| Cutting out the managed care middleman and | | | | advantages of "owning" a network quickly |
| contracting directly with medical providers may | | | | outweigh "leasing" one from a managed care |
| seem like a drastic solution for reducing health plan | | | | company. There are no recurring network access |
| costs. Yet for employers who've been whipsawed | | | | fees; less physician attrition; fewer employee |
| by relentless cost increases, it may be the only | | | | complaints; simpler self-renewing contracts; better |
| solution that actually works. The profit-bloated | | | | provider relationships; straightforward plan design |
| managed care industry, with much to lose, has | | | | features; and the ability to choose the best |
| propagated many myths about why this sensible | | | | contractors for utilization review, case |
| approach won't work. But their solutions haven't | | | | management, claims processing, and other |
| worked. Costs continue to surge and employers | | | | administrative tasks. Managed care companies |
| are desperately seeking relief. A.J. Lester & | | | | have failed to contain employer medical cost |
| Associates, Inc. has debunked the myths about | | | | increases, despite all their so-called network |
| direct provider contracting, shedding much needed | | | | management efforts. Ironically, and coincidentally, |
| light on this ingenious and innovative | | | | managed care industry profits are at an all-time |
| cost-containment strategy. | | | | high while employers continue to suffer. |
| Myth 1: Employers cannot negotiate as good a | | | | Myth 5: Direct contracting exposes employers to |
| deal with medical providers as can managed care | | | | greater liability. The truth is direct contracting |
| companies. The truth is employers can often | | | | poses no greater risk of litigation than any other |
| negotiate just as good a deal, or better. Providers | | | | benefit program component and may actually |
| welcome direct agreements for the very reason | | | | offer greater protection against it. Direct |
| that they are not like conventional managed care | | | | contracting is intended only for self-insured |
| contracts. Physicians have complained for years | | | | employers whose plans are governed by ERISA, |
| about adversarial agreements and poor | | | | which offers built-in protection against liability. |
| reimbursements forced upon them by HMOs and | | | | ERISA preempts state tort laws and limits the |
| PPOs. This negative perception has created a | | | | employee's ability to hold an ERISA plan liable for |
| strong willingness among medical providers to do | | | | malpractice under state laws, which govern |
| business directly with employers. These "win-win" | | | | malpractice, not ERISA. Because direct provider |
| agreements ultimately save employers money | | | | agreements state the employer is not providing |
| without shortchanging the providers. Unlike | | | | directing medical care and has no role whatsoever |
| managed care companies, direct agreements | | | | in any medical decision, protection afforded by the |
| disclose all contractual details so both employer | | | | ERISA preemption is safely maintained. |
| and provider know the deal they're getting and | | | | Myth 6: Managed care companies can't (or won't) |
| nothing can be hidden by a middleman's "cut." | | | | process claims for direct networks. The truth is |
| Myth 2: You need large numbers of employees to | | | | that processing claims and administering benefits |
| negotiate direct provider contracts. The truth is | | | | for employer-owned provider networks are well |
| physicians and hospitals will often contract with | | | | within the technical capabilities of managed care |
| employers for limited numbers of employees. | | | | companies. Their feigned inability to process direct |
| When a direct agreement is fair and | | | | network claims is one of many ways that |
| reimbursement terms are reasonable, providers | | | | managed care companies hold their |
| quickly realize it's a smart business decision to | | | | employer-clients hostage in networks that are |
| work with employers in their own community. A | | | | owned, leased, or arranged by the managed care |
| local employer, regardless of size, represents an | | | | companies themselves. If an existing managed |
| established group of existing lives as prospective | | | | care company cannot or will not administer direct |
| patients, ready to use the direct network | | | | network claims, there are plenty of third party |
| providers. Direct networks have been successfully | | | | administrators (TPAs) than can handle it, usually at |
| developed in areas where the employer had as | | | | a lower cost per employee. For employers that |
| few as 30 employees. | | | | want direct networks in select locations (but want |
| Myth 3: Direct contracting won't work in areas | | | | to keep commercial networks elsewhere), using a |
| where other PPO networks are available. The | | | | TPA is a convenient and cost-effective way to |
| truth is doctors are sick of disadvantageous | | | | get the job done. |
| agreements and miserable reimbursements forced | | | | Myth 7: Managed care companies do a better job |
| upon them by managed care companies. They | | | | containing costs and saving employers money. If |
| actually welcome the opportunity to contract | | | | that was true, employer medical plan costs would |
| directly with employers. For many doctors, the | | | | be falling instead of rising. The truth is employers |
| very fact it's an agreement with the employer, | | | | who have implemented direct provider contracting |
| and not a managed care company, is reason | | | | are experiencing lower costs and higher savings. |
| enough to participate in a direct network. A direct | | | | One national employer with 20,000 employees has |
| agreement establishes a true business relationship | | | | used direct networks to keep their health plan |
| between provider and employer, one that | | | | cost trend flat for the past five years. Another |
| promises the provider quicker reimbursements, | | | | major employer reduced its health plan costs by |
| better benefit payment levels, and easier access | | | | more than 20% without reducing benefits or |
| to the ultimate payer (the employer). It's also a | | | | shifting costs to employees. |
| gesture of good community relations for any | | | | Bottom Line: Cutting out the managed care |
| physician, medical group, or hospital to | | | | middleman and contracting directly with medical |
| demonstrate. | | | | providers can help savvy employers reduce |
| Myth 4: Direct networks create more | | | | benefit costs and regain control over their |
| administrative burdens and higher costs. The truth | | | | corporate health care plans. |
| is once direct networks are developed, the | | | | |