PODCAST: Medicare Advantage [PART C] Cost Reduction Strategies

BY ERIC BRICKER MD

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ORDER: https://www.routledge.com/Financial-Management-Strategies-for-Hospitals-and-Healthcare-Organizations/Marcinko-Hertico/p/book/9781466558731

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Comprehensive Financial Planning Strategies for Doctors and Advisors: Best Practices from Leading Consultants and Certified Medical Planners™

MORE: https://www.routledge.com/Comprehensive-Financial-Planning-Strategies-for-Doctors-and-Advisors-Best/Marcinko-Hetico/p/book/9781482240283

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PODCAST: Why Kaiser Permanente Health Insurance Has Not Spread?

ACROSS TO MORE OF AMERICA

By Eric Bricker MD

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KAISER VACCINE MANDATE: https://www.msn.com/en-us/news/us/almost-5000-kaiser-permanente-health-care-employees-suspended-for-refusing-vaccine/ar-AAPaVF0?ocid=BingNewsSearch

KP: https://www.msn.com/en-us/news/politics/kaiser-permanente-puts-2000-workers-on-unpaid-leave-over-vaccine-mandate/ar-AAPcwNo?li=BBnb7Kz

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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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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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Product Details 

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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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

Conclusion

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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

And so, your thoughts and comments on this Medical Executive-Post are appreciated. 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.

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

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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

And so, your thoughts and comments on this Medical Executive-Post are appreciated.

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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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

Link: www.HealthDictionarySeries.com

Conclusion

And so, your thoughts and comments on this Medical Executive-Post are appreciated?

Link: https://healthcarefinancials.wordpress.com/2009/03/13/rip-retail-financial-services-industry/

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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

Conclusion

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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  

Conclusion

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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.

Conclusion

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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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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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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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