INTENSE FRUSTRATION LEAKS through every word Scott Michel utters when he talks about managed care and its effects on NuTech Healthcare Management, the home medical equipment company he owns in Islandia, N.Y.

And no wonder. His is a litany of lost claims, endless refiling of claims, of slow pay, short pay and non-pay, of selling $15,000 in ostomy and diabetes products weekly and getting checks for $200. It's a saga of fruitless calls to health plans, the New York state attorney general, to the state insurance fund, and to congressmen and senators.

In the end, it's the tale of a company that, owed $150,000 by one insurer, $250,000 by another and thousands more by the eight or so other health plans it contracts with, is trying desperately to deal with vendors pounding on the door — which it is struggling to keep open.

“You do everything for nothing, send out the claims and God help you,” Michel says bitterly. “This year, we literally have been paid 40 cents on the dollar. And these are discounted fees, so how long can you stay in business doing that?”

Contrast that with Bruce Callahan's story. As president and chief executive officer of Melrose Park, Ill.-based Ultra Care, he's managed, during the past decade or so, to build a $12.6 million business mostly by serving managed care companies. His spin on managed care is brighter. He serves more patients, he gets paid in a timely fashion and he doesn't have to deal with the frustrations of Medicare's certificates of medical necessity.

“It's worked out really well for us,” he says.

So which story best reflects the state of HME providers and managed care organizations? What are the pros and cons of managed care? Does every provider need to be involved with health plans in order to be successful? And, if you are involved with managed care, how do you best make it work?

The answers, from both providers and consultants, could help you build a better business.

The Pros

If you're looking for a reason to get into the managed care arena, think need.

“I guess the pro is, it's kind of hard not to [be involved with managed care],” says Neil Caesar, president of the Health Law Center in Greenville, S.C. In many areas of the country, managed care is so entrenched that an HME provider without managed care contracts not only is stifling its revenue growth, but in some cases, actually is working toward its own demise, experts say.

That's the case in the Midwest, says Callahan of Ultra Care. “If you don't [have managed care contracts], you're out of the game. And who can afford to be out of the game?”

As one of the country's greatest bastions of managed care, California is another state where carrying managed care contracts is a must, says John Cassar, vice president of Super Care in City of Industry, Calif. “You have to be involved in managed care in California,” he says. “At least to some degree. If you're in the [HME] and respiratory markets, managed care is key to generating some significant revenue.”

The northeast is the same, says Christina Thompson, director of marketing for Arcadian Health Care (formerly Millennium Health Care) in Livingston, N.J.

“To be competitive, to gather up more of the market share, you really should be in managed care,” she says.

But are there any benefits beyond need?

Callahan, who says managed care accounts for 60 percent of his company's revenue, believes there are several benefits.

“They can bring to you a high volume of business from one source,” he says. “So if you happen to secure a managed care contract, you get a lot of volume and you learn how to bill and collect and you do it so well you would prefer to get that business. It becomes one of your advantages from an operational standpoint.”

He particularly values not having to deal with CMNs. Chasing physician signatures and dealing with the red tape accompanying the documents is a “huge headache” and one that can stall reimbursement for lengthy periods of time, he says. Managed care doesn't require CMNs and that can result in swifter payment, he says. One MCO pays for HME within an average of 45 days, he notes. (Ultra Care also deals in infusion and those payments tend to take longer because the claims are bigger and it is hard to bill infusion electronically, Callahan says).

Thompson says that, while managed care reimbursement generally is lower than Medicare, “there's a volume of business that offsets [lower reimbursement].”

Also, she notes, “It's less out-of-pocket expense for the patient, less paperwork and it is more inclusive care for the patient. Managed care is easier for patients. Medicare has a lot of restrictions on what it will reimburse. Managed care offers so many more services.”

Cassar sees yet another plus. “The advantage is that once you establish a key relationship, it parlays into multiple product lines,” he says. For example, while you might initially agree to provide oxygen for a health plan's patients, the relationship could grow to include mobility products, wound care, bath safety items and so on.

Managed care contracts also can give a provider access to other potential customers. “It gives you the ability to enter into different hospital systems that in the past you weren't able to penetrate,” Cassar says.

Providers who work at understanding the MCO's motivation can find another benefit, Callahan adds.

“Managed care is pretty easy to understand,” he says. “What are they trying to do? They are trying to manage care in a way that they can show a bottom-line profit. If you can tailor your approach to them through utilization reports, data that shows what their savings will be by using your company and going to them with information on how they could save money with disease management — if you show them how you can help reduce their costs, you're pretty much their best friend.”

