Dropping an insurer requires care and analysis

The economic downturn has more physicians giving serious thought to dropping insurers who pay too little, or create too many hassles.

Approximately 55.8% of medical practices surveyed earlier this year by the Medical Group Management Assn. said they were renegotiating or eliminating low-paying commercial payer contracts as a way of dealing with the recession. This was an increase from the 50.4% that were doing so in 2009.

But deciding which insurer to drop and then, if appropriate, actually taking them off the rolls requires careful analysis and handling. "A lot of times physicians make these changes for some emotional reason, because something has happened that they are not happy about with a payer," said Marilyn Rissmiller, senior director for health care financing at the Colorado Medical Society. "Contracting is a business. They need to approach it calmly."

Experts say the first step is to assess how a particular company has performed over the past year.

Practice management systems have made the task easier and may give physicians more information when going in to discuss with an insurer. The billing staff should also be asked about their experiences.

Questions to consider include: What are the rates that a particular insurer is paying? How does what the insurer actually pays compare with what is billed? How long does it take an insurer to pay? What is the denial rate? Are preauthorization procedures onerous and frequently required? Is there something about a payer that makes it more difficult to work with than others?

"When you look at insurers side by side, it becomes very apparent where you are hemorrhaging," said Penny Noyes, president and CEO of Health Business Navigators in Bowling Green, Ky.

Experts suggest next looking at how many patients would be affected. An insurer that only covers a small percentage of a practice's population is a better candidate to be dropped than one that covers a larger proportion.

"If an insurer is tying up your practice and paying the least amount, and there's very little utilization, it may not be worth the time it would take to renegotiate," Noyes said.

Identifying a large insurer as the one with the lowest rates and the biggest hassles, however, does not necessarily mean a practice is stuck.

"I have known practices that have chosen to drop a contract with a larger health plan even though a number of their patients carried that insurance," said Rissmiller. "If the practice has a waiting list for new patients trying to see the physician, or, if they are willing to do some marketing, they should be able to fill the spots vacated by that payer's members who leave the practice."

Other issues to consider include how dropping an insurer may affect referrals from other clinicians, and whether cutting a plan from the rolls means that another will cover more than a quarter of a practice's patient volume. Most experts say that particular ratio would give one insurer too much sway over a practice. However, they acknowledge that it may be unavoidable in some areas of the country because of insurance industry consolidation.

"You want to look at the impact that dropping an insurer will have on your patients and on your financial bottom line," said Mark Jarvis, senior director of practice economics at the Ohio State Medical Assn.

After an insurer is chosen for elimination, the next step is to look at the contract to determine how it can be severed. This is usually done in writing, and the cancellation most likely will take affect anywhere from 60 to 180 days from the time it is received.

Physicians should then contact referring physicians as well as affected patients.

Laws on notifying patients vary from state to state. Sometimes the insurer is required to do so, although, no matter what the regulation, experts advocate that physicians send out their own notices.

Any communication with patients should avoid badmouthing a particular insurance company and include information about possible options, such as staying with the practice and paying an out-of-network rate, or transferring to another physician, experts said.

The letter also should advocate contacting the office if patients need additional guidance. Some patients may decide to stay with the practice, although there is no good rule of thumb as to how many will. An analysis of affected patients may give a practice some clues. Experts say those with PPO coverage may stay. Those on an HMO, who receive no benefits when going out of network, are more likely to leave.

"Whether or not the patients with PPO coverage -- particularly high-deductible plans -- would stay or go would be a question of loyalty and satisfaction," said Rissmiller.

If a physician does break it off with an insurer, experts also suggest doing it in the final months of the year. Patients with employer-sponsored coverage tend to choose their plans around this time, and they may be able to switch from the plan that a physician recently dropped to one that is still on the roster.

But experts also say a breakup may not necessarily be forever. It is not uncommon for physicians to decide not to work with an insurer, only to restart the relationship if identified issues are addressed.

"Sometimes what happens is the situation changes and the insurers comes back to the table," Jarvis said. "It's an opportunity to renegotiate the contract for terms and conditions that make it reasonable for you to do business with them."