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Hospices that insist on operating independently in a growing managed care market could find themselves on the outside looking in while hospitals and physicians are making the deals with HMOs.
By harnessing the collective powers of post-acute allies into a network, managed care organizations can be made to see the value hospices and the rest of their post-acute partners in a managed care environment, says Donald Hutton, MHA, founder of Morgan Consulting Group, an Atlanta-based health care consulting firm.
While forming a post-acute network will go a long way to building clout in a market, Hutton says the road to a viable network is laden with barriers that can stop network building dead in its tracks. These barriers are:
• Lack of leadership and knowledge.
Most hospice providers are focused on the day-to-day operations, so much so that their time and knowledge is spent managing expenses and trying to attract new revenue. Now hospices and other providers need to look at health care from a global perspective rather than from their parochial perspective. One thing is for sure — hospice leaders and those heading up other post-acute facilities will have to exhibit a kind of leadership that does not stress any one organization’s individual success.
The solution, Hutton says, is to re-educate and re-orient operational management, administrators, and directors. While the advice seems rather elementary, for many hospice leaders it represents a change in thinking similar to that of hospital administrators back in the early 1980s when DRGs took effect. "It took a lot of time and effort to educate and re-orient them. The best way to overcome it is to not only re-educate the top people but the operational people as well."
It sounds simple enough, but most hospice providers have not been paying attention to the growth of managed care in their own markets, focusing solely on their traditional Medicare business. Now these providers need to act like sales people and market their services to a new customer.
"They don’t even know the right questions to ask or how to position themselves to market themselves to show the value they would bring to these HMOs," Hutton says.
Know your market
• Lack of market awareness.
Hospice leaders and their partners must become keenly knowledgeable of the market in which they do business. To start, know what percentage of Medicare beneficiaries are moving into Medicare managed care plans. The answer today may be zero, but that could change in as little as a year. The same inquiry should be made on a regular basis.
"If you think of the Medicare population as 100%, in the old days you could market to hospitals and doctors and get them to make admissions," Hutton says. "In this new era, when these beneficiaries are put into a managed care program, it isn’t the doctors or the hospitals that get to pick where these patients go. It’s the managed care plan. So when you start getting more of these patients shifting into managed care plans, you want to have a strategy to access those patients."
• Not knowing how to access managed care organizations.
Another barrier holding back the formation of post-acute provider networks is their ability to take their existing services and link them to managed care organizations in a manner that suits the MCO. It’s an issue of being able to connect network services with the managed care organization.
"Connectivity has to do with understanding where your organization plugs in so that admissions are directed to their [agency]," Hutton says.
The solution, he adds, is to know the requirements of payors and where the network needs to access managed care organizations to deal with both patient care and business development, such as an MCO’s case manager.
If hospice and the rest of the community’s post-acute providers can get past the mindset and social barrier of forming a post-acute network, there is still the very large practical barrier of raising enough capital to ensure proper start-up. Hospice leaders should avoid networks that are undercapitalized.
For post-acute providers to form a network, their capital needs can be as low as $250,000 or as high as $5 million, Hutton says. For their money, they should acquire infrastructure, coverage for operating losses in the start-up phase of the organization, and capital reserve to take on risk.
The capital barrier is overcome by strategically partnering with an entity that already possess the technology — an information system, for example — needed to operate the network.
"The reason for this is that you spread the cost of the required technology over a larger base by using their stuff, and therefore your per unit cost becomes less," Hutton says. "Second, you’ll reduce the need for capital because your operating losses will be less if your partner is experienced and will help you avoid making mistakes as well as no having the personnel costs associated with running your systems.
• Poor industry track record.
When approaching managed care organizations, post-acute providers may discover that their respective industries have become the object of negative stereotyping. Hospice has long suffered from misinformation about its goal and mission. In the age of high-tech procedures, post-acute providers have been relegated to second-class citizen status because much of the care involves low-tech procedures and custodial care.
The phrases that best describe post-acute care — low-tech, hands-on care — are exactly what hospices and their partners need to be promoting because of its effective low-cost care, Hutton says.