Higher co-pays, higher stakes
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Managed care moves to high deductible plans, forcing practices to seek new ways to collect from patients

The managed care system in the U.S. is undergoing substantial and broad-reaching changes. Patients and physicians are personally feeling the effects of macro-economic adjustment by health plans. Independent providers and small practices find themselves undermanned at the negotiating table, feeling the pressure to merge and consolidate. And as accountable care organizations (ACOs) and health insurance exchanges wait just over the horizon, it’s vital for dermatology practices to remain cognizant of the changes that will impact the way they practice and be proactive in addressing them.

Higher patient costs, lower payments

As insurers look to provide maximum coverage at an economically feasible cost, one trend whose adoption is surging is coverage through high-deductible health plans (HDHPs). An HDHP offers patients much lower monthly premiums at the cost of significantly higher up-front payments when they receive care. The plans, coverage through which is a requirement for participation in health savings accounts (HSAs), are defined as those with a minimum deductible of $1,200 per year for self-coverage (or $2,400 for a family), and a maximum out-of-pocket limit of $6,050 ($12,000 for family coverage) under the 2013 tax code. The amount is modified each year by the Internal Revenue Service. 

With the rising cost of health coverage, an increasing number of consumers — and employers — are opting for these plans. A 2013 report by business services company Towers Watson and the National Business Group on Health found that health plans combining higher deductible coverage and HSAs are offered at 40 percent of public sector companies. Among employers, 12.5 percent have already reached 100 percent enrollment in these plans. The report also found that companies with HDHPs and HSAs are more likely to provide cost-of-care information and other decision support tools for patients than those employers offering traditional plans. [pagebreak]

Unfortunately, according to Owings Mills, Md., dermatologist Risa Jampel, MD, the public’s understanding of the parameters and cost of these plans has not expanded at a comparable rate.

“I had one patient who came with her teenaged sons. They were both on isotretinoin, and the co-pay for one visit is $60 for specialist care. So when she brings her two sons to me, it’s $120 out of pocket immediately. That’s not a small amount of money for people,” Dr. Jampel said. “It’s almost like they don’t have insurance for office visits. But she needs a dermatologist to administer the medication.”

In addition to patients seeing greater personal expense because of doctor visits, physicians are now dealing with much lower reimbursement rates from a number of plans offered to consumers at a lower price. Some, according to Dr. Jampel, even pay at rates below Medicare. Just this year, she said, her reimbursement for level two follow-up visits on one particular plan reached a level below that of the patient’s copayment.

“Let’s say it’s a standard follow-up acne visit at level two. You do that level two visit, the patient is completely fine, and their co-pay is $60. If the insurance only pays you $35 for that visit, you end up having to send that patient a refund check. It was something I’ve found absolutely extraordinary,” Dr. Jampel said. “There would be less paperwork if the patient came in and paid me $35. In my area, this has led a lot of dermatologists to not participate with a certain plan.” [pagebreak]

Adapting to new economics

According to Murad Alam, MD, chair of the Academy’s Health Care Finance Committee, as the percentage of patients with HDHPs increases, it may now be advisable for physicians to communicate with patients about the cost of different diagnostic and therapeutic options.

“If patients do have a high deductible plan and they and their physician know that, it’s not unreasonable for them to have a discussion before embarking on therapies regarding the relative costs,” Dr. Alam said. “Sometimes I think there is a treatment that even though it’s more expensive might be really vital, and other times, the patient and physician might decide that a less expensive treatment is sufficient. You want to do what is best for the patient, but you’re in a situation where you don’t want to burden them with bills. We have to optimize the patient’s health without crippling their ability to manage their share of the expense.”

One practice’s solution

In dealing with the economics of a greater financial burden of patients, Angela Short, vice president of revenue management and compliance at The Dermatology Group in West Orange, N.J., said that her practice overhauled the patient check-in process in order to cut down on the increasing number of accounts past due. Now, she said, the patient checks in with a tablet, and part of the process is the system verifying the patient’s status and providing a reminder of the requirements of an HDHP.

“The key for any practice is staying on top of who has high deductibles and either keeping credit cards on file so you can charge it as soon as the claim adjudicates or having the patient pay out of pocket up front,” Short said. [pagebreak]

To complete the check-in process, she said, patients swipe a credit card that can either be charged after claim adjudication or filed along with a request to enter a payment plan. While the version of this conversation that takes place between administrative staff and patients can be awkward and fraught, she said, taking her staff out of the equation by using the tablet for check-in has proved a success in educating patients on their plans, the potential costs, and the options for extended payment schedules.

