Progressive Focus© Newsletter
|Volume 3, Number 3||Fall, 2002|
|Helping You Manage the Expectations of Managed Vision Care|
How the evolution of managed care will impact third party vision care and your patient mix in the years to come
In the previous issue of Progressive Focus© (Summer 2002) you learned about Defined Contribution Plans, an emerging variant of managed care that places a significantly greater share of the financial responsibility and decision-making on a patient's shoulders. In this issue I'll tell you about another important change in managed care and how it will affect your business in the years ahead.
Managed Medicare -- How The Mighty Have Fallen!
Nothing endures but change.
Diogenes Laertius, Lives of Eminent Philosophers
A few years ago Managed Medicare was "it." HMOs competed to sign up seniors in a frantic rush to capture what they then perceived to be a potential "money tree." Indeed, in some counties in California and Florida where government payments had always been high, HMOs for seniors were surprisingly profitable.
These profitable Medicare HMOs offered benefit enticements ("percs") that succeeded in luring away many seniors from traditional Medicare. And that success caused HMOs in other places to venture into Managed Medicare. Into the late 90s most Medicare HMOs were experiencing good growth.
But like the dot-com crash, that bubble now has burst. On January 1, 2001 more than 900,000 senior citizens found themselves suddenly and unceremoniously dumped from their Medicare HMOs. On that date many health plans across the nation exited the Medicare market and left their enrollees with few, sometimes no other options than traditional Medicare.
In January of 2002 that trend continued and hundreds of thousands more were displaced as additional health plans bid adieu to seniors. Those plans that remained in the market were scrambling to revise their benefit packages and trim costs.
The departing health plans bemoaned an ocean of red ink. Hamstrung by congressional budgetary constraints and legislation, annual payment increases were limited to 2%. Yet healthcare costs rose faster. For HMOs, the proposed increases were not enough to keep going.
If Congress (via HCFA/CMS) was not going to pay what the HMOs felt was enough to make a profit then they were no longer going to participate. And so they bailed out, and the number of Medicare HMOs today is many fewer than at the millennium. For seniors it means turmoil.
One Side's Story
The HMOs all sang the same sad financial tune. They also cited burdensome regulations, difficulty negotiating favorable deals with providers, and competitive pressures to attract enrollees that "forced" them to provide free benefits not covered by traditional Medicare. All this combined, they said, to create an environment where it was now impossible to profit in Managed Medicare.
Some plans have tried to maintain a selective presence, withdrawing only from certain markets and freezing enrollments in others. Some plans have raised premiums and/or co-payments, or reduced or eliminated perc benefits such as vision exams, eyeglasses, and prescription medications.
But the industry as a whole has sent a loud message to Congress and to the public: "Raise the funding or we're going to walk." And given that average monthly funding has decreased over the past couple years, it will be interesting to see just how Congress addresses the challenge, and if most of the health plans ultimately make good on their threats.
There were never in the world two opinions alike, any more than two hairs or two grains. Their most universal quality is diversity.
Essays, to the Reader
Michel Eyquem de Montaigne
The Other Side's Story
Now contrast the health plans' public pronouncements of inadequate funding with statements issued by the government and its agencies. According to the government, health plan pullouts are based not so much on premium funding (which varies county to county) but, rather, on local market share and each plan's ability to turn a profit in a particular market.
The government espouses that while HMOs may complain about under-funding they've actually created most of the problem themselves -- by adding expensive perc benefits such as Rx coverage that Congress never built into HCFA/CMS' per member per month premium payments.
These statements claim that while the funding is not generous it certainly is adequate. In a report issued September 2000, the OIG (Office of the Inspector General) opined that the premiums were more than sufficient given the risk selection. That is, seniors enrolling in Medicare HMOs are, on average, healthier than those in traditional Medicare and, therefore, should require less care and less expensive care.
An August 2000 GAO (General Accounting Office) report indicated that Medicare + Choice HMOs received 21% more in monthly capitation than the estimated amount it would have cost for care had the patients been seen in a traditional, fee-for-service Medicare setting. However, HCFA/CMS continued, in 2000 these Medicare HMOs also spent an average 22% on perc benefits not covered in the premiums.
Thus, according to GAO, HCFA/CMS, and OIG, the HMOs are causing their own financial problems as a result of competitive pressures to attract enrollees. (Of course the HMOs would argue that it was HCFA/CMS that originally encouraged and applauded the plans' offering of perc benefits as marketing carrots.)
GAO Data Points The Finger At Plan Failures
The facts will eventually test all our theories, and they form, after all, the only impartial jury to which we can appeal.
