Today the practice of medicine is inextricably tied to the business of medicine. The two cannot be separated.”
I first said those words to physicians in a lecture almost 20 years ago. Back then in some parts of the country, most folks couldn’t spell “H-M-O.” Today everywhere in the nation, unless a physician works as a coroner or has a cash-only, “boutique” practice, the influence of managed care is pervasive and ever-present.
A 2005 publication, The Galderma Quality Report for Dermatology and Managed Care, presents an interesting and enlightening review and analysis of a slice of medicine — dermatology — that, to this point, has been overlooked or substantially neglected by managed care decision-makers. The report reveals areas where there is a lack of understanding about dermatology by plan administrators, and of managed care by dermatologists. This article will highlight key findings in this report to give you a better understanding of where the profession of dermatology stands with managed care and where improvements are needed.
Getting to Know Both Sides
Galderma commissioned the Pharmacy Benefit Management Institute and Kikaku America International to conduct a survey of medical
directors, pharmacy directors, and other managed care professionals. In addition, dermatologists were surveyed on the characteristics of their practices and their relationships with third party payers. The objective was to gain opinion and insight on policies, trends, costs, and other issues from multiple perspectives, and to better understand how much (or how little) the parties really know about each other.
For example, most dermatologists know relatively little about the issues managed care organizations face in managing budgets. Per member per month (PMPM) pharmacy and medical costs to treat specific conditions; the impact on premiums charged to plan sponsors (employers); costs for prior authorizations — these are all insurance issues dermatologists have heard about, but they’re not squarely on the radar screens of most clinicians. Similarly, most managed care decision-makers have limited, if any, understanding of dermatology diseases and the decision-making processes dermatologists employ — for example in product selection.
You could ask quite reasonably: Given the historic relative low cost of dermatology therapies in relation to other therapeutic categories and disease states, is it really worthwhile for managed care organizations to focus their efforts on managing dermatology spending? As we’ll see, the dermatology landscape is changing very rapidly, and what was for so many years may no longer be.
So, it seems reasonable and eminently worthwhile for physicians and plan managers to partner to increase their knowledge and to promote understanding of each other’s issues. The Galderma Report is a vehicle that can help move everyone toward a common goal — the delivery of appropriate, timely, quality care, suitably compensated, in as cost-conscious an environment as is reasonably practical.
What Was. What Is
The report highlights several significant changes in dermatology that are causing managed care decision-makers to put the specialty on their radar screens and to re-evaluate current policies and coverage. For example, every day growing numbers of patients with moderate to severe psoriasis are benefiting from recent treatment advances in biologics. More than 70% of health plans now include biologics in their formularies, and most anticipate that their use will increase in the immediate future.
However, future anticipated utilization increases do not necessarily mean cost-driven (for-profit) payers will continue to cover these modalities, or that they will not significantly increase patient cost-sharing — perhaps to prohibitive levels. The report notes that past experience suggests just such possibilities.
This underscores the urgency for dermatologists to act now to provide managed care decision-makers with the data they need to make the right decisions to ensure the best possible care for their members — your patients.
In years past, many payers — even those that otherwise exercised tight control of formularies — did not pay much attention to the cost of dermatology drugs. Those days are gone.
Roger I. Ceilley, M.D., Chair, Council on Communications, American Academy of Dermatology, notes in the report that: “[T]he technology of new pharmaceutical agents has clearly outstripped the ability of healthcare plans to cover these high-cost agents at their current rate of utilization. Restrictions will likely increase with more costs shifted to the patients.”1
As newer, more expensive dermatology drugs come into use, formularies are becoming more restrictive, with higher, fourth-tier co-payments and prior authorizations increasingly common. Going forward, prior authorizations and medical necessity, long commonplace for other specialist physicians, will become a more regular part of dermatology.
A Snapshot of Dermatological Care
The Galderma Report presented some interesting information about dermatology and dermatology practices.
There are approximately 32 million outpatient visits each year, an average of about 5,000 per dermatologist. The 2002 data2 — the most recent available — indicate that dermatologists recorded 244 distinct ICD-9 diagnoses (although that number is likely higher because of poor classification within the ICD-9 system). The leading conditions treated by dermatologists are shown in Table 1.
The data indicate that these “Top-10” diagnoses comprise about 57% of all diagnoses, while other diagnoses with relatively lower frequencies account for nearly half of all visits. For example, 10% of all visits are for acne, the leading diagnosis; benign growths occupy 4 of the 10 positions, including skin tumors (3), seborrheic keratoses (5), warts (6), and epidermoid cysts (9).
Table 2 displays the drugs most often prescribed or recommended by dermatologists. Table 3 displays their most common surgical procedures.
The 2002 data indicate that dermatologists recommended or prescribed 2,428 medications, both prescription and over the counter. The most common medications listed in Table 2 reflect the leading diagnoses from Table 1.
Dermatology practices have become increasingly surgically oriented compared to 10 or 20 years ago, and this trend is likely to continue. Excluding cryosurgery, 13% of all visits in 2002 included one or more procedures. Approximately 10% of all visits included a biopsy procedure.
Finally, cosmetic dermatology is changing the profession. Its growth could portend how dermatologists will work with (or move somewhat away from) managed care in the future.
The 2002 data did not report on cosmetic dermatology, but another recent report3 indicates that dermatologists perform approximately 44% of all outpatient cosmetic procedures.
