Managed Care is Changing. Are You Ready?
Consumer-driven plans create new challenges for physicians.
BY GIL WEBER, M.B.A., CONSULTING EDITOR

Today's TV, radio, and print media are filled with dire news about healthcare costs spiraling out of control. The traditional alphabet-soup programs -- the HMOs, PPOs, EPOs and their ilk -- no longer seem able to reduce costs. In fact, most plans are now in their second or third years of double-digit premium increases.

This failure to effectively control costs is creating serious concerns for employers and employees. Both are facing tough decisions as to who will have healthcare benefits in the future and who will pay the costs. Clearly, something has to change, especially as increasing numbers of employers announce that they may not be able to subsidize some -- or perhaps provide any -- healthcare benefits in coming years. One concept that's catching on is the consumer-driven health plan. In this article, I'll discuss the pros and cons of consumer-driven plans, and how they're likely to affect the physician/patient relationship.

ILLUSTRATION: TOD DAMAN

Spiraling Costs Drive Change

Patients demand services. Physicians provide them. Insurance companies pay the bills. Despite some nasty battles with physicians over compensation for services, it's clear that insurers are facing some enormous challenges holding down costs.

For example, all plans want to look good on Healthplan Employer Data and Information Set (HEDIS) scores. Yet, if a plan actively moves to get all of its diabetic patients identified and then checked by eye doctors, the effort will encourage utilization. That drives up costs in the short-term. Thus, we can have the two powerful forces of preventive medicine and cost control working in opposite directions.

Practice variation is a second factor that seems to drive healthcare costs perpetually in the wrong direction. Recent Example: Medicare data indicate per-capita healthcare spending in the Miami area is roughly two-and-a-half times what's spent in Minneapolis, even after the data is "massaged" to factor age, sex, and race. How can that be? How can practice patterns be so different across the country?

It's a problem that perplexes and clearly frustrates many health plan executives. Dwayne David, M.D., medical director of Geisinger Health Care in Danville, Pa., summed it up this way in the November 2003 issue of Managed Care: "Practice variation is one of the greatest problems we face in controlling costs."

And in the same article, William Fleming, Pharm.D., a Humana vice president, declared with perhaps a touch of chagrin: "We used to spend a lot of time and resources communicating with physicians about the standards of pharmaceutical care they were delivering. But we didn't see much change in behavior. So for the last 3 years, we've concentrated on influencing consumer behavior."

Consumer-Driven Plans Have Appeal

Today's "buzz" in healthcare cost containment is the consumer-driven health plan. It's offered up in some quarters as the magical pot of gold at the end of the rainbow. We're told that with patients in control of how, when, and where they spend those healthcare dollars, this new cost-containment variant is a cure for the system's ills. But why should such a system work?

The quick answer is that it puts financial responsibility squarely on the shoulders of the end-users -- the patients -- allowing choices of multiple co-payment, deductible, and co-insurance levels, with access to tiered networks. The basic concept calls for these individually owned, tax-preferred, high-deductible policies to be portable and offer significant flexibility to the patient.

And given greater control and critical information, such as access to cost guides for hospitals, physician charges, and prescription medications, patients are supposed to become smarter shoppers and more conscientious consumers of healthcare dollars. At least that's the hope, though a recent "healthcare literacy" survey indicated that patients have difficulty understanding the financial complexities of the healthcare system.

Many insurers are looking to consumer-driven plans with hope and big expectations, based on perceived demands in the marketplace.

Giving Managed Care a New Image

But so far, the public has been slow to embrace these plans, which are typically offered by employers as one of many health plan options. So employers are now taking a different approach. They're using a marketing twist that wraps "consumer-driven" in the aura of an enhanced benefit. The attempt to shift perception is designed to free the employee and his or her family from many negative image problems tied to traditional managed care.

Previously, managed-care programs such as HMOs and PPOs had been considered only in terms of a cost-savings strategy. But that strategy could only wring out so much from the system before it was clear that significant cost savings came with a wagonload full of unwieldy baggage. However, if patients can view these consumer-driven plans as an enhanced benefit of employment, it might create a quite different healthcare financial and administrative environment than existed in the 1980s and 1990s.

Perception vs. Reality

The success of selling consumer-driven healthcare coverage to patients ultimately will depend on managing the fine balance between perception and reality. Consumerism has been in ascendancy for at least two decades, and given the recent double-digit increases in healthcare premiums, anything to stem that trend should look like an improvement.

Some employers now offer their employees fixed amounts of money, sometimes called "flexible spending accounts," with which to purchase health insurance or, sometimes, individual healthcare services. This puts the patients in charge and forces them to think about health care just as they would any other purchase. It comes down to cost vs. benefits, something every consumer understands.

But Mercer Consulting reports that only about 2% of employers offered such plans in 2002, although the percentage is higher for very large employers. The promised significant cost-savings and anticipated benefits are still to be seen.

