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Ask-A-Consultant: Managed Care Plan Participation


About a year ago, I completed my residency and established a general surgery practice in what I thought was a growing market, about fifty miles from a major metropolitan area. Thus far, I have contracted with Medicare, Medicaid and Blue Cross/Blue Shield, but have purposely avoided contracting with any HMOs, PPOs and other managed care plans over concerns regarding the low level of reimbursement from those plans. Initially, my practice grew quickly, but recently I have noticed that my surgical volume has reached a plateau. When I asked my office manager about the situation, she told me our referrals have actually increased, but she has to turn some patients away because I do not participate on any of the plans. Several of the larger plans in the neighboring city are now marketing in my community. Did I make the right decision about plan participation?


You should rethink your decision about plan participation and consider submitting applications to some of the managed care plans in your area. In general, we recommend that new practices sign up with as many plans as possible initially, even if the level of reimbursement is less than desirable, under the theory that physicians can always try to negotiate the fees or terminate their relationships with the plans if they begin operating above capacity. You may want to confer with several of your referring physicians to determine which plans are the most important in their practices. At a minimum, you need to be able to treat patients referred to you by your colleagues. In addition, you may find that the managed care plan fees may be negotiable in your area. While negotiating contract terms may be difficult or impossible in many urban markets with high HMO/PPO penetration, this is often not the case in smaller markets. You may find that you can negotiate the fee schedule to provide a relatively small discount from your billed charges (or an equivalent multiple of the Medicare fee schedule) while also improving the contract language. In this regard, we usually recommend extending the term of the contract and limiting the planís ability to terminate the agreement without cause. By doing so, you may be able to obtain an attractive fee schedule while the plans in your area are negotiable and then lock in that fee schedule for a number of years. On the other hand, you want to avoid signing a contract in which a plan can arbitrarily reduce your reimbursement as it gains more market share in your area.

Lawrence Geller
Director of Consulting Services

MMA does not provide legal, accounting, or tax advice.  If you need assistance in these areas, we recommend that you consult a qualified professional.  In addition, please note that a client relationship with MMA is not established by the submission of a question to this forum or by the publishing of MMA's response.

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