The Galderma Report noted the significance of this number and the impressive trend most likely brought about by the cost pressures and prior authorization requirements imposed by managed care payers. A move toward cosmetic procedures would reduce the pressures of managed care on those practitioners, and could indicate a move by dermatology away from its previous core.
Responses from Health Plan Decision-Makers
The responses from plan managers are enlightening. In particular as to formularies, they reveal to dermatologists a picture of the healthcare delivery world referenced specifically from the cost-control side of the equation.
Of the respondents, 79% indicate that their plans use one or more formularies. Of those plans, three-quarters define their own, 19% contract with pharmacy benefit management companies to define formularies, and 5% use other parties to define.
Eighty-eight percent of plans have their own P&T (Pharmacy & Therapeutics) committees, but only 13% of them include a dermatologist as a full-time member. Incredibly, one-quarter of P&T committees do not even ask a dermatologist to review drugs for dermatologic care.
In plans with formularies, 29% of members are covered by an open formulary, and 22% by a closed one. Furthermore, 43% of members are covered by a three-tier co-payment benefit, and 4% by a four-tier program. The Galderma Report notes that nearly half of all plan participants are covered by a three- or four-tier pharmaceutical co-payment system. Such systems give patients choice, but also shift cost responsibilities. They are the wave of the future.
Responses from plan managers on referrals and prior authorization revealed two more areas sure to be of concern to dermatologists. Figure 11 shows the percentage of plans that require referrals and prior authorizations for dermatology services. More than half the plans report that a referral from a primary care physician is required before patients can see the dermatologist, and more than three-quarters report that a prior authorization is required for some dermatology services.
Of the prior authorization requests, 19% were denied. Yet upon resubmission, 28% of those denials were then reversed (Figure 12). These are understandably frustrating statistics for physicians and their patients, and the high denial rate and even higher reversal rate again demonstrate the critical need for decision-makers to better understand dermatology.
Finally, utilization and costs to treat specific conditions are shown in Figure 16. Here, note the prevalence of dermatological conditions as reported by the plans. Figures 17 and 18 show PMPM pharmacy and medical costs (before cost sharing) for those conditions.
It is worth noting that aggregate pharmacy and medical costs to treat dermatological conditions do not always correlate with their prevalence. So, it is logical that certain conditions consume a greater proportion of financial resources as a result of high treatment costs rather than high disease prevalence. Conversely, some conditions treated much more often actually result in less expense for payers.
These Figures 16, 17 and 18 are, perhaps, those that increasingly will concern plan decision-makers as they look more closely at dermatology services and their costs.
The treatment of psoriasis is one condition certain to undergo careful scrutiny. As an example, the pharmacy director of Physicians’ Health Plan of Northern Indiana noted in The Galderma Report that etanercept (Enbrel) is the plan’s eighth most costly drug, yet it did not even appear on the plan’s radar screen 6 to 8 months ago. In response, the plan has created a new set of prior authorization requirements and, also, specific treatment protocols that must be tried before Enbrel is considered.
The Galderma Report notes that whereas $1,000 per year might be the expected cost for traditional therapies to treat moderate to severe psoriasis, biologics could run from approximately $13,000 to $30,000 per year. The report further notes that 74% of dermatologists anticipate increasing their use of biologics. Given these increases, much tighter restrictions and additional cost-shifting in the future should surprise no one.
Physician Perceptions
Every physician who has signed a managed care provider agreement knows that reimbursements will be discounted, perhaps significantly. And they know that it’s difficult to get most plans to raise fees. Given this, when reviewing contracts for clients I always advise that significant effort be directed into negotiations focused on making the administrative burdens less complicated and time-consuming. My feeling is that it might be worthwhile to take a particular contract for less than top dollar, but it’s not worthwhile to take the double “whammy” of also having to work harder for that lesser amount.
The survey results from dermatologists presented in The Galderma Report are revealing, especially keeping that perspective in mind. They show that in some cases payers are doing a fair job providing administrative support and information to practices. However, in a significant number of categories they are doing a poor job — leaving physicians and staff disappointed and discouraged.
For example, Figure 27 shows how dermatologists feel about the utility of information provided by the health plan sending them the greatest percentage of patients. Fewer than 50% of dermatologists feel that any guideline information provided by their most important insurer is useful. Only 28% indicate that medical necessity review guidelines are useful, and well under one-third feel that guidelines on invoice review and submission are useful.
Figure 28 shows dermatologist satisfaction with managed care plans. While many dermatologists indicate they are generally satisfied with the ease of getting or making referrals, in all other aspects of the survey’s inquiry they overwhelmingly rate payers “fair” or “poor”.
Finances were a key focus of the survey that formed the basis for The Galderma Report. Certain responses were exactly as expected, while others were somewhat or very surprising.
For example, in response to true/false questions, 61% of dermatologists responded “true” to the statement: When I have to file a paper claim, the claim frequently is not paid because the carrier states they never received the claim. On the other hand, 61% also responded “true” to the statement: Our interaction with the majority of plans is getting better. They pay claims faster and more accurately.
Sixty-five percent of dermatologists responded that despite the hassles noted in Figure 28, their managed care relationships generally are profitable. Sixty-eight percent report that claims filing limits are reasonable. Twenty-eight percent indicate that they are paid at the Medicare fee schedule, and 36% are paid above Medicare.
