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PRACTICE STRATEGIES PRACTICE STRATEGIES Evaluating participation in insurance plans Mark J. Hennen, O.D. T he growth of third-party coverage for vision care, as well as the increasing acceptance of optometrists as providers of eye care under medical insurance plans, has been of benefit to both patients and optometric practices. Undoubtedly, more Americans are receiving the eye and vision care they require. Optometric practices are seeing more patients. More than three fourths of the patients in the typical American Optometric Association (AOA) member optometric practice today are covered by insurance plans, according to the most recent AOA Third-Party/Managed Care Survey. The survey finds 48% of patients are covered by private plans, and 28.5% are covered by public health plans (e.g., Medicare, Medicaid, other government pro- grams). In addition, nearly 45.6% of the patients in a typical practice were in private or public managed care plans (e.g., health maintenance organizations, preferred provider orga- nizations), which seek to provide coverage to beneficiaries at reduced premiums by limiting provider reimbursements (through either “per-patient” capitation agreements or sim- ple fixed-fee schedules). However, this growth comes with some costs and some risks. Almost across the board today, American businesses face pressure to provide greater volumes of goods at in- creasingly competitive prices, factoring in the need for greater efficiency and, in many cases, the prospect of a diminished bottom line. In the field of health care, this increasingly competitive environment has been exemplified by the downward pressure on the health care provider reimbursements offered by both public and private insur- ance plans. The trend is illustrated graphically in additional AOA Third- Party/Managed Care Survey data, which show that although insurance plans today account for three fourths of the patients in the typical optometric practice, they only account for two thirds of the revenue. Private plans accounted for 41.8% of total revenue, with public plans accounting for another 24.5%. Managed care–type plans accounted for more than a third of practice revenue (39.3%). Clearly, participation in third-party plans has become a near necessity for many optometrists today. In addition to making good eye and vision care practical and affordable for many patients, insurance plans can be beneficial to optometric practices. They can potentially bring in new patients for a variety of services, albeit at reimbursement levels below those a practitioner may normally charge. Optometrists must carefully evaluate all insurance programs and then make well-considered business decisions regarding which plans can provide a benefit for the practice. Unfor- tunately, questions received by the AOA Eye Care Benefits Center (AOA-ECBC) suggest many practitioners still do not totally understand how to assess participation in third-party plans. To assist practitioners with this important task, the AOA has introduced a number of innovative, new services over recent months. The AOA Web site now features a new “Evaluating a Plan/Making a Business Decision” page, which pro- vides detailed information on the assessment of insur- ance plans (www.aoa.org/x9268.xml). The Evaluating a Plan/Making a Business Decision Web page offers an interactive Chair Cost Calcula- tor to help an optometrist determine how much it costs to provide care in a practice based on the optometrist’s individual expenses (www.aoa.org/ x9619.xml). A recently introduced AOA Contract Analysis Service allows AOA members to have insurance plan contracts reviewed before they sign them. For information, see the AOA Contract Analysis Service Web page (www.aoa.org/contractanalysis.xml). In the most basic terms, the AOA-ECBC suggests a 3-step approach to the evaluation of participation in insurance programs: 1. Know the insurance plan. 2. Know the practice and how much it costs to provide care. 3. Know the specifics of the contract being offered. Mark J. Hennen, O.D., is the chair of the AOA Eye Care Benefits Center. Opinions expressed are those of the author and not necessarily those of the American Optometric Association. The AOA Eye Care Benefits Center offers a look at the basic concepts involved in evaluating participating in an eye or vision care plan. 1529-1839/08/$ -see front matter © 2008 American Optometric Association. All rights reserved. doi:10.1016/j.optm.2008.05.003

Evaluating participation in insurance plans

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PRACTICE STRATEGIESPRACTICE STRATEGIES

Evaluating participation in insurance plans

Mark J. Hennen, O.D.

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he growth of third-party coverage for vision care,as well as the increasing acceptance of optometrists asproviders of eye care under medical insurance plans,

as been of benefit to both patients and optometric practices.ndoubtedly, more Americans are receiving the eye andision care they require. Optometric practices are seeingore patients. More than three fourths of the patients in the

ypical American Optometric Association (AOA) memberptometric practice today are covered by insurance plans,ccording to the most recent AOA Third-Party/Managedare Survey. The survey finds 48% of patients are coveredy private plans, and 28.5% are covered by public healthlans (e.g., Medicare, Medicaid, other government pro-rams). In addition, nearly 45.6% of the patients in a typicalractice were in private or public managed care plans (e.g.,ealth maintenance organizations, preferred provider orga-izations), which seek to provide coverage to beneficiariest reduced premiums by limiting provider reimbursementsthrough either “per-patient” capitation agreements or sim-le fixed-fee schedules).However, this growth comes with some costs and some

