News Story

As Charitable Care Declines, Two Practices Report on Policies
e-Newsletter Provides Practical Support for the Digital Practice
Tips for Negotiating a Favorable Managed Care Contract

As Charitable Care Declines, Two Practices Report on Policies

Despite the escalating number of uninsured people in the United States, a recent study found that only 68.2% of physicians reported providing no-cost or discounted service to low-income patients in 2004–2005, a steady decline from 76.3% in 1996–1997.¹

With results broken down by general internal medicine, family practice, pediatrics, medical specialists, and surgical specialists, the group that reported providing the lowest level of charity care was general pediatrics (60.5%); surgeons reported the highest (78.8%).

Researchers noted that although the number of charity cases has remained stable, the total number of practicing physicians has increased 14% since 1996. Charity care is highest among single or small group practices, with about 80% reporting that they provided charity care. In contrast, practices larger than 50 physicians, hospital-based practices, and medical school practices were less likely to provide charity care. Physicians who earn more than $250,000 annually are more likely to offer charity or discounted care (75.6%) compared to those earning less than $250,000 (65%). In addition, the survey found that physicians who owned their practice were more likely to provide charity care than nonowners. A total of 6,600 physicians responded to the survey, conducted by the Center for Studying Health System Change, Washington, DC.

A spot check of two large western radiology practices confirmed that they are offering charitable care, and they shared their methods of determining who receives what.

Seattle Radiologists APC, a full-service outpatient diagnostic imaging center, reports using the 2006 Federal Poverty Guidelines² for the state of Washington in determining who receives help. “What we use is the 100% to 250% [poverty baseline], and then we offer a discount, depending on family size,” reported Sandra Benson, administrator at Seattle Radiologists APC. Patients fill out a form, and a committee then reviews the information and determines what kind of discount the patient will receive on services rendered. Because Seattle Radiologists is affiliated with a hospital, it offers a full range of services, Benson said.

Radiological Associates of Sacramento Medical Group Inc (RAS), the largest private radiology practice in Northern California, views charitable care as a service to referring physicians. “The bottom line is that if our referring physicians want to send us the patients, then we don’t want to get into cherry picking or not accepting [one of these] patients because of their insurance,” explained Fred Gaschen, executive vice president of RAS.

RAS patients also must submit an income verification form, and if they do not meet a minimum income level, RAS will write off the whole bill. RAS uses the Federal Poverty Guidelines, multiplied by 2.

Gaschen reports that a standard acceptable percentage of charity care that a facility should offer per year is a difficult number to pin down. “In discussions with hospitals over the years, they have talked about 4% to 5%, but when we pressed them into how much they actually gave, the number was more like 1.5%,” he says.

RAS performs about 350 mammograms per day, Gaschen noted, and the practice contracts with outside programs that have federal funding to pay about $50 for charity mammograms. “We have [patients] fill out the charity care guideline forms, and then if there’s no money to be had, we just write it off,” he explained.

The study concluded that although physicians and hospitals historically have subsidized charitable care by charging higher fees to insured patients, the fact that physician practice income has declined suggests that practices have been less successful than hospitals at negotiating fees with private payors, and consequently may reflect a belief among physicians that they cannot afford the time and resources to provide charitable care. The movement toward larger practice arrangements may also create organizational barriers to charitable care.

—M. Saffari

References

1. Cunningham PJ, May JH. Center for Studying Health System Change. A growing hole in the safety net: physician charity care declines again. March 2006. Available at: http://www.hschange.com/CONTENT/826/. Accessed May 22, 2006.
2. US Department of Health & Human Services. 2006 federal poverty guidelines. January 24, 2006. Available at: http://aspe.hhs.gov/poverty/06fedreg.htm. Accessed May 22, 2006.

Tips for Negotiating a Favorable Managed Care Contract

By Tamara Greenleaf

If you have a radiology group or imaging center, chances are that you have to negotiate with managed care companies to gain access to adequate patient volumes.

Michael S. Fenton, MBA

Michael S. Fenton, MBA, executive director of Washington Managed Imaging (WMI), Seattle, manages WMI’s 12 payor contracts covering 3.1 million members. At the 2005 Fall Radiology Business Management Association conference, he shared a wealth of experience on negotiating payor contracts.

