Can Your Medical Practice Afford To Drop An Insurance Carrier?

I worked with a practice that was in a similar situation. The partners wanted to drop an insurance plan, but they had questions they wanted to answer before pulling the trigger, so to speak.

For example, one of the questions was how many patients would they potentially lose and how significant would be the financial impact if they dropped the insurance plan?

Screen Shot 2016-01-05 at 11.09.13 AMI received a letter from the University of Chicago Medical Center explaining that effective Jan 2016; they will no longer accept BCBS.

The announcement took me by surprise. Not because the hospital was dropping an insurance plan- but because they were dropping a major plan, BCBS.

BCBS has a significant market share in Chicago; which translates to a lot of patients having BCBS as their insurance carrier.

I can only imagine why the hospital decided to drop BCBS, but I think I can say with a fair amount of certainty that the decision must have been difficult for stakeholders of the hospital. Undoubtedly dropping such a large plan would affect a lot of patients, but also, shake up the hospital’s income.

CAN A PRACTICE AFFORD TO DROP A PLAN?

I worked with a practice that was in a similar situation. The partners wanted to drop an insurance plan, but they had questions they wanted to answer before pulling the trigger, so to speak.

For example, one of the questions was how many patients would they potentially lose and how significant would be the financial impact if they dropped the insurance plan?

INSURANCE DISTRIBUTION

To help them answer their questions, I worked with the practice manager to create a simple spreadsheet that I call an insurance distribution sheet. Below is a version of the spreadsheet already completed.

Screen Shot 2016-01-03 at 6.28.38 PM

To build the spreadsheet, we needed 3-data sets from the practice’s practice management system. Those three data sets were:

  1. Number of Patient Seen by Insurance Plan
  2. Gross Charges by Insurance Plan
  3. Net Receivables by Insurance Plan

The practice management system we were working with did not provide these data sets in one clean report. We had to run individual reports and enter the values into the spreadsheet.

Once the data was aggregated, we added a simple formula to translate the results into percentages. And the results is what the example above shows.


For those that are unfamiliar with Excel, click HERE to see a brief overview of how to calculate the percent of the total.


WHAT DO THE COLUMNS MEAN?

The first column is the insurance company patients had at the time of service. Percent of patients represents the ratio between all the patients seen, versus the patients seen with the corresponding insurance company. For example, let’s say the practice saw 1000 patients and of those, 300 had BCBS.

300 / 1000 = .3*

(*) BCBS represented 30% of the patients seen

Like percent of patients, percent of charges is the ratio of the practices gross charges divided by the gross charges corresponding to each insurance company. Example. Let’s say the practice billed $1,000,000. Of that million, BCBS represented $250,000.

250,000 / 1,000,000 = .25*

(*) Percent of charges for BCBS is 25%

The percent of receivables column follows the same math as percent of patient as well as percent of charges. And the cents/$ column calculates how many cents on the dollar the practice is collecting from the payor.

INTERPRETING THE GRAPH

Let’s look at BCBS and read across from left to right.

We see BCBS has 40% in the percent of patient column. Meaning, of all the patients seen, 40% had BCBS as their primary insurance. The next column is percent of charges. We see the BCBS represented 45%. This indicates that 45% of gross charges for the practice was billed to BCBS.

Percent of receivables is the next column over. It indicates that the revenue from BCBS accounted for 50% of the practice’s total income. And the revenue averaged 73 cents on the dollar. Another way to read it is, for every $1 billed to BCBS, the practice received 73 cents.

In contrast, let’s look at UHC. Only 8% of all the patients the practice saw for the period were UHC patients. UHC represented 9% of the practice’s revenue, and they averaged 60 cents on the dollar.

WHAT CAN WE GLEAN?

With an analysis like this, the practice can begin to find concrete answers to their pressing questions. For example, if UHC was the plan they were planning to drop, the sheet is able to show them what the impact would be from both a patient standpoint and financial standpoint.

