Peering into the crystal ball of managed care, this author examines the evolving relationship with MCOs, pertinent demographic information and emerging health care models that may affect you in the near future.
By Gary M. Lepow, DPM, FACFAS

The 1990s proved to be the most tumultuous decade ever for the healthcare industry. When increasing costs were coupled with an increasing number of chronic diseases and lengthening life expectancies, it significantly flattened the profitability of the healthcare industry. By the time the Clinton administration attempted to promote sweeping changes in the healthcare industry, the systems were in place to begin incremental changes and develop hybrid forms of coverage.

With the specter of government intervention and sinking profits, the climate was right and the public was willing. However, as we all know, many of these changes led to delays or the withholding of care, delays in implementing new technology, increasing coverage costs, decreasing reimbursement for providers and increasing acrimony between patients and providers. In the late 1990s, the pendulum began to swing back. Understanding that the pendulum will never swing back to pre-1990s, we must do what we can to adapt since the industry will still do all that it can to protect profitability.

For patients, physicians, hospitals and insurers alike, tremendous change is now a way of life. An AISHealth.com article recently stated that "Healthcare delivery and financing have never been in greater turmoil."2 Managed care companies have become lightning rods for the nation's healthcare discontent. They have had to develop new strategies, new alliances, new markets, new prices and newer lines of business. So what does the future hold? To try to answer that question, let's consider some of the emerging trends.

Be Aware Of Key MCO Trends

1) Be aware of the potential impact of MCO consolidation.

Physician/hospital mergers and acquisitions (M&A) still dominate activity in the industry, but have continued to decrease since an all-time high in 1997. While there was a quick rise of Medicare/Medicaid HMOs, hospitals and hospital-run healthcare systems, they were typically underfunded and unable to maintain adequate increases in enrollment. As a result, most of them went out of business, but some were acquired by larger MCOs that wanted to gain access to the groups of patient populations. The net result will be further consolidation of larger MCOs and fewer choices for employers.
If you're a provider in a healthcare system that is being acquired, provider panels are usually kept in place but there are no guarantees on maintaining continued provider status. It is important that podiatrists maintain staff privileges in large hospital systems in order to ensure inclusion in hospital-negotiated contracts through their physician-hospital organizations (PHOs).

2) Will MCOs stay on board with Medicare/Medicaid programs?

The free marketplace for Medicare/Medicaid HMOs has had mixed reviews. When it comes to being included in these programs, podiatrists seem to have a fair degree of stability. Due to the high risks that aging patients with chronic diseases face, DPMs play an important role in the provider team. Again, inclusion is never guaranteed, but very likely.
Unfortunately, private MCOs who assume risk in Medicare/Medicaid programs are finding it difficult to generate profits. As a result, we'll likely see fewer participating MCOs as the federal government takes on an increasingly larger role in the future.

Why Increased Reimbursement May Be On The Way

3) Keep in mind that relationships with MCOs are improving.

MCOs have begun the process of improving their dialogue with medical providers. In 1998, Tom Schedler, CAE, executive director of the American College of Foot and Ankle Surgeons (ACFAS), and I began discussions with the Health Insurance Association of America (HIAA). HIAA is the professional organization for insurance companies that provides coverage for life and health, disability, casualty and other products to four out of every five privately-insured individuals in the U.S.
Through the ACFAS discussions with HIAA and the strength of HIAA's self-study and organizational strategic planning, the HIAA began to revitalize its provider division. The ACFAS developed a coalition of medical specialty organizational leaders that has been well received by HIAA. As a result of this ongoing collaboration between the ACFAS and HIAA, there have been several meetings of national MCO medical directors and their decision-makers with our coalition members. Although it is still in early development, this forum is providing unparalleled opportunity to improve relationships between payers and providers.
Similarly, the ACFAS has become more involved in ongoing activities with the American Association of Health Plans (AAHP), a trade association representing major managed care organizations nationwide. DPMs are participating in AAHP workgroups that are trying to identify opportunities to improve the claims processing and payment procedures. Through a series of focused data collection, conference calls, meetings and facilitated sessions, these workgroups have identified major barriers to timely claims payments.
As far as future goals go, these workgroups are also trying to develop pertinent educational reference materials that can then be made available to physicians nationwide to eliminate (or significantly reduce) unnecessary payment delays.

Be Aware Of These Important Demographic Trends

4) How will the aging population trend affect you?

As we all know, the fastest growing segment of the population is 70 years of age and older. Given this trend and the fact that the baby-boomers are turning 65 or older in the next 10 to 15 years, unique challenges and opportunities abound for payers and providers. Government projections reveal that Medicare can handle the future population growth and remain solvent. However, this issue may not be limited to Medicare itself. Co-insurers and other benefits promised to employees through retirement plans may also face challenges in the future.
Actuarial data and projections made by employer groups will need to be revised frequently. Will the government change the age of eligibility for Medicare? Will Medicare be limited only to patients who are on lower economic levels? These important questions face the current Bush administration, the Social Security Administration, HCFA and others.
The good news is that DPMs play a prominent role in maintaining the health of aging individuals. This should bode well for the secure inclusion of DPMs.

5) Yes, we should be very concerned about a DPM shortage in the future.

For the last few years, there has been a decline in the number of graduates from podiatry schools and a severe shortage in enrollment that appears to have no end in sight. When you factor in the number of baby boomers who will retire in the next several years, the normal attrition due to retirement will be quite dramatic for the profession. As you can tell, this adds up to potentially alarming shortages of podiatric medical providers 10 to 15 years down the road.
Some may look at this as an opportunity to increase the volume of individual practices, but the demands on individual providers could decrease the overall quality of care. This is of concern not only to the profession, but also to payers who are increasingly measuring outcomes, quality of care and patient satisfaction. The program of "best practices" and evidence-based medicine should help in ensuring the quality of health care regardless of demands such as increased volume.

