain the needed data”.

3.  Information Technology: IT hardware and sophisticated software is needed to gather, evaluate and interpret clinical and financial data; yet it is typically “unavailable to the solo or small group practice”.

4. Underpayments: This rate is typically between 3-10% and is usually “left on the table”.

5. Cash Flow Forecasting: MCO contracting will soon begin yearly (or longer) compensation disbursements, “causing significant cash flow problems to many physicians and physicians”.

6. Stop Loss Minimums: SLMs are one-time upfront premium charges for stop loss insurance. However, if the contract is prematurely terminated; you may not receive a pro-rata refund unless you ask for it!

7. Automatic Contract Renewals: ACRs or “evergreen” contracts automatically renew unless one party objects. This is convenient for both the payer and payee, but may result in overlapping renewal and re-negotiation deadlines. Hence, a contract may be continued on a sub-optimal basis, to the detriment of the provider. 

biz-book5

Assessment

Always remember, in the game of negotiations, today’s enemy – may be tomorrow’s ally.

Conclusion

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Direct Reimbursement [DR] and RiskManagers.Us

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Transparent Dental Benefits versus Confusion

[By Darrell K. Pruitt; DDS]

pruitt

“If you are not a part of the solution, there is good money to be made prolonging the problem.” 

Company slogan- www.riskmanagers.us

Meet Mr. William Rusteberg

Today, I met William Rusteberg on the PennWell forum when he replied to the thread, “Why the long NPI, BCBS-TX?” which I copied below, along with my response which includes a plug for Direct Reimbursement [DR].

http://community.pennwelldentalgroup.com/forum/topics/why-the-long-npi-bcbstx?page=1&commentId=2013420%3AComment%3A26976&x=1#2013420Comment26976

Mr. Rusteberg represents a company called RiskManagers.Us, whose specialty involves the benefits market, yet it is not exactly an insurance company – just like there is no such thing as true dental insurance.  RiskManagers.us is a firm that works directly with businesses to identify and develop cost-effective benefits packages – emphasizing transparency and fairness.  Now that is refreshing, friends! 

Defining RiskManagers.Us 

Here is how RiskManagers.us describes itself: 

“We do not work for an insurance company, we work for you. As an independent brokerage, and consulting firm we can represent any licensed insurance company in Texas, Colorado, Mississippi, Louisiana, Alabama, Illinois & Florida.”

If one visits the Web site’s “Reference Library,” here are some of the topics offered:

·         Self Funding – Need a second opinion?

·         Texas leads in transparency issues

·         Can’t get claim information? HB 2015 May Solve Your Problem

·         Medical Stop Loss Through a Captive

·         PPO Discounts – Games People Play

·         PPO Networks – Shell Game

·         Can Hospitals waive Deductibles in Texas?

“What is a NPI number?” 

Mr. Rusteberg’s initial question on the PennWell forum simply asked, “What is a NPI number?”  Following my explanation, he wrote: 

 “It seems that many of those in your profession would do well in accepting cash only, or directly working with employer groups who sponsor dental/medical plans on a direct pay basis. We have had good success in doing this for our clients – we have one employer in San Antonio who pays medical care providers directly and quickly – providers like it and the plan pays a fair and reasonable rate, not relying on a PPO network to “re-price” claims. We have done the same on dental plans, eliminating the insurance company, PPO network and paying dental care providers submitted charges directly and quickly. We see little or no trend increases on dental charges using this method. In my view, insurance companies interfere in patient – provider relationships in a financially detrimental way.”

Thanks for your reply.

My Response:

I like you, William; 

What you describe sounds like my all-time, personal favorite dental benefits plan. It is called Direct Reimbursement {DR}, and it not only gives the employer the unlimited capability to design a plan which reflects the level of commitment desired by the company, but most importantly, it naturally preserves quality of care by allowing employees unlimited freedom of choice in dentists.  And that’s as good as the market gets. 

http://www.directreimbursement.com/

In addition, since there are no NPI requirements for DR, employees are also permitted see dentists who decline NPI numbers for ethical reasons. That increases employees’ choice by 50% over BCBS-TX clients, according to recent information provided by the Healthcare IT Transition Group.

http://www.npidentify.com/stats.htm#states

Little Management Needed

Just like the benefits plans you mention, with DR, very little money is spent on management because such policies are so simple and transparent that there is no room for profit-enhancing (wasteful) confusion used by unethical companies like BCBSTX, Aetna, Cigna, UnitedHealth, Delta Dental, United Concordia, and so many other members of the National Association of Dental Plans (NADP).