And that, experts say, can equate to a beefy bottom line for your business.

The Cons

While the pluses of managed care can be very enticing, even proponents agree that its downsides are many, and no provider, no matter how knowledgeable, efficient and prepared, can escape all of its inherent problems. Like the proverbial little girl with a curl right in the middle of her forehead, when managed care is good, it's very, very good and when it is bad, it is horrid.

“It can be a real pain,” Caesar says.

“Every company is different,” Callahan says. “You have the good ones and the bad ones. And the bad ones can be really bad.”

Remember Michel? He's been grappling with some “really bad” ones for years now. In the HME business for 25 years, 11 years as the owner of NuTech, he turned to managed care as an alternative to Medicare. “The biggest problem used to be getting the CMNs signed by the doctors,” he says. “It was so frustrating, with the rules changing weekly.”

Managed care held a lot of promise, he thought. “I saw the opportunity in managed care and that's where I went.” He landed contracts with about 10 MCOs — some of them major insurers — in New York. Soon, 90 percent of his revenue came from managed care.

Almost from the beginning there were problems. And those problems have deepened in the past 18 months, he says. One major insurer has shortpaid him $250,000. Another owes him $150,000. “We get checks for $2.50,” he says.

At yet another insurer, “We dropped $50,000 in claims on the desk in August,” he says. “In March, they processed $10,000 worth of claims.”

Eight months after filing those claims, he's still $40,000 shy of full payment. He's also dealt with lost claims and had to refile countless claims.

“People in billing don't understand how to pay the bill,” he says. “They don't have an understanding of the durable medical equipment business.”

That's a common complaint among providers, even those happy with managed care. It is, in fact, one of the issues that prompted Seeley Medical of Andover, Ohio, to drop its managed care business, says president Mario LaCute.

“We would sit in on a meeting with five high-end [health plan] executives and we would ask a question on the process for handling a claim and we would get five different answers,” he says. “They didn't know.”

“A lot of the MCOs lack the support staff and the infrastructure to maintain a sophisticated billing system,” Cassar acknowledges. “And the result is a lack of appropriate adjudication.”

High turnover within the health plans complicates the matter, Callahan says. “We have found ourselves educating billers at the HMOs on what they need to do because we know it better than they do,” he says. “It's because of turnover. It takes a long, long time to get them up to speed. … But it is in our best interest to educate them. If you can build a relationship with [them] and teach them what the policy really is and why they should pay [the claim], it will be to your benefit down the road.

“It is so key,” he adds, “to find the ones who know at least what their processes and procedures are to pay, and try to stay away from the others.”

Thompson says Arcadian also has dealt with the problem by educating the case managers with whom it works. “A lot of managed care plans pay on the older technology,” she says. “We try to educate them and stay in touch with them, because they don't know. I think it is our responsibility to educate them on the new technologies out there. And we've found that's been very successful for us.”

Providers' complaints about managed care almost always center on fees, Caesar says. “Not just what they get paid, but how they get paid, when they get paid and if they get paid.”

Michel's story is not at all uncommon, he says. Thompson agrees.

“They don't want to pay,” she says of the managed care companies.

LaCute learned that lesson a few years ago when it became clear that a major insurer was not going to pay Seeley Medical's claims. “If you can't get paid by people who have agreed to pay when you've already rendered the service — it was our providers who were bearing that brunt,” LaCute says. The HME provider finally sued the company for $11 million and ended up settling “for all we were going to get from them.” Seeley paid off its creditors and got out of the managed care business.

Getting HMOs to pay what they owe can take some work on the part of providers, whether it is in establishing relationships with case managers, educating the health plans' billing staff or rigorously monitoring HMOs' payment levels and times. But even that, and consistently filing clean claims, might not result in payment, industry players say.

“They pay what they want to pay,” says Thompson. “It's very tough to collect unless you have a strong department that is educated to understand these case managers. Building relationships with the case managers helps us reduce our [days sales outstanding].”

The Payment Game

And what if the HMO still doesn't pay? Well, that brings up another problem: contracts that offer little or no recourse to the provider in the case of payment disputes.

That was the case for Michel, who finally sought help from the state attorney general's office, his congressman and senator, as well as the state insurance fund. He got no help from any of them, he says — in most cases not even returned phone calls.

“We've done everything we were supposed to do,” he says. “We put out quality products, helped people in an appropriate manner. But I am fit to be tied, because they have got me in a vise. I've gone above and beyond the contract. I've serviced people for nothing.”