Of course there were also lots of negatives. Hassles such as those mentioned below create so much easily preventable frustration and anger for physicians and staff. For example:
• 58% of dermatologists report that they have great difficulty or are unable to obtain a fee schedule from one or more payers.
• 58% report that plans are inconsistent — one time paying for a service and the next time denying it.
Ignoring modifiers when processing claims is yet another persistent irritant. Figures 46 and 47 show the E/M and surgical modifiers most often ignored. Dermatologists whose staffs code to the current Correct Coding Initiative (CCI) must wonder what sort of “voodoo” plans use that result in EOBs (explanation of benefits) coming back showing seemingly capricious recoding or repricing.
The Most Telling Finding
The final, and going forward, perhaps the most telling piece of data in The Galderma Report is that only 54% of dermatologists now report they rely on managed care for a majority of their patients. This seems to contrast sharply with the last 10 years or so when most practices relied much more heavily on the revenues from managed care.
Today an increasing number of dermatologists are building their patient and revenue bases from more diverse sources. They are looking to cosmetic procedures (cash), to Medicare, and to patients seen out-of-network as ways to become less dependent upon what often are perceived as the onerous whims of managed care decision-makers.
And so there is this fascinating dichotomy unfolding in dermatology. Managed care contracts generally seem to be profitable, yet physicians are looking for ways to diversify and free themselves from such dependency on those contracts. The days ahead will be interesting indeed for dermatologists.
Core Concerns
Michael Thomas, Pharm.D., synthesized the core concerns perfectly in the report. “Because dermatology was not ‘on the radar screen,’ there was very little need to try and manage costs. The dermatologists basically could use any treatment therapy they felt would benefit the patient without having to deal with the ‘red tape’ of other high-cost, high-profile specialties . . . . Now dermatology finds itself as a more highly scrutinized specialty, and now dermatologists need to better understand how managed care companies try to manage costs and still allow for appropriate therapies.
“Many of the processes that managed care entities use to ‘control costs’ are foreign to the dermatologist, and there needs to be a period of education and cooperation between the health plans and dermatologists so that treatment-effective and cost-effective therapies are available to the patients without losing the goals of each.”4
You need only to look at psoriasis and biologics for an obvious example of the truth in those words. If a dermatological condition unquestionably can be treated faster and to a better resolution with new technologies, then it’s incumbent upon dermatologists to provide conclusive evidence that such modalities should be encouraged rather than discouraged by the payers. Conceptually, the payers are on-board when it comes to better and faster treatment, but there is always that nasty little complication — cost.
The “bean-counters” would say that the old, proven ways are adequate and, of course, infinitely less expensive. But are the old, proven ways really “good enough” today given the treatment advances available to patient and physician?
Here is where dermatologists must become involved in educating health plan decision-makers on what’s most appropriate, proper and effective. In the end, cheapest does not always result in the lowest total cost or the best outcome, and data will be king. And with the growing interest in pay for performance (see Skin & Aging, July 2005, pgs. 38-48), dermatologists must get involved in creating the measurements and standards by which they will be judged and compensated. Standing idly on the sidelines while others decide the future of dermatology is not an option.
Despite some negative perceptions and issues that remain unresolved, the positive reasons for dermatologists to continue working with third-party payers seem to be growing. If the future is to hold a brighter promise, then it’s essential that dermatologists and third-party payers better understand each other.
The Galderma Quality Report For Dermatology & Managed Care is applicable for dermatologists, PAs, nurse practitioners, practice administrators and billing and coding supervisors.
Copies of the report can be requested on-line at www.galdermausa.com. Click on “For Professionals,” and then on the green “Galderma Report” button on the left side.
Today the practice of medicine is inextricably tied to the business of medicine. The two cannot be separated.”
I first said those words to physicians in a lecture almost 20 years ago. Back then in some parts of the country, most folks couldn’t spell “H-M-O.” Today everywhere in the nation, unless a physician works as a coroner or has a cash-only, “boutique” practice, the influence of managed care is pervasive and ever-present.
A 2005 publication, The Galderma Quality Report for Dermatology and Managed Care, presents an interesting and enlightening review and analysis of a slice of medicine — dermatology — that, to this point, has been overlooked or substantially neglected by managed care decision-makers. The report reveals areas where there is a lack of understanding about dermatology by plan administrators, and of managed care by dermatologists. This article will highlight key findings in this report to give you a better understanding of where the profession of dermatology stands with managed care and where improvements are needed.
Getting to Know Both Sides
Galderma commissioned the Pharmacy Benefit Management Institute and Kikaku America International to conduct a survey of medical
directors, pharmacy directors, and other managed care professionals. In addition, dermatologists were surveyed on the characteristics of their practices and their relationships with third party payers. The objective was to gain opinion and insight on policies, trends, costs, and other issues from multiple perspectives, and to better understand how much (or how little) the parties really know about each other.
For example, most dermatologists know relatively little about the issues managed care organizations face in managing budgets. Per member per month (PMPM) pharmacy and medical costs to treat specific conditions; the impact on premiums charged to plan sponsors (employers); costs for prior authorizations — these are all insurance issues dermatologists have heard about, but they’re not squarely on the radar screens of most clinicians. Similarly, most managed care decision-makers have limited, if any, understanding of dermatology diseases and the decision-making processes dermatologists employ — for example in product selection.