Understand The Shift Toward More Patient Choice In Health Care

6) Health-care models are starting to re-emphasize patient choice.

Northern California, Minnesota and a few other geographic areas continue to maintain hybrid coverages. This is due to long-term MCO penetration in these markets and is likely to continue. Generally, though, the trend is moving away from models such as capitation and more toward models that emphasize patient choice.
While managed care certainly has helped stabilize healthcare costs and promote better efficiencies in clinical practice during the past decade, our patients remain extremely unhappy about having to change physicians every time an employer switches plans or they change jobs. Therefore, the trend to move to more open access and out-of-network coverage is gaining momentum.
Representing the American College of Foot and Ankle Surgeons (ACFAS), I had an opportunity in the late '90s to visit national medical directors and MCO executives in the United States. They shared surveys with us that suggested that patients were unhappy with limited access. Faced with the increase in lawsuits and the potential loss of business, MCOs reluctantly became willing to return to plans with more open access for beneficiaries. This trend is apt to continue in the near future, which is usually an optimistic outlook for specialty providers.

Why Defined Contribution Plans Are The New Wave

7) Stay on top of the movement from defined benefits to defined contribution healthcare.

Monthly premiums for employer-provided health insurance rose 8.3 percent from 1999 to 2000, according to the latest Annual Kaiser Family Foundation Health Research and Educational Trust Health Benefits Tracking Survey of more than 3,000 employers.3 This means annual premium costs, shared by employers and employees, rose to $2,426 for individual coverage and $6,351 for family coverage.
Although this was almost double the previous year's 4.8 percent premium increase, the survey found that due to the tight labor market, more employers continued to offer health insurance to their workers and shouldered these premium increases rather than passing them on to their employees. Various predictions for 2001 premiums reveal increases ranging an average of 7 to 17 percent.

As a cost-cutting approach, some employers have publicly discussed the possibility of moving to a "defined contribution" approach for health benefits, in which employees are given a fixed dollar amount to buy health insurance directly rather than selecting from among plans contracting with the employer.
The defined contribution model for health plans bears some resemblance to the defined contribution model for retirement plans. Just as employees now pick from among a vast range of mutual funds to reserve the allotted retirement cash their employer gives to them, they would do the same among different health plans in the defined contribution model.

Most of the responding employers in the Kaiser survey believe they play an important role in providing health insurance coverage and that they can do a better job in providing that coverage than employees would be able to obtain on their own. Surprisingly, the vast majority of employers in the survey also indicated that they would be very or somewhat likely (78 percent of small employers and 94 percent of large companies) to continue offering health benefits even if employees were given tax breaks to buy coverage on their own. Ten percent of small firms and 5 percent of large employers indicated they would be somewhat or very unlikely to continue coverage.

Conversely, another survey of 100 corporations (conducted by the Virginia-based Booz Allen & Hamilton) determined that major companies in the U.S. will eventually shift to a defined contribution health benefits program.4 A tight labor market was the main reason why they were holding back, according to the study. However, the employers cited a recession, continued healthcare inflation and additional government mandates as factors that would motivate their decisions to implement the change.
In addition, the survey on the defined contribution trend predicts the general demise of employer-managed defined benefit health plans within the next 15 to 20 years.

Will MSAs Have A Surge In Popularity?

Supporters of the recent two-year extension of the Medical Savings Account (MSA) pilot by the Department of Health and Human Services believe that a move from defined benefits to defined contribution within the employer market, which many experts in the healthcare field are predicting, may also drive more consumers toward MSAs.

Daniel Perrin, the Executive Director of the Archer Medical Savings Account Coalition, predicts that "as the cost of insurance continues to rise, employers--who are already cost conscious about this and are thinking about defined contributions--will find that MSAs will be an appealing way of transitioning from a defined benefit plan to a defined contribution plan."5
He also is predicting that MSAs will become one of the main options that people are offered on a defined contribution plan. So, essentially, as the cost of insurance increases, the appeal of MSAs will grow.

Final Notes
With the rise of consumerism, the Internet and the availability of information, there's no doubt that people will increasingly be seeking more choice and control over their own health care.
While we can look at well-documented graphs, monitor current trends, speak firsthand with decision-makers and stay ahead of the managed care curve, there is still an element of the unknown. However, you can be sure that all of the trends discussed here will have an impact on the future of managed care and reimbursement levels for podiatrists.

Yet I remain optimistic that podiatric input through aggressive programs promoted by the ACFAS and APMA are extremely vital and are proving to be successful. So stay informed, buckle your seat belt and try to enjoy the ride.

Dr. Lepow is Past-President of the American College of Foot and Ankle Surgeons (ACFAS) and presently serves as Chairman of the ACFAS Socioeconomics Committee. He is a Clinical Associate Professor at the Baylor College of Medicine and is the ACFAS representative to the Coalition of Specialty Providers for HIAA.

References
1. American Association of Health Plans, Washington, DC (Slide Statistical Information) Atlantic Information Services, Inc., Washington, DC.
2. AISHealth.com, "Managed Care" (October 2000 - February 2001).
3. Kaiser Family Foundation/HRET. "Employer Health Benefits 2000 Annual Survey" (September 7, 2000)
4. Booz Allen & Hamilton, McLean, VA. "Employer Benefits Survey" (May 2000) Health Care Financing Administration, Washington, DC (Slide Statistical Information).
5. Perrin, Daniel. "Assessing the Potential Impact of Medical Savings Accounts" (March 2001; NMHCC Presentation; Atlanta, GA).