"How Far Could This Pendulum Eventually Swing?"

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"How Far Could This Pendulum Eventually Swing?"

The Supreme Court's ruling on "any willing provider" laws could prove significant to some dermatologists in the short term and to many in the long term.

Gil Weber, MBA
Contributing Editor

Reprinted with permission of the publisher.
Skin & Aging, Volume 11 - Issue 11
September 2003 - Pages: 77 - 78


An April 2003 ruling by the United States Supreme Court could eventually prove quite significant to many dermatologists. The ruling upheld two Kentucky "any willing provider" laws obligating HMOs in that state to open provider panels to any physician willing to accept a plan's payment rates and program terms. No longer will Kentucky HMOs be able to deny admission to otherwise willing physicians if those physicians can meet the plan's credentialing standards.

The ruling is also expected to apply in six other states that now have similar laws covering physicians. Although about half of all states have any willing provider laws, most apply only to non-physician provider entities such as pharmacies.

States with "Any Willing Provider" Laws Applying to Physicians

Georgia, Idaho, Illinois, Indiana, Kentucky, Minnesota, Wyoming

As a consequence of the ruling, I see some fascinating scenarios that might result from this significant shift in the traditional power dynamic between HMOs and providers. I'll examine these scenarios and discuss what might happen in the future.

Scenario Number One

Many dermatologists and other physicians alike, have long been able to identify with the phrase, "Sorry, we have all the dermatologists we need. The panel is closed."

For physicians new to practice or new to a practice, and for established physicians seeking to expand their patient bases, the new ruling in Kentucky will mean that HMOs can no longer say this to dermatologists or other physicians.

The disappointing and terribly frustrating response from HMOs that a panel is closed has made it difficult for young physicians to get started, or for any physician to expand an existing practice. With so many patients tied into health plans with closed panels, denial meant no access to many or most patients in some communities. And without access to those patients, a physician's earning potential was seriously diminished. So opening these previously closed panels could be a great opportunity.

Scenario Number Two

The second interesting dynamic that could result from the Supreme Court decision is the further reduction and, perhaps, eventual demise of capitation in some markets. Capitation management is extraordinarily complicated. And it can only work when the at-risk entity — for example, a physician network — handpicks a limited number of dedicated participants (who often are also owners in the at-risk entity). Capitation simply can't work with open networks since crucial tasks such as effective utilization management and stringent cost-containment are impossible.

Managers at an at-risk network would have to be out of their minds to accept a fixed monthly payment and try to make ends meet (or, dare one think, profit) when network admission would be guaranteed to anyone — even to those who clearly weren't on the same philosophical and financial page as those who did understand the commitment necessary for capitation. So I think that HMOs in any willing provider states are going to see a significant reduction in the already shrinking number of entities willing to accept capitation.

Sign of Things to Come?

Most dermatologists in states with any willing provider laws will regard this legislation as positive news. For those in other states, interactions with HMOs will probably remain essentially status quo until such time as other lawmakers put any willing provider legislation on the agenda. But that's probably not going to happen soon given today's much more urgent issues of malpractice insurance cost and tort reform. Still, what's happened in the seven states is probably a good omen for all physicians.


AWP rules vary state-to-state

It's clear that even in the seven states that now have AWP laws applying to physicians the impact will vary state-to-state. For example, the seven all define "physician" a bit differently. In one instance "physician" will apply only MDs and DOs, while in other states the definition may include optometrists and/or podiatrists and/or chiropractors, etc.

In addition, the AWP laws in these states differ on whether the open panel requirements apply only to health plans or if they also apply to health plan sub-contractors such as IPAs, carve-out networks, credentialing organizations, etc. These differences could be profound and, perhaps, discouraging for some physicians who are anticipating that it will now be easy to join any panels they wish. Quirks in state laws may make it harder than anticipated.

For example, in some states HMOs have tried to insulate themselves from direct dealings with physicians by "downstreaming" – a process whereby the HMO delegates certain duties and responsibilities to a sub-contractor. Then that sub-contractor does the health plan's "dirty work" and denies admission to the provider panel.

In Idaho and Indiana, for example, HMOs can delegate to an IPA and then point to that sub-contracted entity saying: "It's their decision; it's not us making the call to deny admission." In those two states downstream IPAs are not considered insurers and, therefore, are not bound by the AWP laws.

And in certain states a downstream credentialing organization might be the surrogate door-blocker, denying admission and, thereby, effectively accomplishing what a health plan could not do on its own.


Gil Weber, a contributing editor to Skin & Aging, is a nationally recognized author, lecturer and practice management consultant to practitioners and the managed care industry, and has served as Director of Managed Care for the American Academy of Ophthalmology.

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