PRACTICE PULSE
Concern for HMOs' Financial Status
By Gil Weber, M.B.A.

I read something interesting but troubling on an Internet news channel at the end of October. Given the almost daily stories we're hearing about HMOs delaying, downcoding or denying claims, no matter what managed care plans you participate in, you should take note.

Weiss Ratings, a respected source for financial ratings and analysis of U.S. industries, reported that 10 HMOs had failed to meet the minimum capital level standards recently adopted by the National Association of Insurance Commissioners (NAIC). The standards were designed to establish a minimum amount necessary for an HMO to maintain financial stability and pay its obligations.

In addition, Weiss reported its own recent ratings of 572 health plans. Weiss scored 78 plans as "very weak." It scored another 162 HMOs as "weak." Only four plans earned an "excellent."

Of the 572 HMOs reviewed, 44% (252 plans) lost money in the first quarter of this year. Martin Weiss stated, "Among all the industries we rate, including banks, insurers, and brokerage firms, HMOs currently have the largest percentage of endangered institutions. What's worrisome is that these financial pressures can sometimes impinge upon the quality of care afforded to customers, or potentially leave them stranded."

So what does this all mean to you -- the community optometrist? What's the relevance of a plan not meeting the NAIC's capital guidelines or receiving a low Weiss rating?

Simple. If you're contracted to an ailing HMO (or its third party intermediary) your receivables are at risk.

It means you must have your eyes and ears open to monitor what's happening in your community and in your state with third party payers. You must constantly review your accounts receivables, and you must take timely, appropriate action if trends turn and seem headed south.

So if your claims with the XYZ health plan had been paid in a consistent 30 days but now they're running a consistent 45, that's a yellow flag. You need to inquire. It may be nothing more than a "hiccup" in the claims processing department, and things could be back to normal after another claims cycle. Then again, it may be an indication that the plan is short on cash to pay its claims, and that pay-ment timing is soon to stretch out even farther.

If those 30- or 45-day payments turn into 60 plus days, the yellow flag has probably turned orange, or bright red. If your files are full of long delayed claims pay-ments, it's time to act -- before you're really stuck with a nightmare. Here's what I mean, and here's why it may be unwise to wait.

Each HMO provider agreement gives you certain rights and responsibilities vis-a-vis contract termination. Typically, you can terminate without cause at the anniversary date by giving the specified written notice. Also, you can terminate with cause at any time if the plan materially breaches the agreement. The amount of notice you must give should also be specified in the agreement. If you can get out cleanly before the hole gets too deep, then that's great.

If things are headed south and if you keep delaying any action hoping things will improve (and trying desperately to hold onto the contract), you may have waited too long. If the HMO files for bankruptcy protection, the court may obligate you to continue to provide services and void your attempts to terminate.

This means that not only are you unlikely to collect in full on already past due claims (the source of the bankruptcy filing). But you may also be forced to provide services during the bankruptcy period with little or no prospect to collect in full on these new claims. In other words, waiting and hoping for a turnaround may end up driving you farther into an already ruinous, but now court-enforced black hole.

Talk to your experienced managed care attorney to determine your rights under state law. Monitor your receivables. And based on your attorney's instructions, act sooner than later in pressuring the plan for payment or terminating your agreement with cause for non-payment.

Read the entire Weiss report at www.weissratings.com/main.asp (click on "news releases"). Note that the end of the report has links to the strongest and weakest HMOs by state. Enjoy this useful resource.

Gil Weber is an author, lecturer and practice management consultant to the managed care and ophthalmic industries. He's also a member of Optometric Management's editorial board. He can be reached at (954) 915-6771 or by email at gil@gilweber.com.  Also, visit his Web site at www.gilweber.com.