Now, with his own creditors clamoring for their money and penalties for late payments mounting, there appears to be no recourse for Michel short of an expensive lawsuit — and that is not uncommon with managed care contracts, industry players say.

“Most of the contracts are slanted toward the managed care organization's benefit,” LaCute says. “If you want to dispute something, you have to have an arbitrator. And that could take months. And you've given up your right to bill the customer directly.”

There actually is little to negotiate in a managed care contract, most providers say, so dealing with problems is a challenge.

“I think at least here in Chicago, there's very little negotiation in any HMO or managed care contract,” Callahan says. “Your only thought is how to get commitments from them on how to resolve problems. Ask about the review board, who your contact is, how available the person is going to be and whether you can have a conference call every month to resolve problems. That sort of support is the only way for you to negotiate. What you've got to be able to do is agree in writing to address problem areas.”

Caesar agrees that many HMOs brook little or no negotiation. “Plenty of the plans are not yet softened in their attitude toward negotiating a contract beneficial to both parties,” he says. Like Callahan, however, Caesar says there are ways for providers to negotiate fairer contracts.

“When you ask questions, particularly pointing out areas of unfairness, inaccuracy or inconsistency, then you can make headway,” he says. Providers need to read each contract critically and carefully: Does Page 6 agree with Page 2? Is there something that's not discussed? Is there a provision that is discussed but that leaves out some things?

“Don't assume there's no point in reading [the contract] and just read the fee schedule,” he cautions. The contracts, he notes, raise a number of financial, liability and privacy issues that are crucial for a provider to know and assess.

“Not only does an attitude of ‘sign first, negotiate later’ raise a naive view of the way things are going to work, but it also means a lot of bad contracts … are entered into,” Caesar says.

Providers do have some leverage these days, says Schuyler Hoss of Northwest Health Care Management in Vancouver, Wash. MCOs, he says, value reliability and service more than they once did. “Seven years ago, you could say, ‘I've been in business since 1934,’ and they'd say, ‘Who cares?’ But now, service quality commitments have become important.”

Indeed, he adds, “Reputation, years in business, the ability to meet contractual responsibility, maintenance and quality standards, accreditation — those things are actually worth more.”

Caesar agrees. “Location, market penetration, volume, a one-stop shop, whatever the managed care plan cares about, that's where the leverage is.”

But even putting into play all the precautions and managing to negotiate a good contract can't protect the provider from every pitfall. For example, “With managed care, you don't know if you are billing the proper payer source,” Cassar says. “The members change their plans and jump from plan to plan and switch from medical group to medical group. But in addition to that, the hospital and medical group are changing their capitated arrangements with their health plans and you have to determine whether or not to bill the health plan or the medical group.”

It's critical for providers to stay on top of all the changes, he says, noting that Super Care has a team dedicated to handling such managed care issues. The team includes the contract manager, the director of managed care, the customer revenue qualification lead person, the customer service supervisor and the accounts receivable manager.

The Bottom Line

So, do the pros and cons of managed care balance out? It's a question each provider must weigh for itself, the experts say.

For Callahan, Cassar and Thompson, the pros have it. They say their companies will continue to forge contracts with MCOs.

“I sign every one I can,” says Callahan, whose company contracts with as many as 75 health plans. “Our strategy has been a little different from the norm. What we are trying to do as a company is take the whole idea of insurance out of the picture. We want to go into a doctor or a discharge planner or a social worker and say, ‘We don't care what the insurer is, you can call us for all of your patients.’”

And the only way to do that, he says, is by contracting with MCOs.

For Michel and LaCute, managed care is not the preferred route. Michel is slowly extricating himself from the managed care stranglehold and is moving back into Medicare. “For me to survive, I have to get away from managed care in total,” he says. “We're going back [to Medicare.]”

Seeley Medical has been there, done that. And while moving away from managed care was a “huge step,” it has not turned out to be a stumbling block to business stability, LaCute says. While he keeps his eye on managed care penetration in his market area and says he would deal again with managed care if he had to, “a contract in managed care is a one-way street — and to me, it's a one-way street to disaster.”

Finding a Good HMO

FOR THOSE WHO want or need to contract with MCOs, one of the best safeguards against trouble, the experts say, is contracting only with solid, good health plans.

But how is one to know which is good and which is bad? “What's bad about our business is that we don't tell each other [which health plans to avoid],” says Scott Michel of Islandia, N.Y.-based NuTech Healthcare Management, noting that only after he ran into problems with health plans did he find out what had happened to his predecessors. Other industry players agree, noting that each provider is on its own when it comes to ferreting out information about health plans.

