T hese days the television, radio and print media are filled with dire news about healthcare costs spiraling out of control. The traditional, alphabet soup programs (HMOs, PPOs, EPOs, etc.) no longer seem able to reduce costs. In fact, most plans are now in the second or third year of double-digit premium increases. This failure to effectively control costs is creating dire circumstances for employers and employees. Both are facing tough decisions about who will have healthcare benefits in the future and who will pay the costs. Clearly, something has to change, especially when increasing numbers of employers are announcing that they may not be able to subsidize some or, perhaps, provide any healthcare benefits in coming years. To curtail rising costs, some see consumer-driven health plans as an answer. Mike Parkinson, M.D., Chief Medical Officer for Lumenos, an Alexandria, VA-based health insurance company offering these plans, told AMNews this month that they’ve seen a 15% reduction in spending on drugs in the first 5 to 6 months, and a 6% reduction in physician visits. He also says that they believe the consumer-driven health plans work because they cut down on unnecessary visits to the doctor, 20% to 25% of which he says are unneeded anyway. But how did we end up here? I’ll briefly discuss this and then talk about consumer-driven health plans and what impact they’ll have on your practice. Spend, Spend, Spend — Something’s Got to Give Patients demand services, physicians provide them, and insurance companies pay the bills. Despite some seemingly ridiculous and often nasty wars of words and action with physicians in regard to compensation for such services, it’s clear that insurers are facing some enormous challenges holding down costs. For example, all plans want to look good on HEDIS (health plan employer data and information set scores). HEDIS is a set of standardized performance measures that allow purchasers and consumers to compare the performance of managed healthcare plans. The performance measures are related to public health issues, such as cancer, heart disease, smoking and diabetes. HEDIS also takes into account results from a consumer survey that evaluates health plans’ customer service, access to care and claims processing. So, if a plan actively moves to get all its diabetics identified and checked, or actively pushes mammograms as part of a breast cancer screening program, it will increase HEDIS scores. But, those efforts will mean encouraging utilization, which thereby drives up costs. And so, we have two powerful forces at work in direct opposition. Practice variation is a second factor that seems to drive healthcare costs perpetually in the wrong direction. For example, recent Medicare data indicate per-capita spending in the Miami area is roughly two and a half times that in Minneapolis, even after the data is “massaged” to factor age, sex and race. How can that be? How can practice patterns be so different across the country? It’s a problem that perplexes and clearly frustrates health-plan executives from coast to coast. Dwayne David, M.D., Medical Director for Geisinger Health Care summed it up by reporting, “Practice variation is one of the greatest problems we face in controlling costs,” in a November 2003 issue of Managed Care magazine. And, in that same article, William Fleming, Pharm.D., a Humana Vice President said, “We used to spend a lot of time and resources communicating with physicians about the standards of pharmaceutical care they were delivering. But we didn’t see much change in behavior. So for the last 3 years we’ve concentrated on influencing consumer behavior.” Consumer-Driven Search for an Elusive Miracle Today’s “buzz” in healthcare cost containment is the consumer-driven health plan. It’s offered up as the Holy Grail, the Fountain of Youth, as the magical pot of gold at the end of the rainbow. This is “it,” opine some experts. We’re told that with patients in control of how, when and where their healthcare dollars are spent, this new variant for controlling rising healthcare costs is a cure for the system’s ills. But why would that be? The answer is because it puts financial responsibility squarely on the shoulders of the end-users — the patients. And given greater control and critical information (for example, access to cost guides for hospitals, physician charges and prescription medications), patients are supposed to become smarter shoppers and more conscientious consumers of healthcare dollars. Most insurers are looking to these plans with a lot of hope and some very big expectations based on perceived demands in the marketplace. Mike Clark, Vice President of Sales and Marketing for Pacificare Health Plans, in a September 29, 2003, statement to PR/Newswire said, “We developed our Self Directed Health Plan in response to increasing demand from consumers for greater information, flexibility, choice and control in how they spend their health care dollars.” Privatized Medicare? During 2003, the word out of Washington, D.C., was privatized Medicare. The President urged Congress to create a system within which private health insurers could compete with traditional Medicare. Driving this proposal was the basic precept of patient choice (consumer driven) as a means to reduce Medicare spending. And the House and Senate both tackled the problem and created their own versions. But many critics see this concept of private health plans competing with Medicare as nothing but a false promise of meaningful cost containment. They opine, perhaps with significant evidence on their side, that healthier seniors would gravitate to privatized plans, leaving the less healthy (and obviously greater consumers of healthcare services) to traditional Medicare. Were that to transpire it would inevitably drive-up Medicare costs and premiums rather than reduce spending. What had been bad would then only become worse. Insurance Companies Weigh-In Advisors to the health insurance industry trade association HIAA (Health Insurance Association of America) are starting to weigh-in on the question of whether or not consumer-driven healthcare is the answer to runaway spending. Consumers were surveyed to measure if it would be possible to promote and persuade acceptance of individually owned, tax-preferred, high deductible policies that would be portable and offer significant flexibility to the end-user (for example, allowing choices of multiple co-payment, deductible, co-insurance levels and access to tiered networks). The jury is still out. To date, the public has been a bit slow jumping on the bandwagon and embracing these plans that typically are offered by employers as one of many health plan options. And so employers are taking a different approach to the offering — using a “twist” to market the consumer-driven plans as an “enhanced benefit” that frees the employee and his or her family from many of the perceptual problems of traditional managed care. And that’s a very interesting development. Previously, managed care programs, such as HMOs and PPOs, had been described only in terms of a cost-savings strategy. But that strategy could only wring out so much before it was clear that significant cost-savings came with a wagonload full of unwieldy baggage. If end-users can be convinced to perceive these consumer-driven plans as an enhanced benefit, then that might create a quite different healthcare financial and administrative environment