Assessment

Without transparency and the invisible hand of freedom-of-choice, free-market competition for healthcare dollars disappears as fast as executive bonuses rise. We’ll see where it goes from here. It would sure be swell if a Direct Reimbursement representative takes interest in the conversation; anyone home? 

Conclusion

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Frank Gehry, Health Reform and the Cleveland Clinic

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Las Vegas Hospital Uses Celebrity Architecture to Fight Disease?

By Dr. David Edward Marcinko; MBA, CMP

[Publisher-in-Chief]

dr-david-marcinko6According to the Las Vegas Sun Newspaper on March 2, 2009, the Cleveland Clinic is the newest top-tier player in Sin-City with an emerging health care system that will shake up the status quo, supposedly creating a multitude of direct and residual benefits for patients throughout the region.

Lou Ruvo Center for Brain Health

In its role as partner with the Cleveland Clinic’s Lou Ruvo Center for Brain Health, the hospital — ranked fourth best nationally by U.S. News & World Report — is projected to influence medical care in Nevada on the strength of its immense organization. And, it is being designed by, none other than esteemed architect, Frank Gehry.

A Huge Project

And, if you believe numerous websites, the behemoth project will include office towers, a park, a 60-story tower for jewelry trading, a hotel conceived by celebrity chef Charlie Palmer, thousands of apartments and a $360 million performing arts center. Of course, in typically flamboyant Gehry fashion, the highly embellished main facility is said to model curvy metallic shapes and “folds of the brain.” Other nescient drawings of the Ruvo Center show it divided in two sections. Offices and examination rooms will be housed in stacked rectangular blocks set slightly off kilter, like a fortress wall built by children.

The Architect

Gehry used this method to design his world famous Guggenheim Museum in Bilbao, Spain (1997) and his Peter B. Lewis Building for the Weatherhead School of Management at Case Western Reserve University in 2002. His style is well known.

Misplaced Priorities

But, with an estimated 40 million uninsured citizens, one only can wonder if this facility could have been built more cost effectively and/or more utilitarian?

Assessment

Moreover, some Clevelanders are grumbling about the clinic’s involvement in such a glamorous project far away, and imagine that the project will drain local resources just as sun-parched Western states have fantasized about tapping the Great Lakes.

Industry Indignation Index: 70

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The No Insurance Club

Emerging Pre-Paid Cash-Based Medicine

By Bob Grove

no-insurance-clubHealthcare in America is in Turmoil. The No Insurance Club [NIC] feels private contracts may be the solution. More and more Americans are going without healthcare especially preventative healthcare. The reasons – costs are too high, patients can’t get accepted due to a pre-existing condition, companies are cutting back on benefits, people have been laid off from work; and the list goes on.

Governmental Solutions 

What’s being done to improve healthcare? Barack Obama and the Government want more control and regulation and the system seems to be leaning toward socialized care. Private insurance companies continue to increase premiums, which prices healthcare out of reach for the average American. Employers can no longer float the cost of insurance so they pass it on to their employees. Patients aren’t the only ones being affected by the current state of healthcare. More and more doctors are going out of business and hospitals are cutting back due to escalating costs and payment defaults.

Private Solutions 

The current remedy; Americans are taking out private major medical policies for catastrophic events with high-deductibles [MSA/HSAs] to keep monthly premiums down, or are turning to Medicaid, mini retail-clinics at grocery stores/pharmacies, and emergency room visits for common illnesses.

Innovative Solutions 

What about prevention and maintenance? More than 90 percent of health related issues can be taken care of with preventative care and maintenance but only a small percentage of Americans currently enjoy the benefit of preventative healthcare.

The No Insurance Club

The NIC has come up with a fresh look at healthcare by offering an affordable alternative to traditional insurance options.

