| Cutting out the managed care middleman and | | | | administrative tasks. Managed care companies |
| contracting directly with medical providers may | | | | have failed to contain employer medical cost |
| seem like a drastic solution for reducing health plan | | | | increases, despite all their so-called network |
| costs. Yet for employers who've been whipsawed | | | | management efforts. Ironically, and coincidentally, |
| by relentless cost increases, it may be the only | | | | managed care industry profits are at an all-time |
| solution that actually works. The profit-bloated | | | | high while employers continue to suffer.Myth 5: |
| managed care industry, with much to lose, has | | | | Direct contracting exposes employers to greater |
| propagated many myths about why this sensible | | | | liability. The truth is direct contracting poses no |
| approach won't work. But their solutions haven't | | | | greater risk of litigation than any other benefit |
| worked. Costs continue to surge and employers | | | | program component and may actually offer |
| are desperately seeking relief. It's time to debunk | | | | greater protection against it. Direct contracting is |
| the myths about direct provider contracting and | | | | intended only for self-insured employers whose |
| shed some light on this highly effective, innovative | | | | plans are governed by ERISA, which offers built-in |
| cost-containment strategy.Myth 1: Employers | | | | protection against liability. ERISA preempts state |
| cannot negotiate as good a deal with medical | | | | tort laws and limits the employee's ability to hold |
| providers as can managed care companies. The | | | | an ERISA plan liable for malpractice under state |
| truth is employers can often negotiate just as | | | | laws, which govern malpractice, not ERISA. |
| good a deal, or better. Providers welcome direct | | | | Because direct provider agreements state the |
| agreements for the very reason that they are | | | | employer is not providing/directing medical care |
| not like conventional managed care contracts. | | | | and has no role whatsoever in any medical |
| Physicians have complained for years about | | | | decision, the protection offered by ERISA's |
| adversarial agreements and poor reimbursements | | | | preemption is safely maintained.Myth 6: Managed |
| forced upon them by HMOs and PPOs. This | | | | care companies can't (or won't) process claims for |
| negative perception has created a strong | | | | direct networks. |
| willingness among medical providers to do business | | | | The truth is that processing claims and |
| directly with employers. These "win-win" | | | | administering benefits for employer-owned |
| agreements ultimately save employers money | | | | provider networks are well within the technical |
| without shortchanging the providers. Unlike | | | | capabilities of managed care companies. Their |
| managed care companies, direct agreements | | | | feigned inability to process direct network claims is |
| disclose all contractual details so both employer | | | | one of many ways that managed care companies |
| and provider know the deal they're getting and | | | | hold their employer-clients hostage in networks |
| nothing can be hidden by a middleman's "cut."Myth | | | | that are owned, leased, or arranged by the |
| 2: You need large numbers of employees to | | | | managed care companies themselves. If an |
| negotiate direct provider contracts. The truth is | | | | existing managed care company cannot or will not |
| physicians and hospitals will often contract with | | | | administer direct network claims, there are plenty |
| employers for limited numbers of employees. | | | | of third party administrators (TPAs) than can |
| When a direct agreement is fair and | | | | handle it, usually at a lower cost per employee. |
| reimbursement terms are reasonable, providers | | | | For employers that want direct networks in select |
| quickly realize it's a smart business decision to | | | | locations (but want to keep commercial networks |
| work with employers in their own community. A | | | | elsewhere), using a TPA is a convenient and |
| local employer, regardless of size, represents an | | | | cost-effective way to get the job done.Myth 7: |
| established group of existing lives as prospective | | | | Managed care companies do a better job |
| patients, ready to use the direct network | | | | containing costs and saving employers money. If |
| providers. Direct networks have been successfully | | | | that was true, employer medical plan costs would |
| developed in areas where the employer had as | | | | be falling instead of rising. The truth is employers |
| few as 30 employees.Myth 3: Direct contracting | | | | who have implemented direct provider contracting |
| won't work in areas where other PPO networks | | | | are experiencing lower costs and higher savings. |
| are available. The truth is doctors are sick of | | | | One national employer with 20,000 employees has |
| disadvantageous agreements and miserable | | | | used direct networks to keep their health plan |
| reimbursements forced upon them by managed | | | | cost trend flat for the past five years. Another |
| care companies. They actually welcome the | | | | major employer reduced its health plan costs by |
| opportunity to contract directly with employers. | | | | more than 20% without reducing benefits or |
| For many doctors, the very fact it's an | | | | shifting costs to employees.Bottom Line: Cutting |
| agreement with the employer, and not a | | | | out the managed care middleman and contracting |
| managed care company, is reason enough to | | | | directly with medical providers can help savvy |
| participate in a direct network. A direct | | | | employers reduce benefit costs and regain control |
| agreement establishes a true business relationship | | | | over their corporate health care plans.Howard |
| between provider and employer, one that | | | | "A.J." Lester is president of A.J. Lester & |
| promises the provider quicker reimbursements, | | | | Associates, Inc, a leading employee benefits |
| better benefit payment levels, and easier access | | | | consulting firm based in Houston, TX that helps |
| to the ultimate payer (the employer). It's also a | | | | major employers reduce health plan costs by |
| gesture of good community relations for any | | | | developing directly contracted medical provider |
| physician, medical group, or hospital to | | | | networks as an alternative to commercial PPOs. |
| demonstrate.Myth 4: Direct networks create | | | | Since 1994, A.J. Lester has developed direct |
| more administrative burdens and higher costs. The | | | | provider networks for well-known national |
| truth is once direct networks are developed, the | | | | employers across 35 states, negotiating |
| advantages of "owning" a network quickly | | | | agreements with nearly 80,000 physicians and |
| outweigh "leasing" one from a managed care | | | | over 800 hospitals on behalf of clients. A.J. Lester |
| company. There are no recurring network access | | | | & Associates has helped its clients save tens of |
| fees; less physician attrition; fewer employee | | | | millions of dollars on their health benefit |
| complaints; simpler self-renewing contracts; better | | | | programs.Read the Case Studies of employers |
| provider relationships; straightforward plan design | | | | who have reduced costs through direct provider |
| features; and the ability to choose the best | | | | contracting.To help employers understand direct |
| contractors for utilization review, case | | | | contracting as a cost-reducing strategy, A.J. |
| management, claims processing, and other | | | | |