“There's no repository of information, no Dun & Bradstreet,” confirms consultant Schuyler Hoss of Northwest Health Care Management in Vancouver, Wash. Providers must be alert to the buzz in the industry if they are to gain useful information. “If you're a smart HME business person, you're listening to what's happening, you're talking to other providers, you're listening to the market, so when the XYZ contract does come up, you should know that the physicians' group across town had to almost shutter their doors because the claims were 120 days out,” Hoss says.

Neil Caesar of the Health Law Center in Greenville, S.C., strongly urges providers to ask questions of everyone, including the plans themselves.

“One of the things you should do in assessing a plan is talk to colleagues, see if there are any complaints filed against them with the Better Business Bureau or the Chamber of Commerce. Chase that information. Ask the plan, ‘What's your history? Show me proof.’ Or, ‘I've heard complaints about you. What is your response?’

“Becoming a pain before signing is a lot better than becoming a pain after signing,” Caesar says.

He adds a caveat. “If [providers] get together and compare notes, do not talk about your fees. It's still an antitrust issue.”

But you can ask other providers whether or not the MCO is prompt, responsive, follows through, will negotiate and what its penetration in the marketplace is.

Probing the health plans' procedures also can elicit some telling information, says Bruce Callahan of Ultra Care in Melrose Park, Ill. “Usually the companies that are bad don't know how to get things done,” he says. “You say, how do we bill for a concentrator to get paid? And they can't tell you. When they just give you HCPCS codes, that's when you have to wonder about them. You know there are going to be problems. Companies should be able to tell you how the process works, what to do if claims don't get paid, the review process, et cetera.”

He suggests also asking about their billing system and whether you can bill them electronically. If so, he notes, you have a much better chance of billing correctly because the software system will alert you when there is an error.

Once you've signed the contract, it's imperative to monitor the health plan's response, says John Cassar, vice president of Super Care in City of Industry, Calif. “You have to start your own auditing within 90 days,” he says, adding that providers should watch for timeliness of payments, whether cutbacks have been applied, whether claims are routinely kicked back. “You need a lot of up-front auditing and follow-up on your end in order to identify problems early on,” he says. “Your due diligence on the front end is critical to having a successful relationship.”
— S.H.

How to Negotiate a Favorable Contract

NEIL CAESAR OF the Health Law Center in Greenville, S.C. offers the following tips for negotiating a fair managed care contract.

• Do your homework. Gather as much information about the health plan as you can, including what the plan needs and what it is looking for. “If you want a managed care plan to make your life better, you need to figure out how you're going to make its life better.”
• Know what you can do and what you want to accomplish.
• Set your priorities-what you can give up, what you can live with. “Profitability needs to be assessed and what the bottom line is going to be, what you can live with [as well as] what you're going to walk away from.”
• Maintain a professional, calm attitude during the negotiating process. This personalizes the dialogue, so it is people, not entities, talking. Remember, if you don't appear to be an articulate businessperson, the plan will not take you seriously. “If you want them to listen to you when you say ‘This is unfair and this is why,’ then you have to demonstrate why they should listen to you. Identify your strengths and their weaknesses, but stay professional in the process.”
• Always have logical reasons for what you want. Explain why things aren't fair.
• Figure out a strategy in setting priorities to negotiate. Perhaps start with something easy to grasp and get the dynamics going. Then you might introduce the harder issues and finish up with some of the easier ones.
• Keep the momentum going in negotiations. If you're getting bogged down, move on to something else and come back to the difficult point.
• Only do what benefits you in the long-term relationship and what is mutually beneficial in the long term.
• Remember that the greatest tool a provider has in its arsenal is the word “no.” The least-used tool a provider has in its arsenal is the word “no.”
• Remember that there are resources available — people who can help you prioritize, see the issues, break the logjam or set a strategy.

Caesar has yet another caution. “One cardinal rule that applies when you are assessing a relationship, any relationship: It's just like a courtship. They don't treat you better after the marriage. If they give you the runaround, act arrogant. If they are bumbling when they are trying to impress you, it will get no better when they don't have to impress you.”

If such red flags wave during negotiations, it's wise to rethink whether or not you want to deal with the health plan. “It's a mistake to think that if something doesn't work or you don't like it, you can just get out of the contract,” Caesar says. “It's not typical that any party can quit at any time. In many instances, your contract is automatically renewed unless you initiate some action to cancel it before the deadline.”

The bottom line in all this is don't sign a bad contract, Caesar says. Read it before you sign it, because, he says, “most of the time the problem is not that the contract says something bad, but that it says something you didn't bother to read.”
— S.H.