than was seen in the 1980s and 1990s. Perception versus Reality The success in selling consumer-driven healthcare coverage to end-users ultimately will depend on managing the fine balance between perception and reality. Consumerism has been all the rage for at least two decades, and given the current situation with double-digit premium increases, anything to stem that trend seemingly should look better. So, employers started to offer their employees fixed amounts of money (sometimes called “flexible spending accounts”) with which to purchase health insurance or, sometimes, individual healthcare services. And, these flexible accounts seemed like a great idea — putting the patients in charge and forcing them to think about healthcare just as they would any other purchase. It comes down to cost versus benefit — a concept every consumer understands. Still, as of early 2004 these plans haven’t been a rousing success with employers or consumers. Only about 2% of employers offered them in 2002 (the percentage is higher for very large employers), and the promised, significant cost-savings and anticipated benefits are still to be seen. Some critics voice an interesting concern that once patients are put “at risk” for their healthcare dollars, they’ll neglect getting care until they can’t put it off any longer. This unintended turn of events could lead to a generally less healthy population that depends more on interventional care and less on preventive care. That would certainly cost the healthcare system more in the long term. According to the January/February issue of Health Affairs, consumer-driven health plans would best benefit people who are very sick or healthy. Health Affairs reported that while the healthy would likely save about $584 per year in out-of-pocket spending, the slightly sick would lose $250, the moderately sick would lose $581 and the very sick would save $300. It’s clear that health plans understand this dilemma. Arthur Sou-tham, M.D., Senior Vice President for Kaiser Foundation Health Plan noted in the September 2003 issue of Managed Care magazine, “Our phy-sicians are concerned that some patients will find this to be a burden and that it might affect their ability to have the right visits and have the right tests and get the right medicines…. Using cost sharing to get people thinking about their own health care needs is probably a sound idea for someone who makes $200,000 a year. It’s a challenging and complex proposition for someone with two children earning $10 an hour.” There is also a feeling among some plan managers (including physician-executives) that many practitioners are not fully on-board with this notion that consumerism really is the best way to solve rising health care costs while also maintaining quality care. In the November 2003 issue of Managed Care magazine, John Wennberg, M.D., Director of the Center for Evaluative Clinical Sciences at Dartmouth Medical School, said, “There’s physician resistance to the idea of involving patients in decision making. After all, they’re trained to treat, not talk to patients.” Preparing Your Practice for Consumer-Driven Health Plans Whether these plans light the health insurance world on fire remains to be seen. What’s clear is that some of these plans will come to your town sooner or later, so you might as well be prepared. While patients will have greater flexibility to see the physicians of their choice (a good thing), and you’ll be entitled to a larger portion of a generally higher fee up-front from the patient (also a good thing), there’s considerable risk that if your staff doesn’t collect those monies on the date of service you’ll then have a harder time collecting all you’re owed later (a really bad thing). Practices that do not do a superior job collecting at the front end could find that they are saddled with all sorts of bad debt, something the practice was not faced with when insurance companies paid most of the bill and patients only had to come up with a nominal co-payment. Clearly, you’ll want to conduct a complete re-think of how the practice asks for and collects patient-owed amounts. This means new rules for managing and minimizing accounts receivable. And it certainly means that those who work the “check-out” desk and are responsible for collecting amounts owed must have exceptional people-skills. In my opinion, two points will be key to maximizing your collections under these new plans. 1. First, there must be no surprises at check-out for your patients or for the staff. Each patient’s potential financial responsibility should be discussed prior to the date of service, and each patient should be told that payment is expected on the day of service. Of course you can’t know the exact amount owed until after the patient has been seen, but at a minimum staff needs to know the broad specifics of each patient’s coverage (by calling the plan, if necessary), and then must convey that responsibility to the patient. If, for example, an insurer says that the patient is responsible for 100% of the next “$X” of services, then that information should conveyed to the patient before she is at the check-out window. This will mean additional phone calls, but the positive impact on your collections (and reduction in stress at the check-out counter) should be considerable if correctly handled. 2. Second, staff responsible for collecting at the time of service must be told in no uncertain terms that this is a critical part of their job responsibilities. You may find that it’s worthwhile to do performance evaluations measuring collection success, and make those performance results part of annual reviews. Or, you might find it worthwhile to bonus the staff if they achieve certain collection targets over designated time periods. Whatever the case, the staff must get on board with collections if you’re to profit from participation in these new plans. Communication When patients can choose to go to any provider you’ll suddenly find yourself placed into a much larger competitive pool than under traditional managed care plans. This means physicians will have to do a different and more effective job promoting themselves and their practices. This is true for all physicians, but especially for dermatologists since many of their services are elective/cosmetic and, therefore, driven by a patient’s wishes and desires rather than by purely medical needs. Dermatologists share with their eyecare colleagues a very rare niche in medicine — something absent in cardiology, rheumatology, gastroenterology, etc. Just as ophthalmologists may offer cosmetic procedures, such as laser refractive surgery, Botox treatments or blepharoplasty (not covered or only partially covered by insurance), so, too, might you provide various elective/cosmetic dermatology procedures. And just as the sale of eyeglasses and/or contact lenses adds a “retail” component to the ophthalmologist’s practice, so, too, does the sale of specialty skincare products and the like add a similar “retail” component to the dermatologist’s practice. This means using very effective communication to “sell” the patient, and thereby, generate additional revenue streams. (Please note that the words “sell” and “retail” should not in any way be construed as disparaging or contrary to the ethical practice of medicine.) Changing Perceptions But whether the care you provide is elective or absolutely necessary, patients in consumer-driven plans will have