Choosing a profitable managed care plan

Issue: November 1998

With managed care plans starting to reach even rural areas, optometrists face tough choices in deciding which plans, if any, will benefit their practice's bottom line.

The most important step is for optometrists to determine what their chair costs are, said Ken Bumgarner, OD.

Determine chair cost

"You must know your exact chair cost so you can determine if a plan is good or bad for your group. If you don't have a good handle on your chair costs, you will be bidding blind, and you can get in big trouble fast doing that," Dr. Bumgarner said. Another important practice benchmark to note is the revenue per exam.

"Once you have those two ratios, you can begin some very simplified 'what if?' scenarios with every managed care plan that comes across your desk. The fact remains that in these scenarios if you cannot turn a profit with the plan, then don't accept it," Dr. Bumgarner said.

Doctors also have to understand when to join a plan even if there are few covered lives in the area at the time, he said. If an optometrist declines a plan because it is too small and misses out on large employers that move in later, the practice is in trouble.

The intangible benefits of some plans could outweigh up-front losses, he said. If a plan brings an employee into the optometrist's office for a covered visit, but the family is not covered and pays full price, the doctor could recoup losses on the employee's exam and other services. Another consideration is products and services that are not covered by the patient's plan, but are paid by the patient.

"You have to look at all those avenues to see if this plan will be good for your office," Dr. Bumgarner said.

Although managed care does not play a large role in his practice, he, along with other optometrists and ophthalmologists, have begun preparing by forming a management services organization (MSO), and about 300 MDs and ODs are part of the Carolina Eye Group, Dr. Bumgarner said.

Become business-oriented

"It's becoming very critical that we, as optometrists in private practice, have our finger on the pulse of our office's financial situation and understand how that situation can be affected by managed care and, eventually, capitation," Dr. Bumgarner said. "It's requiring us to be more business-oriented than we've ever been. Forming networks and MSOs where the eye doctor can practice optometry and have the expertise of experienced businesspeople to make these decisions is becoming more and more important."

Once a plan is selected, the optometrist should continue to evaluate the service and returns the office sees as a result, said Steve Eyler, OD.

Within the past year, Dr. Eyler's office fired a plan that included the primary electrical company in the state. Despite the number of carried lives, the plan's inefficiencies and mistakes were detracting from the rest of the practice, he said.

"They were slow in getting jobs to us and were so inefficient, it reflected poorly on me, not them," he said. "Because we were spending so much time on these problems that mounted into the dozens after only 3 months, our regular patients were getting poorer service."

After completing 250 exams for plan patients in the first 3 months, the practice decided to terminate it because of these problems, and Dr. Eyler called the decision the "best thing we could have done."