In recent years, we’ve seen a frantic, sometimes irrational trend sweep ophthalmology. In response to real or perceived marketplace conditions, many physicians have jumped, lemming-like, onto the network bandwagon – either to build networks from scratch or to join them.

Today, the near panic seems to have subsided as physicians have become more cautious and selective. Unfortunately, the collateral damage from many poorly conceived and built networks has come home to roost.

Some networks have succeeded, benefiting physicians who were sharp (or lucky) enough to have seized on good opportunities. But for the most part, physicians who invested their time, efforts and resources to build or join a strategic alliance have experienced more disappointment than success.

Here, I’ll explain how this unfortunate trend got started, and focus on six all-too-common mistakes that resulted in many sleepless nights and, in some cases, thousands of dollars in misspent money. By learning from these setbacks, you can step more confidently toward an emerging network opportunity when – and only when – it’s in your best interest.

Why the panic started

Most of the eagerness to build or join networks can be attributed to three factors:

• Changes in mature managed care markets.
In places such as California and Oregon, conventional wisdom suggested these changes would soon spread across the nation.
• Key contracts awarded to big name, optometry-oriented, third-party vision plans.
These contracts were awarded in both mature and immature managed care markets. They often excluded physicians or seriously limited their participation.
• "Me too" thinking.
The logic here suggested that if one network started in an area, that was all the reason necessary to start another and another and another.

Many ophthalmologists perceived that access to patients was in immediate jeopardy, and that contracting opportunities were quickly falling under the control of non-physicians. This lit a bonfire under the physician community. Almost overnight, a perception emerged that a single, magical, cure-all solution was available: the physician-controlled network.

And so, networks proliferated like mushrooms:

• loosely structured independent practitioner associations (IPAs) comprised of competitors
• group practices without walls
• fully merged practices
• society-sponsored vision plans
• management service organizations (MSOs)
• physician practice management companies (PPMCs).

Each was "sold" by its backers as the best vehicle to promote (advocate) ophthalmology while, simultaneously, positioning physicians to capture managed care contracts and protect patient access. But none was a smashing success and most went nowhere. Not even the PPMCs succeeded, though they were hailed by many as the most innovative, progressive and economically integrated form of network affiliation.

So what were the most common mistakes made by those building or joining networks? What can you now learn from these failures to better position yourself for successful participation in some form of network (the need for which still exists if you’re to participate in certain local, regional or national managed care contacts)? Let’s look.

1. Physicians proceeded without a demonstrated need for so many networks.

Imagine this scenario: You practice in a highly penetrated, fee-for-service managed care market. A major Medicare risk health maintenance organization (HMO) announces that it’s coming into your area. The HMO is known for capitating specialists in other parts of the country.

Because of this development, ophthalmologists suspect other HMOs are gearing-up for capitation. So 11 ophthalmology networks spring up in your area. The 11 networks scramble to capture this non-existent business – that is, committing to fee schedules or capitation rates before any enrolled lives or experiential data are available.

When the Medicare risk HMO and others finally launch and award contracts, you and your peers start to struggle. Some networks engage in bidding wars and, occasionally, the contract winners can’t weather the subsequent financial storms. Other networks capture no contracts and eventually collapse.

After 4 years, only three of the 11 original networks survive. Signs indicate that the number will be down to two in the near future. This is what has happened in Boston, and it’s typical of network meltdown across the nation, when these entities proliferate beyond any possible need.

Lesson to be learned:

Physicians should not create networks simply to have them, and certainly not because someone (everyone) else is doing it. Unlike personal wealth and good health, too much is not good. Without a justifiable, sustainable need, it makes no sense to add another network to an already turbulent market mix. If you’re considering a network, you must be certain that it has a purpose, that there is a need and that the network has a chance of meeting the need.

2. Doctor entrepreneurs lacked originality and strategy.

Virtually all networks assumed the same homogeneous, "cookie-cutter" look. Physicians seemed to believe that if joining one network was good, then joining three or four was much better, giving them access to more contracts and patients. Unfortunately, reality presented a different, disastrous, typically unanticipated result.

Inevitably, competing networks submarined each other to capture contracts. When an HMO staff analyst compared provider lists and found virtually identical rosters for networks A, B and C, he could base the purchase decision entirely on the most worrisome discriminator – cost. As you can imagine, that’s the worst possible scenario for providers like you.

If that HMO could get renowned glaucoma specialist, Dr. "Q," or general ophthalmology group "C," or the university practice in any of three or four networks, it would differentiate and award contracts on the basis of which was cheapest.

