SHOULD WE OR SHOULDN'T WE CONTRACT?

Weighing the benefits and disadvantages of participating in any managed care plan will help you focus on what is best for your practice. As you review the following considerations, keep in mind that most managed care programs are discounted--less medical care is provided for less than your usual fee. So you can't necessarily make up lost revenue by increasing the number of services you provide.

The Upside ...

Increase patient volume and positive cash flow.
As managed care becomes the wave of the near future, dermatologists who don't leap on the bandwagon may see a hefty decline in their patient base. Participating selectively in managed care plans can increase your patient volume and positive cash flow.

Build a safety net during this transition period.
Contracting with certain managed care plans may help your practice during the "shake-out" period resulting from the shrinkage in dermatology services as the number of managed care patients increases.

Reduce or eliminate administrivia.
Some managed care plans -- particularly capitation arrangements -- eliminate time-consuming administrative activities, such as billing and insurance hassles.

Receive support services.
Many managed health care organizations offer practice management guidance and provide learning opportunities through team building, peer review, quality management, and development of clinical and research guidelines.

... And the Downside

Lose autonomy and quality control of care.
A major argument for dermatologists not participating in managed care plans is the potential loss of autonomy, especially as employees of the plan. The ripple effect of this can be considerable--high volume requirements, limitations on services and follow-up, increased administrative tasks to justify your care and treatments, and strict coverage requirements. Not only is quality of care affected, but discounted fees may make it difficult to cover all the expenses in your practice.

Increase vulnerability to market whims.
Allowing too much of your income to come from managed care contracts leaves you vulnerable to the whims of the HMO and uncertain economic change. For instance, if 30 percent of your income is from a single HMO, and that HMO either forces you to take a lower fee rate or doesn't renew your contract, you could take a significant loss. So you need to spread your risk.

Treat more severe cases and less minor cases.
With primary care physicians treating more patients with minor skin problems, the volume of patients referred to specialists will continue to drop. The result is that you will tend to see more severe cases that demand additional treatment at a higher cost per patient.

Understanding the ups and downs of managed care contracting is the first step toward making intelligent choices about your participation in this process. Another consideration to factor into your decision concerns the type of reimbursement options available.