By Rebecca Anwar, Ph.D. & Judy Capko

Published March 1997

• React to this article in the Discussion Forum.

Things have certainly changed! Managed care is gaining incredible force in the market, with almost 60 million people enrolled in over 650 plans throughout the country. This force has been driven by employers’ demands for reduced rates and health care cost containment, along with government scrutiny of health care providers.

Physicians are responding to these forces in a number of ways. There is a rapid movement toward group formations of one sort or another, alliances are being made, many practices are being sold, and close to half of the physician population have already become employees. It’s no wonder that feelings of loss of control and vulnerability are not uncommon. How can physicians be certain they are making the right strategic moves? How is it possible to secure a place in this rapidly changing health care delivery system? Having a strategic plan is essential and requires commitment of time and attention to understanding the managed care environment, establishing realistic goals and priorities for your practice, knowing your practice performance and being flexible while sticking with your strategic plan of action.

If you were an athlete, your team wouldn’t enter a playoff game without a game plan. The team would come together with the captain and the coach to outline a strategy. They would learn everything they could about the opposition. The team would outline a strategy to draw on their strengths and outsmart the competition. The same is true for physicians facing managed care—they need an effective strategy. The best way to accomplish this is to develop a Strategic Plan designed specifically for your specialty.

Whether you are in solo or group practice, a managed care strategic plan is essential to your future. The plan will strategically define where you are today, where you want to go and how to get there.

The plan will incorporate the critical areas of a traditional strategic plan, including market research and demographics, establishing goals, defining your product line, identifying competition, determining your target market, recommendations to achieve your goals, as well as a projected budget. However, there are variations from a traditional plan that are essential to managed care.

Here are the additional components you need to address in a Managed Care Strategic Plan.

Managed care environment. Understanding potential opportunities begins with market research, specifically related to managed care. Gain a better understanding of the employment scene in your area. Determine whether employers plan to shift their health care purchases to include more managed care products. Find out what those products are and how your practice fits in. The same is true for other players in the health care loop. Is your hospital making major moves to gain access to managed care? Is it part of a larger health system in the area? What plans are they working with? Are they acquiring primary care practices or creating network alliances? Examine these issues with an open mind and you may find hidden opportunities. It will be to your advantage to maintain a cooperative attitude.

Practice performance. What is the current position of your practice? Is your income flat or declining? What about your patient base? Are you attracting new patients or experiencing increased attrition? Has there been a change in referral patterns? Are you obtaining referrals from the same sources or has there been a shift?

It will be important to examine your utilization patterns. Assess your performance by reviewing your productivity using service codes (CPT) and case studies related to diagnosis. Examine your hospital utilization. Are your admissions and length of stay (LOS) in the expected range? How do you compare to your peers?

Quality assurance is next. Are you serving your patients needs? Can they get appointments, authorizations and referrals promptly? Would your facility pass a managed care audit? Patient access and service are important factors in attracting and retaining managed care.

Managed care comparative analysis. It’s important to examine revenue by payer class for the past three years, focusing on the major third party payers. Compare what changes may have occurred in the past few years and what effect has this had on your practice. This will help you understand trends related to the shift from indemnity to managed care insurance. Compare your statistics to the payer mix changes in the hospital and area employers. If they are not similar, you may be missing opportunities to increase your patient base.

Contract performance. Further analysis of managed care includes assessing your existing contracts. How well have you fared with them and, are the contracting agents performing appropriately? Whether you are contracting directly with the plan through an independent provider association (IPA), a specialty network or other managed care organization (MCO), you need to assess if the contract is being appropriately administered. For instance, are referrals and authorizations handled in a timely and organized manner? If the contract provides for distribution of a risk withhold, did you get your piece of the pie?

Another important issue is how timely you are paid. If you feel a sense of disorganization, poor service and delayed payments, the particular plan, IPA or MSO associated with this may be in troubled waters.

Managed care strategy. An effective managed care strategy will ensure that you make the best moves. This means taking a "let’s play ball" attitude and teaming up with the right partners. Physicians tend to think of managed care organizations as the opposition. In reality, they are an important player in the game. Know all the plans in your geographic area, how much of the market they control and their predicted viability. With managed care, it’s who has the largest number of enrolled members and the potential to retain them. Beyond this, who are the health care providers in your area that are responsive to managed care and taking action?

Together, with careful planning, you and your advisors can develop a managed strategy and implementation plan.

Rebecca Anwar, Ph.D., is based in Philadelphia, PA, and Judy Capko is based in Newbury Park, CA. They are senior consultants with The Sage Group, Inc., a national consulting firm specializing in integrated practice formation, strategic planning and practice management, quality improvement, managed care and marketing for health care providers.