UHC represents 10% of their patient panel. Which would have to leave the practice if they drop the plan, taking with them 9% of the practice’s revenue.

If the plan in question is BCBS, the numbers tell a different story. Fifty percent of the practice’s revenue would walk away with 40% of their patient panel.

Another observation is that Medicaid accounted for 37% of patients seen; but the State’s insurance plan accounted for 24% of the practice’s revenue. Something worth pondering.

HOW MUCH IS THE SHORTFALL?

For the sake of argument, let’s say UHC is the plan the practice was considering dropping. Doing so they would lose 9% of their revenue. This is not insignificant. If practice revenue is 1-million dollars, 9% represents $90,000. If practice revenue is 5-million, 9% is near $500,000. It’s less money no matter how you look at it.

PREPARING FOR THE SHORTFALL

When the doctors I was working with realized how much they’d lose, they got cold feet.

Here is what I explained to them…. the practice doesn’t have to see the same amount of patients to recuperate the 9% revenue shortfall. In fact, the practice can see fewer patients and still make up the revenue shortfall. How so?

Because of the cents on the dollar.

BCBS pays .73cents for every dollar billed. That’s 13cents more than UHC. By filling the schedule with better paying plans, like BCBS, Aetna or HFN, the practice will recuperate the 9% revenue loss faster because they are making more per patient than they would treating a UHC customer.

NOT ALWAYS SO CLEAR

Admittedly this graph does not give you a comprehensive picture. There are potentially other variables that a practice may consider. However, in the case of the practice that I worked with, this analysis was all they needed to answer their questions and move forward.

One last thing before you move one… don’t focus on the numbers you see on the graph and use them to compare with your practice numbers. Focus instead on the method, the process and the math with your numbers. Deal?


EDITORIAL UPDATE
The practice reached out to the payer to negotiate better rates. Armed with the data, they felt empowered (not at the mercy of the payor) and firmly request payment increases. The payer agreed. And they signed a contract that was competitive.

 

Let’s Talk About What Happened In Vegas

My friends from the Pediatric Management Institute (PMI) put on another great practice management conference in Las Vegas last January.Screen Shot 2016-02-21 at 10.55.37 AM

The content was excellent, thanks to the fabulous faculty PMI brought in.

The topics varied from customer service principles to fundamental changes happening in the health insurance industry and how those changes are – or soon will be – affecting doctors’ financial bottom line.

Below are a few highlights and notable points that resonated with me.

ANCILLARY SERVICES | INCOME DIVERSIFICATION

Dr. Jeanne Marconi presented an account of how her practice diversifies income streams by incorporating ancillary services into her practice.

Admittedly Dr. Marconi’s comprehensive – almost overwhelming – plethora of services (they even offer in-house exercise training programs for children with high BMI) is probably too much for the standard practice to implement.

But for me, her talk wasn’t an invitation to follow her footsteps, but instead, provide insight into what is possible, what can be done and what is available to practices.

Dr. Marconi dished out several challenges to the physicians in the crowd. But the one that resonated with me the most was her call for pediatric practices to challenge the status quo, expand their minds, think creatively (or to use a cliche, think outside the box) and begin to think about ways to diversify practice’s revenue streams.

HOW HEALTH INSURANCE COMPANIES ARE PAYING DOCTORS

Susanne Madden arrived in Vegas with her extensive knowledge and expertise of the health insurance industry.

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Dr. Jeanne Marconi and Susanne Madden

She presented attendees the sobering reality of how health insurance companies are adjusting, changing – even experimenting in some cases – with their models to continue delivering value to “their” shareholders. And by value, she means lower cost and higher profits.

Susanne underscored the importance of implementing quality measures such as P4P, HEIDIS, PCMH into our medical practices. But not for the reasons you might think.

While many of these health insurance programs are currently in place as rewards (e.g., enhanced or incentive payments) for medical practices that achieve quality measures thresholds in patient care, Susanne highlighted that these programs will soon become a requirement for practices.