Jean Louis Rodolphe Agassiz
The GAO report listed factors other than reimbursement that it felt accounted for the recent rash of HMO withdrawals from Medicare + Choice:
- Low enrollment,
- Limited experience in the market,
- Non-competitive position.
According to the GAO, low enrollment is the number one reason why plans withdraw.
- Of the plans with less than 10,000 Members in 2000 about 30% withdrew (38 of 129 plans).
- During the same year only about 7.5% of plans with more than 20,000 Members withdrew (6 of 80).
- And of the 33 HMOs with more than 50,000 Members in a state only one withdrew.
If the government's contention is correct, that Medicare HMOs are paid enough to cover the basic benefits package, then it seems obvious that if an HMO wants to remain in this business it must cut its costs, and/or raise premiums, and grow market share without giving away the farm.
Achieving "critical mass" seems to be a key requirement for those plans that have chosen to stay the course. Still, looking at large market share as the solution to success in Managed Medicare may be too simplistic. On February 8, 2001 the Sacramento Bee reported that PacifiCare, the nation's largest provider of Medicare + Choice through its heretofore highly successful Secure Horizons, had reported an 82% drop in net income for the fourth quarter of 2000. PacifiCare, which derived 65% of its premium revenue from Managed Medicare, threatened to pull out of all Medicare + Choice unless the government significantly raised premiums going forward.
To date the government has not conceded to Pacificare, and Secure Horizons' future is uncertain. So now we have the prospect of the largest and most successful of the Managed Medicare plans -- the market share giant -- pulling the plug. That would be a significant "seismic event" on the managed care landscape.
(Note: effective January 1st 2003 Pacificare will terminate VSP as the Secure Horizon's vision care provider. The contract has been awarded to Cole Managed Vision. Once can assume that in part this move was made to reduce costs.)
The Immediate Impact On Optometry
So what does all of this turmoil and downsizing of the Managed Medicare market mean to optometry and to you? In my opinion it's good news for your core business. In this meltdown of Managed Medicare there is opportunity for you to increase patient load and profitability. Let's see why.
No matter what the government may do vis-à-vis additional funding, it's clear to just about everyone that reimbursements are as low as they can go if the payers hope to have any providers on their panels. Around the country we're seeing doctors, hospitals, pharmacies, medical groups, etc. pulling out of financially unsound managed care contracts.
Facing the reality that nothing more can be squeezed from the providers to achieve cost reductions, many Medicare HMOs reluctantly have eliminated or significantly reduced major enticement percs such as prescription drug benefits and vision exams and/or eyewear.
Without those "carrots" to dangle in front of seniors, it's made the job of marketing Medicare HMOs a much bigger challenge. The allure is certainly not what it was four or five years ago, and many seniors have decided that managed care without the percs is not for them.
Reduced Vision Benefits
Even if Medicare + Choice HMOs maintain a presence in your city you can assume that most if not all of the seniors who remain in HMOs will no longer have eyewear benefits. And very few will retain exam benefits.
Most seniors will have no vision coverage at all and will be thrown back into the general population -- uninsured as far as vision care is concerned. There's your opportunity.
Once again these seniors who had been taken from your practice or who could be seen only under the often drastically reduced fees of Managed Medicare will again be potential fee-for-service business. Cash money. Patients you should pursue with a vengeance. And you can bet it's going to be free-for-all battle – private practice ODs, optical chains, independent opticians, dispensing ophthalmologists – everyone's going to be scrambling for a share.
Capturing Your Share Of The Prize
In war there is no second prize for the runner-up.
In the Military Review
General Omar Bradley
You'll want to work hard now to retain your valuable patients formerly covered by HMO vision benefits. You'll also want to develop a battle plan to prospect for others who were not your patients but who were in HMOs and previously had vision benefits.
And you'll also want to prospect for seniors who join any of the recently announced Medicare PPOs. This experimental program in 23 states is set to begin enrolling seniors in November 2002 with coverage starting January 1, 2003. The Medicare PPOs will offer limited Rx benefits making them popular with seniors. However, they're unlikely to cover routine vision care.
Still, all of these patients, HMO, PPO, or neither will need vision care from someone and it might as well be you, right? Essentially the gradual devolution of Managed Medicare means it's year-round, open season for the business of your community's seniors.
You can be certain that the business-savvy optical chains already have a strategy for drawing seniors into their stores. It may be "BOGO" (buy one; get one free) or it might be some other special – but it will be something focused on price. After all, that and the convenience of one hour eyeglasses are proven marketing successes for the chains.