With few exceptions, after the provider list, virtually nothing other than cost really mattered to health plan decision-makers. Not a beautifully written quality assurance program, not patient satisfaction surveys, not even the most conscientious reply to a Request For Proposal.

Lesson to be learned:

If several provider panels look essentially the same, why join them all? You’ll only contribute to the proliferation of "cookie cutter" networks that benchmark community reimbursement rates at ever-lower levels and that inevitably collapse from provider dissatisfaction.

Limit yourself to networks that aren’t obvious replicas of others in the community. (Note: You also must consider antitrust concerns when your participation in a network is based on exclusivity. Seek the guidance of a qualified attorney.)

Understand that markets generally don’t need more networks – but there’s usually room for a better network, if it can demonstrate meaningful differentiation. For example, if other networks provide only locally based vision care or only eye care, you may have an opportunity for differentiation. Perhaps a new group could offer a payer the complete ophthalmic package – vision care, medical-surgical eye care, ambulatory surgery center and tertiary, etc. – all in a single contract. This network could also tie in service areas in a neighboring state.

3. Too few physicians considered how much cash they would need.

Undercapitalization led to numerous network failures. I’ve heard of 30 or 40 physicians getting together, tossing $1,000 each into a hat and announcing that they were a network. Then they hire an attorney to draw up papers, put one practice administrator in charge of making things happen, and commission a broker to shop the network to insurance companies.

A year passes and the group gets no contracts. Three years pass and, still, no meaningful activity. But during that time, the network has gone through its meager seed money and needs to raise additional funding. The physicians wonder why they’re being assessed again if the initial efforts have borne no fruit. Someone asks, "Who’s out marketing our network, and why aren’t we getting results?"

That’s when they hit the wall of truth. It costs a lot of money to start up and run a network – more than you probably imagine. And growing the business to a level that creates sufficient cash flow to support on-going operations will seem like a financial black hole. Burning through $500,000 in 2 or 3 years would not be surprising for a moderately sized, local start-up network. A national network could consume millions before showing any meaningful return to participants. (Just look at PrimeSight’s results after 3 years.)

Lesson to be learned:

Networks can’t be built and run on a shoestring budget with a part-time staff. And physicians and practice administrators don’t have the time or expertise to do it all themselves. So if you’re a network joiner, don’t even consider funding a network that can’t show you a well-developed, logical business plan projecting cash flow and operations (including a full-time marketing staff) at least 3 years out. And if you’re a network builder, understand up front that you’ll probably need $5,000 to $10,000 per physician to make a serious go of it.

If you lack funds and must go back to members to re-capitalize, physician enthusiasm will surely wane, particularly if you haven’t accomplished much. It’s better to fund a start-up sufficiently at the front end than to go back later and assess disgruntled participants.

4. Networks lacked adequate full-time staffs.

Incredibly, some networks have tried to run day-to-day operations using society administrators or part-time, skeleton staffs. They soon discovered that these folks are unprepared or unable to handle the complex challenges of the job.

Marketing – selling the network to payers – is a difficult, full-time job. It requires staff experienced not only in vision and eye care, but also in the nuances of "walking and talking" the managed care game.

Meanwhile, administration – running the network and overseeing operational aspects – requires an entirely different skill set. Provider relations, customer service, claims and quality assurance are all key components of network management that need to be handled by experienced professionals, even if you out-source certain functions. Sadly, too many networks have failed when trying to run "on the cheap" by under-staffing or hiring novices.

Lesson to be learned

: Run, don’t walk, from a network that has not built or funded for adequate staff infrastructure. Although physicians should be involved in global decision-making, day-to-day operations must be under the control of dedicated, experienced staff.

5. Too many members became polarized.

Polarization of physician-led networks has taken two forms: general ophthalmologists vs. sub-specialists and physicians vs. optometrists. In either case, those building the networks and establishing core values went in with what proved to be faulty, often inappropriate premises for success under managed care. Dissension, mistrust and conflict ultimately brought them crashing down, or pushed them into a stand-still, "holding pattern" from which they never escaped.

Examples are numerous and obvious. With many physicians looking on optometry-based networks as the ultimate evil, they responded by creating ophthalmology-dominated entities that were equally rigid in purpose and philosophy. It’s a classic battle of deeply polarized positions with little or no willingness to find middle ground on which to build for the betterment of patients and all providers. And that’s truly sad.

