AIS's Health Business Daily
Strategic Business News from Experienced Health Care
Reporters at Atlantic Information Services, Inc.
January 10, 2008
Historically Rocky Marriage Between Health Plans and Network
Providers Is Becoming Even More Contentious
By Steve Davis, Managing Editor
Health Plan Week
March 31, 2008
The historically rocky marriage between health plans and their network providers
is crumbling, according to two recent surveys of hospital executives and
physicians. And, as has happened in the past, failing relationships can
ultimately have a negative effect on earnings for health plans.
The 113 hospital executives who responded to one of those surveys early this
year gave three of the nation's five largest health plans more negative scores
than positive ones. By far the most disliked and least trusted health plan
operator was UnitedHealth Group, which received an unfavorable rating from 91%
of respondents. The average unfavorable rating among the other plans was 41%.
United, however, was not the largest insurer in terms of revenue for the average
responding hospital, and its reimbursement rates were not significantly lower
that those of the other plans.
Among the chief complaints against United were ones tied to claims denials, low
reimbursement rates and an unwillingness to "fix claims." When asked
which health plan was most difficult to negotiate with, 64% of hospital
executives cited United, while 2% pointed to Aetna, Inc. United also was ranked
as the slowest to process and pay claims. Overall, Aetna fared the best, with
only 37% of respondents citing an unfavorable opinion of the company. Results of
the survey were released this month by Santa Barbara, Calif.-based Davies Public
Affairs. All participants were responsible for negotiating contracts with health
plans and represent more than 10% of the nation's hospitals, according to
Davies.
United was quick to dismiss the study as "narrow" and
"non-scientific." The study failed to reflect the favorable
relationships that United has with most of its 4,800 network hospitals, says
United spokesperson Daryl Richard. "We work directly and collaboratively
with hospitals to decrease administrative cost and complexity so that hospitals
receive fair compensation for services, at the same time balancing overall
health care costs in line with the Consumer Price Index on behalf of our
customers," he says.
Joseph Paduda, president of Health Strategies Associates, says hospital
executives most likely to respond to this type of survey are those who have
complaints or who have had a negative experience with a health plan.
Health plan consultant John Gorman, CEO of Washington, D.C.-based Gorman Health
Group, LLC., says he's not surprised that hospital executives rated United so
poorly. "They wield the biggest club in the market and are not afraid to
use it" during negotiations, he says. "But doctors and hospital execs
don't like feeling bullied." Gorman says that health plans could do a lot
to improve relationships with providers by paying claims in a timely and
accurate manner and by "manning the phones" with people who can answer
questions and solve problems. "You don't have to pay astronomically high
rates," he adds. "This is fundamentally a cash-flow matter for
providers."
Paduda says providers often are caught between the patient and the health plan
because they know the patient is liable for any charges the health plan denies.
Another problem from the perspective of providers has been the rapid
consolidation among health plans over the past several years, says one industry
observer and hospital board member who asked not to be identified. When a health
plan contracts with a hospital, there is an expectation about what that health
plan will be like to work with, he says. This can create problems when that
insurer is acquired by another company with a completely different philosophy,
he explains.
Henry Loubet, a senior vice president in the Oakland, Calif., office of Keenan
& Associates, says the relationship between providers and insurers is
critically important to the managed care industry. But, he adds, those
relationships have worsened in the past few years "which is
troubling." According to Loubet, health plans and providers need to be
aligned in order to provide the best care for the members they both serve. Low
ratings in areas such as honesty and candor could be in part a reflection of how
tough United is when it comes to negotiating rates, he asserts. While health
plans need to be more transparent by sharing information on how they make their
decisions, hospitals and other providers also need to be more transparent about
their rates as well, he says. Between 1996 and 1999, Loubet was the CEO of
United's West Coast operations.
"I think a lot of health insurers understand fundamentally that they need
to do a better job in dealing with providers," Paduda adds.
