Consultant's corner: Think managed care is the solution?

Thursday, August 25, 2011

Industry consultant Alison Cherney says "everyone wants to get into managed care" these days.

"They're saying, 'I'm in a competitive bidding area and I lost Medicare, what do I do now?'" said Cherney, president of Cherney & Associates in Brentwood, Tenn. "They think managed care looks attractive, but they can't, after all these years of hating it, just turn around and get a contract. It's not easy and it takes awhile."

Cherney says managed care means, among many other things, building a sales organization whose goal is chasing a contract rather than chasing a referral source.

For many providers, at this point in the game, the learning curve may be too steep, she says.

"For those providers who have been in managed care for a long time, if they're smart and they monitor their costs, they can make money at it," Cherney said. "But for those providers who have been in Medicare a long time, it may be too much of a life shock."

Instead, providers may want to "re-order" their existing businesses, Cherney says. Her clients have negotiated better pricing from manufacturers, reduced their deliveries by asking customers to do pick-ups and switched to lower-end products.

"One has cut 40% of their sales team," she said. "If you're a company with $10 million in revenue with eight salespeople, you go down to four sales people, you cover your main clients and you don't project growth that year. Sometimes the strategy is to compress business so you can re-order your business."

Like Cherney, industry consultant Roberta Domos' first piece of advice for panicking providers isn't managed care. All too often the payer is associated with low reimbursement and increasingly closed networks.

"I've been encouraging them to diversify for several years, but I want them more into retail and cash," said Domos, owner of Domos Consulting Group in Redmond, Wash.