Dynamic Chiropractic – September 1, 2001, Vol. 19, Issue 18

Managed Care: Is the Pie Shrinking, or Are Appetites Just Increasing?

By Caroline Iverson, DC
Editor's note: A version of this article appeared in our last issue (Aug. 13 issue of DC). Dr. Iverson notified us, after the article had gone to press, that important changes to the article were necessary, in light of recent news, in particular, the lawsuit filed by the California Chiropractic Association against ASHP.
This, then, is Dr. Iverson's revised article.

Chiropractic independent practice associations (IPA) began as an effort to include chiropractic in the preferred practice organizations (PPOs). Eventually, the health maintenance organizations (HMOs) followed suit. Chiropractic needed an advocate for its inclusion and an assurance to the medical managed care companies that chiropractic could be added to the benefit safely and without added administrative headaches for the managed care organizations (MCOs). Individuals or small groups of chiropractors did not have the same clout with the health plans as a large, state-wide chiropractic IPA, which could offer enough chiropractors to serve the health plans' membership and handle the administration of the benefit. The chiropractic IPAs were necessary for chiropractic to establish itself as a legitimate part of the managed care benefit plans.

As managed care evolved and standards set by state regulatory agencies and accrediting agencies (such as the National Committee for Quality Assurance and the American Accreditation Health Care Commission) became increasingly more sophisticated, the chiropractic IPAs were necessary to coordinate the contracting, credentialing, utilization review, and quality improvement activities that would otherwise be administered uniquely by each MCO. So where do things stand today?

Much of this can be summed up with the saying, "As the pie gets smaller, the table manners get worse." There are two wars being waged over chiropractic. One battle exists between the health plans and the chiropractic IPAs/HMOs, whereby the health plans are willing to pay less in capitation rates for the chiropractic benefit than they were five years ago. The other contest exists among the major chiropractic IPAs/HMOs that are trying to retain the health plan contracts they currently have, perhaps to obtain the contracts of their competitors and persuade health plans without a chiropractic health benefit to add one. Unfortunately, to offer the chiropractic benefits at the rates the health plans are willing to pay, the IPA chiropractic fee schedules have taken a hit.

The challenge to chiropractic IPAs is to make the case for how they remain relevant and necessary to each DC. With chiropractic being offered by nearly every health plan in the state, it is difficult for the IPAs to bring a greater volume of patients to their panels. Instead, the IPAs must primarily compete against each other for their competitors' market share. The IPAs still take on the coordination of contracting, credentialing, utilization review and quality improvement activities. However, the chiropractic IPAs are challenged with demonstrating to their chiropractic panels that the value of their administrative services is still favorably balanced by the reimbursement offered and the time required to participate in the pre-authorization, recredentialing and quality improvement systems. In short, they must demonstrate that the piece of the health-care-dollar pie that they use is money well spent.

The primary concern for the profession today is how to ensure that this "pie" is divided equitably. The logical starting place for this assessment is with the health plans. After all, they are the ones dictating to the IPAs/HMOs how much they are willing to pay in per-member-per-month (PMPM) fees for the chiropractic benefit. However, the capitation rate that the health plan pays to the chiropractic IPA/HMO may differ, in some cases significantly, from the PMPM rate the health plan is receiving from the employer group for that chiropractic benefit. In other words, the health plan typically charges the employer group more in PMPM than what they pay to the chiropractic IPA/HMO to administer the benefit and pay the claims. While the health plan does bear some administrative expenses in overseeing the IPA/HMO and assisting members with the chiropractic benefit, it would seem that those costs should be relatively minor. It would be interesting to know whether any decreases in rates paid by the health plans to ASHP were passed along by the health plans to the employer groups with the chiropractic benefit. Or could the health plans be using the difference to offset losses in their medical costs without having to lower capitation to their medical groups?

In all fairness, this same scenario holds true for the chiropractic HMOs that contract directly with an employer group instead of with the health plan. What the chiropractic specialty HMOs are able to charge an employer group in PMPM for the chiropractic benefit is generally much greater than what they receive under capitation from a health plan. In this case, the chiropractic HMO is not sharing any of the PMPM with a health plan. The number of lives enrolled directly with the chiropractic HMOs in California has been relatively low; however, the reduced fee schedule has been applied to these patients as well, despite the PMPM revenues for these lives that have presumably not decreased.

One solution may be a more sophisticated reimbursement system that rewards high-quality, efficient chiropractors that are also very accessible to members. The flat fee, either per diem or global, does just the opposite, and essentially pits the practitioners against the IPA. Worse yet, as those fees drop, the schism becomes greater. The situation is not irreparable, but calls for creative solutions from the chiropractic IPAs/HMOs if they are to emerge from this difficult time with a restoration of their raison d'etre.

Caroline Iverson,DC
Davis, California


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