Aetna Leadership Change Improved Relations
Aetna admits it had dismal relationships with many of its providers in the
mid-to-late 1990s after the company (then Aetna Life Insurance Co.) acquired US
Healthcare, Inc. for $8.9 billion. The acquisition made Aetna the nation's
largest health insurer and a target for much of the building backlash against
managed care.
Aetna came into new markets with a swagger and antagonized providers, Paduda
says. "They would say, 'here is what we will pay and if we deny a
procedure, that's just the way it is,'" he recalls. But that model led to
tremendous backlash against managed care and prompted providers to drop out of
Aetna's networks.
"Back then, we had a lot of focus on how to collaborate with [providers] to
achieve our goals rather than sitting across the table from them and hammering
out the best deal," explains Allen Karp, vice president of health care
delivery at Aetna.
On Sept. 15, 2000, Aetna named John Rowe, M.D. — the former CEO of Mount Sinai
N.Y.U. Medical Center and Health System — as its president and CEO. One of his
key missions was to improve Aetna's relationships with providers. In the month
before Rowe was hired, Aetna reported a 17% drop in second-quarter net profit
while its competitors posted strong earnings.
Rowe "helped lead a cultural change in the way we approached
providers….and made a number of fundamental changes in the way we
interacted," according to Karp. One of those changes, he says, was the
development of a provider service center staffed by people who were
"subject-matter experts" on provider issues. Previously, providers
that called with problems were routed to the insurer's customer service
department, where multiple transfers were common. Aetna's profits have shown
strong growth in recent years.
Karp says it's important for health insurers to meet regularly with health
system and hospital executives to discuss ways to improve efficiencies.
"Then, when you get to the [contract] negotiating phase, you've already got
a relationship," he explains. "But it's not always a panacea…We
might have [a change] we know providers won't like. When that happens, we have a
dialogue and reach out to them in advance."
Paduda agrees that Aetna has made big strides in improved provider relationships
over the past decade. "When there's a dispute, Aetna's [modus operandi] is
not to immediately deny the claim, but to look for more information and reach an
accommodation. Providers need to feel like they are being dealt with
professionally," he says.
"You are always going to have somewhat of a contentious relationship with
providers when you talk about fees," Karp says. But if you have an ongoing
dialogue, you can get things done that you otherwise couldn't."In the days
after the US Healthcare acquisition, he says, Aetna might get providers to agree
to a rate, but the backlash was ultimately damaging to the company.
Insurers Are Equally Bad, Texas Docs Say
The relationship between physicians and health plans has long been more
adversarial than collegial, says Lewis Foxhall, M.D., vice president for health
policy at the University of Texas M.D. Anderson Cancer Center and
president-elect of the Houston-based Harris County Medical Society (HCMS).
Results of an HCMS member survey last December prompted the six largest health
plans in the Houston area to meet with HCMS members to determine how to resolve
some of the issues that were uncovered. Nearly 500 physicians from Harris and
surrounding counties responded to the survey, which asked them to rate Aetna,
Blue Cross and Blue Shield of Texas, CIGNA Corp., Humana Inc., UniCare and
United.
"The six health plans were uniformly bad. And that makes it even more
challenging because we can't point to any [insurer] that is doing a great
job," Foxhall tells HPW.
According to the study:
More than 65% doctors said they have experienced difficulty getting their
patients' medical services approved,
70% of physicians said insurers had denied payment of medically necessary care,
and
Nearly 70% of doctors reported problems with getting paid on time, and 64% said
they were paid less than their contracted rates.
This isn't an area where a big public relations campaign isn't going to do it,
says Gorman. Doctors just want to get paid for services rendered, and they want
insurance companies to add value for their patients instead of getting in the
way of their care, he explains. Gorman suggests that the vast amounts of claims
and clinical data held by health plans could be used to give providers
actionable data about their patients. Foxhall agrees and says there is great
potential in wellness, prevention and screening programs where health plans
could pay a role in improving the overall health of their members. "But we
haven't seen much effort on their part," he says
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