Insurers share doctors' financial pain, worry about networks

Health plan executives expect contracted physicians will be hit hard by the recession -- but there's no indication that concern will affect payments.

By Emily Berry — Posted Feb. 9, 2009

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About three-quarters of surveyed insurance company executives said they expect doctors to have cash-flow problems because of the economic recession, and were concerned about the impact on health plan networks.

Experts say physicians shouldn't expect that concern to result in more money from insurers.

Business consulting firm CSC surveyed health plan executives in November 2008 about how they expected the recession to affect their business.

Most of the survey didn't deal with physicians directly, but the last question asked executives how they expected doctors, called "business partners," to fare in the recession.

According to CSC's report, "One executive commented that the situation for primary care providers was especially problematic because their financial situations were fragile before the recent crisis."

The CSC survey also revealed executives' expectations that the recession would mean putting off big projects, cutting staff and looking for new ways to make money. Onlookers say it's unlikely contracts with doctors will be more generous.

"I have not seen a softening of the attitude yet," said Charles Thomason III, president of Medical Management Associates, an Atlanta-based practice-management firm. "In fact, quite the contrary. Recently in opening negotiations with a managed care plan in terms of, 'We need to talk about reimbursement,' arguing from a viability standpoint, the plan's response was, 'That's their struggle. We are unable to have any fee negotiations because we're struggling with our own economics.' "

Ted Epperly, MD, a family physician in Boise, Idaho, and president of the American Academy of Family Physicians, said he doesn't expect to see insurers offer higher payments to help doctors weather the recession.

"I think insurance companies for the most part are very short-sighted," he said. "They only see one year, maybe two years at a time in terms of their own budgets."

A spokesman for America's Health Insurance Plans, the health insurance trade group, declined to comment on the survey results.

Individual plans have pitched their pay-for-performance programs as a financial boost for well-rated doctors, and the plans that offer these programs say real-time claims adjudication and online eligibility checks are a way for physicians to better anticipate income and collect the correct co-pay or coinsurance amount from patients.

Both Dr. Epperly and Thomason said insurance executives are right to be concerned for the survival of physicians' practices.

"With poor reimbursement before the economic crisis, many of our family practices were at small margins," Dr. Epperly said. "I think some will not make it."

Thomason said practices in his part of the country began struggling to survive last year.

"We've already seen several physicians have gone out of business altogether," Thomason said.

It's good that insurance executives recognize what's happening to doctors, Dr. Epperly said. "But money talks. Until they do more than just lip service with this, until they actually pay for the value of the services of what a family doctor and primary care physician can provide, we're going to see this continued problem."

Thomason said few physicians fit into the category of "must-have" for insurers, and often an insurer represents such a large market share that a physician has little leverage in contract negotiations.

"If you are negotiating with a Blue Cross or Blue Shield that might have a 50% market share, you can't afford not to participate," he said.

Ron Rosenberg, founder and president of Practice Management Resource Group, a consulting firm based in Tinley Park, Ill., said the dynamic between insurers and physicians in a recession will still depend very heavily on the individual market, just as in good times.

But no matter what the dynamic, "It's doubtful they'd ever say, 'We're going to pay you more.' "

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Health plan leaders weigh in on recession

CSC, a consulting firm, surveyed 30 executives at health insurance companies in November 2008, asking how their businesses are affected by the recession and what they expect in the near term. The 26 responders to a question about the recession's impact on physicians said financial pressures could close practices and cause the plan's network of medical professionals to shrink.

How will the economic downturn affect other business partners?

73%: Solvency (cash flow interruptions) 54%: Network stability (access/availability) 31%: Quality of service and care

Note: Respondents could choose more than one answer.

Source: CSC, "Insuring the future: health plans respond to the financial crisis." Released December 2008 (link)

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Everyone is hurting

A survey asked health plan executives to anticipate the impact of the economic crisis.

Compared with 2001-02, how will the current economic downturn impact your organization?

74%: Bigger impact

13%: About the same

3%: Smaller impact

3%: No impact

7%: No opinion

Which indicator does your organization use to predict and plan for the effects of overall economic changes?

69%: Unemployment

55%: Health care inflation

31%: Investment performance

14%: General inflation

7%: Other

Note: Respondents could choose more than one indicator.

Source: CSC, "Insuring the future: health plans respond to the financial crisis," released December 2008 (link)

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Insurance changes ahead

The survey asked health plan executives how the economic downturn might affect the demand for their products.

Anticipate increase Anticipate decrease No change
Individual products 48% 10% 21%
Group sales 7% 45% 28%
Government programs 69% 14% 10%
Small group renewals 12% 54% 19%
Large group renewals 12% 31% 38%
Consumer-directed plans 67% 5% 19%
PPOs/EPOs 29% 24% 38%
HMOs 43% 14% 38%
Traditional products 5% 38% 43%

Note: Not all respondents answered every question.

Source: CSC, "Insuring the future: health plans respond to the financial crisis," released December 2008 (link)

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