isks. Almost across the board today, American businessesace pressure to provide greater volumes of goods at in-reasingly competitive prices, factoring in the need forreater efficiency and, in many cases, the prospect of aiminished bottom line. In the field of health care, thisncreasingly competitive environment has been exemplifiedy the downward pressure on the health care providereimbursements offered by both public and private insur-nce plans.The trend is illustrated graphically in additional AOA Third-

arty/Managed Care Survey data, which show that althoughnsurance plans today account for three fourths of the patients

ark J. Hennen, O.D., is the chair of the AOA Eye Care Benefits Center.pinions expressed are those of the author and not necessarily those of the

he AOA Eye Care Benefits Center offerslook at the basic concepts involved in

valuating participating in an eye orision care plan.

merican Optometric Association.

529-1839/08/$ -see front matter © 2008 American Optometric Association. Alloi:10.1016/j.optm.2008.05.003

n the typical optometric practice, they only account for twohirds of the revenue. Private plans accounted for 41.8% ofotal revenue, with public plans accounting for another4.5%. Managed care–type plans accounted for morehan a third of practice revenue (39.3%).

Clearly, participation in third-party plans has become aear necessity for many optometrists today. In addition toaking good eye and vision care practical and affordable

or many patients, insurance plans can be beneficial toptometric practices. They can potentially bring in newatients for a variety of services, albeit at reimbursementevels below those a practitioner may normally charge.ptometrists must carefully evaluate all insurance programs

nd then make well-considered business decisions regardinghich plans can provide a benefit for the practice. Unfor-

unately, questions received by the AOA Eye Care Benefitsenter (AOA-ECBC) suggest many practitioners still do not

otally understand how to assess participation in third-partylans.To assist practitioners with this important task, the AOA

as introduced a number of innovative, new services overecent months.

● The AOA Web site now features a new “Evaluating aPlan/Making a Business Decision” page, which pro-vides detailed information on the assessment of insur-ance plans (www.aoa.org/x9268.xml).

● The Evaluating a Plan/Making a Business DecisionWeb page offers an interactive Chair Cost Calcula-tor to help an optometrist determine how much itcosts to provide care in a practice based on theoptometrist’s individual expenses (www.aoa.org/x9619.xml).

● A recently introduced AOA Contract Analysis Serviceallows AOA members to have insurance plan contractsreviewed before they sign them. For information, seethe AOA Contract Analysis Service Web page(www.aoa.org/contractanalysis.xml).

In the most basic terms, the AOA-ECBC suggests a 3-steppproach to the evaluation of participation in insurancerograms:

1. Know the insurance plan.2. Know the practice and how much it costs to provide

care.

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3. Know the specifics of the contract being offered.

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Practice Strategies 473

eneral considerations for ahird-party planhen evaluating a third-party plan, health care practitioners

hould ask themselves the following questions.1) How prevalent is the plan?—Almost any optometrist

will want to consider providing care under insuranceplans that provide employer-based coverage for amajor area employer or otherwise provide coveragefor a substantial number of people in the area. How-ever, practitioners should not stop there. If plan re-imbursements are not adequate to cover costs, it maynot matter how many patients the insurance plan canbring to a practice (see point 2). The practitioner maylose money on the plan. In addition, practitionersmust consider the potential for change in the insur-ance marketplace. Most employers rebid their healthplans every few years. The plan that has virtually nobeneficiaries in a given area one month could beamong the largest plans in the area a few monthslater. By then it may be too late to sign on as aprovider. Optometrists clearly must consider all rele-vant factors.

2) What is the reimbursement level?—This is a primaryquestion that most practitioners will ask, but, onceagain, it should not be the last. Be realistic; reim-bursement will probably not be what the practicecustomarily charges. A key concern is whether thereimbursement covers practice costs (see point 3 andthe article, “Utilizing chair cost to evaluate healthplan contracts” in this edition of Optometry: Journalof the American Optometric Association). If not, thepractice could end up losing money on the plan.

3) Will volume at lower reimbursement equal greaterrevenue?—Do the math. Compare the reimburse-ments offered by the plan against chair cost. If theplan provides for a satisfactory profit margin (albeitone lower than the practitioner may now be used to),will the likely increase in patients generated by theplan result in a net increase in practice net income?These equations will be key factors in determiningwhether a practice should participate in a plan. How-ever, the equations may not provide a final answer.The plan that offers substantial increases in revenuemay entail hidden costs, such as the necessity to addan associate. The plan that offers minimal to nomargin may be helpful in filling unused appointmentslots but may also detract from the time available forseeing other patients at higher reimbursement rates.There is no simple “one size fits all” answer to thesequestions.