NIC Benefits and Features 

The No Insurance Club connects patients with participating board certified physicians that will treat and care for preventative healthcare needs for a one-time prepaid annual membership fee:

   

  • NIC patients make a one-time annual payment that is typically less than a one-month premium with traditional insurance.
  • Patients receive up to 12 office visits per year that also include immunizations, $4 or less in-office prescriptions, and additional services including blood tests.
  • No deductible, no co-pays, no premiums.
  • No surprise bills to patients.
  • Viable alternative to COBRA for employees laid off from work.
  • Low cost option for the self-employed.

Assessment

What’s in it for the doctors? How about no insurance clerks, no need to snail mail medical insurance claims or use expensive electronic claims submission clearinghouse services, no bad debts or bad expense write-offs, no ARs; and fast cash! 

Link: http://www.noinsuranceclub.com/

I would be happy to speak with and connect ME-P readers, participating doctors and even patients for interviews to learn more about the NIC network and its benefits.

Bob Grove

Wild West PR

(801) 651-0290

bob@wildwestpr.com

Conclusion

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Speaker: If you need a moderator or speaker for an upcoming event, Dr. David E. Marcinko; MBA – Publisher-in-Chief of the Executive-Post – is available for seminar or speaking engagements. Contact: MarcinkoAdvisors@msn.com  or Bio: www.stpub.com/pubs/authors/MARCINKO.htm

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Sherlock Health Plan Management Navigator

Information System Implications on Health Plans

By Douglas B. Sherlock; MBA, CFAcomputer-hardware

Messrs. and Mesdames

Attached, please find the February 2009 edition of our Health Plan Management Navigator.
Link: sherlock-company

The Sherlock Expense Evaluation Report

In this month’s edition, we endeavor to better understand the functional area of information systems [IS] and its implications on health plans. Information systems, based on the results from out 2008 Sherlock Expense Evaluation Report (SEER) displayed overall anti-scalability in costs. In order to better comprehend IS and its influence on health plans overall, we performed numerous analyses that looked at relationships between IS and other aspects, such as scalability, variety of product offerings, commitment to ASO products and other functional areas.

Assessment

The results suggest that scale does not appear to play a role in IS costs and that more of a concentration in ASO products seemed to lower IS costs. It also appears that management of information systems, in the context of its support to other functional areas, is an inexact science.

Conclusion

Additional information about SEER is available at www.sherlockco.com/seer.shtml or; by contacting me at: sherlock@sherlockco.com

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Introducing Douglas B. Sherlock MBA CFA

About Our Newest Thought-Leader

By Ann Miller; RN, MHAcap-and-gown

Douglas B. Sherlock CFA is President of Sherlock Company which assists health plans, their business partners and their investors in the treasury and control functions of finance.

Resume

Prior to the founding of Sherlock Company, Mr. Sherlock was Vice President of Financial Analysis of U.S. Healthcare, Inc. where he directed the company’s merger and joint venture activity, its investor relations program and its HMO product for Medicare beneficiaries. Sherlock was formerly Vice President of Salomon Brothers, Inc where he specialized in the financial research of prepaid health plans and hospital systems, and assisted in the capital formation and merger activities of health care companies. He was the Greenwich Survey First Place HMO Analyst and a runner-up in the Institutional Investor polls. 

Professional Associations and Memberships

Mr. Sherlock is a Chartered Financial Analyst. He has been a member of the Financial Accounting Policy Committee of the CFA Institute. He has served on the Editorial Board of Inquiry, a journal of health care organization, provision and financing published by the Blue Cross Blue Shield Association, and is a reviewer for Chartered Financial Analyst. He has been a member of the Financial Accounting Policy Committee. Sherlock is a frequent speaker before health care groups including the American Association of Health Plans, the HealthCare Financial Management Association, and the Blue Cross Blue Shield Association. The research of Sherlock Company has recently been cited in such periodicals as The New York Times, Forbes, Investor’s Business Daily, Modern Healthcare, Hospitals, The Wall Street Journal, HMO Managers Letter, Business Week and The Medical Business Journal.

Educational Background

Mr. Sherlock holds an M.B.A. in finance from Loyola College in Maryland. He received his bachelor’s degree in economics from Franklin and Marshall College, Lancaster, Pennsylvania.

