Healthcare Industry/
Managed Care

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Financial issues dominate the concerns of managed care executives, according to a survey by the Managed Care Information Center. Fifty-eight percent of those polled cited financial issues as one of the greatest challenges confronting the healthcare industry today. Of the 58 percent, half cited costs as one of the greatest challenges while the other 50 percent said reimbursement issues dominated their thinking.

One respondent, a manager of group products marketing, cited cost trend mitigation as a chief concern. "Significant medical cost increases are pricing employers and individuals out of the market and decreasing the richness of benefits that the insured are able to afford."

An executive vice president of a consulting firm agreed and said cost is the greatest threat to the industry because "it is pricing people out of the private market and forcing a government solution. Costs are creating problems for business competition."

Respondents also cited drug pricing as a threat to the industry. The manager of healthcare reporting and market analysis for a physician organization said that too many systems are not paying the right amount for drugs. The prices, the manager said, are either "way too high or way too low" and are creating issues for everyone involved – payers, providers, patients and drug companies. An assistant director of a MCO agreed and said, "advertising created a demand for new brand name drugs and increases the use when other less expensive drugs may be just as effective."

The underlying fear among those citing the cost issues is that the government will intervene now that healthcare has become an election year issue. Reimbursement is always an issue in the industry.

"Competitive pricing in the market among insurers and PPOs is of concern to the provider community as the top insurers dominate in pricing and the smaller networks will have to receive better pricing from the providers in order to compete," said the director of a medical center.

The director continued, "This matter will affect the net revenue for providers by deepening pricing for the smaller networks or the business will transition to the larger insurers who in most cases have the deepest discounts."

A director of managed care for a physician organization said the decline in reimbursement rates by private sector payors and government payers is a threat. "We are expected to improve our quality of care through technology which is very costly while we are reimbursed less."

The president of Fagin Advisory Services Inc., Howard Fagin, said the fee schedule reductions by Medicare are impacting the rates provided by managed care payors. He noted that the survival of physician practices and growth in the number of physicians are dependent on practice income.

The president of a physician organization cited the top three challenges facing providers as 1) getting paid accurately according to the contract; 2) fighting against access to our contracts that is not specifically stated in the contract; and 3) continued downward pressures on reimbursement to providers. The executive said the greatest threat was that "everyone seems to think the problems in the nation’s healthcare system can be cured by paying the providers less."

The executive director of managed care contracting for a medical center said that "lowering reimbursement to hospitals is not the answer. Patients suffer. The MCOs pocket the profits at the expense of the consumer. Those patients who have little to no coverage also suffer since the hospitals can no longer afford indigent patients."

Address: The Managed Care Information Center, 1913 Atlantic Ave., Ste. F5, Manasquan, NJ 08736; (732) 292-1100, http://www.themcic.com.

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Source: Executive Report on Physician Organizations, May 2008