some rather different expectations and demands than those you’ve experienced under the traditional managed care scenarios. When responsible for the allocation of their healthcare dollars, patients will want to know why they should come to you rather than go to Drs. X, Y or Z. They’ll want to know how/why your treatment will differ from what they’d receive elsewhere. What do you offer newer or better or different that should cause them to hand over their now-budgeted healthcare dollars? If you can’t provide convincing answers, then these patients are likely to go elsewhere, and to spend their discretionary dollars at a practice that can provide convincing answers. Consumer-driven plans will incentivize patients to become better managers of their health — for example, learning how to take better care of themselves when spending time in the sun or when exposed to potential skin irritants. In theory, if patients become better educated about their own health conditions, they’ll spend more wisely from their healthcare spending accounts. In the past, patients did not have such a clear-cut (financial) incentive to become educated, and to ask questions of their doctors. Now they will be motivated, and you’ll have to devote more time to educating increasingly demanding patients. Patients will want to know more about you — your clinical education, your specialty. And they’ll want to know more about your staff, your facility and your equipment. What differentiates your dermatology practice from every other one in town? And patients will be much less tolerant of what they perceive to be disinterested or rude staff, poor customer service on billing issues, or poor customer service when making appointments. And so, you’ll want to evaluate your practice and determine if its level of customer service is the medical office equivalent of Nordstroms. And, don’t be surprised if the health plans start asking you for more data. Patients will be looking for more information on which to base their physician selection decisions, and so the plans likely will be looking to supply some sort of comparative data to those patients. Thus, you should expect increased reporting responsibilities. Be prepared to respond to requests for information on your outcomes, special “cutting-edge” services you provide, or on any other data elements that might be used to compare the relative quality and/or cost of the care you provide. Rethinking Your Fees In the past, when you agreed to accept discounted fees from an HMO or PPO it was on the assumption that you were trading discounted fees for certain expected increases in patient volume driven by the health plan. And the assumption was that you’d receive the largest slice of the fee from the plan, which, of course, had an absolute stranglehold on the fees paid for your services. With consumer-driven healthcare, much of that changes, and the plans should no longer have dictatorial control over what you have to accept as payment. You won’t be part of a traditional, closed panel, and so the idea of “steerage” essentially goes out the door. Instead, increased volume will come about through your own efforts, not through actions or efforts of the payer. This means you may want to re-think your fee schedule and the amounts you’ll accept from payers and patients. Many practices will decide to raise their fees — finally freed of the crushing reductions forced upon them by third-party payers. But will patients pay these amounts after years of getting everything essentially for “free”? That’s the $64,000 question. There’s certainly reason to believe that, at least for these consumer-driven plans, fees can be raised from the levels offered by traditional managed care. But, each practice will have to convince patients that the quality of services justifies the price. So you’ll have to be in the ballpark, and to do this you’ll need to know how your fees compare to those offered elsewhere in the community. On the other hand, there’s always the chance that dermatologists could find themselves in an even more cutthroat pricing environment if everyone in town starts playing the pricing game as a misguided means of attracting new patients. Hopefully, we won’t see that play-out (e.g., with ridiculous cosmetic procedure pricing offered by some high-volume “mills”), but it’s a worrisome possibility. It’s All in the Presentation In the end it will all come down to the presentation — to convincing choosy patients that you should be their dermatologist. Present your practice, your staff, and yourself in a way that demonstrates clearly superior patient care and customer service. Whether you do that face-to-face, on the telephone, on your practice Web site, in a newsletter, or in office handouts, say it loud and say it proud, and believe in yourself. I think it’s the Marines who have a motto “It’s hard to be humble when you’re the best.” That’s how you need to approach this new era of consumer-driven healthcare.
Consumer-Driven Health Plans
T hese days the television, radio and print media are filled with dire news about healthcare costs spiraling out of control. The traditional, alphabet soup programs (HMOs, PPOs, EPOs, etc.) no longer seem able to reduce costs. In fact, most plans are now in the second or third year of double-digit premium increases. This failure to effectively control costs is creating dire circumstances for employers and employees. Both are facing tough decisions about who will have healthcare benefits in the future and who will pay the costs. Clearly, something has to change, especially when increasing numbers of employers are announcing that they may not be able to subsidize some or, perhaps, provide any healthcare benefits in coming years. To curtail rising costs, some see consumer-driven health plans as an answer. Mike Parkinson, M.D., Chief Medical Officer for Lumenos, an Alexandria, VA-based health insurance company offering these plans, told AMNews this month that they’ve seen a 15% reduction in spending on drugs in the first 5 to 6 months, and a 6% reduction in physician visits. He also says that they believe the consumer-driven health plans work because they cut down on unnecessary visits to the doctor, 20% to 25% of which he says are unneeded anyway. But how did we end up here? I’ll briefly discuss this and then talk about consumer-driven health plans and what impact they’ll have on your practice. Spend, Spend, Spend — Something’s Got to Give Patients demand services, physicians provide them, and insurance companies pay the bills. Despite some seemingly ridiculous and often nasty wars of words and action with physicians in regard to compensation for such services, it’s clear that insurers are facing some enormous challenges holding down costs. For example, all plans want to look good on HEDIS (health plan employer data and information set scores). HEDIS is a set of standardized performance measures that allow purchasers and consumers to compare the performance of managed healthcare plans. The performance measures are related to public health issues, such as cancer, heart disease, smoking and diabetes. HEDIS also takes into account results from a consumer survey that evaluates health plans’ customer service, access to care and claims processing. So, if a plan actively moves to get all its diabetics identified and checked, or actively pushes mammograms as part of a breast cancer screening program, it will increase HEDIS scores. But, those