Conclusion

We look forward to his contributions and now professionally welcome him warmly, as our newest ME-P thought-leader. 

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Managed Care IBNR Claims

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Tax Savings Strategies

[By Ana Vassallo] AND [Dr. David E. Marcinko MBA]

Managed Care Organizations (MCOs) that accept capitated risk contracts face a potentially significant tax burden for Incurred but Not Reported (IBNR) claims. It is not uncommon that IBNR claims at the end of a reporting period equal one to two months premiums for MCOs under a fee-for-service model. The Internal Revenue Service (IRS) has taken a very strong position relative to the deductibility of these claims by saying that an MCO cannot deduct such losses if they are based on estimates.

Incurred But Not Reported [IBNR] Claims

IBNR is a term that refers to the costs associated with a medical service that has been provided, but for which the carrier has not yet received a claim. The carrier to account for estimated liability based on studies of prior lags in claim submission records IBNR reserves. In capitated contracts, MCOs are responsible for IBNR claims of their enrollees (Kennedy, 1). 

For example, if an enrollee is treated in an emergency room, a plan may not know it is liable for this care for at least 30-60 days. Well-run plans devote considerable attention to accurately estimating such claims because a plan can look healthy based on claims submitted and be financially unhealthy if IBNR claims experience is increasing substantially but is unknown.

Why a Problem for HMO’s/MCOs 

Section 809(d)(1) of the Code provides that, for purposes of determining the gain and loss from operations, a insurance company shall be allowed a deduction for all claims and benefits accrued, and all losses incurred (whether or not ascertained), during the taxable year on insurance and annuity contracts.  Section 1.809-5(a) (1) of the Income Tax Regulations provides that the term “losses incurred (whether or not ascertained)” includes a reasonable estimate of the amount of the losses (based upon the facts in each case and the company’s experiences with similar cases) incurred but not reported by the end of the taxable year as well as losses reported but where the amount thereof cannot be ascertained by the end of the year. By taking into account for its prior years only the reported losses but not the unreported losses, the taxpayer has established a consistent pattern of treating a material item as a deduction. The effect of the taxpayer’s claim for the first time of a deduction for an estimate of losses incurred but unreported under section 809(d)(1) of the Code, was to change the timing for taking the deduction for the incurred but unreported losses.

Due to the taxpayer consistently deducting losses incurred in the taxable year in which reported, a change in the time for deducting losses incurred under section 809(d)(1) is a change in the method of accounting for such losses to which the provisions of section 446(e) apply (IRS, 14-30). 

In order to qualify for an insurance company under the current IRS regulations, the MCO must have the following criteria (Kongstvedt, 235-256):

· At least 50% of the MCO must come from insurance related activities.

· The MCO must have an insurance company license.

If an MCO did not have these two criteria, the IRS will not deem the manage care company as an eligible insurance company.  Therefore, the MCO would not be able to file for IBNRs with the IRS.

How MCOs/HMOs Intensify IBRN Claims

There is a high degree of uncertainty inherent in the estimates of ultimate losses underlying the liability for unpaid claims.  The only reason the IRS would not allow an MCO to deduct IBNR because the financial statements is based on an estimate (IRS, 134-155).

Except through the insurance company exclusion IRS does not allow any taxpayer to deduct losses based on estimates. There has been some precedence set that the IRS will accept an amount for incurred but not reported claims if the amount is supported by valid receipts of claims that the company has in-house prior to the filing of the tax return.

There has been some controversy as to how long of a period of reporting time the IRS will allow you to include in those estimates. There are ranges from 3-6 months to file a claim (IRS, 137). The process by which these reserves are established requires reliance upon estimates based on known facts and on interpretations of circumstances, including the business’ experience with similar cases and historical trends involving claim payment patterns, claim payments, pending levels of unpaid claims and product mix, as well as other factors including court decisions, economic conditions and public attitudes.

There has been no clear indication from the IRS that it will accept an accrual for these losses and entities. Therefore, companies deducting such losses may eventually find themselves in a position where the IRS may challenge the relating deductibility of those losses.