What does this mean exactly? Insurance companies will soon stop offering enhanced payments programs to practices for achieving PCMH level III certification (or other types of incentives). Instead, they will reduce payments to doctors don’t meet PCMH certification.

As if that wasn’t bad enough, she added that many payers are evaluating providers based on how much the provider costs the company in benefits payouts.

How is that different than what they do now?

The difference is that they are not looking at the practice as a whole, but rather evaluating each provider individually.

The implications are that if you have physicians in your practice that don’t adhere to designated quality standards, payors can potentially pay each doctor in the practice different amounts.

HOW MUCH CAN WE AFFORD TO PAY AN EMPLOYED PROVIDER?

PMI’s very own Paul Vanchiere gave two of his hallmark presentations. The first one focused on customer service using the acronym KIDS (Kindness, Integrity, Dignity & Service).

His second talk was my favorite. Why? Because Paul took a complicated, MBA, executive consulting level exercise (determining how much can your practice afford to pay an employed provider) and distilled it into an easy to follow, step-by-step, process, which only requires one to understand a few financial concepts and enter value sets into a spreadsheet.

BROADEN YOUR CODE REPERTUAR

Dr. Rich Lander went over the fundamentals of proper coding. In addition to reviewing the differences between coding Level 2, 3, 4 & 5 for a sick visit, Dr. Lander stressed the importance of documenting “time” correctly in a patient’s chart.

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Joanne Blanchard and Dr. Richard Lander

Dr. Lander shared multiple clinical scenarios that we often encounter with patients. But some of the codes he suggested I wasn’t all too familiar with. I couldn’t recall if we used them.

So I wrote down a reminder to myself to check how well (or not) providers at Salud Pediatrics were using the full scope of codes available.

NO PRESENCE, NO INFLUENCE

Dr. John Moore – a new PMI faculty member – brought us up to speed with some of the new social media trends (Are you familiar with SnapChat and how kids are using it?)

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Dr. John Moore and Paul Vanchiere

One of the points that Dr. Moore articulated that I appreciated the most was the importance for pediatricians to embrace social media.

He said something that I’ve been saying for a long time; which is, had pediatricians adopted social media at a faster clip, the pro-vaccine vs. anti-vaccine arguments would have been balanced. Moreover, there was the potential to stifle the anti-vax movement.

CHANGE IS THE NEW STATUS QUO

You can always count on Chip Hart to deliver great wisdom and insight. Chip also gave two talks.Screen Shot 2016-02-21 at 10.56.11 AM

I’ve heard Chip speak many times, but this time, I felt his talks were different. Chip’s talks had a subtle, tough-love tone to them.

While addressing the challenges practices are facing today, he stressed that pediatricians have faced similar challenges before. He mentioned that during all previous tectonic shifts (aka industry changes) naysayers shouted out the demise of private practices. Much like many are shouting today.

Chip eloquently argued that not only are the doomsayers wrong, but that pediatricians are actually in a better situation than most think.

Chip wasn’t disregarding the challenges or downplaying the potential threats. We are indeed going through tough times. But these tough times were an opportunity to transform and reinvent our practices, he argued.

My takeaway was: If the plan is to defend the status quo and hedge the long-term success of your business on account that you have the initials MD after your name, thus somehow inoculated from change, the end is certainly near for you.

MEETING, CONNECTING, NETWORKING, SOCIAL LEARNING

Attending a seminar like this to learn from the speakers is certainly worth the price and the time. But more often than not, the icing on the cake, at least for me, is the immeasurable, intangible value I glean from networking.

The people who attend these events are the smartest and brightest in my opinion (and I’m not talking about the faculty, although they are good too).

Whether attendees are veterans in managing practices or opened their first private practices last week and believe they have no clue what they are doing, the truth is, there is opportunity to learn from everybody.

The faculty makes the trip worthwhile. But I would say the attendees make the event special.

Next year I hope to see you there. Especially if you didn’t get a chance to attend this year.

Place: New Orleans
Dates: Jan 27-28th 2017