efforts will mean encouraging utilization, which thereby drives up costs. And so, we have two powerful forces at work in direct opposition. Practice variation is a second factor that seems to drive healthcare costs perpetually in the wrong direction. For example, recent Medicare data indicate per-capita spending in the Miami area is roughly two and a half times that in Minneapolis, even after the data is “massaged” to factor age, sex and race. How can that be? How can practice patterns be so different across the country? It’s a problem that perplexes and clearly frustrates health-plan executives from coast to coast. Dwayne David, M.D., Medical Director for Geisinger Health Care summed it up by reporting, “Practice variation is one of the greatest problems we face in controlling costs,” in a November 2003 issue of Managed Care magazine. And, in that same article, William Fleming, Pharm.D., a Humana Vice President said, “We used to spend a lot of time and resources communicating with physicians about the standards of pharmaceutical care they were delivering. But we didn’t see much change in behavior. So for the last 3 years we’ve concentrated on influencing consumer behavior.” Consumer-Driven Search for an Elusive Miracle Today’s “buzz” in healthcare cost containment is the consumer-driven health plan. It’s offered up as the Holy Grail, the Fountain of Youth, as the magical pot of gold at the end of the rainbow. This is “it,” opine some experts. We’re told that with patients in control of how, when and where their healthcare dollars are spent, this new variant for controlling rising healthcare costs is a cure for the system’s ills. But why would that be? The answer is because it puts financial responsibility squarely on the shoulders of the end-users — the patients. And given greater control and critical information (for example, access to cost guides for hospitals, physician charges and prescription medications), patients are supposed to become smarter shoppers and more conscientious consumers of healthcare dollars. Most insurers are looking to these plans with a lot of hope and some very big expectations based on perceived demands in the marketplace. Mike Clark, Vice President of Sales and Marketing for Pacificare Health Plans, in a September 29, 2003, statement to PR/Newswire said, “We developed our Self Directed Health Plan in response to increasing demand from consumers for greater information, flexibility, choice and control in how they spend their health care dollars.” Privatized Medicare? During 2003, the word out of Washington, D.C., was privatized Medicare. The President urged Congress to create a system within which private health insurers could compete with traditional Medicare. Driving this proposal was the basic precept of patient choice (consumer driven) as a means to reduce Medicare spending. And the House and Senate both tackled the problem and created their own versions. But many critics see this concept of private health plans competing with Medicare as nothing but a false promise of meaningful cost containment. They opine, perhaps with significant evidence on their side, that healthier seniors would gravitate to privatized plans, leaving the less healthy (and obviously greater consumers of healthcare services) to traditional Medicare. Were that to transpire it would inevitably drive-up Medicare costs and premiums rather than reduce spending. What had been bad would then only become worse. Insurance Companies Weigh-In Advisors to the health insurance industry trade association HIAA (Health Insurance Association of America) are starting to weigh-in on the question of whether or not consumer-driven healthcare is the answer to runaway spending. Consumers were surveyed to measure if it would be possible to promote and persuade acceptance of individually owned, tax-preferred, high deductible policies that would be portable and offer significant flexibility to the end-user (for example, allowing choices of multiple co-payment, deductible, co-insurance levels and access to tiered networks). The jury is still out. To date, the public has been a bit slow jumping on the bandwagon and embracing these plans that typically are offered by employers as one of many health plan options. And so employers are taking a different approach to the offering — using a “twist” to market the consumer-driven plans as an “enhanced benefit” that frees the employee and his or her family from many of the perceptual problems of traditional managed care. And that’s a very interesting development. Previously, managed care programs, such as HMOs and PPOs, had been described only in terms of a cost-savings strategy. But that strategy could only wring out so much before it was clear that significant cost-savings came with a wagonload full of unwieldy baggage. If end-users can be convinced to perceive these consumer-driven plans as an enhanced benefit, then that might create a quite different healthcare financial and administrative environment than was seen in the 1980s and 1990s. Perception versus Reality The success in selling consumer-driven healthcare coverage to end-users ultimately will depend on managing the fine balance between perception and reality. Consumerism has been all the rage for at least two decades, and given the current situation with double-digit premium increases, anything to stem that trend seemingly should look better. So, employers started to offer their employees fixed amounts of money (sometimes called “flexible spending accounts”) with which to purchase health insurance or, sometimes, individual healthcare services. And, these flexible accounts seemed like a great idea — putting the patients in charge and forcing them to think about healthcare just as they would any other purchase. It comes down to cost versus benefit — a concept every consumer understands. Still, as of early 2004 these plans haven’t been a rousing success with employers or consumers. Only about 2% of employers offered them in 2002 (the percentage is higher for very large employers), and the promised, significant cost-savings and anticipated benefits are still to be seen. Some critics voice an interesting concern that once patients are put “at risk” for their healthcare dollars, they’ll neglect getting care until they can’t put it off any longer. This unintended turn of events could lead to a generally less healthy population that depends more on interventional care and less on preventive care. That would certainly cost the healthcare system more in the long term. According to the January/February issue of Health Affairs, consumer-driven health plans would best benefit people who are very sick or healthy. Health Affairs reported that while the healthy would likely save about $584 per year in out-of-pocket spending, the slightly sick would lose $250, the moderately sick would lose $581 and the very sick would save $300. It’s clear that health plans understand this dilemma. Arthur Sou-tham, M.D., Senior Vice President for Kaiser Foundation Health Plan noted in the September 2003 issue of Managed Care magazine, “Our phy-sicians are concerned that some patients will find this to be a burden and that it might affect their ability to have the right visits and have the right tests and get the right medicines…. Using cost sharing to get people thinking about their own health care needs is probably a sound idea for someone who makes $200,000 a year. It’s a challenging and complex proposition