Diversifying, integrating key responses to managed care consolidation

Diversifying services and integrating with other medical practices – either vertically or horizontally – can cushion the financial blow optometrists are likely to feel from continued consolidation in managed care.

“In health care, the entities that pay for services are joining together through acquisitions, mergers and internal growth (e.g., United Healthcare/PacifiCare with Spectera, Luxottica Group with Eye Med, Vision Service Plan, Anthem BC/BS, Humana, Medicare, Medicaid, TriCare, Kaiser Permanente, Group Health) to become large enough to support regional and national contracts with the employer groups that have become regional and national,” Donald A. Hood, OD, a Primary Care Optometry News Editorial Board member told PCON in an interview. “Remember: Follow the money. Health care contractors are chasing the opportunity to provide our services. When an employer needs a national entity with which to contract for health care, including eye care services, the opportunity will ultimately be filled by an entity that can provide nationwide services.”

Dr. Hood believes that, eventually, governments (both state and federal) will pay for a portion of most optometry patients’ eye care. And for payers in general, he feels the trend is for further reduced compensation, “especially when inflation is factored in. The larger these payers become, the more leverage they will have over the provider community.”

Discretionary spending dollars

One encouraging sign for providers is employee health savings accounts and other similar products that allow workers to accumulate dollars, “that can be used for eye care,” Dr. Hood said. “These dollars seldom involve reduced fees for vision-related products and can generally be used at any doctor’s practice.”

Providers joining forces

National trends in the provider community include providers joining forces to compete financially and market to patients; an increasing number of providers joining large group practices, both private practice and groups linked to chains and located in commercial settings; and ODs and ophthalmologists practicing together to become more cost-effective and reap all aspects of revenues from each patient.

Providers are also forming groups for greater purchasing power, management expertise and cost-effective marketing, according to Dr. Hood. To become financially competitive in the consolidated arena, services must also broaden to encompass comprehensive eye and vision care, as well as surgical and facility services.

“Most metropolitan areas are consolidating the payer community at a rapid rate,” Dr. Hood said. Similarly, less populated areas “are slowly eroding as local employers consolidate with regional and national links.”

See the accompanying chart for questions to consider regarding consolidation.

Integration strategies

One successful vertical integration strategy has been the Italian frame company Luxottica Group SPA, which now owns the retail outlets LensCrafters and Pearle Vision and has an aggressively marketed the EyeMed vision plan. Another example is Highmark, which owns Davis Vision, the BlueCross BlueShield system in Pennsylvania, a frame business and multiple retail sites across the country.

“Even Vision Service Plan, which has always been considered the independent optometry plan, now has a private-label frame and has recently been acquiring labs,” Scott A. Edmonds, OD, FAAO, a PCON Editorial Board member from Wills Eye Hospital in Philadelphia, said in an interview.

Private practice optometrists who formed networks and independent practice associations back in the late 1980s and early 1990s “are being revitalized so that private practice ODs can get into the game,” Dr. Edmonds said. “These practices have come together to create their own vision plan and are aligning with a number of vendors. Although this is not as tight a vertical integration as Luxottica, they are trying to follow similar blueprints.”

In response to consolidation, Dr. Edmonds and his colleagues now have four locations: two hospital-based and two private. “This arrangement links our private practices to the hospital,” Dr. Edmonds said. ODs who limit themselves to routine eye exams and glasses, “need to start offering more medical care and fit more specialty contact lenses. They should also consider integrating with primary care physicians to develop a better relationship for medical referrals. Without diversifying the practice you are looking at nothing but plunging reimbursements for routine vision service, and your practice is in trouble. Moreover, young graduates are no longer interested in joining the traditional private practice.”

Prelude to universal health care

Dr. Edmonds noted that current Medicaid and Medicare services will likely expand to other age groups and demographics if Hillary Clinton becomes the next president. “I believe that various groups such as children and the unemployed will be filled in until ultimately we will have some kind of universal health care,” he said. “However, I think this will occur in steps.”

Time to diversify

Nonetheless, “ODs should start right now diversifying into more medical eye care, especially glaucoma,” he continued. Dr. Edmonds’ practices already have a brisk business in low vision, “which is a growing specialty.”

Added to the mix should be eye care products unlikely to be covered by insurance plans, such as high-end coatings for glasses, wavefront glasses, premium progressive lenses and second pairs. “There is still going to be a huge desire for technology-based ophthalmic eye wear,” Dr. Edmonds said.