4) How does the plan actually reimburse providers?—Practitioners should understand clearly whether theplan is:● A capitation plan, which passes risk onto providers

by paying a fixed amount per member patient per

month, with the provider then responsible for all O

the care required by the patient during that timeperiod or

● A preferred provider organization (PPO), whichcovers care on a fee-for-service basis through anetwork of providers. There are other types of planstoo, but these are 2 of the most prevalent, basic plantypes.

In addition, practitioners should inquire about speed ofayment, payment error rates, “withholds,” and otherayment provisions (see the “Contracts” section of thisrticle).

5) How easy is the paperwork?—Does the plan use thestandard CMS 1500 claim form? Can the office staffunderstand the claim submission process, how toconfirm benefits, or how to determine the propercopayment? Does the patient identification card guar-antee payment?

6) How easy is access for the patient?—Must patients bereferred by a primary care gatekeeper?

7) What is the plan’s overall reputation?—Ask patientsand employers if they are happy with the plan, ifreimbursements are generally accurate, and if prob-lems are promptly and professionally resolved. Re-search if there are any complaints on file about theplan with insurance regulators. Although a practitio-ner may talk to plan participants about their experi-ences with the plan, be careful not to discuss fees anddecisions to join a plan with other providers.

8) What else does the optometrist need to know?—If theplan passes theses tests, the practitioner must ask anumber of specific questions about the stability of theplan, the personal responsibility of the participatingoptometrist, the services and benefits covered, pay-ment, and access to care (see the AOA Web site“Evaluating a Plan” page for a more comprehensivelist).

hair costo determine whether an insurance plan’s reimbursementsre adequate, an optometrist must first know how much itosts to provide care. The cost of providing care in aractice is generally referred to as the “chair cost,” the costf providing care during an “average” patient visit. Thishair cost will vary from one practice to another. The chairost can then be compared against plan reimbursements.everal methods have been developed over the years foromputing chair cost in an optometric practice. Most in-olve adding up the practice’s expenses (overhead) and thenividing by patient count or working hours to determineow much it is costing to provide care to a typical patient.ethods for determining chair cost are outlined in the

rticle, “Utilizing chair cost to evaluate health plan con-racts” in this issue of Optometry: Journal of the American

ptometric Association.

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474 Practice Strategies

ontract analysisven if all the numbers add up, participating in a health planomes down to a contractual agreement. And when it comeso contracts, it is important to read the fine print. Mostontracts will included highly detailed sections on plandministration, payment policy, coverage of services, ratehange mechanisms, and other subjects about which healthare providers should be fully informed. For example:ontracts may give the plan the right to drop a provider forny reason, at any time, with only brief notice, sometimeso more than 60 to 90 days. Health care practitioners mayhink they have little negotiating room when it comes toejecting or changing unacceptable language in an insurancelan provider contract. Most plans appear to be presented toanel prospects on a take-it-or-leave-it basis. However, thats not reality. Optometrists can and should negotiate withlans. Because of this, the optometrist must fully understandhe contract and not sign anything that is not understood.

It is important to have a health care attorney review anyontracts. To make that easier, the AOA Office of Counselow offers its AOA Contract Analysis Service. An AOAtaff attorney will analyze unsigned managed care planontracts for members, at no charge. However, the AOAtaff attorney can only review the contract and cannot act ashe optometrist’s personal attorney. The service is availableo AOA members only. Signed contracts cannot be re-iewed by the AOA staff attorney. Additional informationnd a registration form for the AOA Contract Analysis

ervice can be accessed on the AOA Web site “Evaluating W

Plan” page (www.aoa.org/x9268.xml) or can be requestedy calling the AOA Office of Counsel at (314) 983-4232.

he bottom lineew practices today can make a blanket decision to eitherhun third-party plans altogether or participate in virtuallyny plan that is offered. Similarly a “snap decision” toccept or reject participation in a plan based on anecdotalvidence can be equally unwise. Each practitioner mustarefully study how each plan would impact the practicend its patients, and ask questions like:

● Will it enable the practice to prosper?● Will additional staff be necessary?● Will the practitioner need to spend more time in the

office or perhaps hire an associate?Weigh all the factors carefully. Practitioners cannot risk

osing patients because they are not fully participating in theroper insurance plans. However, few practices can afford alan that is going to clutter the practice’s appointment bookith below-cost patients, forcing the practitioner to scram-le to make up for lost revenue.It should be emphasized that the intricacy of insurance

lan evaluation cannot be adequately covered in the spacef 1 short article. Additional articles on the general points toe considered when assessing insurance plans, chair costs,nd contract analysis will be provided in future issues ofptometry: Journal of the American Optometric Associa-

ion. For information, AOA members are welcome to lognto the “Evaluating a Plan/Making a Business Decision”

eb page (www.aoa.org/x9268.xml).