for someone with two children earning $10 an hour.” There is also a feeling among some plan managers (including physician-executives) that many practitioners are not fully on-board with this notion that consumerism really is the best way to solve rising health care costs while also maintaining quality care. In the November 2003 issue of Managed Care magazine, John Wennberg, M.D., Director of the Center for Evaluative Clinical Sciences at Dartmouth Medical School, said, “There’s physician resistance to the idea of involving patients in decision making. After all, they’re trained to treat, not talk to patients.” Preparing Your Practice for Consumer-Driven Health Plans Whether these plans light the health insurance world on fire remains to be seen. What’s clear is that some of these plans will come to your town sooner or later, so you might as well be prepared. While patients will have greater flexibility to see the physicians of their choice (a good thing), and you’ll be entitled to a larger portion of a generally higher fee up-front from the patient (also a good thing), there’s considerable risk that if your staff doesn’t collect those monies on the date of service you’ll then have a harder time collecting all you’re owed later (a really bad thing). Practices that do not do a superior job collecting at the front end could find that they are saddled with all sorts of bad debt, something the practice was not faced with when insurance companies paid most of the bill and patients only had to come up with a nominal co-payment. Clearly, you’ll want to conduct a complete re-think of how the practice asks for and collects patient-owed amounts. This means new rules for managing and minimizing accounts receivable. And it certainly means that those who work the “check-out” desk and are responsible for collecting amounts owed must have exceptional people-skills. In my opinion, two points will be key to maximizing your collections under these new plans. 1. First, there must be no surprises at check-out for your patients or for the staff. Each patient’s potential financial responsibility should be discussed prior to the date of service, and each patient should be told that payment is expected on the day of service. Of course you can’t know the exact amount owed until after the patient has been seen, but at a minimum staff needs to know the broad specifics of each patient’s coverage (by calling the plan, if necessary), and then must convey that responsibility to the patient. If, for example, an insurer says that the patient is responsible for 100% of the next “$X” of services, then that information should conveyed to the patient before she is at the check-out window. This will mean additional phone calls, but the positive impact on your collections (and reduction in stress at the check-out counter) should be considerable if correctly handled. 2. Second, staff responsible for collecting at the time of service must be told in no uncertain terms that this is a critical part of their job responsibilities. You may find that it’s worthwhile to do performance evaluations measuring collection success, and make those performance results part of annual reviews. Or, you might find it worthwhile to bonus the staff if they achieve certain collection targets over designated time periods. Whatever the case, the staff must get on board with collections if you’re to profit from participation in these new plans. Communication When patients can choose to go to any provider you’ll suddenly find yourself placed into a much larger competitive pool than under traditional managed care plans. This means physicians will have to do a different and more effective job promoting themselves and their practices. This is true for all physicians, but especially for dermatologists since many of their services are elective/cosmetic and, therefore, driven by a patient’s wishes and desires rather than by purely medical needs. Dermatologists share with their eyecare colleagues a very rare niche in medicine — something absent in cardiology, rheumatology, gastroenterology, etc. Just as ophthalmologists may offer cosmetic procedures, such as laser refractive surgery, Botox treatments or blepharoplasty (not covered or only partially covered by insurance), so, too, might you provide various elective/cosmetic dermatology procedures. And just as the sale of eyeglasses and/or contact lenses adds a “retail” component to the ophthalmologist’s practice, so, too, does the sale of specialty skincare products and the like add a similar “retail” component to the dermatologist’s practice. This means using very effective communication to “sell” the patient, and thereby, generate additional revenue streams. (Please note that the words “sell” and “retail” should not in any way be construed as disparaging or contrary to the ethical practice of medicine.) Changing Perceptions But whether the care you provide is elective or absolutely necessary, patients in consumer-driven plans will have some rather different expectations and demands than those you’ve experienced under the traditional managed care scenarios. When responsible for the allocation of their healthcare dollars, patients will want to know why they should come to you rather than go to Drs. X, Y or Z. They’ll want to know how/why your treatment will differ from what they’d receive elsewhere. What do you offer newer or better or different that should cause them to hand over their now-budgeted healthcare dollars? If you can’t provide convincing answers, then these patients are likely to go elsewhere, and to spend their discretionary dollars at a practice that can provide convincing answers. Consumer-driven plans will incentivize patients to become better managers of their health — for example, learning how to take better care of themselves when spending time in the sun or when exposed to potential skin irritants. In theory, if patients become better educated about their own health conditions, they’ll spend more wisely from their healthcare spending accounts. In the past, patients did not have such a clear-cut (financial) incentive to become educated, and to ask questions of their doctors. Now they will be motivated, and you’ll have to devote more time to educating increasingly demanding patients. Patients will want to know more about you — your clinical education, your specialty. And they’ll want to know more about your staff, your facility and your equipment. What differentiates your dermatology practice from every other one in town? And patients will be much less tolerant of what they perceive to be disinterested or rude staff, poor customer service on billing issues, or poor customer service when making appointments. And so, you’ll want to evaluate your practice and determine if its level of customer service is the medical office equivalent of Nordstroms. And, don’t be surprised if the health plans start asking you for more data. Patients will be looking for more information on which to base their physician selection decisions, and so the plans likely will be looking to supply some sort of comparative data to those patients. Thus, you should expect increased reporting responsibilities. Be prepared to respond to requests for information on your outcomes, special “cutting-edge” services you provide, or on any other data elements that might be used to compare the relative quality and/or cost of the care you provide. Rethinking Your Fees In the past, when you