Audiology services can also be added. “This is a fertile area,” he said. “In fact, the Pennsylvania College of Optometry is training doctor-level audiologists.”

Contract evaluation

Since Oct. 1, the American Optometric Association has provided its members free evaluation of managed care contracts, in response to questions over time about provisions. In the first full month, four practices have used the member-only service.

“What does the contract require you, the optometrist to do, and in turn, what does the contract say that the managed care entity will do on its part?” Lance R. Plunkett, Esq., general counsel for the AOA in St. Louis, asked. “We indicate what areas of the contract may require more information. Essentially, will the contract be a good fit for their particular practice?”

The fees and reimbursement schedules of a specific plan are a common concern. “Sometimes, these things are not stated in a contract, or not stated clearly,” Mr. Plunkett said.

Another potential red flag are provisions that can change the fees without notice. “Optometrists need to be aware that they could be signing something that today is at “x” rate, but tomorrow could unilaterally move to a much lower “y” rate,” Mr. Plunkett said.

Contractual favored nation clauses should be avoided because of antitrust issues. This form of price fixing “requires the practice to guarantee the lowest possible reimbursement schedule of any previously signed contract,” Mr. Plunkett said. AOA members are also warned about gag clauses in managed care contracts, whereby practices are prohibited from discussing with patients certain plan decisions, even if such decisions affect health or clinical care.

“A contract is always negotiable – either by modifying particular provisions or potentially deleting them and even adding things that may be missing,” Mr. Plunkett said. “We would certainly recommend that optometrists act in their own best interest and be proactive. The more knowledge they have, the less timid they are likely to be.”

Continuity of care, communication

“Managed care organizations seem to be recognizing the importance of the continuity of care by bringing together the medical eye care networks as well as their vision eye care networks,” Mark J. Hennen, OD, chair of the AOA Eye Care Benefits Center and a practitioner from West St. Paul, Minn., told PCON. Consolidated networks are not only more cost-effective with less paperwork, “but they are better for the patient because the patient does not need to see more than one provider to have his or her problems resolved.”

Although Dr. Hennen anticipates growing consolidation, the eye care side and medical side “do not communicate well with each other.”

Citing the example of a diabetic patient undergoing an annual diabetic exam under the vision care, “the medical side of the plan does not always know that a patient has had an annual diabetic eye exam, even if the two practitioners are under the same roof or have some type of working relationship.”

In addition to the need for enhanced communication, practices can benefit from larger consolidations by being provided more efficient electronic billing and reimbursement processes. “Therefore, ODs have less administration in their offices,” Dr. Hennen said. “Transmission of electronic medical records also allows for better continuity.”

Practices in smaller communities, without many surrounding providers, have more leverage “because these managed care organizations obviously need you in their network to make it viable,” Dr. Hennen said. “Managed care is kind of a two-edged sword. On the one hand, if they need you and you only have to deal with one or two larger plans, you don’t need to negotiate different fees with a lot of companies. But if you are in a network with plenty of providers, then the managed care plan has the upper hand because it will be able to ratchet down reimbursement rates.”

Dr. Hennen said that practices should not fear managed care consolidation, but be engaged with their managed care organizations on a regular basis. “Find your representative and be in constant communication,” he said. “You should also know your cost of doing business, so you know what is an acceptable reimbursement rate and what is not. Unfortunately, I don’t think the majority of ODs have taken the time to determine the true cost of a patient visit.”

For more information:

• Donald A. Hood, OD, is a member of the Editorial Board of Primary Care Optometry News. He can be reached at 1550 South Potomac, No. 155, Aurora, CO 80012; (303) 369-1022; fax: (303) 369-1022; e-mail: donhoood@aol.com.
• Scott A. Edmonds, OD, FAAO, is also a member of the Editorial Board of Primary Care Optometry News. He can be reached at Edmonds & Associates, Ste. 1010, 840 Walnut St., Wills Eye Hospital, Philadelphia, PA 19107; (215) 928-3450; fax: (610) 325-9241; e-mail: scottaed@aol.com.
• Lance R. Plunkett, Esq., is general counsel for the American Optometric Association. He can be reached at 243 N. Lindbergh Blvd., St. Louis, MO 63141; (800) 365-2219, ext. 4234; fax: (314) 991-4101; e-mail: Lrplunkett@aoa.org.
• Mark J. Hennen, OD, can be reached at Dakota Optometric Eyecare Associates, 1540 Humboldt Ave., Ste. 201, West St. Paul, MN 44118; (651) 455-5212, fax: (651) 457-0368; e-mail: m2mrhennen@aol.com.