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AIS's Health Business Daily
Featured Story March 31, 2008 Historically Rocky Marriage Between Health Plans and Network Providers Is Becoming Even More ContentiousReprinted from HEALTH PLAN WEEK, the industry's leading source of business, financial and regulatory news of health plans, PPOs and POS plans. By Steve Davis, Managing Editor, (sdavis@aispub.com) The historically rocky marriage between health plans and their network providers is crumbling, according to two recent surveys of hospital executives and physicians. And, as has happened in the past, failing relationships can ultimately have a negative effect on earnings for health plans. The 113 hospital executives who responded to one of those surveys early this year gave three of the nation's five largest health plans more negative scores than positive ones. By far the most disliked and least trusted health plan operator was UnitedHealth Group, which received an unfavorable rating from 91% of respondents. The average unfavorable rating among the other plans was 41%. United, however, was not the largest insurer in terms of revenue for the average responding hospital, and its reimbursement rates were not significantly lower that those of the other plans. Among the chief complaints against United were ones tied to claims denials, low reimbursement rates and an unwillingness to "fix claims." When asked which health plan was most difficult to negotiate with, 64% of hospital executives cited United, while 2% pointed to Aetna, Inc. United also was ranked as the slowest to process and pay claims. Overall, Aetna fared the best, with only 37% of respondents citing an unfavorable opinion of the company. Results of the survey were released this month by Santa Barbara, Calif.-based Davies Public Affairs. All participants were responsible for negotiating contracts with health plans and represent more than 10% of the nation's hospitals, according to Davies. United was quick to dismiss the study as "narrow" and "non-scientific." The study failed to reflect the favorable relationships that United has with most of its 4,800 network hospitals, says United spokesperson Daryl Richard. "We work directly and collaboratively with hospitals to decrease administrative cost and complexity so that hospitals receive fair compensation for services, at the same time balancing overall health care costs in line with the Consumer Price Index on behalf of our customers," he says. Joseph Paduda, president of Health Strategies Associates, says hospital executives most likely to respond to this type of survey are those who have complaints or who have had a negative experience with a health plan. Health plan consultant John Gorman, CEO of Washington, D.C.-based Gorman Health Group, LLC., says he's not surprised that hospital executives rated United so poorly. "They wield the biggest club in the market and are not afraid to use it" during negotiations, he says. "But doctors and hospital execs don't like feeling bullied." Gorman says that health plans could do a lot to improve relationships with providers by paying claims in a timely and accurate manner and by "manning the phones" with people who can answer questions and solve problems. "You don't have to pay astronomically high rates," he adds. "This is fundamentally a cash-flow matter for providers." Paduda says providers often are caught between the patient and the health plan because they know the patient is liable for any charges the health plan denies. Another problem from the perspective of providers has been the rapid consolidation among health plans over the past several years, says one industry observer and hospital board member who asked not to be identified. When a health plan contracts with a hospital, there is an expectation about what that health plan will be like to work with, he says. This can create problems when that insurer is acquired by another company with a completely different philosophy, he explains. Henry Loubet, a senior vice president in the Oakland, Calif., office of Keenan & Associates, says the relationship between providers and insurers is critically important to the managed care industry. But, he adds, those relationships have worsened in the past few years "which is troubling." According to Loubet, health plans and providers need to be aligned in order to provide the best care for the members they both serve. Low ratings in areas such as honesty and candor could be in part a reflection of how tough United is when it comes to negotiating rates, he asserts. While health plans need to be more transparent by sharing information on how they make their decisions, hospitals and other providers also need to be more transparent about their rates as well, he says. Between 1996 and 1999, Loubet was the CEO of United's West Coast operations. "I think a lot of health insurers understand fundamentally that they need to do a better job in dealing with providers," Paduda adds. Aetna Leadership Change Improved Relations Aetna admits it had dismal relationships with many of its providers in the mid-to-late 1990s after the company (then Aetna Life Insurance Co.) acquired US Healthcare, Inc. for $8.9 billion. The acquisition made Aetna the nation's largest health insurer and a target for much of the building backlash against managed care. Aetna came into new markets with a swagger and antagonized providers, Paduda says. "They would say, 'here is what we will pay and if we deny a procedure, that's just the way it is,'" he recalls. But that model led to tremendous backlash against managed care and prompted providers to drop out of Aetna's networks. "Back then, we had a lot of focus on how to collaborate with [providers] to achieve our goals rather than sitting across the table from them and hammering out the best deal," explains Allen Karp, vice president of health care delivery at Aetna. On Sept. 15, 2000, Aetna named John Rowe, M.D. — the former CEO of Mount Sinai N.Y.U. Medical Center and Health System — as its president and CEO. One of his key missions was to improve Aetna's relationships with providers. In the month before Rowe was hired, Aetna reported a 17% drop in second-quarter net profit while its competitors posted strong earnings. Rowe "helped lead a cultural change in the way we approached providers….and made a number of fundamental changes in the way we interacted," according to Karp. One of those changes, he says, was the development of a provider service center staffed by people who were "subject-matter experts" on provider issues. Previously, providers that called with problems were routed to the insurer's customer service department, where multiple transfers were common. Aetna's profits have shown strong growth in recent years. Karp says it's important for health insurers to meet regularly with health system and hospital executives to discuss ways to improve efficiencies. "Then, when you get to the [contract] negotiating phase, you've already got a relationship," he explains. "But it's not always a panacea…We might have [a change] we know providers won't like. When that happens, we have a dialogue and reach out to them in advance." Paduda agrees that Aetna has made big strides in improved provider relationships over the past decade. "When there's a dispute, Aetna's [modus operandi] is not to immediately deny the claim, but to look for more information and reach an accommodation. Providers need to feel like they are being dealt with professionally," he says. "You are always going to have somewhat of a contentious relationship with providers when you talk about fees," Karp says. But if you have an ongoing dialogue, you can get things done that you otherwise couldn't."In the days after the US Healthcare acquisition, he says, Aetna might get providers to agree to a rate, but the backlash was ultimately damaging to the company. Insurers Are Equally Bad, Texas Docs Say The relationship between physicians and health plans has long been more adversarial than collegial, says Lewis Foxhall, M.D., vice president for health policy at the University of Texas M.D. Anderson Cancer Center and president-elect of the Houston-based Harris County Medical Society (HCMS). Results of an HCMS member survey last December prompted the six largest health plans in the Houston area to meet with HCMS members to determine how to resolve some of the issues that were uncovered. Nearly 500 physicians from Harris and surrounding counties responded to the survey, which asked them to rate Aetna, Blue Cross and Blue Shield of Texas, CIGNA Corp., Humana Inc., UniCare and United. "The six health plans were uniformly bad. And that makes it even more challenging because we can't point to any [insurer] that is doing a great job," Foxhall tells HPW. According to the study:
This isn't an area where a big public relations campaign isn't going to do it, says Gorman. Doctors just want to get paid for services rendered, and they want insurance companies to add value for their patients instead of getting in the way of their care, he explains. Gorman suggests that the vast amounts of claims and clinical data held by health plans could be used to give providers actionable data about their patients. Foxhall agrees and says there is great potential in wellness, prevention and screening programs where health plans could pay a role in improving the overall health of their members. "But we haven't seen much effort on their part," he says. To see a copy of
the Davies report, visit www.daviespublicaffairs.com.
To see a copy of the HCMS report, visit www.hcms.org/Template.aspx?id=468.
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