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Evaluating IBNRs from a New Present Value Perspective

The best measure of whether or not a stream of future cash flows actually adds value to the organization is the net present value (NPV).  The best decision rule for NPV to accept or reject a decision problem is if the NPV is greater than zero, the project adds value to the organization.  Although – if the NPV is exactly zero it neither adds nor subtracts value from the organization (McLean 193).  In either case, the project is acceptable.  In addition, if the NPV is less than zero, the project subtracts value from the organization and should not be undertaken (McLean, 193).

The provision for unpaid claims represents an estimate of the total cost of outstanding claims to the year-end date. Included in the estimate are reported claims, claims incurred but not reported and an estimate of adjustment expenses to be incurred on these claims. The losses are necessarily subject to uncertainty and are selected from a range of possible outcomes (Veal, 11). During the life of the claim, adjustments to the losses are made as additional information becomes available. The change in outstanding losses plus paid losses is reported as claims incurred in the current period.

All but the smallest organizations have predictable and unpredictable losses. It is important mentally to separate the two since predictable losses are not risks but normal business expenses. Risk is the degree to which losses vary from the expected. If losses average $85,000 per year but could be as much as $20 million, the risk is $20 million minus $85,000. The $85,000 figure represents reasonably predictable losses (Veal, 12).

IBNR Challenges and Solutions

While I was unable to find an actual amount of the cost of the penalties that can be incurred, the IRS is able to impose penalty fees under Section 4958 of the IRS code (IRS, 255). While penalties differ depending on individual bases, MCOs will be penalizing for any misconduct either by IRS Codes or Court Jurisdiction.

It is prudent that MCOs ensure their organization that they will not incur a financial “meltdown”. They further need to ensure IBNR is funded for period of at least 2-3 months. In some states, the state laws make the MCO financially responsible to pay the providers for a second time if the intermediary fails to pay or becomes insolvent (Cagle, 1).

Paid losses, paid expenses and net premiums are usually deductible; reserves for incurred-but-unpaid losses generally are not, unless the taxpaying entity is an insurance company. Consequently, if a corporation has a high effective tax rate and concedes that it cannot deduct self-insured loss reserves, some of its more cost-effective options may be a paid-loss retro (if state rules are not too restrictive), a compensating balance plan, or the formation of a pool or industry captive. Even these plans may be subject to IRS challenge. To qualify as a tax-deductible expense, a premium or other payment must satisfy two criteria (Cagle, 2):

 

  • There must be transfer of risk: an insurance risk. This differs from investment risk, but there is no authoritative definition of “risk transfer” other than various court decisions (primarily Helvering v. Le Gierse, 312 US 531 — U.S. Supreme Court 1941).
  • There must be both risk shifting and risk distribution. “Risk shifting” means that one party shifts the risk of loss to another, generally not in the same corporate family. “Risk distribution” means that the party assuming the risk distributes the potential liability, in part, among others.

The deductibility of an insurance expense may also be questioned if it is contingent upon a future happening, such as a loss payment, right to a dividend or other credit, or possible forgiveness of future loans or notes (Cagle, 3). This may seem a broad statement, but the Cost Accounting Standards Board states in its Standards for Accounting for Insurance Expense that any expense which is recoverable if there are no losses shall be accounted as a deposit, not an expense. This is essentially the IRS position (IRS, 145).

Assessment

While there are a few solutions to this matter, the IRS is making sure that MCOs will be penalized if MCOs improperly handle IBNRs.  It is also important for organizations to understand the MCO’s policies regarding IBNR reserves and their contractual obligations. And, while the IRS has set limitations for MCOs to file their IBNR claims, MCOs have the major responsibility of allocating these IBNR claims appropriately.  There are severe penalties for not properly filing the IBNR claims appropriately.  However, there is several tax saving strategies to help MCOs properly file their IBNR claims with the IRS.  It imperative that MCO executives and accounting manager consult an expert to properly plan an ethical strategy that will help them build a stable business that is trustworthy and reliable.

Bibliography

1. Cagle, Jason, Esq., Interview, June 8, 2004, interview performed by Ana Vassallo.

2. McLean, Robert A., Net Profit Value, Pages 193-194, 2nd Edition, Thomson/Delmar Learning, Financial Management in Heath Care Organization, 2003.

