Weighing the Pros & Cons of a Managed Care Plan

BY WALTER D. WEST, O.D.
FEB. 1997

If you could buy patients for $27 apiece, how many would you buy? You may not have asked the question quite this way, but if you've evaluated a managed care plan recently, you've had to consider the economics.

For some practitioners, deciding whether or not to join a plan is a no-brainer. Rural and small-town O.D.s who practice in areas dominated by one major employer may have no choice but to sign on as a provider. But for most of us, managed care means we must base our decisions on sound business principles.

FULLY BOOKED & PROFITABLE

The $27 figure I mentioned earlier is hypothetical, but it helps illustrate one segment of the decision-making process. If I normally charge $75 for an eye exam, but on a managed care program I can charge only $48, I have to determine what I'm getting for that $27 reduction in fee. For the rural practitioner, it can be almost like paying the mob protection money. The way I look at it is, if I'm not booked 100 percent with full-fee patients, then I may be willing to pay $27 to a managed care company to have them refer a patient to me.

How many patients would I buy? I would buy enough to fill any open time slots in my schedule. Yes, I must reduce my fee, but in return, the managed care company, on my behalf, convinces employers and employees of the value of routine eye care and then convinces employers that they should pay for this care on behalf of their employees. The managed care company then educates the employees about their benefits and the providers they may see. And all that's happened before the patients walk through my door.

NO FEAR NO GREED

We also have to determine if we can afford to see these patients at a reduced fee. Your cost of doing business, the reimbursement schedule and the anticipated volume of patients are key factors to consider when you decide whether or not to participate in a particular plan.

Unfortunately, too many O.D.s are motivated by fear (if I don't participate and everybody else does, I'll be left out in the cold) or greed (I may be able to corner the market and take patients away from other practices). If we banish fear and greed and make a conscious and astute business decision, ultimately we can influence the quality of managed care contracts presented to us. If we refuse to accept a 'lowball' contract, the managed care companies will have to offer better contracts.

FEES & DISCOUNTS

I'd encourage all contact lens practitioners to charge a separate fee for a routine eye exam, a separate fee for a contact lens fitting and follow-up (differentiating daily wear, extended wear, toric, multifocal and monovision), and a separate fee for materials. If a plan dictates that I must give a 20 percent discount for contact lenses, and if I charge an all-inclusive $200 fee, then I must deduct $40. If I charge $150 for the contact lens fitting and follow-up and $50 for the lenses, I need only deduct $10.

With service agreements, you can set your usual and customary fee at, say, $60, and your service agreement fee at $40. If you must discount your usual and customary fee 20 percent, you're still able to charge $48. If you're already charging a competitive fee of $40, then the discount reduces that to $32. Unfortunately, by being competitive in the marketplace, you've hurt yourself. I'm not suggesting that you should inappropriately or fraudulently manipulate fees, but be aware that these are the things that should enter into your decision-making process.

AVOID THIS PITFALL

One of the biggest mistakes practitioners can make is to give something away, either professional services or materials, in hopes of getting something back. If you're breaking even on contact lens materials and services in hopes of selling a pair of eyeglasses, or if you're 'giving away' your exam and spectacles in hopes of making up the difference by charging your usual and customary fees for contact lenses, don't.

Managed care is not going to look next year like it looks this year. The pendulum is swinging back toward the patient who is going to demand better benefits. We must stand our ground to maintain our profits. A well-organized and efficient managed care program that provides a good product at a fair price and also provides practitioners fair compensation for time and materials can be a good thing. CLS

Dr. West lectures nationally and internationally and has served as a clinical investigator for contact lenses. He is in private practice in Brentwood, Tenn.