You could ask quite reasonably: Given the historic relative low cost of dermatology therapies in relation to other therapeutic categories and disease states, is it really worthwhile for managed care organizations to focus their efforts on managing dermatology spending? As we’ll see, the dermatology landscape is changing very rapidly, and what was for so many years may no longer be.
So, it seems reasonable and eminently worthwhile for physicians and plan managers to partner to increase their knowledge and to promote understanding of each other’s issues. The Galderma Report is a vehicle that can help move everyone toward a common goal — the delivery of appropriate, timely, quality care, suitably compensated, in as cost-conscious an environment as is reasonably practical.
What Was. What Is
The report highlights several significant changes in dermatology that are causing managed care decision-makers to put the specialty on their radar screens and to re-evaluate current policies and coverage. For example, every day growing numbers of patients with moderate to severe psoriasis are benefiting from recent treatment advances in biologics. More than 70% of health plans now include biologics in their formularies, and most anticipate that their use will increase in the immediate future.
However, future anticipated utilization increases do not necessarily mean cost-driven (for-profit) payers will continue to cover these modalities, or that they will not significantly increase patient cost-sharing — perhaps to prohibitive levels. The report notes that past experience suggests just such possibilities.
This underscores the urgency for dermatologists to act now to provide managed care decision-makers with the data they need to make the right decisions to ensure the best possible care for their members — your patients.
In years past, many payers — even those that otherwise exercised tight control of formularies — did not pay much attention to the cost of dermatology drugs. Those days are gone.
Roger I. Ceilley, M.D., Chair, Council on Communications, American Academy of Dermatology, notes in the report that: “[T]he technology of new pharmaceutical agents has clearly outstripped the ability of healthcare plans to cover these high-cost agents at their current rate of utilization. Restrictions will likely increase with more costs shifted to the patients.”1
As newer, more expensive dermatology drugs come into use, formularies are becoming more restrictive, with higher, fourth-tier co-payments and prior authorizations increasingly common. Going forward, prior authorizations and medical necessity, long commonplace for other specialist physicians, will become a more regular part of dermatology.
A Snapshot of Dermatological Care
The Galderma Report presented some interesting information about dermatology and dermatology practices.
There are approximately 32 million outpatient visits each year, an average of about 5,000 per dermatologist. The 2002 data2 — the most recent available — indicate that dermatologists recorded 244 distinct ICD-9 diagnoses (although that number is likely higher because of poor classification within the ICD-9 system). The leading conditions treated by dermatologists are shown in Table 1.
The data indicate that these “Top-10” diagnoses comprise about 57% of all diagnoses, while other diagnoses with relatively lower frequencies account for nearly half of all visits. For example, 10% of all visits are for acne, the leading diagnosis; benign growths occupy 4 of the 10 positions, including skin tumors (3), seborrheic keratoses (5), warts (6), and epidermoid cysts (9).
Table 2 displays the drugs most often prescribed or recommended by dermatologists. Table 3 displays their most common surgical procedures.
The 2002 data indicate that dermatologists recommended or prescribed 2,428 medications, both prescription and over the counter. The most common medications listed in Table 2 reflect the leading diagnoses from Table 1.
Dermatology practices have become increasingly surgically oriented compared to 10 or 20 years ago, and this trend is likely to continue. Excluding cryosurgery, 13% of all visits in 2002 included one or more procedures. Approximately 10% of all visits included a biopsy procedure.
Finally, cosmetic dermatology is changing the profession. Its growth could portend how dermatologists will work with (or move somewhat away from) managed care in the future.
The 2002 data did not report on cosmetic dermatology, but another recent report3 indicates that dermatologists perform approximately 44% of all outpatient cosmetic procedures.
The Galderma Report noted the significance of this number and the impressive trend most likely brought about by the cost pressures and prior authorization requirements imposed by managed care payers. A move toward cosmetic procedures would reduce the pressures of managed care on those practitioners, and could indicate a move by dermatology away from its previous core.
Responses from Health Plan Decision-Makers
The responses from plan managers are enlightening. In particular as to formularies, they reveal to dermatologists a picture of the healthcare delivery world referenced specifically from the cost-control side of the equation.
Of the respondents, 79% indicate that their plans use one or more formularies. Of those plans, three-quarters define their own, 19% contract with pharmacy benefit management companies to define formularies, and 5% use other parties to define.
Eighty-eight percent of plans have their own P&T (Pharmacy & Therapeutics) committees, but only 13% of them include a dermatologist as a full-time member. Incredibly, one-quarter of P&T committees do not even ask a dermatologist to review drugs for dermatologic care.
In plans with formularies, 29% of members are covered by an open formulary, and 22% by a closed one. Furthermore, 43% of members are covered by a three-tier co-payment benefit, and 4% by a four-tier program. The Galderma Report notes that nearly half of all plan participants are covered by a three- or four-tier pharmaceutical co-payment system. Such systems give patients choice, but also shift cost responsibilities. They are the wave of the future.
Responses from plan managers on referrals and prior authorization revealed two more areas sure to be of concern to dermatologists. Figure 11 shows the percentage of plans that require referrals and prior authorizations for dermatology services. More than half the plans report that a referral from a primary care physician is required before patients can see the dermatologist, and more than three-quarters report that a prior authorization is required for some dermatology services.
Of the prior authorization requests, 19% were denied. Yet upon resubmission, 28% of those denials were then reversed (Figure 12). These are understandably frustrating statistics for physicians and their patients, and the high denial rate and even higher reversal rate again demonstrate the critical need for decision-makers to better understand dermatology.
