The American College of Physicians/American Society of Internal Medicine has defined managed care as “a system of health-care delivery provided by contracted providers in which the entities responsible for financing the cost of health care exert influence on the clinical decision-making of those who provide the health care in an attempt to provide health care that is cost effective, accessible, and of acceptable quality.”

Managed care is actually a spectrum of health-care delivery systems ranging from managed indemnity insurance through preferred provider organizations (PPOs) and point-of-service (POS) plans to various types of health maintenance organizations (HMOs). Collectively, these organizations are called managed care organizations (MCOs). To a greater or lesser extent, all managed care systems attempt to shift financial risk in one way or another to the providers of care.

In most cases, the patient’s initial contact is with a health-care provider, conveniently called a primary care provider (PCP). This person is usually a physician, such as a family medicine, family practice, or general practice physician, but often the PCP may be a physician who has specialized in internal medicine or an internist with a subspecialty (e.g., endocrinology) who enjoys practicing primary care in addition to his or her subspecialty or does not have enough subspecialty work to fill his or her schedule. The PCP can also be a physician extender, such as a nurse practitioner or a physician assistant. Some MCOs use physicians in large clinic-type settings in an effort to control costs. In other situations, PCPs function out of their usual private practice offices—in a sense, mixing their private (or non-MCO) patients with their HMO or PPO patients.

There has been a movement over the past few years to allow pediatricians to become PCPs for children and for obstetrics and gynecology specialists to become PCPs for women of childbearing years, who often have no need to see other types of physicians.

A patient is allowed to see a subspecialist, such as an endocrinologist, only with the recommendation of a PCP. Usually, an endocrinologist is not allowed to function as both a PCP and a subspecialist within a given HMO. In these situations, when a fully trained endocrinologist is serving as a PCP, he or she cannot even perform specialty-type procedures and must refer patients to another endocrinologist.

After an MCO has established itself in a community, it begins to develop a panel of all the providers it requires, including PCPs, medical subspecialists, surgeons and surgical subspecialists, pediatricians, obstetricians-gynecologists, and dermatologists. Simultaneously, the MCO contracts with hospitals (strategically located around the community that it wants to “penetrate”), nursing homes, home health agencies, physical therapy centers, dialysis centers, outpatient diagnostic centers, clinical (commercial) laboratories, and, sometimes, even outpatient diabetes education centers or dietitians.

The panel of providers is published yearly in a directory that goes by a variety of names (e.g., preferred provider list) and is distributed to all participants of the MCO. This directory is sometimes called the list. It is used by patients to determine which PCP is available for them to use (although in some HMOs, new patients are immediately assigned to a PCP of the HMO’s choice). The directory is used by a PCP to know which subspecialists, diagnostic center, and laboratory to use. It is also used by the MCO itself as a marketing tool to solicit business for itself by proudly showing which subspecialists belong to its panel of providers. It is therefore necessary to be on the list to receive referrals from this HMO. However, your presence on the list as a subspecialist does not mean that you will ever receive referrals. The health care for the MCO is then provided by this entire group of health-care providers, all of whom are under contracts with the HMO to provide the care in the manner and for the price negotiated. Thus, the MCO has managed to do what the health-care system was never able to do by itself—organize all the health care into one unit.

In some cases, the POS option allows the patient to see any specialist, although the reimbursement schedule is different. In addition, the patient’s out-of-pocket expenses (copayment) are often much larger. The POS option differs greatly among insurance companies that offer it.

When one looks at the managed care system from afar, it is not so different from any other business unit that has to negotiate with vendors to provide services that it cannot provide on its own. Think of a business unit as the cruise ship industry, which negotiates with its own employees, as well as with entertainers, doctors, food suppliers, fuel suppliers, ports, and travel agents, to provide its customers (passengers) a total package for their enjoyment. So have the MCOs attempted to organize the U.S. health-care system. It is clearly a private, non–government-regulated, for-profit (in most cases) system with the primary goal of earning a profit for its shareholders while attempting to contain costs for the entire health-care system. Not-for-profit MCOs are not necessarily any more efficient in providing the care to their members and often have the same fiscal problems as for-profit MCOs.

