"Thinking About Creating Your Own Vision or Eyecare Plan?"
Understand the populations you'd be trying to capture. Learn the legal and financial constraints that state law might impose when contracting directly with self-insured entities.
by Gil Weber, MBA
Adapted with permission from Administrative Eyecare
American Society of Ophthalmic Administrators
© Copyright, 2001. All rights reserved.
From time to time you may have thought about creating a vision or eyecare plan to serve the needs of local self-funded employers, union trusts, municipalities, and so forth. Even if your local market dynamics have offered few or no possibilities for statewide or countywide contracting with health maintenance organizations (HMOs), you still might sense opportunities for exclusive contracting with a non-HMO business in your area.
Some self-insured entities may be looking to contract directly with local providers or groups to which they would refer their employees and dependents. If those entities have the resources and ability to process and pay their own claims or have the inclination to capitate, you may see opportunities to capture these populations, grow your practice, and supplement, or perhaps replace, one or more problematic HMO contract.
If you've had these thoughts, it's important to understand the populations you'd be trying to capture. Equally important, you must learn the legal and financial constraints that state law might impose on your efforts to contract directly with self-insured entities.
If you're going to create a local plan, it must be done right the first time. There's nothing worse than pouring a lot of sweat, money, time, and emotion into building an administrative infrastructure and delivery system only to have it torn down when a regulator gives a look and says, "You're not in compliance." Because regulatory and legislative issues vary from state to state, it's essential that you have proper guidance every step of the way. Following are pointers on how to get started down the right road the first time.
Before your hopes reach the clouds, it's important to have your feet firmly on the ground, rooted in reality. Given regulatory constraints, can you create the necessary infrastructure? Do you want to put out the necessary effort to make it happen? Can you afford to do this, even on a scale smaller than would be necessary for contracting with HMOs?
Let's consider two similar scenarios. Assume that there's an opportunity if you can get a small collection of physicians to enter into an exclusive risk agreement with a local union trust. Here are some matters you'll want to investigate before any negotiations.
First, it's essential to determine whether your state differentiates between a provider entity that provides services (i.e., the contracting entity is the doctors who provide the patient care) versus an entity that arranges for the provision of services (i.e., the contracting entity is an administrative intermediary that acts on behalf of the participating physicians who will provide the care).
It's a critical difference. In many states, only those who actually provide health care services can accept certain risk (in some cases, any risk) without holding an insurance license. In those states, an administrative intermediary cannot accept risk without licensure even if the physicians are not put at-risk for their reimbursements. The answer in your state will likely determine whether you can go forward with the concept and how you'll set up a delivery system and involve your providers.
Scenario 1: Professional Services Risk
Assume that the union trust asks you to consider a risk agreement for professional services. You must determine whether a group of providers in your state can enter into a collaborative arrangement with this self-insured union trust to go at-risk. Can you accept capitation or another form of prepayment for professional services (and materials if it's to be a vision plan) without first securing an insurance license and without being an economically integrated entity such as a fully merged group practice? In some states, the barriers placed before a loosely structured collaboration of competitive physicians will prove insurmountable.
Scenario 2: Administrative Risk
How about a similar scenario but with a twist? What if the doctors won't or legally can't go at-risk for their professional services, but the union trust asks whether you'd be willing to self-administer the eligibility, member services, and claims functions for a capitated administrative fee paid on top of the claims reimbursements? In other words, the doctors, group entity, or both would be at no risk for the services they provide. But the entity would get only a fixed payment for its administrative services no matter how many patients were seen or claims generated.
This type of agreement is called ASO (administrative services only). You'll need to determine whether regulators view this type of risk differently from a professional risk. Even though the dollars involved are much fewer than when contracting for professional services, and it may not seem to carry the same risk as traditional capitation, it's still risk contracting. And some regulators are very uptight about any at-risk arrangements.
Depending on what you learn, you'll be able to start determining how, or whether, you can move forward. Key questions include the following:
- What legal entities or structures are permitted/not permitted? For example, your entity might not be required to secure an insurance license but it still might have to register as an individual practice association.
- What are the estimated costs and time necessary to process the paperwork assuming no license is required?
- If you must secure an insurance license, what are the requirements, estimated costs, and the time required to do so?
- What are the limitations of that license?
- Is there a bond or claims reserve requirement? If so, how much?
- Is there a stop-loss/reinsurance requirement? If so, how much?
Other Issues You Might Encounter
Are there other means for you to operate under the umbrella of insurance licensure without having to secure your own license? For example, can you piggyback onto another nonophthalmic insurance license? Could you "rent" a dental company's paper (license)? If yes, what are the requirements and limitations?
If your doctors build and own this group delivery system, what are their personal and the system's legal and financial responsibilities and limitations to the state? To the individual providers? To the patients? To the union trust?
What are your state's requirements in areas such as credentialing and recredentialing, quality assurance, utilization review, grievance resolution, medical records, and so forth? The requirements for contracting with self-insured employers may be as burdensome as those for contracting with an HMO.
What state agency(ies) would oversee your operations? Does that oversight differ if only physicians participate as opposed to optometrists and physicians?
What recurring responsibilities would you have to the regulator(s)? Are there recurring costs?
What About Fee-For-Service?
Maybe you're thinking that all this discussion about risk contracting is of no interest to you. You'd only be interested in going after self-insured business if it could be done as fee-for-service.
That's fine. But some of these issues may still apply. Even if you'll assume no risk, the union trust may still need to contract with a legal entity responsible for all participating physicians. Even without entering into a risk contact, you'll still be expected to conduct quality assurance and utilization management functions. You'll still be expected to have formal grievance procedures. These and other administrative functions might still come under the watchful eyes of state regulators.
Is All of This Worth It?