“We are finding that patients are more readily providing that information in that environment than when we were asking for it through our staff. Because of 5010 our claims are adjudicating so quickly that by the time they come back for a stitch removal, that claim has already been adjudicated. We know exactly what that patient owes,” Short said. “If they don’t have a credit card on file, [the tablet] will prompt them immediately, you have a standing balance of X.’ They can pay or enter a payment plan. The number of payment plans has increased from five a month to 200-250 because of the application. The nice thing about the technology is that it automatically charges the card when it’s due. I don’t have to have staff monitoring that on a daily basis.”

Employing this system, Short said, had allowed the practice to capture 50 percent of outstanding balances by taking the front desk employees out of the process. Total patient collections, she said, have increased by 42 percent. Adjusting to shifting economics, she said, has necessitated a flexible and technology-driven solution.

Consolidated medicine and the future

The same market forces that place pressure on patients and physicians also drive the consolidation of existing practices. According to a 2012 report by Accenture, though the supply of physicians is increasing, the number of independent physicians is following a sharp downward curve from 57 percent in 2000 to 39 percent in 2012. (Younger dermatologists, in particular, are part of the trend; only 18 percent of dermatologists under 40 and 31 percent between ages 40 and 49 are in solo practice. See April’s Facts at Your Fingertips.) The aforementioned decline in reimbursement is partially to blame, according to Short, in addition to the lowered contract negotiating power of smaller providers. The overall effect, she said, is lower reimbursement for smaller practices. [pagebreak]

“Smaller practices are really challenged to come up with any kind of leverage for negotiating with managed care companies,” Short said. “It’s not necessarily because the managed care companies don’t want to give them attention, it’s akin to medical practices watching human resources expenses. There are fewer provider reps to service a larger population. They’re so stretched that they don’t really have the time to focus on smaller practices. That’s a reason that the big practices have so much leverage. They provide so much value at the table, securing 50 to 60 doctors with one conversation as opposed to one or two. You can’t compete in that environment — you’re going to see continued consolidation.”

The negotiating power of a practice, she said, depends greatly on the local supply of dermatologists. In northern New Jersey, Short said, even her 30-provider practice has little negotiating power with managed care. Yet some practices, she said, can command more attention with as little as five providers in more isolated areas. In addition, dermatologists in a multi-specialty practice, or those who are part of a national group, will always have significant negotiating power, according to Short.

In addition, providing efficient care for a lower total payment through coordination is one of the strategies of accountable care organizations (ACOs), in which a group of varied providers are given financial incentive to provide care at reduced cost.

“ACOs are a new way of trying to provide cost-effective care and efficient care by creating large organizations that have a financial incentive to be streamlined,” Dr. Alam said. “To the extent that there’s greater efficiency in the market, that’s a good thing. We should be cost-conscious, careful, and provide patients with excellent care. That’s true across the board in health care.” [pagebreak]

While the structure and implementation is still in the formative stage, finding dermatology’s place in the eventual model is of paramount importance to the future health of the specialty, according to Short.

“We know that primary care is really getting on board with ACOs because there are a lot of incentives. We have started having conversations with the payers that we know are administering the ACO benefits to understand what our roles are with the ACO model and how we can get involved,” Short said. “It has been my experience thus far that the ACOs are looking for specialists to join, and the participation agreements are very vague in terms of obligations from the specialist or the specialist share in the cost savings. On the flip side, I have reviewed some of the ACO agreements with primary care that are very specific in terms of cost savings, bonus payments for achieving specific goals such as a percent of women over the age of 40 that have had their annual mammogram, as well as the percent of medications written/dispensed as generic versus brand. The theme of these more comprehensive agreements is that they are centered on prevention and cost savings, so dermatologists should be thinking in the same regard.”

In reaching out to ACOs, Short said, her practice is attempting to be proactive while there is still time to explore options and consider a number of relationships. [pagebreak]

“We’re trying to get into the system early, so we don’t miss a beat where referrals are concerned. We do believe that ACOs could potentially find more [patients being treated for skin conditions] in the primary care office than sent to the specialists. We constantly monitor our referral numbers to watch out for any signs that ACOs are turning inward for skin conditions instead of continuing to refer out.” If the numbers start to shift, Short said, “We would make every effort to listen to primary care to understand how our practice could modify our practices to gain their assurance of referring patients. Furthermore, we would offer to work as a partner, and teach the primary care providers some of the basic dermatology procedures, in an effort to secure the more complicated cases.”

Further underscoring the themes of consolidation and nationwide macroeconomic change in the health system, health insurance exchanges are required to be fully certified and operational by Jan. 1, 2014 under the Affordable Care Act. For physicians already dealing with significant patient loads and wait times, the potential increase in traffic might prove stark.

“The most apparent effect of health insurance exchanges will be a lot more patients to your door,” Short said. “If you’re a practice that is struggling from a volume standpoint, that’s a winning scenario. Though those rates are going to be at Medicaid level in many aspects, especially for subsidized plans,” she said.