A PPO is a plan, as originally conceived in the 1990s, that contracts with independent providers at a discounted fee for service. When the PPO systems first started, their representatives would approach a PCP or a specialist and offer a discounted fee schedule to a physician in exchange for the potential of being specifically referred a group of patients who otherwise would not be able to see that physician. There developed the concept of panels (i.e., the lists discussed earlier), in which a list of accepted providers would be given to patients covered by the plan, who must agree to use only the physicians on such a panel for their care to be covered by the plan. This concept has been modified many times (see question 12).

HMO was originally defined as a prepaid organization that provided comprehensive health-care services to voluntarily enrolled members in return for a prepaid fixed amount of money. Nowadays, an HMO can be a health plan that places some providers at risk for medical expenses or a health plan that uses PCPs as gatekeepers.

As pressure was placed on businesses with large numbers of employees who were not happy with the original types of plans and the costs of the yearly premiums of certain plans, many other insurance options were created.

Blended policies include PPOs with an assigned PCP and full coverage for specialty referral within the network of contracted providers but partial payment for use of specialists outside the network. Plans can have different deductibles for office visits, hospitalizations, and brand-name versus generic medications. In some HMOs, an entire clinic provides all the health care, and referrals must be made internally. Other HMOs may contract with certain physicians within a community to be PCPs and with other physicians to be the specialists. Referrals may be scrutinized carefully, and PCPs may be indirectly penalized by withholding bonuses or even reprimanded when they refer too many patients to specialists. There are many more plans as insurance companies try to provide options to employers that meet the needs of employees but keep the cost down to employers. In many MCOs, a physician must provide care for both HMO and PPO patients, although sometimes with different fee schedules. Some MCOs allow physicians to participate in one or the other type of organization.

As many options are there are for a physician to practice, such are the options for joining MCOs. In some cases, an endocrinologist is employed by a faculty group practice of a large medical center or a large group practice, in which all members are participants in the specific plan. He or she is most likely to become a provider as soon as his or her credentials are approved by the MCO. In areas of the country with a shortage of endocrinologists, you will be approached by many MCOs to participate immediately. For the most part, if an endocrinologist decides to practice solo or joins a group practice in an area where the MCO is satisfied with the doctors already on the panel, joining the HMO can be difficult; in some cases, it may be impossible. Trying to open a solo office for general endocrinology in an area of great HMO penetration may be extremely difficult and frustrating. Sometimes, however, the MCO is under pressure to increase the number of endocrinologists, especially in certain geographic areas, and welcomes the applications of new doctors. At other times, MCOs receive specific requests from patients or employers to include in their panels certain groups of doctors who were not previously participants. In general, the process of application, review of application, and final approval for participation can be quite long, maybe even more than 6 months. During this time, a physician cannot see patients for the MCO.

After a PCP determines that he or she does not have the experience or expertise to treat a certain endocrine problem, the patient is referred to your office. Sometimes the referral is made by the patient’s HMO or “center,” as it is often called. The patient must have in hand some kind of a referral form, either an authorization form or a special slip of paper giving you the specific authority to evaluate and treat the patient. Without the referral form or some kind of definite referral from the center, you will not be compensated for the consultation visit. Each subsequent visit must also be authorized in the same manner, or payment will be withheld. It can be frustrating when a patient arrives for follow-up at the physician’s office without the authorization form. Naturally, the doctor wants to see the patient and has blocked out the time in his or her schedule for the visit. Nonetheless, the HMO will definitely refuse to back-issue a referral form, and, most likely, the doctor will receive no compensation for the visit.

In general, you will be allowed to perform a history and physical examination and order simple diagnostic tests without hassle. Blood tests should be allowed, although the samples usually have to be sent to the laboratory with which the MCO has contracted (see question 17). Other tests have to be approved in writing by the HMO center or by the main HMO office, depending on the individual company’s policy. Approval for simple procedures, such as thyroid scans, ultrasound studies, radioactive iodine treatment, and even fine-needle aspiration (FNA) biopsies can take hours to days. Some HMOs require that PCPs schedule all tests. This can be a problem because you may not know when or where the study is scheduled or when to have the patient return to discuss the results. The more expensive a test is (e.g., magnetic resonance imaging), the more difficult it is to arrange.

