ANALYZING AND NEGOTIATING COST-VOLUME PROFIT CONTRACTS
By: Hope Rachel Hetico; RN, MHA, CPHQ, CMP™
By: Dr. David Edward Marcinko; MBA, CPHQ, CMP™
Institute of Medical Business Advisors, Inc.
Introduction
In the distant fee-for-service past, an independent private physician, hospital or healthcare entity would raise fees if more income was desired. Correspondingly, income increased and volume changed very little, if at all. This occurred because patients (insurance payers) were willing to pay almost any price and medical fees were considered inelastic, within the relevant price range.
Economists call this relationship the elasticity of demand and define it as a number representing the percentage change in quantity (patient volume) demanded of a service resulting from each 1% change in the price of the service.
Elasticity of demand prevails if the price of the service exceeds 1.0 unit, and is deemed inelastic if equal to or greater than zero, but less than one. In other words, medical pricing is elastic if revenues increase only by lowering price. Conversely, raising the price will decrease revenues.
Medical care has a ratio of about .35. Inelasticity occurs in a growth industry, such as wireless Internet, where a fee increase will also increase revenues in the relevant range, while elasticity occurs in a mature (non-growth) business, such as medicine, where revenues are increasing but profits are stagnating or decreasing. The marketplace becomes resistant to price pressure, as it has done with health maintenance organizations.
Analyzing and Negotiating Cost-Volume-Profit Contracts
Table of Contents
Introduction
A. Hospitalists and Physicians
B. Medical Office Profits
The Profit Equation
Marginal Profit
C. Cost-Volume-Profit Analysis
Traditional Net Income Statement
Contribution Margin Income Statement
Contribution Margin Ratio
Standard Cost Profiles [SCPs]
D. Capitation
Cost-Volume-Profit Analysis
Capitation Economics
Table 1: Baseline Practice Profile
Table 2: Shift to Capitation
Table 3: Shift from Capitation to Fee-for-Service
Table 4: Revised Shift from Capitation to Fee-for-Service
E. Break-even Analysis for Capitated Contracts
Net Target Profit Analysis
Margin of Safety
Office Operating Leverage
Standard Treatment Protocols [STPs]
(a) Goals and Objectives
(b) Targeted Procedures
F. Capitation Impact Analysis: [Experience Attitudes and Predictors]
G. Negotiation and Managed Care Contracting
Contract Negotiation Objectives
Types of Contracts
a. Sub-capitated Contract
b.Self-tracking Managed Care Plans
Capitation Discount Payments
Managed Care Contract Pitfalls
Appealing Dis-enrollment Decisions
Useful Patterns and Trend Information
The Negotiation Process
Develop an Accurate Pricing Model
H. Use Effective Negotiation Skills
Incorporate Protective Contract Clauses
Monitor, Implement, and Renegotiate the Deal
Medical Contract Standards
General Standards
Specific Medical Office Standards
Standard Managed Care Contract Questions
(a) Questions 1 thru 8
I. “Micro-Capitation”
Medical Care Packages
Acute Episodes of Care
Comprehensive Payment Reform [A Theoretical Construct]
Advantages of Comprehensive Payments
Economic Assessment
Sample Pro-Forma Payment Scheme
Abuse Potential
The Capitation-Liability Theory
Conclusion
References
Case Models:
Case Model 1: New-Co Medical Clinic, Inc
Case Model 2: Hospital of Saint Mackenzie the Hopeful
Case Model 3: Cardio-Thoracic surgical services at Saint Mackenzie
Case Model 4: “To Joint -or- Not to Join” [Evaluating an MCO Contract
Case Model 5: A Chronic Diabetic Care Package in Driggs, ID [Micro-capitation]
Checklists:
Checklist 1: CVPA for Prospective Payment System Contracts
Checklist 2: Pitfalls to Evaluating CVPA
Checklist 3: HMO Managed Care Needs
Checklist 4: Medical Office Standards for HMO Contracts
Checklist 5: Appealing MCO Dis-enrolment Decisions
Checklist 6: Capitation Rate and Contract Terms
Checklist 7: Managed Care Negotiations and Re-Negotiations
Appendix:
Appendix 1: Sample HMO Enrolment Letter
Appendix 2: Sample Physician Capitation Contract Proposal
Appendix 3: HMO Capitated Contract Negotiation Work-Sheet
COUNTY MENTAL HEALTH PROGRAMS
[Preparing for the Future]
By: Dr. Gary L. Bode; CPA, MSA
By: Carol S. Miller; RN, MBA
By: Hope Rachel Hetico; RN, MHA, CPHQ, CMP™
Institute of Medical Business Advisors, Inc
Introduction
Counties are the primary providers of mental healthcare for persons who lack private coverage for such care. Both children and adults are eligible to receive such assistance. The counties provide a wide range of psychiatric and counseling services to the residents in their community as well as other types of assistance such as:
The county facilities generally include outpatient clinics, county mental health programs, short-term psychiatric facilities, day-care centers, de-toxification centers, residential rehabilitation centers for substance abuse, long-term care psychiatric facilities, and Veterans Affairs (VA) psychiatric centers. The county centers may be co-located with other county services such as social services, occupational rehabilitation services, information technology services, human resources, maintenance services, and others or may be independently located.
County Mental Health Programs [Preparing for the Future]
Table of Contents
Introduction
A. Description of a County Mental Health Center
Staffing
Types of Covered Services
Sources of Clients
Regulatory Environment
Types of Revenue
Other Sources of Revenue
B. Issues Impacting County Mental Health Programs
Fragmented Entry Process into the Mental Health System
Administrative Challenges
Medical versus Mental Health Parity
C. Coding Classification
a. Diagnostic and Statistical Manual of Mental Disorders
Medication and Pharmaceutical Direction
Provider Stratification and Specialization
Decentralization
Prevention
D. Future Options for County Mental Health Centers
Internal Reorganization
Privatization
Table 1: Privatization Techniques
An Examination of the Privatization Option
Table 2: Pros and Cons of Privatization
Table 3: Cost Components of Privatization
Conclusion
References
Mental Health Support Groups
Mental Health Professional Organizations
Mental Health Professional Publications
Case Model:
The Down-Home Mental Health Center: Poised for Privatization
Checklists:
Checklist 1: Analyze Your Mental Health Center
Checklist 2: Analyze the Revenue Sources of Your Mental Health Center
Checklist 3: Prepare for the RFP
Appendices:
Appendix 1: Bidder Evaluation
Appendix 2: Request for Proposal
Appendix 3: DSM-IV Diagnoses and Codes
Appendix 4: DSM-IV Diagnoses and Codes [Numerical Listing]
TOC: TABLE OF CONTENTS.pdf
To Purchase: Call 1-770-448-0769 or email MarcinkoAdvisors@msn.com