Finally, utilization and costs to treat specific conditions are shown in Figure 16. Here, note the prevalence of dermatological conditions as reported by the plans. Figures 17 and 18 show PMPM pharmacy and medical costs (before cost sharing) for those conditions.
It is worth noting that aggregate pharmacy and medical costs to treat dermatological conditions do not always correlate with their prevalence. So, it is logical that certain conditions consume a greater proportion of financial resources as a result of high treatment costs rather than high disease prevalence. Conversely, some conditions treated much more often actually result in less expense for payers.
These Figures 16, 17 and 18 are, perhaps, those that increasingly will concern plan decision-makers as they look more closely at dermatology services and their costs.
The treatment of psoriasis is one condition certain to undergo careful scrutiny. As an example, the pharmacy director of Physicians’ Health Plan of Northern Indiana noted in The Galderma Report that etanercept (Enbrel) is the plan’s eighth most costly drug, yet it did not even appear on the plan’s radar screen 6 to 8 months ago. In response, the plan has created a new set of prior authorization requirements and, also, specific treatment protocols that must be tried before Enbrel is considered.
The Galderma Report notes that whereas $1,000 per year might be the expected cost for traditional therapies to treat moderate to severe psoriasis, biologics could run from approximately $13,000 to $30,000 per year. The report further notes that 74% of dermatologists anticipate increasing their use of biologics. Given these increases, much tighter restrictions and additional cost-shifting in the future should surprise no one.
Physician Perceptions
Every physician who has signed a managed care provider agreement knows that reimbursements will be discounted, perhaps significantly. And they know that it’s difficult to get most plans to raise fees. Given this, when reviewing contracts for clients I always advise that significant effort be directed into negotiations focused on making the administrative burdens less complicated and time-consuming. My feeling is that it might be worthwhile to take a particular contract for less than top dollar, but it’s not worthwhile to take the double “whammy” of also having to work harder for that lesser amount.
The survey results from dermatologists presented in The Galderma Report are revealing, especially keeping that perspective in mind. They show that in some cases payers are doing a fair job providing administrative support and information to practices. However, in a significant number of categories they are doing a poor job — leaving physicians and staff disappointed and discouraged.
For example, Figure 27 shows how dermatologists feel about the utility of information provided by the health plan sending them the greatest percentage of patients. Fewer than 50% of dermatologists feel that any guideline information provided by their most important insurer is useful. Only 28% indicate that medical necessity review guidelines are useful, and well under one-third feel that guidelines on invoice review and submission are useful.
Figure 28 shows dermatologist satisfaction with managed care plans. While many dermatologists indicate they are generally satisfied with the ease of getting or making referrals, in all other aspects of the survey’s inquiry they overwhelmingly rate payers “fair” or “poor”.
Finances were a key focus of the survey that formed the basis for The Galderma Report. Certain responses were exactly as expected, while others were somewhat or very surprising.
For example, in response to true/false questions, 61% of dermatologists responded “true” to the statement: When I have to file a paper claim, the claim frequently is not paid because the carrier states they never received the claim. On the other hand, 61% also responded “true” to the statement: Our interaction with the majority of plans is getting better. They pay claims faster and more accurately.
Sixty-five percent of dermatologists responded that despite the hassles noted in Figure 28, their managed care relationships generally are profitable. Sixty-eight percent report that claims filing limits are reasonable. Twenty-eight percent indicate that they are paid at the Medicare fee schedule, and 36% are paid above Medicare.
Of course there were also lots of negatives. Hassles such as those mentioned below create so much easily preventable frustration and anger for physicians and staff. For example:
• 58% of dermatologists report that they have great difficulty or are unable to obtain a fee schedule from one or more payers.
• 58% report that plans are inconsistent — one time paying for a service and the next time denying it.
Ignoring modifiers when processing claims is yet another persistent irritant. Figures 46 and 47 show the E/M and surgical modifiers most often ignored. Dermatologists whose staffs code to the current Correct Coding Initiative (CCI) must wonder what sort of “voodoo” plans use that result in EOBs (explanation of benefits) coming back showing seemingly capricious recoding or repricing.
The Most Telling Finding
The final, and going forward, perhaps the most telling piece of data in The Galderma Report is that only 54% of dermatologists now report they rely on managed care for a majority of their patients. This seems to contrast sharply with the last 10 years or so when most practices relied much more heavily on the revenues from managed care.
Today an increasing number of dermatologists are building their patient and revenue bases from more diverse sources. They are looking to cosmetic procedures (cash), to Medicare, and to patients seen out-of-network as ways to become less dependent upon what often are perceived as the onerous whims of managed care decision-makers.
And so there is this fascinating dichotomy unfolding in dermatology. Managed care contracts generally seem to be profitable, yet physicians are looking for ways to diversify and free themselves from such dependency on those contracts. The days ahead will be interesting indeed for dermatologists.
Core Concerns
Michael Thomas, Pharm.D., synthesized the core concerns perfectly in the report. “Because dermatology was not ‘on the radar screen,’ there was very little need to try and manage costs. The dermatologists basically could use any treatment therapy they felt would benefit the patient without having to deal with the ‘red tape’ of other high-cost, high-profile specialties . . . . Now dermatology finds itself as a more highly scrutinized specialty, and now dermatologists need to better understand how managed care companies try to manage costs and still allow for appropriate therapies.
