Eye Care in a Managed Care Environment F. T. FRAUNFELDER
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have pockets of advanced managed care markets. Economic forces are causing changes to occur at a rapid rate, so that many ophthalmologists are facing markedly decreased incomes, denial of patient access, and erosion of medical camaraderie. In this editorial, I will attempt to define the problems faced in advanced managed care markets and outline how we are attempting to cope in Portland, Oregon. Managed competition rewards physicians if they participate in health plans that decrease costs and satisfy patients. In the Portland-area market, it appears that the ten most important factors to the large managed care buyers are 1-5, cost; 6-8, patient satisfaction; 9, perceived quality; and 10, measured outcome of care. To compete successfully, your price must be within a fraction or few percentage points of your competing providers. The buyer can evaluate patient satisfaction; however, to date, valid outcome data are rudimentary and too costly to obtain. Managed competition involves integrated financing and health care delivery plans for physician groups, but not for individual physicians. Provider groups divide into competing economic units, with market forces motivating them to develop efficient, lower-cost delivery systems. Managed care requires ophthalmologists to join a system that may pay for their services at a discounted fee or a capitated rate.
From the Department of Ophthalmology, Casey Eye Institute, The Oregon Health Sciences University, Portland, Oregon. Reprint requests to F. T. Fraunfelder, M.D., Casey Eye Institute, Oregon Health Sciences University, 3375 S.W. Terwilliger Blvd., Portland, OR 97201-4197; fax: (503) 494-6864.
From an ophthalmologist's point of view, what are the characteristics of the advanced managed care market? POWER SHIFT A health care delivery system controls patient flow. The ophthalmologist may be part of a general medical or eye care group, which directly contracts with the buyer, such as insurance companies, unions, large business entities, and government units. The ophthalmologist may or may not be the first health care professional to see the patient (there may be a gatekeeper, or primary care physician, who controls access to the ophthalmologist), and the ophthalmologist may or may not be authorized to see the patient. The market in eye care is usually divided into the following three parts: (1) vision care, that is, refraction and prescribing spectacles; (2) general medical and surgical care; and (3) tertiary medical and surgical care. If the eye care group is large enough, it may capture all three markets. If this is not possible, the eye care group's goal is to get the contract, and subcontract what it can't provide. In advanced managed care markets, attempts to protect oneself by organizing physician groups along specialty lines to negotiate with the buyer or subcontractor have been difficult, in part because of the oversupply of specialists in highly capitated markets. In vertically integrated systems, where both the buyer and provider are the same entity, the long-term goal is often to have all physicians on salary. Congeniality within the medical profession is often strained because the gatekeepers control the specialists, and the specialists control the subspecialists. All are competing for a piece of a finite money pie, with medical, economic, and personality disagreements occurring along each step of this revenue food chain.
Today, most managed care is structured to pay physicians on a discounted fee-for-service. In capitation, however, bids are based on how much the physician will be paid per member of the managed care plan per month for medical care. In eye care, this includes ( 1 ) vision care, that is, refraction and prescribing spectacles (currently, in up to half the contracts, this may include the cost of the spectacles); (2) general medical and surgical services (these services may involve a global fee, as for example, cataract surgery; one's bid includes not only one's own costs but also operating room costs); and (3) tertiary medical and surgical care. Delineation of who takes care of what conditions is required. Precise determination of what constitutes primary, general (secondary), or tertiary care is essential. Patients can be shifted among these groups with major economic consequences for the provider. Capitated systems in eye care divide patients into two groups: commercial (below age 65 years) and senior (age 65 years and older). Currently, monthly fees per senior patient are eight to ten times higher than the commercial rate. Markets may be highly developed for managed care, but only 5% to 10% capitated; however, this capitation figure will increase. When only 5% to 10% of the managed care market is capitated, it has minimal effect on your practice and is often a loss leader, that is, the cost of doing business. However, when capitation is over 40% (as it is in San Diego, California), the impact is marked, because the provider's economic incentive is now to see fewer patients and do fewer procedures. The impact of this degree of capitation on the overall medical community may be devastating, with a major oversupply of physicians, especially specialists and subspecialists. CARVE-OUTS