agreed to accept discounted fees from an HMO or PPO it was on the assumption that you were trading discounted fees for certain expected increases in patient volume driven by the health plan. And the assumption was that you’d receive the largest slice of the fee from the plan, which, of course, had an absolute stranglehold on the fees paid for your services. With consumer-driven healthcare, much of that changes, and the plans should no longer have dictatorial control over what you have to accept as payment. You won’t be part of a traditional, closed panel, and so the idea of “steerage” essentially goes out the door. Instead, increased volume will come about through your own efforts, not through actions or efforts of the payer. This means you may want to re-think your fee schedule and the amounts you’ll accept from payers and patients. Many practices will decide to raise their fees — finally freed of the crushing reductions forced upon them by third-party payers. But will patients pay these amounts after years of getting everything essentially for “free”? That’s the $64,000 question. There’s certainly reason to believe that, at least for these consumer-driven plans, fees can be raised from the levels offered by traditional managed care. But, each practice will have to convince patients that the quality of services justifies the price. So you’ll have to be in the ballpark, and to do this you’ll need to know how your fees compare to those offered elsewhere in the community. On the other hand, there’s always the chance that dermatologists could find themselves in an even more cutthroat pricing environment if everyone in town starts playing the pricing game as a misguided means of attracting new patients. Hopefully, we won’t see that play-out (e.g., with ridiculous cosmetic procedure pricing offered by some high-volume “mills”), but it’s a worrisome possibility. It’s All in the Presentation In the end it will all come down to the presentation — to convincing choosy patients that you should be their dermatologist. Present your practice, your staff, and yourself in a way that demonstrates clearly superior patient care and customer service. Whether you do that face-to-face, on the telephone, on your practice Web site, in a newsletter, or in office handouts, say it loud and say it proud, and believe in yourself. I think it’s the Marines who have a motto “It’s hard to be humble when you’re the best.” That’s how you need to approach this new era of consumer-driven healthcare.
T hese days the television, radio and print media are filled with dire news about healthcare costs spiraling out of control. The traditional, alphabet soup programs (HMOs, PPOs, EPOs, etc.) no longer seem able to reduce costs. In fact, most plans are now in the second or third year of double-digit premium increases. This failure to effectively control costs is creating dire circumstances for employers and employees. Both are facing tough decisions about who will have healthcare benefits in the future and who will pay the costs. Clearly, something has to change, especially when increasing numbers of employers are announcing that they may not be able to subsidize some or, perhaps, provide any healthcare benefits in coming years. To curtail rising costs, some see consumer-driven health plans as an answer. Mike Parkinson, M.D., Chief Medical Officer for Lumenos, an Alexandria, VA-based health insurance company offering these plans, told AMNews this month that they’ve seen a 15% reduction in spending on drugs in the first 5 to 6 months, and a 6% reduction in physician visits. He also says that they believe the consumer-driven health plans work because they cut down on unnecessary visits to the doctor, 20% to 25% of which he says are unneeded anyway. But how did we end up here? I’ll briefly discuss this and then talk about consumer-driven health plans and what impact they’ll have on your practice. Spend, Spend, Spend — Something’s Got to Give Patients demand services, physicians provide them, and insurance companies pay the bills. Despite some seemingly ridiculous and often nasty wars of words and action with physicians in regard to compensation for such services, it’s clear that insurers are facing some enormous challenges holding down costs. For example, all plans want to look good on HEDIS (health plan employer data and information set scores). HEDIS is a set of standardized performance measures that allow purchasers and consumers to compare the performance of managed healthcare plans. The performance measures are related to public health issues, such as cancer, heart disease, smoking and diabetes. HEDIS also takes into account results from a consumer survey that evaluates health plans’ customer service, access to care and claims processing. So, if a plan actively moves to get all its diabetics identified and checked, or actively pushes mammograms as part of a breast cancer screening program, it will increase HEDIS scores. But, those efforts will mean encouraging utilization, which thereby drives up costs. And so, we have two powerful forces at work in direct opposition. Practice variation is a second factor that seems to drive healthcare costs perpetually in the wrong direction. For example, recent Medicare data indicate per-capita spending in the Miami area is roughly two and a half times that in Minneapolis, even after the data is “massaged” to factor age, sex and race. How can that be? How can practice patterns be so different across the country? It’s a problem that perplexes and clearly frustrates health-plan executives from coast to coast. Dwayne David, M.D., Medical Director for Geisinger Health Care summed it up by reporting, “Practice variation is one of the greatest problems we face in controlling costs,” in a November 2003 issue of Managed Care magazine. And, in that same article, William Fleming, Pharm.D., a Humana Vice President said, “We used to spend a lot of time and resources communicating with physicians about the standards of pharmaceutical care they were delivering. But we didn’t see much change in behavior. So for the last 3 years we’ve concentrated on influencing consumer behavior.” Consumer-Driven Search for an Elusive Miracle Today’s “buzz” in healthcare cost containment is the consumer-driven health plan. It’s offered up as the Holy Grail, the Fountain of Youth, as the magical pot of gold at the end of the rainbow. This is “it,” opine some experts. We’re told that with patients in control of how, when and where their healthcare dollars are spent, this new variant for controlling rising healthcare costs is a cure for the system’s ills. But why would that be? The answer is because it puts financial responsibility squarely on the shoulders of the end-users — the patients. And given greater control and critical information (for example, access to cost guides for hospitals, physician charges and prescription medications), patients are supposed to become smarter shoppers and more conscientious consumers of healthcare dollars. Most insurers are looking to these plans with a lot of hope and some very big expectations based on perceived demands in the marketplace. Mike Clark, Vice President of Sales and Marketing for Pacificare Health Plans, in a September 29, 2003, statement to PR/Newswire said, “We developed our Self Directed Health Plan in response to increasing demand from consumers for greater information, flexibility, choice and control in how they spend their health care