Payer Relationships Key to Transplant Revenues

ORLANDO--Using certain strategies in dealing with payers can contribute significantly to building successful relationships and maximizing revenues from bone marrow transplants and peripheral stem cell procedures, said Charles J. Bruno, vice president of business development for the City of Hope Management Services Organization, which manages oncology care for nearly 1 million lives in Southern California.

Case Rate Payer Method

Mr. Bruno formerly managed key payer relationships for the City of Hope National Medical Center, which has performed more than 2,000 bone marrow transplants since 1976.

Especially in a highly evolved managed care market like California, following key guidelines can help ensure sound, profitable relationships with physicians, institutions, and payers, Mr. Bruno said at a transplant conference, sponsored by IBC/Infoline.

City of Hope most often uses the case rate payer method (a flat rate per case treated) for reimbursing transplant services. In a few cases, Mr. Bruno contracted on a discounted fee-for-service basis. While capitation (a flat rate per member enrolled) is highly desirable, he said, few payers have expressed interest in this approach. "We’ve been experimenting with it," he commented. "Its advantage is in removing barriers regarding the decision whether or not to transplant."

The first maxim for those responsible for managing transplant contracts is that they should understand all risk-sharing relationships, and align institution and physician objectives and incentives accordingly, Mr. Bruno said.

"In highly competitive markets such as Southern California," he said, "there’s not much room left for reducing rates, as pricing has already been cut to the bone."

In other, less intensively managed areas, however, if institutions and physician groups are interested in sharing risk, he said, "it should be for services where modest reductions won’t break the bank. Because institutions and physicians must work together on managed care strategies, all parties must be clear on the objectives you’re trying to achieve."

Second, make contracts as user-friendly as possible, Mr. Bruno counseled. For example, in contracting separately for physician/hospital services, apply payment methodology consistently in terms of case rate structure, outlier protection, and exclusions. "Also use consistent contract language and try to achieve seamless communication with health plans and members," he said. "In other words, plan members should view the institution and physicians as one and the same."

Third, to the extent possible, it is critical to include physicians in the payer contracting process. Review service attachments, coverage criteria, and transplant grids with them, and be sure to determine physician payment rates and splits on all-inclusive case rates prior to contracting.

In addition, have key physicians participate in site visits with payers. "This is a major hurdle, but so important," Mr. Bruno noted. Payers want a collaborative relationship with medical staff, so physicians should be encouraged to participate in developing patient selection criteria, implementing contracts, and serving on technology assessment committees.

"When payers or the medical director of a health plan can associate a face with a name of the medical director of your bone marrow program, it can cut through a lot of discomfort and increase your chances for success immensely," he said.

Fourth, contract designers and negotiators must be extremely well educated about details such as variable vs fixed costs for each transplant phase, including pretransplant evaluation and care, the transplant procedure itself, post-transplant care, and donor search/marrow procurement procedures, he cautioned.

"You must know what’s acceptable and what’s not, including when experience and knowledge tell you that accepting business below cost may be worth it, or when to walk away," he said.

Community-based programs are now competing more successfully on a cost basis than academic programs, he said, so contractors should also understand the services and costs associated with each phase of the transplant. "For ease of negotiation, it’s a good idea to develop standard ‘boilerplate’ proposal language for all transplant procedures," he advised.

Similarly, know the typical exclusions in case rate contracts, such as standard chemotherapy, cancer care not directly related to transplants, National Marrow Donor Program (NMDP) charges, readmissions, postdischarge drugs, and blood and blood-related products.

"Unless you’re prepared to accept the risk, only contract for those services directly provided through your own program," he warned. "Some payers may ask the program to provide one year’s care, whether it’s on-site or not. If you aren’t able to do that, don’t include it in your contract!"

Stop/Loss Coverage

Contract negotiators should also be well-versed in the different types of stop/loss coverage. Some California payers, Mr. Bruno said, are now requesting a flat case rate "take it or leave it," with no outliers.

"If I’ve done a thousand stem cell rescues, I should have very good cost data plus a smaller degree of variability in cost to perform the procedure. So with certain payers, we could consider taking this risk," he said. "But with unrelated allogeneic transplants, which are much more costly, where NMDP charges are incurred outside your program, and where significant cost variability can exist, you have no protection, and the losses can be significant."

Part of the job of any good negotiator should be to educate the institution’s clients, Mr. Bruno said. Be sure that payers understand that outpatient bone marrow transplant programs work differently than inpatient programs.

"It is wise to base outpatient program stop/loss on charges accrued either from the date of evaluation or from the date of actual transplantation. These charges should be tracked until the patient is formally released from the program after completion of all necessary outpatient transplant care," Mr. Bruno said. "In programs combining inpatient and outpatient services, you must be able to track patients through both inpatient and outpatient days," he added.

Know the Market

Finally, he emphasized that negotiators must know their market and their competition in order to deal successfully with payers, including what types of procedures are available at their own and other institutions, how their program compares with others, the unique capabilities and value-added services their institution offers, and the institution’s patient satisfaction rates.

Also, he said, to get the best advantage, be aware of competitive rates and terms, staff changes at other institutions, and distribution of referrals by type of procedure.

Mr. Bruno noted that "transplant technology is shifting from the cutting edge to the leading edge," meaning that community-based programs will compete with more established centers for the same patient base. Unfortunately, he added, HEDIS [Health Plan Employer Data and Information Set] lacks data-specific indicators on transplant services, so it is hard for payers to compare programs.

"When there are no other indicators, you have to default back to price," Mr. Bruno acknowledged. Payers can be reluctant to share data on how programs compare on both costs and services, but this information is invaluable if you can get it. "Ideally, you and the payers can educate each other, to the benefit of everyone involved," he said.