Why All The Workers’ Compensation PPO Consolidation in 2007?
Why is the medical cost containment industry experiencing all the PPO consolidation in 2007? The answer is fairly simple. The payor community won’t make fast decisions. It is not unusual to see payors take two (2) to three (3) years to make a decision to choose a new workers’ compensation PPO. With such a slow response, it doesn’t allow PPOs to easily gain new business, even if they are much better than the current PPO vendor of the Payor.
It takes approximately 10 years to create a really quality PPO that is able to compete on the national stage. However, if a workers’ compensation PPO doesn’t obtain new business early in its genesis, then it may never have the 10 years needed in development. It takes a lot of capital and patience to last the years of needed.
The market in late 2007 had a major shift. Two larger named PPOs, including the market “800 pound Gorilla”, for all practical purposes merged in the market place. In my opinion, this occurred because the payors were not making choices at a fast enough pace to satisfy the business model needs of those two PPOs.
Most PPOs are paid on a percentage of savings that they achieve for their clients. However, these rates have been pushed down greatly over the past seven (7) years. This decline in % of savings rates has reduced revenues to PPOs along with ever increasing and deepening fee schedules in the various U.S states.The payor community consisting of TPAs, Insurance Carriers, and Self Insured employers are unfortunately hurting themselves by not choosing new PPO options more quickly. The consolidation of the market continues to take away PPO choices. However, all is not lost. There are quality PPO choices in the mature space of workers’ compensation PPOs. Hopefully, the payor community, which is now faced with a consolidation process that is ongoing, will understand and react by choosing competitive quality PPOs. If they don’t act soon, they will be paying much more for PPO savings all across the country. As in economics in general, monopolies only drive up costs. The new “800 pound Gorilla” is going to be pushing pricing up much sooner than later.
October 16th, 2007 at 10:22 am
Another factor in consideration of PPO’s, especially in the Workers’ Compensation arena, is in looking realistically at the depth of penetration and savings that is possible. Unfortunately, too many clients that would have need of accessing a PPO network fail to truly incorporate the direction of care component. Without putting in place adequate tools for Adjustors, Utilization Management Nurses and Case Managers to see and refer in-network, then much of the savings potential of any PPO Network is lost.
Technology has come so far that any client looking at accessing a PPO Network for savings (whether that be a Third Party Administrator, Self-Insured Employer, or Insurance Carrier) should work to establish policies with their referral staff, along with working with the PPO I.T. staff to establish real-time data access to make sure referrals occur in network wherever possible. Referral staff should be incentivized to see that in-network referrals occur, and out-of-network referrals are minimized.
Finally, technology can only do so much. Clients should work with their referral staff members to help them recognize that the best possible savings often come through “specialty networks”. These organizations have negotiated deep savings as well as providing a customer service component for scheduling appointments and referrals. Generally, these are tracked via their 800# call center’s. Many times the deep savings potential is missed because referral staff members see these 800# centers are cumbersome when in fact, they are far from that. Many have online scheduling capabilities which allow appointments to be made (or rescheduled) immediately. Those that allow these networks to be utilized find them easily accessible, cooperative, and resulting in the savings desired.
There are many PPO choices in the market today. I would suggest that only those networks that can afford the technological answers along with innovative specialty network solutions, and the appropriate network coverage should be looked at seriously.
October 25th, 2007 at 4:43 pm
Frankly, what will happen if the rates for access to PPO networks do go up with the “800 Pound Gorilla Networks”? Let them drive up costs. This will likely produce less than stellar service to their clients and as they will be busy merging and evaluating the host of other networks they’ve aquired for quite some time to come which may create some negatives between a network and the providers in it - this is no small task. Let’s add along with this merging staffs and determining future direction while working to keep and consolidate their position with their clients- also very challenging.
We all know that as a Payor, savings is the bottom line. Yes, that’s true but we are really saving less if the cost of the savings keeps going up. You have control, not them. I’m finding that there are several other PPO choices in our marketplace. I think that those folks that think there are no other choices simply are misinformed or are not willing to look at these other networks at any depth. We all should do a little more homework. I think we’ll find some PPO networks of value out there when we do.
I know of specific cases where when other networks are evaluated that the results have been surprisingly good - and not in the favor of the “800 Pound Gorilla”.
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