3. Patient-Physician Network, Managed Care Glossary, Printed 6/11/04 http:/www.drppg.com/managed_care.asp.

4. Internal Revenue Services, IRS.Gov, Printed 6/12/04, http://www.irs.gov/

5. Internal Revenue Services, Revenue Ruling, Printed 6/11/04, http://www.taxlinks.com/rulings/1079/revrul179-21.thm

6. Kongstvedt, Peter R., Managed Care – What It Is and How it Works, Pages 235-256, Jones and Bartlett Publishers, 2003.

7. Veale, Tom, The Return of Captives in the Hard Market, Tristar Risk Management Aug. 22, 2002, San Diego RIMS.

Conclusion

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Supply and Demand in Medical Care

The Imperfect Competitive Medical Marketplace

By Dr. David Edward Marcinko; MBA, CMP™

By Hope Rachel Hetico; RN, MHA, CMP™biz-book1 

The issue is not how to fill or reuse empty beds. In this changing environment, hospitals and health systems must focus on streamlining and simplifying operational processes, facilitating case management, promoting the least costly setting for care delivery, and optimizing resource sharing among departments. When hospitals have addressed these issues, then solutions to the “bed problem” will be obvious.

-Cynthia Hayward, 1996

How and why the current healthcare imbroglio happened is very complex, but here is a brief synopsis of current supply-demand inequalities.

A Definition of Medical Care 

Medical care is defined as the finite examination and treatment of patients, for monetary compensation. Among other reasons, changes in patient demand may occur as a result of the absence or presence of health insurance plans or the encouragement of additional treatments by profit maximizing providers. 

Health Economics 101 

Changes in supply occur as a result of physician shortages or surpluses and a host of other factors. Until recently, a glut of physicians has caused them to become “price takers,” selling a homogenous service.

How else could aggregate HMO fee schedules drop to some percentage below prevailing Medicare or Medicaid rates in some instances? Or, how else could otherwise qualified physicians be de-selected from managed healthcare plans because of large (successful equates with expensive) practices? 

The Supply-Demand Curve 

A graphical representation of this economic relationship produces the classic downward sloping demand curve and the upward sloping supply curve. At some point in time however, the treatment plan is completed, the patient is satisfied, and additional services are not needed. This is known as market equilibrium.  

When an industry becomes more competitive – either by too much supply or too little demand – market equilibrium fees tend to become elastic while patient volume becomes very sensitive to even small changes in price. This may be where we have arrived, right now relative to medical price elasticity. 

Medical Price Elasticity 

In a managed care environment, every covered service has a low price ceiling and every “non-covered” service has its own price elasticity.   

Traditionally, medical services were inelastic to price changes and considered a growth industry since a fee increase would also increase revenues.  Now, the marketplace has become resistant to pricing pressure by physician oversupply and managed care.  

Generally, a pricing coefficient greater than one is considered elastic, while a coefficient less than one is inelastic.

Interestingly, exact unity prevails when elasticity of supply is exactly equal to one.  

In the golden days of medicine, the price elasticity of medical care was greater than 1, now it is about .35 and diminishing 

Meaning to Doctors 

Financially, all this means that many doctors are “taking what they’re given (by HMOs, CMS, etc), because they’re working for a living”.   

Younger doctors under 40 are especially inclined to work for less since they have had little exposure to fee-for-service compensation. Older doctors are retiring. Middle-Agers are frustrated. 

Additionally, physicians have an increasingly smaller share of the medical marketplace because of so-called medical care extenders, such as PAs and nurse practitioner’s.

Some health plans have even done away with many true allied healthcare professionals, such as RN’s or CRNAs, in favor of trained, not educated, and less costly technicians.  

Conclusion

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Despite the financial impact of managed care on doctors, patients may also be hurt physically as the economic cost of medical re-intervention is often much more than the cost of the proposed initial professional care.  

For example, a study by Deloitte & Touche a few years ago, reported employee satisfaction was decreasing about 10 percent per year, as healthcare coverage represented a fiscal and economic time bomb on corporate books. 

How would you comment on the above in light of the IOM on medical errors and mistakes, findings a few years back?

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