Some critics voice the concern that once patients are put "at risk" for their healthcare dollars, they'll tend to neglect getting care except when they can't put it off any longer. Such an unintended turn of events could lead to a generally less healthy population that depends more on interventional care and less on preventive care. Certainly, that result would cost the healthcare system more in the long term.

It's clear that health plans understand this dilemma. Arthur Southam, M.D., senior vice president of the Kaiser Foundation Health Plan, noted in the September 2003 issue of Managed Care: "Our physicians are concerned that some patients will find this (type of plan) to be a burden and that it might affect their ability to have the right visits and have the right tests and get the right medicines. Using cost-sharing to get people thinking about their own healthcare needs is probably a sound idea for someone who makes $200,000 a year. It is a challenging and complex proposition for someone with two children earning $10 an hour."

There's also a feeling among some plan managers, including physician-executives, that many practitioners aren't fully on-board with this notion that consumerism really is the best way to solve rising healthcare costs while also maintaining quality care.

John Wennberg, M.D., director, Center for Evaluative Clinical Sciences, Dartmouth Medical School, said in the November 2003 issue of Managed Care: "There's physician resistance to the idea of involving patients in decision-making. After all, they're trained to treat, not talk to patients."

Whether consumer-driven plans achieve wide acceptance is still unknown. But these plans will come to your town sooner or later, so you might as well be prepared.

Collecting the Cash

While patients will have greater flexibility to see the doctors of their choice (a good thing), and you'll be entitled to a larger portion of a generally higher fee upfront from the patient (also a good thing), there's considerable risk that if staff doesn't collect those monies on the date of service you'll have a harder time collecting all you're owed later.

Practices that don't do a superior job collecting at the front end could find that they're saddled with all sorts of bad debt not faced when insurance companies paid most of the bill. Clearly, you'll want to rethink how your practice asks for and collects patient-owed amounts. This means new rules for managing and minimizing accounts receivable. And it certainly means that those who work the checkout desk and are responsible for collecting amounts owed must have exceptional people skills.

You'll Have to Change

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

This is especially true for ophthalmologists, because several key services are elective/cosmetic, driven by a patient's wishes and desires rather than by purely medical needs. This adds a kind of "retail" component to the ophthalmology practice, a niche that most of your colleagues in other specialties don't share.

But whether the care you provide is elective or absolutely necessary, patients in consumer-driven plans will have rather different expectations and demands than those you've experienced in the traditional managed care scenarios.

When patients are responsible for the allocation of their healthcare dollars, they'll want to know why they should come to you rather than go to Drs. X, Y or Z. What do you offer newer or better or different that should cause them to hand over their now-budgeted healthcare dollars? If you can't provide convincing answers, these patients are likely to go elsewhere.

Consumer-driven plans will incentivize patients to become better managers of their health. They'll have to learn how to take better care of themselves when spending time in the sun, or managing their diabetes or glaucoma. In theory, if patients become better educated about their own health conditions, they'll spend more wisely from their healthcare accounts. In the past, patients didn't have such clear incentives to become educated, and to ask questions of their doctors. Now, they'll be motivated, and you'll have to devote more time to educating increasingly demanding patients.

Patients Will Judge You

Patients will want to know more about you: your clinical education, your special skills. And they'll want to know more about your staff, your facility and your equipment.

Patients will be less tolerant of what they perceive to be disinterested or rude staff, or poor customer service on billing and scheduling issues. You'll want to evaluate your practice and determine if your level of customer service compares favorably or unfavorably with your peers.

Finally, don't be surprised if the health plans start asking you for more data than ever before. Patients will be looking for information on which to base their physician-selection decisions, so the plans likely will be looking to supply some sort of comparative data to those patients.

Rethinking Your Fees

In the past when you agreed to accept discounted fees from an HMO or PPO, it was on the assumption that you were trading off discounted fees for certain expected increases in patient volume driven by the health plan. With consumer-driven health care, the plans should no longer have dictatorial control over what you have to accept as payment.

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

Many practices will raise their fees, finally freed of the crushing reductions forced upon them by third-party payers. But will patients pay these amounts after years of getting everything essentially for "free?"

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

On the other hand, ophthalmologists could find themselves in an even more cutthroat pricing environment if everyone in town starts playing the pricing game as a misguided means of attracting patients from these new plans. It's a worrisome possibility, especially given the absurd price wars we've seen with LASIK in recent years.

Win Patients Over

Present your practice, your staff, and yourself in a way that demonstrates clearly superior patient care and customer service. Whether you do that face-to-face, on the telephone, on your practice Web site, in a newsletter, or in office handouts, say it loud and say it proud, and believe in yourself. That's how you need to approach this new era of consumer-driven healthcare.

Gil Weber, who resides in Davie, Fla., is Ophthalmology Management's Consulting Editor. He's a nationally recognized author, lecturer and practice management consultant to physicians and the managed care industry, and has served as Director of Managed Care for the American Academy of Ophthalmology. You can reach him at (954) 915-6771, by e-mailing gil@gilweber.com or at www.gilweber.com