Trends in Managed Care Cost Containment: What Will They Think of Next?

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A former managed care executive predicts that accreditation/credentialing and cost transparency are next up in insurers’ campaigns to contain imaging costs Over the past few years, the imaging industry has come under attack by managed care companies. Many people in the industry still wonder why imaging has become such a target. Imaging, when done properly, can be an extremely cost-effective diagnostic tool that, in many cases, can help eliminate more costly and invasive procedures. If imaging is less invasive and less expensive than other diagnostic procedures when used appropriately, why are the managed care companies doing so much to curtail its use rather than promote it? It is imperative to recognize that not all imaging being done is appropriate. For example, when I was working for a large managed care company, we learned of a neurologist with his own MRI machine who had scanned a patient more than 30 times in one year. Anecdotal cases like these cause managed care companies to enact procedures that ultimately affect everyone. Another factor is the fixation by the managed care companies on the trend. In the world of managed care, everything revolves around being able to predict the trend (or inflationary nature of health care costs). If you can predict it, you can rate for it. In addition, if you can influence (reduce) the trend, you can improve your bottom line. For managed care companies, it is all about profit. In the area of imaging, we have seen cost increases of more than 20% for the past several years. Managed care companies look at this figure and immediately go into reaction mode. They do not consider the fact that increased use of imaging, if done correctly, can actually reduce the total cost of care. Rather, they focus on an area where costs are increasing at a rate higher than that seen anywhere else, and they develop strategies that attempt to combat that rate of increase. The first strategy employed by managed care in an attempt to attack overutilization was the development of precertification and prior-authorization programs for high-end imaging such as CT, MRI, and PET studies. This mother-may-I approach is right out of the standard HMO playbook. In the arena of imaging, this strategy got a strong dose of steroids from the explosion of radiology benefit management (RBM) companies. RBMs like MedSolutions (Nashville, Tenn); National Imaging Associates/Magellan (Avon, Conn); American Imaging Management (Chicago); and others sprang up to help managed care companies counter imaging increases. The RBMs took prior authorization to a new level. They not only developed clinical protocols for the approval or denial of imaging requests, but also developed tools and strategies to direct patients to the lowest-cost provider in the area. By doing this, they could affect the trend even if they were unsuccessful in reducing utilization. Consider the busy front-office person at a primary care physician’s office. The physician orders an MRI for a patient and assumes that the study will be done at the local imaging center, staffed by radiologists that he or she knows and trusts. The front-office person realizes that this scan requires precertification and calls the RBM. After a time-consuming exchange of information, the scan is finally approved. At this point, the RBM staff member offers to schedule the patient at one of the network’s facilities, as a service to the requesting office. Looking at the pile of work on the desk, the front office person is grateful for the assistance and agrees, not knowing that the RBM is going to schedule the patient’s examination at a less costly mobile machine that has remote radiologists doing the interpretation. The result may be a nondiagnostic study, but it will produce a reduction in cost. This is just one example of how RBMs are employing new strategies, above and beyond the simple clinical review of imaging requests. What’s next? By now, radiology providers are familiar with RBM tactics and have adjusted their practices to either combat or deal with them. What will be the next set of strategies to face? The next wave of attacks on imaging will come in two main areas: accreditation/credentialing and cost transparency. Depending on the provider’s position in the marketplace, these approaches could have a positive or negative impact on business. What is clear is that everyone in this industry should understand these approaches and develop strategies to address them proactively. Accreditation and Credentialing For many years, managed care companies have been concerned about imaging technology that is owned and operated by nonradiologist specialists. The concern of payors is that this kind of legal self-referral drives up utilization significantly. At first, it was assumed by the managed care companies that the RBMs and precertification would be successful in addressing this problem. That belief has since fallen by the wayside. The managed care companies now believe that specialists who own these advanced imaging machines have become adept at documenting the necessary symptoms and conditions in order to get clinical approval for these scans. Simply put, they believe that these physicians have learned how to game the system. A new strategy is necessary. Over the next few years, most major managed care companies will have an accreditation process for advanced imaging. If a neurology group owns and operates an MRI unit, that machine will have to pass a payor’s accreditation standards to be approved for claims payment. Some of these standards may be as straightforward as having ACR accreditation, while others will be much more detailed. Some payors will adopt standards requiring that at least five different imaging modalities be performed at the location before advanced imaging is approved. The whole purpose of this approach is to make it difficult for nonradiologist physician