Keith Borglum, CHBC
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Q: I have been offered a capitated contract from a plan representing around 30 percent of my practice. If I don't accept it,
I might lose the patients in that plan. How do I determine whether I should accept the offer? A: Taking capitated contracts, or discount-contracts with risk-withholds, involves risk, which can result in higher or lower
income. You should not take risk if you cannot manage it or if you cannot survive the failure.
The margin of error is smaller and consequences greater than many physicians realize. For example, a five percent reimbursement
reduction (for example, loss of bonus) can result in approximately a 35 percent loss of after-expense, after-tax net income.
The myriad techniques for managing capitation successfully in the solo or small-group practice are outside the scope of this
column but certainly include:
- Know your statistics, including fee-for-service equivalence, per contract, per month, per patient encounter, and in comparison with others in
family practice. Statistical studies are available from the Medical Group Management Association at
http://www.mgma.com and the National Society of Certified Healthcare Business Consultants at
http://www.nschbc.org.
- Achieve at least the 65th percentile for ambulatory encounters compared with national statistics for primary care physicians. In other words, have better-than-average efficiency.
- Read and understand your managed care contracts before signing them, because plans may prohibit you from using your own lab facilities as well as performing your own echocardiogram,
ambulatory blood pressure monitoring, and other testing on patients they cover.
- Become an expert in pay for performance, carve-outs, formularies, pre-authorizations, admits, emergency room penalties, specialist panels,
co-pays, contracted ancillary services, coding, non-covered services, cost-reimbursements, and other relevant matters.
Determine the impact on your practice of the loss of 30 percent of your patients, even though some likely will switch plans
to stay with you, reducing your losses. If your patient wait list usually is at least two weeks long for non-urgent appointments,
then the impact may be negligible because the change will reduce your wait list only by one-third, and your day-to-day productivity
with remaining patients will remain the same. If your patient wait list usually is shorter than 2 weeks in length, however,
then loss of the patients may be financially disastrous.
Medical Economics Consultant Keith Borglum, CHBC (left), of Professional Management and Marketing, has been a licensed practice broker, appraiser,
author, and management consultant to physicians for more than 25 years, is based in Santa Rosa, California, and practices
nationally. Send your practice management questions to mepractice@advanstar.com
.
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