Although many endocrinologists have their own laboratories, accredited to perform certain endocrine tests, you usually cannot use POLs for HMO patients. Often the HMO has arranged special fees with commercial laboratories. This situation can create logistical problems in your office if you work for several HMOs, all of which use different commercial laboratories. Your laboratory technicians must keep straight which specimens go where. In addition, some HMOs require that the patients have all blood tests drawn at the office of the PCP. This requirement is especially a problem because sometimes you will not know whether your patient went to the PCP’s office to have the blood drawn, and the test results may not be sent to you until the patient returns for a follow-up visit. You may have to call the PCP’s office to have the results given to you over the phone or by fax.

Endocrinologists often perform FNA biopsy of a thyroid nodule. Most endocrinologists trust the interpretations by one particular laboratory, often at a university setting. The MCO may not have a contract with that laboratory and may require you to use a totally different laboratory for FNA cytology interpretation. Sometimes the pathologists at that laboratory may not be used to interpreting thyroid FNAs, and the results you receive may not be as accurate. This particular problem is being addressed by the American Thyroid Association and the College of American Pathologists.

Obviously, this problem is highly frustrating for both patient and physician. The concept of long-term loyalty has been changed. Occasionally, a POS option may be available in the new plan, but often the patient grows tired of paying the extra copayment. Sometimes a physician will give the patient a discount to continue their professional relationship. At other times, patients feel so strongly about the opinion of their doctor that they pay the fee out of pocket to the physician, especially if the patient must be seen only once or twice a year. There are movements in Congress to allow the continuation of the patient-physician relationship. Until such time, the physician has to understand that losing patients in this way may be unavoidable. He or she should always welcome the patient back to his or her practice if the insurance situation changes.

After endocrinologists finish seeing the patient, they usually complete a “superbill” by entering the type of office visit performed, any diagnostic tests ordered that are performed in house, and the proper diagnosis code covering the patient’s medical condition. The doctor then turns the chart and superbill over to a clerical person, thus ending the patient-physician interaction of the day. What happens thereafter is usually a total mystery to most physicians. A secretary or administrative assistant usually enters the charges and the diagnosis into some type of physician management system, in which an insurance claim is generated and sent electronically or by paper to the insurance carrier. The carrier examines the claim, and eventually a check is cut to cover what the carrier deems appropriate. The check returns to the physician’s office after some period of time, and a clerical person posts the payment received in the patient’s account. There was somewhat of an honor system in the past, whereby the insurance company trusted the physician explicitly. This is no longer the case.

MCOs are notorious for holding back payments. There are all kinds of excuses:

 Deliberate down-coding (i.e., stating that the service provided was really a level 3 service, even though the claim was submitted at level 4)

 Bundling (e.g., including the charges for the physician component of treatment for a hyperthyroid patient with the cost of the radiopharmaceutical)

 Delayed payments (holding onto the claim for 6–8 rather than 2–3 weeks)

 Wrongful denial of claims (e.g., stating, inappropriately, that there is no coverage, no authorization, a nonexistent preexisting condition, or improper completion of the insurance form)

These problems result in inappropriate payments (always less than expected), prolonged time before claims are finally resolved, and endless amounts of paperwork, administrative time, and loss of income. In fact, a lawsuit for using such practices that was filed on behalf of the Florida Medical Association, California Medical Association, Texas Medical Association, and Medical Association of Georgia was settled against five MCOs. For this reason, physicians must understand all the potential problems before they enter into contract to see patients for a specific HMO or continue seeing their patients without checking with their billing offices to find out what kinds of problems may exist.

This becomes a personal and financial decision that each physician or group practice has to make. Some doctors work for a company strictly on a salary basis. Seeing all patients is just part of what they have to do. Physicians who are in solo practice or small groups must be aware of all the problems so that the decision to begin or continue seeing patients is made for the right economic reasons. Many doctors react out of fear and anger, the worst emotions to invoke when an economic decision has to be made.

Doctors must be involved in all aspects of the MCO relationship, from contract negotiation to ongoing monitoring of day-to-day problems in seeing patients for the particular MCO and awareness of reimbursement problems. The practice must monitor collections, be on top of claims, and resubmit claims that were rejected, down-coded, or held for a long time without payment. The doctor must make sure that the collection of claims is not forgotten and that all claims are actively pursued, especially when third-party payment (i.e., from an insurance company) is involved. Doctors or their staff must have a policy in force to ensure that referrals are obtained, claims are submitted on time, and proper payments are received.