Fenton advised that before you even begin negotiations, make sure the payor contract is worth it. How many members will it cover? How much patient steerage is offered? What are the patients’ ZIP codes and ages? Will the payor offer a multiyear contract?

One very important question to answer: Who is the ultimate payor, and how easy is that payor to deal with? Fenton does not recommend doing business with any payor that offers “silent PPOs”—a situation in which the PPO network will offer the same discount they negotiate with you to other PPOs around the country.

“Pretty soon, you’re getting patients who you think are not contracted, and then you receive the EOB in the mail, and there’s your 60% discount,” he said. “In your contracts, have a black-and-white provision that says, point blank, there will be no offering of this discount other than to your direct members that are part of this particular PPO.”

Fee-Setting and Discounting

Make sure your fees are competitive and reasonable, Fenton warns, because the payors can figure out your fee schedule just by looking at your claims that are submitted throughout the year.

He suggests looking at your fees on an annual basis. “I’m amazed that the last time many radiology groups changed their fee schedule was 5 or 10 years ago,” he said. “If you’re sitting with the same fees, the payors will love you, but I’m not sure it’s a good idea.”

In deciding about discounting, he recommends ranking each payor in your market by number of members and market share stability. A payor could have 400,000 members today, but tomorrow, it might be down to 100,000. “You need to see that [the payor] has a stable track record of having that kind of population in its market,” he said.

Reserve better discounts for larger payors and exclusivity. “If you can wrap up the market with that particular payor, it’s worth more to you to give them a better discount—because over time, you’re looking for stabilized volumes of patients,” he said.

However, he warned, always negotiate an inflator for future years. “Never agree to a multiyear contract that doesn’t have some kind of provision that says in years two, three, and x, your reimbursement rate goes up by a certain percentage. Most payors are okay with using the medical consumer price index inflation.

“Stay away from scan brokers,” he added. “If you work with them, you’re commoditizing the business of radiology by agreeing to absurdly low reimbursement rates. Once they set foot in your territory, they have a way of multiplying that makes rabbits look slow. Pretty soon, you’re doing a great percentage of your MR and CT business at rates that are 70% of Medicare.”

When negotiating, Fenton said that people think only of what amount they are going to be paid. He said to focus not just on what you are receiving in terms of dollars per Relative Value Unit (RVU), but also on the year of the RVU schedule. “If you don’t have that specifically mentioned in your contract, you can bet the payor is going to tie the reimbursement to the best possible contract year for them in terms of paying you the least,” he said.

Be very cautious about code bundling and unbundling rules. “If the payor has the ability to bundle in some logic other than Medicare or CCI [Correct Coding Initiative], they can be extremely creative if you’re letting them do their own thing,” Fenton noted.

Another negotiating factor is claims submission time frames. If you are on the hook for submitting claims within 30 or 60 days, you could be losing a lot of money just by that contract provision alone, irrespective of what the rate is. “I always try to negotiate 365 days,” he said. “I’ll agree to using our best efforts to submit claims within 30 or 90 days, but the fact is, you might not know who to submit claims to until it’s too late.”

Get termination provisions for as short a time period as possible, Fenton said. “If a deal is not working, I want out yesterday. I don’t want to be on the hook for another 6 months. I try to get 30 days, but nobody agrees to that, usually. However, 60 days, and certainly 90, are very realistic termination without cause provisions.”

Try to get very clear language up front that allows your physicians to have some say over what is medically necessary. “This is a big one,” he said. “If you let the payor set the language for what is medically necessary, they’ll have all sorts of things they will come up with as being medically unnecessary on the back end. You’ll get your EOBs, and you’ll see that the payment is exactly zero dollars because somebody at the payor level determined that whatever service you provided was medically unnecessary.”

When negotiating, Fenton said, never forget that payors need you. “They need to have a network that they can sell to the big employers before they can make any money,” he said. “So capitalize on what you bring to the table: geography, equipment, modalities, your radiologists’ qualifications, and reputations. If you’re ACR-accredited, use that to your advantage as well. They ought to be paying you for it.”