A New Strategy for Managed Care 

Once again a managed care company has come up with a new technique for saving money. Trigon Blue Cross/Blue Shield, a large regional insurance company recently asked all of it's "preferred" providers to sign a contract with a "most favored nation" clause.  This clause stated that the provider agrees to charge the company the lowest rate that any company pays the provider - even if that rate was lower than the rate in the contract.    Providers balked at new contracts they were being asked to sign, and the managed care company backtracked and agreed to re-write the contract.

Insurance companies have already cut the fees that they pay to providers.  In order to join a preferred provider panel a physician or therapist is asked to accept a lower fee in return for more referrals.  In the past this was always a set fee agreed to in advance.   Companies sometimes reduced the fee later, but nobody ever proposed something like this.

Why was this new proposal a problem?  When managed care first came on the scene providers scrambled to get on as many "panels" as they could.   I'm signed on with almost a dozen companies in my part-time practice, but only 3 or 4 regularly refer people to me.  A couple of others allow me to see their clients if the client requests to see me.  I have never seen a client from some of the companies.  In some cases I knew in advance that I was unlikely to see clients from that company.  I signed-up as insurance - in case things changed in the future.    

The "most favored nation" clause would have affected me in the following manner:

If the big regional company paid me $75 for a service, but the official rate from a small midwestern company I contracted with was $65 for that service, the big company expected me to tell them this, and to voluntarily accept a $10 cut in my fee.  They expected this even though I'd never even seen a client from the midwestern company. 

Neither I nor my office staff are completely aware of every fee set by every managed care company.  If I failed to voluntarily reveal a lower fee charged by another company I could be declared in breech of my contract and cut from the company's panel.   What if every company wrote their contract this way?  Medical costs might fall, but some doctors and therapists would go out of business. 

When I wrote this article in May of 1999 I did not mention Trigon by name. I had a private practice at the time, and they were one of the companies that covered some of my clients. A colleague reminded me that insurance companies sometimes blacklist people who speak out.  I really do want to give Trigon some credit.  They listened to their providers and changed their policy.   Is this the last we will hear of this strategy?  If you are a healthcare professional be sure to read any new contracts very carefully.   The "most favored nation" scheme could show up at any time.

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