dollars.” Privatized Medicare? During 2003, the word out of Washington, D.C., was privatized Medicare. The President urged Congress to create a system within which private health insurers could compete with traditional Medicare. Driving this proposal was the basic precept of patient choice (consumer driven) as a means to reduce Medicare spending. And the House and Senate both tackled the problem and created their own versions. But many critics see this concept of private health plans competing with Medicare as nothing but a false promise of meaningful cost containment. They opine, perhaps with significant evidence on their side, that healthier seniors would gravitate to privatized plans, leaving the less healthy (and obviously greater consumers of healthcare services) to traditional Medicare. Were that to transpire it would inevitably drive-up Medicare costs and premiums rather than reduce spending. What had been bad would then only become worse. Insurance Companies Weigh-In Advisors to the health insurance industry trade association HIAA (Health Insurance Association of America) are starting to weigh-in on the question of whether or not consumer-driven healthcare is the answer to runaway spending. Consumers were surveyed to measure if it would be possible to promote and persuade acceptance of individually owned, tax-preferred, high deductible policies that would be portable and offer significant flexibility to the end-user (for example, allowing choices of multiple co-payment, deductible, co-insurance levels and access to tiered networks). The jury is still out. To date, the public has been a bit slow jumping on the bandwagon and embracing these plans that typically are offered by employers as one of many health plan options. And so employers are taking a different approach to the offering — using a “twist” to market the consumer-driven plans as an “enhanced benefit” that frees the employee and his or her family from many of the perceptual problems of traditional managed care. And that’s a very interesting development. Previously, managed care programs, such as HMOs and PPOs, had been described only in terms of a cost-savings strategy. But that strategy could only wring out so much before it was clear that significant cost-savings came with a wagonload full of unwieldy baggage. If end-users can be convinced to perceive these consumer-driven plans as an enhanced benefit, then that might create a quite different healthcare financial and administrative environment than was seen in the 1980s and 1990s. Perception versus Reality The success in selling consumer-driven healthcare coverage to end-users ultimately will depend on managing the fine balance between perception and reality. Consumerism has been all the rage for at least two decades, and given the current situation with double-digit premium increases, anything to stem that trend seemingly should look better. So, employers started to offer their employees fixed amounts of money (sometimes called “flexible spending accounts”) with which to purchase health insurance or, sometimes, individual healthcare services. And, these flexible accounts seemed like a great idea — putting the patients in charge and forcing them to think about healthcare just as they would any other purchase. It comes down to cost versus benefit — a concept every consumer understands. Still, as of early 2004 these plans haven’t been a rousing success with employers or consumers. Only about 2% of employers offered them in 2002 (the percentage is higher for very large employers), and the promised, significant cost-savings and anticipated benefits are still to be seen. Some critics voice an interesting concern that once patients are put “at risk” for their healthcare dollars, they’ll neglect getting care until they can’t put it off any longer. This unintended turn of events could lead to a generally less healthy population that depends more on interventional care and less on preventive care. That would certainly cost the healthcare system more in the long term. According to the January/February issue of Health Affairs, consumer-driven health plans would best benefit people who are very sick or healthy. Health Affairs reported that while the healthy would likely save about $584 per year in out-of-pocket spending, the slightly sick would lose $250, the moderately sick would lose $581 and the very sick would save $300. It’s clear that health plans understand this dilemma. Arthur Sou-tham, M.D., Senior Vice President for Kaiser Foundation Health Plan noted in the September 2003 issue of Managed Care magazine, “Our phy-sicians are concerned that some patients will find this to be a burden and that it might affect their ability to have the right visits and have the right tests and get the right medicines…. Using cost sharing to get people thinking about their own health care needs is probably a sound idea for someone who makes $200,000 a year. It’s a challenging and complex proposition for someone with two children earning $10 an hour.” There is also a feeling among some plan managers (including physician-executives) that many practitioners are not fully on-board with this notion that consumerism really is the best way to solve rising health care costs while also maintaining quality care. In the November 2003 issue of Managed Care magazine, John Wennberg, M.D., Director of the Center for Evaluative Clinical Sciences at Dartmouth Medical School, said, “There’s physician resistance to the idea of involving patients in decision making. After all, they’re trained to treat, not talk to patients.” Preparing Your Practice for Consumer-Driven Health Plans Whether these plans light the health insurance world on fire remains to be seen. What’s clear is that some of these plans will come to your town sooner or later, so you might as well be prepared. While patients will have greater flexibility to see the physicians of their choice (a good thing), and you’ll be entitled to a larger portion of a generally higher fee up-front from the patient (also a good thing), there’s considerable risk that if your staff doesn’t collect those monies on the date of service you’ll then have a harder time collecting all you’re owed later (a really bad thing). Practices that do not do a superior job collecting at the front end could find that they are saddled with all sorts of bad debt, something the practice was not faced with when insurance companies paid most of the bill and patients only had to come up with a nominal co-payment. Clearly, you’ll want to conduct a complete re-think of how the practice asks for and collects patient-owed amounts. This means new rules for managing and minimizing accounts receivable. And it certainly means that those who work the “check-out” desk and are responsible for collecting amounts owed must have exceptional people-skills. In my opinion, two points will be key to maximizing your collections under these new plans. 1. First, there must be no surprises at check-out for your patients or for the staff. Each patient’s potential financial responsibility should be discussed prior to the date of service, and each patient should be told that payment is expected on the day of service. Of course you can’t know the exact amount owed until after the patient has been seen, but at a minimum staff needs to know the broad specifics of each patient’s coverage (by calling the plan, if necessary), and then must convey that responsibility to the patient. If, for example, an insurer says that the patient is responsible for 100% of the next “$X” of services, then that information should conveyed to the patient before she is at the check-out window. This will mean additional phone calls, but the positive impact on your collections (and reduction in stress at the check-out counter) should be considerable if correctly handled. 