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Managed care has already penetrated your market in the form of discounted fee for service, but it’s clear that capitation is on the horizon. Will your group ride the tide of discounted fee-for-service as long as it lasts, or will you position yourself as a leader in the area of risk contracting?
If your group chooses the second path, a good vehicle for your efforts would be the "dual-model network." This model incorporates elements of both the independent practice association (IPA) and medical group concepts. The idea is to increase the number of physicians participating in your group by committing to a contractual relationship instead of actually employing these physicians or creating an IPA, explains Angela Herron, CPA, a consultant with Phoenix Healthcare Consulting, which has offices in Cincinnati, Newport Beach, CA, and Manhattan Beach, CA.
Herron says the dual-model network concept has several advantages. It’s more expedient than forming a new legal entity such as an IPA or acquiring physician practices, she says. Building a network through contract relationships can often be accomplished in four to six months, while acquiring practices or adding physicians in new specialties to your practice can easily take twice that long. Another advantage of the dual model is its ability to establish exclusive relationships and avoid a common IPA pitfall: having some physicians who compete in multiple IPAs, which causes a physician network to lose its differentiation in the market.
Herron says she’s worked with about half a dozen practices during the last two years that have implemented this concept, including Knoxville, TN-based Summit Medical Group. The group is currently in the final stages of putting together the structure, which Summit chief executive officer Tim Young, MPH, CMPE, calls a "virtual organization."
Summit decided to pursue this approach after seeing that some hospitals in its market were beginning to purchase physician practices with less than stunning results, Young says. "They were putting together people who didn’t know how to work together," he explains. "We figured that if we put together people who want to work together, we could distinguish our network for managed care organizations."
Young describes Summit’s model as an integrated delivery system that is not owned and organized by one entity. The nucleus is Summit, an 85-physician primary care group practice. The entity has contracting relationships with four hospital systems, specialists, and ancillary providers such as rehab facilities.
Although the relationship is just getting off the ground, Young says the group has already signed one contract with a managed care organization to cover about 9000 commercial lives. Summit is pursuing relationships with other MCOs, and hopes to sign on between 20,000 to 30,000 commercial and Medicare lives by the end of 1998.
Although capitated contracts are few and far between in Knoxville, Summit hopes to lead the way, Young says. The contract it has in place is a global capitation contract, with utilization management (UM), physician credentialing, and quality assurance (QA) programs delegated to Summit. Specialists will participate in the UM and QA process through various subcommittees. And more importantly, they will share in the risk pool resulting from hospital utilization savings.
For each dollar saved in hospital utilization, a percentage will go to the hospitals and a percentage will go to the physicians (Young did not disclose specific details on the percentage amounts). Specialists who are members of Summit’s physician advisory committee which includes representatives from various specialty groups participating in the network will determine the methodology for distributing those dollars among the participating network specialists.
Young’s advice to practices thinking about trying this concept: Be committed in terms of time and education, as well as capital. Having the appropriate systems in place to capture data is critical, as is a willingness to spend time educating specialists in your community about the risks and rewards involved in capitation. "We have a large presence at a number of hospitals, so we’ve had the visibility to obtain a forum for that education," he says. "In this type of market, you have to move quickly. We’ve done that, but we’ve developed a participatory program through our physician advisory committee and various UM committees and subcommittees."