Providers may give managed care a second look

Sunday, February 29, 2004

YARMOUTH, Maine - Medicare has been the payer to turn to in recent years following a period of hard times for managed care contracts, but all that could change as massive cuts look to revamp the Medicare fee schedule.

“There are ebbs and flows in the managed care business,” said Schuyler Hoss, president of Northwest Healthcare Management in Vancouver, Wash. “As one [payer] initiates change and reform, people gravitate to the other. I have seen this over 20 years, like the tide, in and out, back and forth.”

A period of steep discounting in managed care contracts drove many providers from the option because they were unable to keep up with the falling prices and demands from HMOs. Although contract competition waned, the smart bidders who remained made the contracts profitable again, Hoss said.

“A lot of HMOs are willing to pay a little more for stable, responsible providers because they have been burned so badly by people who have signed under-funded contracts and six months later demanded more money or tore up the contract,” he said.

Industry watchers expected the managed care market to experience some growth as a result of the Medicare Prescription Drug Act’s changes. However, managed care contracts should not be the only solution from providers looking to lessen their reliance on Medicare since many contracts mimic Medicare changes.

“They will look at rate structures and compare what they are paying to the new Medicare rates and generally they will look to either match or lower what Medicare is paying,” Hoss said.

Steve Lutzger, principle consultant at The Lutzger Group in Escondido, Calif., was more optimistic, saying that some “more enlightened” manage care contractors are willing to negotiate contracts item by item.

“Nobody yet knows how closely the contracts are going to mirror Medicare,” he said.

Neither Medicare nor managed care holds the key, however, and tip toeing back and forth can be a hassle more than a help, say industry insiders, who support a balanced portfolio approach.

“It’s very, very hard to manage a business following a particular payer source,” said Hoss. “You become so vulnerable to their idiosyncrasies and the changes they make. You shouldn’t shun or run away from any of them.”