“Many of the processes that managed care entities use to ‘control costs’ are foreign to the dermatologist, and there needs to be a period of education and cooperation between the health plans and dermatologists so that treatment-effective and cost-effective therapies are available to the patients without losing the goals of each.”4
You need only to look at psoriasis and biologics for an obvious example of the truth in those words. If a dermatological condition unquestionably can be treated faster and to a better resolution with new technologies, then it’s incumbent upon dermatologists to provide conclusive evidence that such modalities should be encouraged rather than discouraged by the payers. Conceptually, the payers are on-board when it comes to better and faster treatment, but there is always that nasty little complication — cost.
The “bean-counters” would say that the old, proven ways are adequate and, of course, infinitely less expensive. But are the old, proven ways really “good enough” today given the treatment advances available to patient and physician?
Here is where dermatologists must become involved in educating health plan decision-makers on what’s most appropriate, proper and effective. In the end, cheapest does not always result in the lowest total cost or the best outcome, and data will be king. And with the growing interest in pay for performance (see Skin & Aging, July 2005, pgs. 38-48), dermatologists must get involved in creating the measurements and standards by which they will be judged and compensated. Standing idly on the sidelines while others decide the future of dermatology is not an option.
Despite some negative perceptions and issues that remain unresolved, the positive reasons for dermatologists to continue working with third-party payers seem to be growing. If the future is to hold a brighter promise, then it’s essential that dermatologists and third-party payers better understand each other.
The Galderma Quality Report For Dermatology & Managed Care is applicable for dermatologists, PAs, nurse practitioners, practice administrators and billing and coding supervisors.
Copies of the report can be requested on-line at www.galdermausa.com. Click on “For Professionals,” and then on the green “Galderma Report” button on the left side.
Today the practice of medicine is inextricably tied to the business of medicine. The two cannot be separated.”
I first said those words to physicians in a lecture almost 20 years ago. Back then in some parts of the country, most folks couldn’t spell “H-M-O.” Today everywhere in the nation, unless a physician works as a coroner or has a cash-only, “boutique” practice, the influence of managed care is pervasive and ever-present.
A 2005 publication, The Galderma Quality Report for Dermatology and Managed Care, presents an interesting and enlightening review and analysis of a slice of medicine — dermatology — that, to this point, has been overlooked or substantially neglected by managed care decision-makers. The report reveals areas where there is a lack of understanding about dermatology by plan administrators, and of managed care by dermatologists. This article will highlight key findings in this report to give you a better understanding of where the profession of dermatology stands with managed care and where improvements are needed.
Getting to Know Both Sides
Galderma commissioned the Pharmacy Benefit Management Institute and Kikaku America International to conduct a survey of medical
directors, pharmacy directors, and other managed care professionals. In addition, dermatologists were surveyed on the characteristics of their practices and their relationships with third party payers. The objective was to gain opinion and insight on policies, trends, costs, and other issues from multiple perspectives, and to better understand how much (or how little) the parties really know about each other.
For example, most dermatologists know relatively little about the issues managed care organizations face in managing budgets. Per member per month (PMPM) pharmacy and medical costs to treat specific conditions; the impact on premiums charged to plan sponsors (employers); costs for prior authorizations — these are all insurance issues dermatologists have heard about, but they’re not squarely on the radar screens of most clinicians. Similarly, most managed care decision-makers have limited, if any, understanding of dermatology diseases and the decision-making processes dermatologists employ — for example in product selection.
You could ask quite reasonably: Given the historic relative low cost of dermatology therapies in relation to other therapeutic categories and disease states, is it really worthwhile for managed care organizations to focus their efforts on managing dermatology spending? As we’ll see, the dermatology landscape is changing very rapidly, and what was for so many years may no longer be.
So, it seems reasonable and eminently worthwhile for physicians and plan managers to partner to increase their knowledge and to promote understanding of each other’s issues. The Galderma Report is a vehicle that can help move everyone toward a common goal — the delivery of appropriate, timely, quality care, suitably compensated, in as cost-conscious an environment as is reasonably practical.
What Was. What Is
The report highlights several significant changes in dermatology that are causing managed care decision-makers to put the specialty on their radar screens and to re-evaluate current policies and coverage. For example, every day growing numbers of patients with moderate to severe psoriasis are benefiting from recent treatment advances in biologics. More than 70% of health plans now include biologics in their formularies, and most anticipate that their use will increase in the immediate future.
However, future anticipated utilization increases do not necessarily mean cost-driven (for-profit) payers will continue to cover these modalities, or that they will not significantly increase patient cost-sharing — perhaps to prohibitive levels. The report notes that past experience suggests just such possibilities.
This underscores the urgency for dermatologists to act now to provide managed care decision-makers with the data they need to make the right decisions to ensure the best possible care for their members — your patients.
In years past, many payers — even those that otherwise exercised tight control of formularies — did not pay much attention to the cost of dermatology drugs. Those days are gone.
Roger I. Ceilley, M.D., Chair, Council on Communications, American Academy of Dermatology, notes in the report that: “[T]he technology of new pharmaceutical agents has clearly outstripped the ability of healthcare plans to cover these high-cost agents at their current rate of utilization. Restrictions will likely increase with more costs shifted to the patients.”1
As newer, more expensive dermatology drugs come into use, formularies are becoming more restrictive, with higher, fourth-tier co-payments and prior authorizations increasingly common. Going forward, prior authorizations and medical necessity, long commonplace for other specialist physicians, will become a more regular part of dermatology.
