As hospitals try to tap into the multi-billion dollar managed care revenue stream, provider marketing must expand to include managed care contracting responsibilities.
Nancy Hess, manager of healthcare consulting at Altschuler, Melvoin and Glasser (AM&G) in Chicago, talks to HPRMN about what marketing's role should be within this managed care contracting context.
Hospitals still are missing out on getting a bigger piece of the managed care pie because they don't understand the marketing, underwriting and risk selection strategies from the payer's perspective, Hess says.
Hess's managed care consulting experience includes HMO infrastructure development, benefit design and pricing strategies. She has planned and implemented a start-up HMO with PPO (preferred provider organization) and POS (point of service) product extensions in Tennessee and a provider -sponsored IPA model HMO in Florida.
In this exclusive interview she discusses how marketers can become involved in provider decisions to become more active health plan participants and negotiating risk-sharing agreements.
HPRMN: What are the managed care contracting marketing opportunities for hospitals?
NH: The hospital's role in marketing switches once they start looking at managed care contracting.
When the hospital takes on more managed care contracting risk it has a more active role in the actual insurance management functions like medical management and provider reimbursement.
What they need to do is market more aggressively to employer groups and also put together marketing packages for those HMOs that might select them for network participation or securing a risk contract.
But what the HMO winds up keeping is marketing. So there are pros and cons to hospitals accepting this kind of risk.
HPRMN: In a marketing context, what do you see hospitals bringing to the negotiation table for managed care contracting?
NH: When an HMO moves into a market, there are two different aspects of marketing. First, we look at why members initially select the health plan, (which typically tends to be price), who's in the network and what that benefit design looks like. Then HMOs look for a solid reputation from providers.
Some of the things the hospital can do to get that initial contract is:
- Position its access and location as huge benefits.
- Highlight its patient satisfaction - particularly demonstrating its quality of care. Depending on the sophistication of the market, it may be that everybody goes to the hospital because it's best for specific areas of treatment. In a more sophisticated market, the hospital might focus on prevention and wellness. The HMO is certainly looking for those [preventive] opportunities when they're talking about contracting.
- Demonstrate its move toward managing services for specific populations like preventive care and asthma programs.
HPRMN: Where do you see the hospital marketer's role in this process?
NH: In two areas. The first is being proactive by putting together a package of the hospital's services for employers and HMOs. The package should include the quality of caregivers and reputation with employers in the market. That last one is key because employers in some markets are aggressively driving managed care decisions as they try to manage costs.
I often ask hospitals to put together a package that demonstrates benchmark results.
Then, once the hospital is in a managed care contract, the marketing shifts a little bit. It goes from access and convenience to reducing hospitalization with wellness programs, screenings and ancillary services.
HPRMN: What provider-based services are HMOs most interested in?
NH: It depends on the market. The first thing HMOs look at is what services have high usage in the market.
The trend is moving from inpatient to outpatient.
Ancillary programs that are getting more attention are services like homecare, hospice ambulance services, assisted living centers and nursing homes.
Nancy Hess can be reached at 312/207-2973; email: [email protected].
Managed Care Contracting Pros and Cons
Contracting with managed care organizations, offers several hospital-based benefits. But hospital marketers need to be aware of the pros and cons of taking on this new role. Nancy Hess, manager of healthcare consulting at Altschuler, Melvoin and Glasser in Chicago, highlights these key considerations:
Pros:
- The HMO provides "free advertising" for the hospital through the listing of providers in provider directories and HMO ads.
- The hospital gets additional members, or - in a risk environment - additional covered lives.
- The hospital gains experience in contracting and implementation of managed care practices.
- The hospital increases and expands referral sources and provider relationships with other network providers.
- The hospital gets a predictable stream of revenue, particularly in a risk environment.
Cons:
- Risk of adverse selection: HMOs member selection and underwriting guidelines may invite higher-risk members into the plan when the hospital is capitated.
- Potential loss of revenue if the hospital's negotiated rates do not adequately cover utilization of services.
8 HMO's positioning strategies may result in increased utilization (lower out-of-pocket costs for members), or tighter network management (quality of care standards).
Source: Nancy Hess, AM&G