The big breakup: How to drop an insurer

Between low reimbursements and high hassle factors, there are times when dealing with a health plan seems like more trouble than it is really worth. During these times the question becomes, should I stick with the insurer and try to work out the situation, or should I drop the plan altogether?

Dumping a health plan might seem like a daunting task. But at some point, when the hassle factors outweigh the benefits, many doctors initiate this course of action for the sake of what's best for the long-term financial health of the practice.

Experts say this isn't a decision that should be taken lightly, and emotions should never enter the equation, let alone be the sole reason for dropping a plan. Instead, experts say a detailed analysis of the problematic situation should guide your decision about whether a plan is worth shedding.

"The decision is ultimately driven by the numbers and the data," said Robert Beck, MD, a family physician and vice president of medical affairs at HealthEast Clinics in St. Paul, Minn. "Over the years we have made some real tough [decisions to drop a health plan]. We said, 'We'll just bite the bullet and walk away from them.' "

Different practices have different ways of decision-making. But that decision-making process comes down to three steps: gathering evidence to decide whether to drop a plan; finalizing your decision; and gathering evidence after the fact to determine the effect of your decision.

Gathering evidence

You might suspect a certain health plan is causing you more problems than others. But first you need to gather evidence to make sure perception squares with reality.

Experts recommend that you look at least six months of past performance from the health plan in question, keeping track of such things as how timely payments were and how many claims denials the plan issued. They also suggest that you monitor reimbursement rates and how they are trending. The practice could keep track of the demeanor of the person who picked up the phone when anybody called the health plan. The same processes in evidence-gathering apply whether you're investigating a private health plan or a public plan such as Medicare or Medicaid.

Also, a practice should keep track of how other plans are doing in the same categories, so it knows whether one plan is significantly worse than another.

"Termination is really an old-fashioned weapon because you can't put it back in the box," said Todd Welter, founder and president of R.T. Welter and Associates, a practice management consulting firm in Denver. "The real way to win is get all the data you can. Find out as much as you can about them, and use termination as the last and final act."

Experts say you should engage the health plan in conversations about persistent problems before you decide to drop it entirely. Having documented evidence to justify your concerns is no guarantee you might get the plan to change its ways, but not having evidence guarantees that it won't. Welter said it is helpful to benchmark the poor-performing health plan against other insurers you contract with to demonstrate the problem -- say, late reimbursements. Then, you can illustrate to the plan how the late payments cause financial harm to your practice.

"A lot of physicians are afraid to talk to the health plans," Welter said. "They really don't need to be. They're huge organizations, but there's usually a contact that you can get to that you can have a business discussion with."

While gathering evidence, it's important to think about the problematic health plan in terms of the percentage of your business it represents.

Consultants say dropping a plan that represents more than 15% to 20% of your practice is risky because it might be difficult to make up those patients elsewhere. Conversely, a plan that makes up a smaller percentage of your practice and presents ongoing problems might be easier to drop.

The key question to consider is whether your practice can sustain any projected loss of patients. If the numbers say you're losing money on every patient, then the answer might be, yes you can. If the plan is not that much worse than others, then experts say it might be worth thinking twice before dropping it.

Finalizing your decision

After you've decided that dropping a plan is the right course of action, it's time to check your contract to make sure you do it right.

The first item you want to check for is the notification clause. Usually you need to send a letter to the plan at least 30 to 60 days in advance of the date you are dropping it.

Aaron Bloomquist, systems director for contracting at HealthEast, said part of your advance work involves knowing what patients will do after you drop their plan. He said you can survey patients to gauge their intentions.

"You always do some contingency planning," Bloomquist said. "You get information where you can. You make some assumptions, but the [percentage of patients] who stay [with the practice] is going to be paying at a higher level, and that's the tradeoff."

Bloomquist said to pay close attention to phone calls from patients asking questions about what to do. It's also helpful to contact other practices in your area to find out what their experiences were in keeping patients following a separation with a health plan. To compensate for the expected loss of patients, some practices choose to advertise for new patients.

Also, once you've terminated your relationship with the health plan, be sure that the plan removes your practice from their list of in-network physicians.

Now is also the time to think about your referral relationships. The best way to handle this is through written communication. Bloomquist said it's important to send out this letter promptly after the decision is made to drop the health plan to give your colleagues time to adjust to the change in the referral relationship.

Immediately after you've sent notice to the health plan severing the relationship, it's time to notify your patients. Quickly. Experts say it's best to be the first to reach patients before the plan sends out a notice to members. Some practices opt to send letters to patients, while other, larger practices have taken out advertisements in local newspapers to reach a greater audience.

"For the small guys, the letter is going to have the personal touch," said Sandy Page, a program manager for the health care financing division of the Colorado Medical Society. "For the larger [practices] it's going to have more of a business feel. Your main thing is your patients. You've got to make sure there's no break in their care. We do recommend putting in a records release form with the letter."

When contract negotiations reached a standoff late last year between Northern Ohio Medical Specialists and Medical Mutual of Ohio, the Sandusky, Ohio, practice decided to send notice to its patients and the community through a full-page advertisement in local newspapers.

"We wanted to notify the community that we were having problems with Medical Mutual," said Northern Ohio Medical Specialists CEO Brad Smith. "We wanted to prevent other businesses from carrying Medical Mutual."

Page said doctors should check their state's regulations about how much detail can be revealed to patients about contract negotiations, and how they factored into the decision.

In states such as Colorado and Ohio, physicians are free to go into as much detail as they are comfortable revealing.

But other states bar any mention of contract squabbles.

The aftermath

Once you've ended the relationship with a health plan, that doesn't mean the end of the relationship forever.

Experts say it's likely the plan will want to do business with you again. That's why it's important to continue to keep track of your practice's performance minus the dropped health plan.

Smith said despite the fact that Northern Ohio Medical Specialists refused to take a large reduction in reimbursement rates, they would still consider partnering with Medical Mutual in the future. "As long as it doesn't involve a cut," he said.

Still, practices should prepare themselves for the aftermath. Northern Ohio Medical Specialists, a 34-physician practice with about 180 employees, projects revenue to fall nearly $5 million in 2006, or about one-fifth of the practice's revenue that was tied to Medical Mutual of Ohio in 2005.

"We're going to have a hard time, [but] our physicians were prepared for that," Smith said. "They were still willing to say enough is enough."