A Snapshot of Dermatological Care
The Galderma Report presented some interesting information about dermatology and dermatology practices.
There are approximately 32 million outpatient visits each year, an average of about 5,000 per dermatologist. The 2002 data2 — the most recent available — indicate that dermatologists recorded 244 distinct ICD-9 diagnoses (although that number is likely higher because of poor classification within the ICD-9 system). The leading conditions treated by dermatologists are shown in Table 1.
The data indicate that these “Top-10” diagnoses comprise about 57% of all diagnoses, while other diagnoses with relatively lower frequencies account for nearly half of all visits. For example, 10% of all visits are for acne, the leading diagnosis; benign growths occupy 4 of the 10 positions, including skin tumors (3), seborrheic keratoses (5), warts (6), and epidermoid cysts (9).
Table 2 displays the drugs most often prescribed or recommended by dermatologists. Table 3 displays their most common surgical procedures.
The 2002 data indicate that dermatologists recommended or prescribed 2,428 medications, both prescription and over the counter. The most common medications listed in Table 2 reflect the leading diagnoses from Table 1.
Dermatology practices have become increasingly surgically oriented compared to 10 or 20 years ago, and this trend is likely to continue. Excluding cryosurgery, 13% of all visits in 2002 included one or more procedures. Approximately 10% of all visits included a biopsy procedure.
Finally, cosmetic dermatology is changing the profession. Its growth could portend how dermatologists will work with (or move somewhat away from) managed care in the future.
The 2002 data did not report on cosmetic dermatology, but another recent report3 indicates that dermatologists perform approximately 44% of all outpatient cosmetic procedures.
The Galderma Report noted the significance of this number and the impressive trend most likely brought about by the cost pressures and prior authorization requirements imposed by managed care payers. A move toward cosmetic procedures would reduce the pressures of managed care on those practitioners, and could indicate a move by dermatology away from its previous core.
Responses from Health Plan Decision-Makers
The responses from plan managers are enlightening. In particular as to formularies, they reveal to dermatologists a picture of the healthcare delivery world referenced specifically from the cost-control side of the equation.
Of the respondents, 79% indicate that their plans use one or more formularies. Of those plans, three-quarters define their own, 19% contract with pharmacy benefit management companies to define formularies, and 5% use other parties to define.
Eighty-eight percent of plans have their own P&T (Pharmacy & Therapeutics) committees, but only 13% of them include a dermatologist as a full-time member. Incredibly, one-quarter of P&T committees do not even ask a dermatologist to review drugs for dermatologic care.
In plans with formularies, 29% of members are covered by an open formulary, and 22% by a closed one. Furthermore, 43% of members are covered by a three-tier co-payment benefit, and 4% by a four-tier program. The Galderma Report notes that nearly half of all plan participants are covered by a three- or four-tier pharmaceutical co-payment system. Such systems give patients choice, but also shift cost responsibilities. They are the wave of the future.
Responses from plan managers on referrals and prior authorization revealed two more areas sure to be of concern to dermatologists. Figure 11 shows the percentage of plans that require referrals and prior authorizations for dermatology services. More than half the plans report that a referral from a primary care physician is required before patients can see the dermatologist, and more than three-quarters report that a prior authorization is required for some dermatology services.
Of the prior authorization requests, 19% were denied. Yet upon resubmission, 28% of those denials were then reversed (Figure 12). These are understandably frustrating statistics for physicians and their patients, and the high denial rate and even higher reversal rate again demonstrate the critical need for decision-makers to better understand dermatology.
Finally, utilization and costs to treat specific conditions are shown in Figure 16. Here, note the prevalence of dermatological conditions as reported by the plans. Figures 17 and 18 show PMPM pharmacy and medical costs (before cost sharing) for those conditions.
It is worth noting that aggregate pharmacy and medical costs to treat dermatological conditions do not always correlate with their prevalence. So, it is logical that certain conditions consume a greater proportion of financial resources as a result of high treatment costs rather than high disease prevalence. Conversely, some conditions treated much more often actually result in less expense for payers.
These Figures 16, 17 and 18 are, perhaps, those that increasingly will concern plan decision-makers as they look more closely at dermatology services and their costs.
The treatment of psoriasis is one condition certain to undergo careful scrutiny. As an example, the pharmacy director of Physicians’ Health Plan of Northern Indiana noted in The Galderma Report that etanercept (Enbrel) is the plan’s eighth most costly drug, yet it did not even appear on the plan’s radar screen 6 to 8 months ago. In response, the plan has created a new set of prior authorization requirements and, also, specific treatment protocols that must be tried before Enbrel is considered.
The Galderma Report notes that whereas $1,000 per year might be the expected cost for traditional therapies to treat moderate to severe psoriasis, biologics could run from approximately $13,000 to $30,000 per year. The report further notes that 74% of dermatologists anticipate increasing their use of biologics. Given these increases, much tighter restrictions and additional cost-shifting in the future should surprise no one.
Physician Perceptions
Every physician who has signed a managed care provider agreement knows that reimbursements will be discounted, perhaps significantly. And they know that it’s difficult to get most plans to raise fees. Given this, when reviewing contracts for clients I always advise that significant effort be directed into negotiations focused on making the administrative burdens less complicated and time-consuming. My feeling is that it might be worthwhile to take a particular contract for less than top dollar, but it’s not worthwhile to take the double “whammy” of also having to work harder for that lesser amount.
