Times have been tough for primary care – especially those who are in private practice. The main reason for this is the poor reimbursement given to the main procedures done by PCP’s. It is far more profitable to remove a tumor than to prevent one. The doctor who determines that colon cancer screening is appropriate, discusses this with the patient, and schedules the colonoscopy is paid very little compared to the physician who does the colonoscopy. Plus, the insurance companies are able to “divide and conquer” by negotiating the payment schedule with each group separately. The law prohibits physicians from disclosing to each other their negotiated fee schedules.
So when the opportunity to turn the tables arises, we jump at the opportunity. One such opportunity came up when I first started practicing in this city. The outcome was not just positive; it was amazing. I was invited into the situation – and knew very little about the physician/insurer relationship. That would change.
One of the insurance plans in our area was languishing. Very few physicians were under contract with them, and very few employers were signing up for the plan, meaning that their market share was very small. So they teamed up with a group of primary care physicians to improve their product. This group of physicians formed an IPA – an Independent Physician’s Association – which allowed them to negotiate as a group, rather than as individual providers. The laws that prohibit sharing fee schedules are circumvented in this group as it lets a third party do the negotiations with the insurance companies and then come to each group individually (this is called the “messenger model”). Each physician puts money into the IPA to pay for those who do the negotiation.
Things went extremely well. The insurance plan quickly became one of the largest plans in the area – most likely due to the fact that the majority of the primary care physicians in the area were on the plan – as the rate negotiated was very attractive. The agreement with the insurance company was such that the IPA owned 50% of the insurance plan – and thus shared in the profits. As long as the plan stayed profitable, the IPA owners were bonused by the insurance company for a percent of the profits. The only way out of the agreement was if the plan started losing money – and things were going so well, it seemed this wouldn’t happen any time soon.
At each meeting of the IPA we would get a bonus check and hear how well the plan was doing. It was now the most popular plan in the area by far. But as time wore on, the administrators of the IPA reported that the insurance company was singing a different tune. We were told that the plan was now barely breaking even – and even losing money. We were beginning to see the writing on the wall – the insurance company didn’t want physicians as partners and so was reporting a loss. This didn’t make sense, as the plan was an incredible success in the community. Still, what we saw of the books (what we had access to) did seen to show a decrease in profits, and even a loss. We knew something wasn’t being disclosed, but couldn’t get access to the information.
The day finally arrived when the insurance company formally dissolved the agreement between themselves and the IPA. It seemed as if the bad guys had won. We had been the driving force to take a failing plan and make it the dominant plan in the area, yet we were going to lose control of it. It didn’t seem right. Something was up.
But the story wasn’t over. The administration of our IPA had an idea on how to uncover the truth. One of the areas of known revenue for insurance companies is from rebates gotten by including certain drugs on the plan’s formulary. If the plan has a certain number of prescriptions of a certain drug, the drug company pays a “rebate” to the insurance company. This isn’t really a rebate, as it is not money returned to someone who had paid, but instead a bonus that was negotiated up front – one that often determines whether or not a drug is put on the formulary in the first place. The drug companies don’t like these “rebates” as it forces them to compete for formulary inclusion based on the money they give, and not the merit of the drug. If you think this sounds like bribery, you see it as we saw it. But this bribe was done under the table so we couldn’t see it.
Our administration thought that we should be able to look at the rebate money, as many of the criteria used for this revenue for the plan was driven by physician behavior. We prescribed the drugs, and our prescribing caused there to be increased revenue for the plan. Yet our insurance company “partner” did not see it that way. They saw the drug benefit as entirely separate, and would not disclose to us the revenue from this source, nor would they include it on the calculation as to whether or not the plan was profitable.
We took it to court. Our attorneys argued that the insurance companies were not being truthful to us about the profitability of the plan because of the omission of the rebates. The judge agreed with us, ruling that the insurance company had to disclose to us the profits from these “rebates.” It wasn’t long until the lawyers from the insurance companies made us a settlement offer we could not refuse. They retained full control of the insurance plan, but we kept the favorable fee schedule and were awarded a substantial cash settlement.
The moral of the story is that physicians banding together can do much good. Medicine has been a classic case of united we stand, divided we fall. Primary care is a scarce commodity, and it only figures that scarcity increases value. Banding together, primary care physicians can wield much more power than they think. People won’t join plans without good primary care. Insurance companies make more money off of colonoscopies than they do office visits, but they make no money at all if people don’t sign up for the plan. The key to success is to work as a group. Be ready to walk away from a bad offer – even if it means that you will lose patients. Being willing to refuse bad payment will greatly enhance your ability to force better pay. It’s obvious that PCP pay is not going to break their bank. The reason we have been under their thumb has been our inability to act together.
See? Sometimes the good guys do win.
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