You'll also need to do some work to "bag" your share of the potential economic prize. Whether you decide to pursue a pricing strategy or, instead, go down another path, here are some ideas for identifying and capturing these valuable seniors.
- Check with your State Department of Insurance for the names of Managed Medicare HMOs that have pulled out of your area in the past two years. It's public information. That's where you begin identifying the potential target population of those who've lost all vision care benefits and who are going to be cash patients.
- Additionally, request information on Medicare HMOs that remain in the market but have applied to change benefits in the next year. Here, you're looking to see which of those health plans have dropped or reduced coverage for vision exams and/or eyewear. This is your target population of seniors who will have fewer, perhaps no, vision benefits, and who probably are going to be cash patients.
- Have your computer print out a list of all your patients seen in the past two years under a Managed Medicare plan. This could include those seen as the result of your direct provider contracts with HMOs or through a third party intermediary such as VSP. Here you'll find the names of current patients you must try to keep from going elsewhere for their vision care.
- Send a letter or postcard to all of your senior patients who were in a Managed Medicare HMO that no longer serves your area or that has reduced benefits. Invite them to continue with your practice, and promote service!
- Also, use your office newsletter to reach these seniors with the same message.
- If you do any advertising (print, TV, radio, etc.) reach out specifically to seniors who were not your patients but who now may no longer be covered by HMO vision benefits. Promote service!
- Train your optical staff to talk up eyewear that's attractive and beneficial to seniors -- for example polarized lenses for golf, tennis, or fishing. Or progressive lenses with durable AR coating. Or lightweight frames combined with ultra-thin, lightweight lenses.
Those Were The Days, My Friend...
In the end, whether the government stays the course and keeps Medicare + Choice funding at or near current levels, or if it decides to pour a bag full of new money into an effort to keep M+C alive, it really doesn't matter. Little or nothing is going to be there for continued funding of routine vision care.
For most seniors vision care will remain outside the list of covered services. Any increases in funding likely will go toward prescription drug benefits or to medical care, not to funding your bread and butter services.
Rejoice! This means it will be the rare Medicare HMO that takes away your patients only to return that business to you at lower fees. It's not that the HMOs don't recognize the importance or popularity of vision care. Rather, it's a matter of tough economic choices.
And in this case you can be the beneficiary of a purely economic decision not to continue using vision care as a marketing carrot. Carpe Diem!
Education is what you get when you read the fine print.
Experience is what you get when you don't.
Vision Plan Profile
Cole Managed Vision
Cole Managed Vision (CMV) administers funded vision benefit programs to more than 17 million members throughout the United States and Puerto Rico. Clients include national health care organizations and Fortune 500 companies. In addition, CMV administers discount vision programs to millions of people through some of the nation's largest membership organizations.
CMV manages two major provider networks offering a blend of retail and independent eye care providers. This offers its members choice and convenience when selecting an eye care provider, an attribute that has become important for many health care organizations and employer groups. With 14 years experience in managed vision care, CMV expects to process more than 4 million claims in 2002, up more than a million from 2001.
The CMV Preferred Network includes approximately 5,000 provider locations nationwide. These are split equally between retail and independent locations, and all providers are credentialed according to the standards set forth by NCQA.
Earlier this year CMV completed the transition of the Metropolitan Life vision business. Through this transaction, CMV acquired the 20,000 Metlife vision providers now called the Access Network. CMV is currently credentialing and recruiting for additional networks as it prepares to add several major new clients in 2003.
Providers benefit by using CMV's web-based eligibility and claims processing system. They can verify eligibility and process claims online 24 hours a day, seven days a week. Providers can also expect to be reimbursed weekly.
To learn more about CMV, visit its website at www.colemanagedvision.com or contact CMV Network Development at 1-800-699-0993.
Copyright © 2003-2007, Gil Weber, MBA. No part of this newsletter may be reproduced or distributed in any form whatsoever without the author’s prior written authorization.
These materials are intended to provide useful information about the subject matter covered. The author believes that the information is as authoritative and accurate as is reasonably possible and that the sources of information used in preparation of the materials are reliable, but no assurance or warranty of completeness or accuracy is intended or given, and all warranties of any type are disclaimed.
The materials are not intended as legal advice, nor is the author engaged in rendering legal services. The materials are not intended as a replacement for individual legal or professional advice. Information contained herein is presented only for illustrative purposes, and it should not be used to establish any fees or fee schedules, nor is it intended and it should not be construed as encouraging any user of the materials to take any actions that would violate any state or federal antitrust laws, tax laws, or Medicare or Medicaid laws.