groups to perform advanced imaging within their practices. As this becomes more widespread, we will see some physician groups get out of advanced imaging altogether, while others will try to form creative partnerships with local radiology groups. Either way, it is imperative for all imaging providers to take a long look at their situations, as well as those of their competitors, and develop a plan that will allow them to stay ahead of these upcoming changes and take full advantage of the options available to them. Cost Transparency The latest buzzword for the managed care companies is transparency. They are using this word (along with one of their other favorite new terms, consumerism) to help spin their latest strategy, designed to attack high-end imaging as well as other services. Payors are launching what they call transparency tools to help the consumer make wise financial decisions. Do you see the spin? Transparency sounds like a good thing because the opposite is secrecy and that is bad. Consumerism is another feel-good word because it sounds like consumer protection. The same strategy was used to control the cost of pharmaceuticals a several years ago. When managed care plans started having trouble controlling pharmacy costs and trends, they developed three-tier drug benefit plans. These plans included very low copayments for generic drugs (which have the lowest cost to the payor), a higher copayment for preferred-brand drugs, and the highest copayment for nonpreferred-brand medications. What separated the preferred from the nonpreferred drugs was their cost to the payor. Drug companies that discounted their drugs more for the payor could get them placed in the preferred-brand category. This strategy was very successful in getting consumers to demand lower-cost drugs or generics to reduce out-of-pocket costs for their medications. Keeping that scenario in mind, consider the implementation of that three-tiered strategy in the imaging-center environment, where you may have a hospital, a radiologist-owned imaging center, and a single-modality mobile MRI as options in the same community, but all delivered to the consumer at different price points. In the case of imaging, these tactics will take the form of either price transparency or tiered networks based on benefit design. The price transparency will be done by publishing information about the cost or average cost of a procedure such as an MRI done at different locations. The cost picture will show the hospital as having the highest cost, the imaging center with the second highest, and the mobile MRI with the lowest. The idea is to educate the consumer who is paying a coinsurance percentage to look for the lowest-cost option and demand it, as for a generic drug. Information may also be sent to ordering physicians stressing that they should use the lowest-cost option to help their patients reduce their out-of-pocket expenses. Several managed care executives have indicated their intent to implement this type of strategy through comments that they believe in full disclosure, and that all provider contracts and fee schedules should be made available to consumers on their Web sites. Although we are still a long way from that becoming a reality, it does point to what the managed care companies hope to see in the future. The tiered network approach will look very much like the pharmacy approach. Managed care companies will start offering benefit plans that have different copayment levels based on the cost of the provider’s service. In the case of an MRI study, members may have a benefit that calls for a copayment of $100, $200, or $300, based on the cost rating of the provider. They will be asked to look at a Web site or directory to check the provider’s rating and the associated copayment. The managed care companies believe that this will compel the member to ask the ordering physician to schedule the study at a lower-cost facility. What’s wrong with these tactics? They completely overlook quality differences. It is one thing to have this type of tier structure for drugs, where it can be argued that a generic is the same as its branded counterpart. It is an entirely different story, however, when you attempt to characterize each MRI (and each radiologist reading the scan) as a commodity. There are too many examples of complex scans done on low-field machines, or being read by general radiologists, with results that are nondiagnostic. In many cases, the patient has to repeat the study to obtain the correct result. It is too much to ask of consumers to have to make that kind of quality determination. This kind of myopic focus—one that looks solely at unit cost—misses the bigger picture: the total cost of health care and reduction of waste or double work. Many payors will say that the increases in cost due to duplication will be more than offset by the total cost reduction that will be achieved by shifting larger numbers of patients to lower-cost settings. If we accept this argument, then we are saying that what matters is the total amount spent, not the individual patient. Consider the patient who gets channeled to a lower-cost provider who produces a nondiagnostic scan. That patient will either be forced to have the study repeated or to have an unnecessary (and more invasive) procedure done instead. In either case, the patient faces unnecessary increased costs and possible risks, not least of which is exposure to radiation from repeated scans. What is the best response to managed care’s campaign against increasing imaging costs? First and foremost, be alert. Watch for the use of these tactics and buzzwords in your marketplace. Second, evaluate your position in the marketplace and how these tactics are going to affect your operation. Third, develop a strategic plan designed around how you intend either to function in this new environment or to combat it. Get ready: a new wave is about to hit shore, and it is a big one. Additional Reading - Precertification: The Provider Foots the Bill