Doctors in small groups must make sure that the MCO in question is contributing a significant amount to the gross revenue of the practice to be worth the “hassle” involved in seeing its patients. As a particular doctor becomes busier and busier, it may be more worthwhile to replace patients from an HMO with a low reimbursement schedule with patients from HMOs with higher reimbursement schedules. Perhaps the doctor can see only patients covered by higher-paying PPOs or choose not to be involved in MCOs at all, if there are enough patients to fill his or her schedule. For those physicians new in practice, it may be worthwhile to see more and more patients, despite the associated problems.

The decision to join MCO panels or to resign from a particular panel should not be emotional, such as out of fear that if you do not accept a contract with what you consider an inadequate reimbursement schedule, another endocrinologist will do so. In addition, do not make a decision in anger, when a company denies payment or down-codes a series of claims without good reason. Work out the economics associated with leaving, rather than resigning out of anger. In fact, first try to work it out with the MCO. Then look at all these issues, and decide whether resignation is appropriate for economic reasons, not emotional ones.

Contracts for most HMOs come up for renewal each year. Doctors have a chance to decide whether the contract should be continued. The decision to continue should be based on facts, rather than feelings: revenue tracking, handling of claims, and fee schedule.

Doctors should track their revenue during each year from all payers to make sure that no single MCO becomes such a large percentage of their practice that dropping the company or, even worse, being dropped by the company would result in a gigantic loss of revenue. No one can say for sure what the ideal percentage should be, but some physicians use 10% to 15% as the ceiling for the cutoff. A doctor must be careful, however, in turning away new referrals from that HMO, because there may be some contractual obligations that must be followed.

Practice management software should be able to provide information, such as how many claims for each MCO were down-coded, bundled, or denied. How many claims were delayed in payment for more than 3 weeks? How many times did a billing clerk have to call the company before payment was finally received? Each time a claim is not paid properly or promptly, administrative costs are associated with collecting these fees. These extra costs effectively reduce the expected amount of reimbursement. In addition, talk to the secretaries to find out what kinds of hassles are encountered in receiving referrals, scheduling procedures, and getting laboratory tests done promptly. They can guide you in your decision.

After the decision is made to continue seeing the patients for an MCO, the physician must look at the fee schedule. Try not to sign a document that expresses reimbursement in terms of a percentage of Medicare or some other baseline. Try to be specific in providing a list of office visit codes that will be used and agree on criteria for judging what documentation is required for each level. Also provide the company with a list of procedures and tests that you perform in your office, and agree on a fee schedule. Make sure that the company signs off on the reimbursement expected for each item. This strategy will save a major hassle later when down-coding or denials appear.

Yes. Do not expect to understand the contract that is provided to you. Have an attorney, especially one well versed in health-care law, review it, and point out the potential problems. Many physicians are reluctant to spend the money to do so, but this reluctance is shortsighted.

Contracts are always up for discussion. Do not think that you cannot negotiate for terms other than those initially provided.

Unfortunately, yes. Most physicians go to medical school to learn how to become good doctors. They work hard during their residency and fellowship to learn as much internal medicine and then endocrinology as they can. Most likely, nothing is taught about practice management, contract negotiation skills, and cost-effective medical care. In addition, the traditional role of a physician as a healer of the sick without concern for compensation because doctors “always made a good living” is no longer applicable. It is becoming too expensive to run an office without being aware of the costs of every aspect of the practice, the revenue stream, and the “bottom line.” Some doctors sell their practices to avoid dealing with these problems, only to find out that working for a physician management company or a hospital that acquires practices, or very large groups, creates an entirely different set of problems that they never expected.

To have a financially successful practice, the doctor must have a totally different attitude from that of physicians of a generation ago. The doctor has to view practice as a business, with the provision of health care as only one part of the practice. It takes time, effort, experiential learning, and even mistakes to be successful. Doctors have high intellectual abilities. They must apply these abilities to learning the business aspects of their practices. Combining a career in clinical endocrinology with a successful income stream is certainly possible and should be the goal of all practicing endocrinologists.