The survey results from dermatologists presented in The Galderma Report are revealing, especially keeping that perspective in mind. They show that in some cases payers are doing a fair job providing administrative support and information to practices. However, in a significant number of categories they are doing a poor job — leaving physicians and staff disappointed and discouraged.
For example, Figure 27 shows how dermatologists feel about the utility of information provided by the health plan sending them the greatest percentage of patients. Fewer than 50% of dermatologists feel that any guideline information provided by their most important insurer is useful. Only 28% indicate that medical necessity review guidelines are useful, and well under one-third feel that guidelines on invoice review and submission are useful.
Figure 28 shows dermatologist satisfaction with managed care plans. While many dermatologists indicate they are generally satisfied with the ease of getting or making referrals, in all other aspects of the survey’s inquiry they overwhelmingly rate payers “fair” or “poor”.
Finances were a key focus of the survey that formed the basis for The Galderma Report. Certain responses were exactly as expected, while others were somewhat or very surprising.
For example, in response to true/false questions, 61% of dermatologists responded “true” to the statement: When I have to file a paper claim, the claim frequently is not paid because the carrier states they never received the claim. On the other hand, 61% also responded “true” to the statement: Our interaction with the majority of plans is getting better. They pay claims faster and more accurately.
Sixty-five percent of dermatologists responded that despite the hassles noted in Figure 28, their managed care relationships generally are profitable. Sixty-eight percent report that claims filing limits are reasonable. Twenty-eight percent indicate that they are paid at the Medicare fee schedule, and 36% are paid above Medicare.
Of course there were also lots of negatives. Hassles such as those mentioned below create so much easily preventable frustration and anger for physicians and staff. For example:
• 58% of dermatologists report that they have great difficulty or are unable to obtain a fee schedule from one or more payers.
• 58% report that plans are inconsistent — one time paying for a service and the next time denying it.
Ignoring modifiers when processing claims is yet another persistent irritant. Figures 46 and 47 show the E/M and surgical modifiers most often ignored. Dermatologists whose staffs code to the current Correct Coding Initiative (CCI) must wonder what sort of “voodoo” plans use that result in EOBs (explanation of benefits) coming back showing seemingly capricious recoding or repricing.
The Most Telling Finding
The final, and going forward, perhaps the most telling piece of data in The Galderma Report is that only 54% of dermatologists now report they rely on managed care for a majority of their patients. This seems to contrast sharply with the last 10 years or so when most practices relied much more heavily on the revenues from managed care.
Today an increasing number of dermatologists are building their patient and revenue bases from more diverse sources. They are looking to cosmetic procedures (cash), to Medicare, and to patients seen out-of-network as ways to become less dependent upon what often are perceived as the onerous whims of managed care decision-makers.
And so there is this fascinating dichotomy unfolding in dermatology. Managed care contracts generally seem to be profitable, yet physicians are looking for ways to diversify and free themselves from such dependency on those contracts. The days ahead will be interesting indeed for dermatologists.
Core Concerns
Michael Thomas, Pharm.D., synthesized the core concerns perfectly in the report. “Because dermatology was not ‘on the radar screen,’ there was very little need to try and manage costs. The dermatologists basically could use any treatment therapy they felt would benefit the patient without having to deal with the ‘red tape’ of other high-cost, high-profile specialties . . . . Now dermatology finds itself as a more highly scrutinized specialty, and now dermatologists need to better understand how managed care companies try to manage costs and still allow for appropriate therapies.
“Many of the processes that managed care entities use to ‘control costs’ are foreign to the dermatologist, and there needs to be a period of education and cooperation between the health plans and dermatologists so that treatment-effective and cost-effective therapies are available to the patients without losing the goals of each.”4
You need only to look at psoriasis and biologics for an obvious example of the truth in those words. If a dermatological condition unquestionably can be treated faster and to a better resolution with new technologies, then it’s incumbent upon dermatologists to provide conclusive evidence that such modalities should be encouraged rather than discouraged by the payers. Conceptually, the payers are on-board when it comes to better and faster treatment, but there is always that nasty little complication — cost.
The “bean-counters” would say that the old, proven ways are adequate and, of course, infinitely less expensive. But are the old, proven ways really “good enough” today given the treatment advances available to patient and physician?
Here is where dermatologists must become involved in educating health plan decision-makers on what’s most appropriate, proper and effective. In the end, cheapest does not always result in the lowest total cost or the best outcome, and data will be king. And with the growing interest in pay for performance (see Skin & Aging, July 2005, pgs. 38-48), dermatologists must get involved in creating the measurements and standards by which they will be judged and compensated. Standing idly on the sidelines while others decide the future of dermatology is not an option.
Despite some negative perceptions and issues that remain unresolved, the positive reasons for dermatologists to continue working with third-party payers seem to be growing. If the future is to hold a brighter promise, then it’s essential that dermatologists and third-party payers better understand each other.
The Galderma Quality Report For Dermatology & Managed Care is applicable for dermatologists, PAs, nurse practitioners, practice administrators and billing and coding supervisors.
Copies of the report can be requested on-line at www.galdermausa.com. Click on “For Professionals,” and then on the green “Galderma Report” button on the left side.