2. Second, staff responsible for collecting at the time of service must be told in no uncertain terms that this is a critical part of their job responsibilities. You may find that it’s worthwhile to do performance evaluations measuring collection success, and make those performance results part of annual reviews. Or, you might find it worthwhile to bonus the staff if they achieve certain collection targets over designated time periods. Whatever the case, the staff must get on board with collections if you’re to profit from participation in these new plans. Communication When patients can choose to go to any provider you’ll suddenly find yourself placed into a much larger competitive pool than under traditional managed care plans. This means physicians will have to do a different and more effective job promoting themselves and their practices. This is true for all physicians, but especially for dermatologists since many of their services are elective/cosmetic and, therefore, driven by a patient’s wishes and desires rather than by purely medical needs. Dermatologists share with their eyecare colleagues a very rare niche in medicine — something absent in cardiology, rheumatology, gastroenterology, etc. Just as ophthalmologists may offer cosmetic procedures, such as laser refractive surgery, Botox treatments or blepharoplasty (not covered or only partially covered by insurance), so, too, might you provide various elective/cosmetic dermatology procedures. And just as the sale of eyeglasses and/or contact lenses adds a “retail” component to the ophthalmologist’s practice, so, too, does the sale of specialty skincare products and the like add a similar “retail” component to the dermatologist’s practice. This means using very effective communication to “sell” the patient, and thereby, generate additional revenue streams. (Please note that the words “sell” and “retail” should not in any way be construed as disparaging or contrary to the ethical practice of medicine.) Changing Perceptions But whether the care you provide is elective or absolutely necessary, patients in consumer-driven plans will have some rather different expectations and demands than those you’ve experienced under the traditional managed care scenarios. When responsible for the allocation of their healthcare dollars, patients will want to know why they should come to you rather than go to Drs. X, Y or Z. They’ll want to know how/why your treatment will differ from what they’d receive elsewhere. What do you offer newer or better or different that should cause them to hand over their now-budgeted healthcare dollars? If you can’t provide convincing answers, then these patients are likely to go elsewhere, and to spend their discretionary dollars at a practice that can provide convincing answers. Consumer-driven plans will incentivize patients to become better managers of their health — for example, learning how to take better care of themselves when spending time in the sun or when exposed to potential skin irritants. In theory, if patients become better educated about their own health conditions, they’ll spend more wisely from their healthcare spending accounts. In the past, patients did not have such a clear-cut (financial) incentive to become educated, and to ask questions of their doctors. Now they will be motivated, and you’ll have to devote more time to educating increasingly demanding patients. Patients will want to know more about you — your clinical education, your specialty. And they’ll want to know more about your staff, your facility and your equipment. What differentiates your dermatology practice from every other one in town? And patients will be much less tolerant of what they perceive to be disinterested or rude staff, poor customer service on billing issues, or poor customer service when making appointments. And so, you’ll want to evaluate your practice and determine if its level of customer service is the medical office equivalent of Nordstroms. And, don’t be surprised if the health plans start asking you for more data. Patients will be looking for more information on which to base their physician selection decisions, and so the plans likely will be looking to supply some sort of comparative data to those patients. Thus, you should expect increased reporting responsibilities. Be prepared to respond to requests for information on your outcomes, special “cutting-edge” services you provide, or on any other data elements that might be used to compare the relative quality and/or cost of the care you provide. Rethinking Your Fees In the past, when you agreed to accept discounted fees from an HMO or PPO it was on the assumption that you were trading discounted fees for certain expected increases in patient volume driven by the health plan. And the assumption was that you’d receive the largest slice of the fee from the plan, which, of course, had an absolute stranglehold on the fees paid for your services. With consumer-driven healthcare, much of that changes, and the plans should no longer have dictatorial control over what you have to accept as payment. You won’t be part of a traditional, closed panel, and so the idea of “steerage” essentially goes out the door. Instead, increased volume will come about through your own efforts, not through actions or efforts of the payer. This means you may want to re-think your fee schedule and the amounts you’ll accept from payers and patients. Many practices will decide to raise their fees — finally freed of the crushing reductions forced upon them by third-party payers. But will patients pay these amounts after years of getting everything essentially for “free”? That’s the $64,000 question. There’s certainly reason to believe that, at least for these consumer-driven plans, fees can be raised from the levels offered by traditional managed care. But, each practice will have to convince patients that the quality of services justifies the price. So you’ll have to be in the ballpark, and to do this you’ll need to know how your fees compare to those offered elsewhere in the community. On the other hand, there’s always the chance that dermatologists could find themselves in an even more cutthroat pricing environment if everyone in town starts playing the pricing game as a misguided means of attracting new patients. Hopefully, we won’t see that play-out (e.g., with ridiculous cosmetic procedure pricing offered by some high-volume “mills”), but it’s a worrisome possibility. It’s All in the Presentation In the end it will all come down to the presentation — to convincing choosy patients that you should be their dermatologist. Present your practice, your staff, and yourself in a way that demonstrates clearly superior patient care and customer service. Whether you do that face-to-face, on the telephone, on your practice Web site, in a newsletter, or in office handouts, say it loud and say it proud, and believe in yourself. I think it’s the Marines who have a motto “It’s hard to be humble when you’re the best.” That’s how you need to approach this new era of consumer-driven healthcare.