Lesson to be learned:

New networks won’t succeed long- term with agendas that play general ophthalmologists against sub-specialists or ophthalmologists against optometrists. Neither physicians nor optometrists are going to roll over and play dead. And neither group is going to go away, nor can either group afford to abandon managed care.

If ophthalmology-friendly networks are to succeed in providing high-quality care and patient choice under the rigorous constraints of finite budgets, they’ll need to foster a collaborative effort between the professions and among all participants. If you’re uncomfortable with a network’s management philosophy, or if turf wars and professional jealousy are deeply rooted in a network’s foundation, be wary. If these issues seem unlikely to be resolved, look for other opportunities. Networks that have burned professional bridges during the formative stages litter the landscape. The time, energy and resources you invest in such poorly-focused efforts are likely to be lost.

6. Leaders failed to blend practice styles.

Without question, several high-profile networks fell by the wayside in part from an inability to meld differing practice styles and operational modalities. Physicians’ Resource Group (PRG) is one recent example – a PPMC that tried the "shotgun" approach to practice acquisition, network development and practice management. The results were disastrous, and we can learn a lot from its collapse.

PRG’s acquisition philosophy seemed based on the idea that if you can get one practice in a city, then other practices will follow. And if you get into one city, other cities will follow. And so PRG took this hopscotch approach all over the country, acquiring one in City A, one in City B, two in City C, etc. These practices were strung together and declared a network for managed care contracting purposes.

Unfortunately, a practice here and a practice there didn’t constitute a credible network. Managed care payers weren’t impressed with PRG’s inconsistent geographical coverage. The company failed to drive significant new managed care patient volume to its practices. In that failure, PRG was no different than other unsuccessful networks.

PRG and other PPMCs also failed because they made no obvious attempt to link or acquire practices that fundamentally shared some common philosophies or work ethics, and which could have been combined into something greater than the individual parts. In other words, some PPMCs acquired ophthalmology practices that had "done their own thing" for years, and then tried to force fundamental, system-wide practice management changes on resistant doctors, pushing them down one path.

To use the classic description of ophthalmologists: It was like trying to herd cats – impossible. And when the cost savings and efficiencies anticipated in those changes never materialized, the organization unraveled.

Lesson to be learned:

If you’re thinking about a network that has equity participation, or if you’re thinking of merging your practice with others to form a new entity, be certain that your practice style fits in with the others.

If you’re oil and the others are water, you just won’t mix, no matter how hard you shake. In the end, all you’ll have is a lot of time and money dumped into a venture that had little chance of success from the start. You’ll be no closer to your goal and, in fact, may be farther away from it, given the time lost in rebuilding.

Learn from past mistakes

Please don’t think that all networks have proven unsuccessful. That’s not the case. But most have accomplished little, and their failure can be attributed to the mistakes I’ve discussed.

By learning these lessons and proceeding with a new level of sophistication, you can succeed in a network – and may find that you must. Just don’t repeat the mistakes of yesterday.

Gil Weber is a nationally recognized managed care and practice management consultant, lecturer and author. He is the former Director of Managed Care for the American Academy of Ophthalmology. Reach him at (954) 915-6771; by e-mail at gilweber@flinet.com; or on his website http://www.gilweber.com

 

What To Look For From Networks Of The Future

Networks can have a place and a purpose – and can benefit almost every physician. For some, the time for a network has come; for others, it’s still in the future.

What seems to be changing is where networks can deliver you real value. In the past, network value was assumed to be access to patients via single-signature contacts. But tomorrow it will be different.

Network focus now seems to be emphasizing practice support, rather than actual management of the practice. In other words, physicians are no longer being told how to run their practices for collective uniformity – rather, they’re being given the tools to make individual changes and do what they do even better.

So when considering networks, look for the services and support you don’t provide or can’t afford to provide at a state-of-the-art level. For example, a network should be able to furnish you with utilization management, quality assurance and total quality improvement assistance. It should help you track and report your outcomes. It should help you become more competitive and efficient through a smorgasbord of sophisticated management information (computer) services. These are areas where a network really can help make a difference to solo or small-group physicians.

But don’t be swayed if someone from a network tells you that it will drive significant numbers of new patients through your doors. That’s not the most likely scenario.

And don’t be overly impressed if you’re told that a network can increase your optical shop profitability by getting you into buying groups, or by showing you how to price your product, or by teaching your staff to "sell-up" or by showing you how to market refractive surgery. You can learn these strategies on your own – without the risk and commitment of joining a network.

— Gil Weber, M.B.A.