A carve-out occurs when a specialty area (such as eye care, cardiology, drug dependency, oncology, and mental health) is allowed to bid to a health plan separately from the full health-care package. While eye care is a logical carve-out, local market forces will dictate whether such a carve-out occurs. If a market is driven by large insurance companies (as in parts of California), the primary care physician has less control, and eye care carve-outs are more likely. In the 526
Portland managed care market, where vertically integrated self-insured hospital systems or hospitalinsurance company partnerships exist, carve-outs are less likely, because, in these systems, the primary care physician has more control. A carve-out would decrease the income of the primary care physician (who is often the gatekeeper), decrease the primary care physician's control of patient flow, and could encourage other carve-outs. Vision care (refraction and the prescribing of spectacles) is being carved out in the Portland area, but the medical and surgical portions of eye care are not. However, with time, carve-outs will occur if they make economic sense. PHYSICIANS IN MANAGED CARE MARKETS MUST MAKE THE GRADE
In general, physicians are strong individualists, attracted to medicine in part so they could be masters of their own fate. This type of personality is less successful in a managed care environment. Administrators are already grading physicians as A, B, C, or D. The A and B physicians are sought after for managed care health groups. The A physician is fast, efficient, cost-conscious, a team player, and has excellent communication skills with patients and coworkers. The A physicians tend to limit their practice to capitalize on their most cost-effective talents, and they are willing to give up their independence. The D physicians are the opposite of the A physicians, with the B and C gradations in between. OPTOMETRY
While having obtained increased therapeutic license within some markets, the long-term success of this profession may be affected even more than ophthalmology in highly developed markets. As capitation increases, the income differential between the two professions may narrow markedly because of an oversupply of both professions. Ophthalmologists can perform optometric functions, but not vice versa. Ophthalmologists may well replace many optometrists because they will be much more cost-effective. Oversupply of ophthalmologists may become the biggest nemesis of optometrists. SPEED OF CHANGE
Although many predicted the changes occurring in the American health care industry, few predicted the
AMERICAN JOURNAL OF OPHTHALMOLOGY
rapidity of this change. San Diego, California, went from a few percent to over 40% capitation for medical care in a little more than two years. Large, national, for-profit health plans are buying multiple local hospitals and recouping their investments by consolidating services and closing hospitals, which results in a decreased need for physicians. These changes can occur almost overnight.
Recent congressional hearings are addressing the way buyers abuse medical providers. Large managed care businesses are reaping huge profits with little regard for their effect on the medical community. State and federal legislation and local, state, and national networking of both buyers and providers are examples of forces that make the situation fluid. For-profit health care systems come from outside of a given medical community and may suddenly become dominant players in that locale. The American public may also rebel against capitated medicine.
HOW TO PROTECT YOURSELF
What can you, as an ophthalmologist, do in this type of medical environment? On the basis of what is going on in advanced managed care markets, here are some things to consider:
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1. Monitor the more advanced managed care markets with demographics similar to your practice community. 2. Do not overreact to rumors. In the past you could make major errors in business decisions and survive. In some markets, survival is difficult with one incorrect decision. 3. Consider alliances with groups or networks that have a large primary care patient base. This may provide you with the greatest chance for success. 4. Attempt to develop the characteristics of the "A" physician. 5. Obtain accounting systems to allow you to measure productivity and costs of all aspects of your practice. 6. Systematically reduce your overhead. 7. Plan your lifestyle to accommodate a markedly reduced income. 8. Reduce debt. 9. Avoid conflict with medical colleagues and administrators. You never know who you will need to align with or work for. 10. Plan for other options, such as increasing primary eye care, downsizing, taking a salaried position, retraining, looking to industry for a position, or taking early retirement. Unless you are practicing in an advanced managed care environment with capitated patients in your practice, you may have difficulty identifying with this editorial. I wish I had this problem!