Middlemen’s middleman

WSJ recently completed a series of articles (available for 7 days) on employer’s use of middlemen in their dealings with intermediaries to make sure they get the best bargain.  The article points out both the advantage (potential cost savings) and disadvantages (middlemen making huge profits at the expense of their employer customer which in part makes up for the huge increases in health care premium).

One of the surest signs that the benefit of outpatient physical therapy is administered inconsistently, suffers from oversaturation, and is viewed by payors as a commodity is the rise in use of PT benefit managers by payor and employers (middlemen’s middleman-MM) and this is reeking havoc on rates for physical therapy centers.

Traditionally, benefit managers are used when services truly are a commodity (pharmacy, DME, lab).  If you have ever gotten a letter stating that you are now being paid on a per visit or case rate, you are most likely in the hands of a MM.  ACN is one such but there are others including Network Synergy (heavy in work comp) and Orthonet.  Purely based on feedback from providers, they appear to me to be almost universally hated.  The sad reality is that I believe the use of MM in PT will grow.  They will be successful as long as PT’s are willing to take rates at below their costs (taking advantage of oversaturation), be compliant with overly meddlesome pre-certification requirements (MM make their money off of lopping off visits and love it when these burdensome pre-certs aren’t performed), and take case rates without regard to the patient’s individual diagnoses but rather have it “wrapped” within some larger diagnostic category.  To my knowledge, none of the MM in PT actually have engaged EBP as a standard.

One of the motivations of EIM, MyPhysicalTherapySpace.com, and this blog is to promote the use of the Internet to help create transparency in the PT world.  As the article points out, disintermediation has occurred in most industries but it has not in medicine (by way of example, pharma benefit manager’s made 1.9 billion in profits last year).  Although middlemen serve a role in some industries (e.g. banking), the only thing it will do in PT is reduce our rates.  This is indeed scary.

A future post will deal with some potential solutions to this but in the meantime, please post your experience and thoughts on this very timely topic.



3 responses to “Middlemen’s middleman

  1. Kevin says:

    After 20 years doing military PT I’m getting my first exposure to “civilian PT” in an outpatient clinic. My observation is that there appears to be a battle between the PT clinic that trys to “jack up the charges” vs the payer/middleman (in this case Orthonet) that is trying to reduce them, primarily by controlling the number of visits. It bothers me that PTs continue to treat, and in too many cases overtreat, until the payer finally decides the patient has had enough.

  2. Patrick Myers says:

    I agree with you on this concept and know that we all see it in practice. From the Cigna flat rate (in our region) to ACN (who just adjusted from a fee schedule to a flat rate in order to “provide parity across market regions and service types”), we all are having difficulty with this. In fact, the change in ACN fees will cost tens of thousands of dollars per year to even small clinics. The question, how can we leverage our position in a united front? In other words, what is stopping us from converging as a group and using our strength in numbers to help negotiate a higher fee? I just had a consultant tell me that most hospitals LOWEST rate they will accept for PT services is at least 200% the Medicare fee paid. How do they do that? She said that they negotiate all hospital services as a group, often bundling lower revenue services with profitable services. In this manner, they get good reimbursement for PT because it is bundled. Should we schedule all our per diem patients during select hours and work multiple patients during a short treatment period, i.e. 6 patients in one hour? Or, since these MM will only accept a per diem CPT no matter the treatment, why don’t we see those patients for 15 increments (i.e. 1 patient for every 15 minutes)? Of course, besides being unethical, was presented in jest. However, I think there are clinics that may very well start to see Cigna and UHC patients for 15 minutes only and get the per diem charge 4 times in 1 hour. Has anyone noted treatment patterns in Canada or New Zealand? Anyway, I think the real way to combat this problem is in our strength of service, statistical support of our patient outcomes, and competing clinics standing unified. Any thoughts?

  3. Larry Benz says:

    Patrick: your points are right on. They want to pay us less and desire more quality!

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