Are all your efforts worth it? That's the $64,000 question. Is there really opportunity for contracting with local, self-insured entities? The answer is . . . maybe.
If you've followed the action across the nation, you know that a lot of physician-driven entities have formed and folded after having absolutely no success in contracting with HMOs. Thus, you might be tempted to view the idea of local group contracting with self-insured employers from a jaded perspective. And you'd be right to do so.
It won't be a slam-dunk if risk contracting is involved. And even if the payments are to be fee-for-service, with absolutely no risk on either the services or administration, the hill may still be too high to climb.
But let's assume that you have a group of physicians who really want to pursue local contract opportunities. And let's assume that you can negotiate the logistical and legal hoops. How do you go about establishing a solid information-collection process so that any contract that might result has at least a reasonable chance of success? How do you avoid the kinds of disastrous contracts that have sunk some provider groups?
Getting the Information You'll Need
Let's assume that you've approached that local union trust in an effort to capture its membership and dependents. The trust has indicated preliminary interest. Figure 1 shows a sample letter you might use to create a request for the information you'll need to ascertain whether it's worthwhile or feasible to enter into negotiations. (You'll want to be sure that the letter you create is approved by your experienced attorney.)
And then you wait. And you probably wait a little more. Eventually, if you're lucky, you'll get some useful information and can begin figuring out whether there's a deal to be crafted. And if you're very lucky, you'll sign a good agreement, care for the patients, and put profits on each practice's bottom line.
To this point, this article has covered simple concepts, glossing over many issues, particularly forming the group, capitalizing it, and building the infrastructure. For this article, I've assumed you're not thinking of building something complex designed to pursue large patient populations and necessitating its own full-time sales, marketing, and administrative staff.
Instead, I've assumed that you're considering something less formal, capable of capturing contracts from small- and medium-sized self-insured entities, but that you are not intent on developing something that will have a life of its own. I've assumed that you're thinking about having maybe four to six doctors work on this effort.
If that's the case, with relatively limited resources and funding (assuming no mandated insurance licensure) and with the pooled talent and input of enthusiastic, committed physicians and savvy administrators, you should be able to consider pursuing local self-insured contracts.
Figure 1. Sample Letter Requesting Information
Thank you for requesting [group's legal name] proposal to provide eyecare benefits to the members and dependents of Local [xxx] of the [name of union]. We very much appreciate the opportunity to demonstrate ways in which we can work together to improve the quality of eyecare services and your members' overall satisfaction with their health care benefits, and also to manage the costs of those benefits.
Thank you, too, for offering to provide us with the historical information necessary to make an effective, attractive presentation. We would appreciate receiving the following information about your members and their dependents.
1) Total Covered Population (by month for the past 2 years)
- Number of covered employees (i.e., number of "contracts")
- Number of their covered dependents
(Note to readers: If routine vision examinations and eyewear are also covered benefits but are not provided to everyone covered by this union trust's major medical plan, you'll need an additional set of enrollment numbers for this sub-segment of the total population.)
2) Contract Distribution/Family Size (most current enrollment information)
- Number of members without dependents
- Number of members with one dependent
- Number of members with two or more dependents
3) Age Distribution (most current enrollment information)
- Number of covered lives (members plus dependents) within each of the following age ranges (in years):
4) Projected Enrollment Growth (over next 12 and 24 months)
5) Utilization History (by CPT code, by month for the past 2 years)
(Note to readers: Self-insured employers have this information. They may hem and haw about giving it to you or claim that it's a hassle to pull the information together. But they have it. After all, they've been paying their own claims.)
6) Historic Costs (by month for the past 2 years)
7) Specific Med/Surg Services Included and Excluded from the Current Benefits Package
- Is refractive surgery included?
- If yes, are any refractive procedures not covered?
8) Specific Vision Care Services, Benefit Intervals, and Dollar Allowances Included in the Current Benefits Package
- Written description of tests and measurements defining a vision care examination
- Written description of covered eyeglass lenses and frames
- Written description of covered contact lenses
9) Specific Limitations to the Current Benefits Package
- If there is a vision plan, it might specify that two pairs of glasses are not allowed in lieu of bifocals.
10) Are There Any Co-payments, Deductibles, or Other "First Dollar" Payments?
If yes, specify.
11) Will the Trust Retain Any Administrative Functions?
If yes, specify.
12) Can the Trust Generate Monthly Enrollment and Disenrollment (Eligibility) Reports?
If yes, in what format? For example:
- Disk, tape to tape, hard copy? Please provide samples.
13) Trust's Experience with Capitation
(Note to readers: If you're considering risk contracting, it's important to learn whether the Trust is currently capitating other health care services [e.g., pharmacy, mental health/substance abuse]. If so, you want to know with whom, for how long, and what the experience has been.)
14) Ethnicity (if available)
What percentage of the covered membership is:
- African American
- Latin American
- Asian American
- Native American
(Note to readers: This information may or may not be available. But it's useful for evaluating the population's projected needs for services related to glaucoma, retinal problems, etc. You must carefully word any request for ethnicity data to make it clear that ethnicity significantly affects the expected number of eyecare services and the costs. In other words, it must be clear that the request is in no way prejudicial for or against any ethnic group.)
15) Benefits, Value-Added Services, Etc.
What issues and concerns, if any, have been identified by the members concerning the scope (definition) of their vision and eyecare benefits, the doctors currently providing those benefits, the quality of the services rendered, etc.? Are there specific features or program enhancements the Trust has identified?
Please send this requested information to our attention as quickly as possible. We look forward to receiving it and will forward a proposal to you once we have reviewed and analyzed the data. Thank you.
[group representative's name]
Gil Weber is an author, lecturer and practice management consultant to the managed care and ophthalmic industries. He has served as Managed Care Director for the American Academy of Ophthalmology.