Evaluating 3 rd Party Plans

1. Evaluating 3rd Party Plans • Some things to consider before joining a 3rd Party Panel • Quick review of the basics • Dr. Quack suggests you create an Excel spreadsheet when considering enrollment in various 3rd Party Plans

2. This presentation based on“How to Evaluate Insurance Plans”byBrad Williams O.D., President Consulting Solutions at Williams Group

3. Fundamental issue: What it costs you to do business. Chair-cost-per-hour • What does it cost per hour to have patient(s) sitting in your exam chair? (Worse yet: not sitting in your exam chair…) Dispensary-cost-per-hour • What does it cost per hour to operate your dispensary?

4. Two major expense categories. • Operating Expenses All expenses except lab bills • Rent, • Staff Salaries, • Utilities, • Telephone, Etc. • Cost-Of-Goods-Sold • Primarily your lab bills

5. Dispensary 35% Operating Expenses (Excludes Lab Cost & Doctor’s Pay) • Clinic 65%

6. Example Operating Expenses • Monthly operating expenses (excludes lab bills and Dr. pay) equals • Today’s example: $12,675

7. Compute Doctor Hours • Dr. works 18 days per month • Dr. works 8 hours per day • Result: Dr. works average of 144 hours per month

8. Compute Cost per Hour • Monthly Expenses • Monthly hours = cost per hour

9. Compute Cost per Hour Monthly Expenses Monthly hours $12,675 144 hours. • $88 Operating cost per hour • $44 Operating cost per 1/2 hour • $22 Operating cost per 1/4 hour • A different chair cost formula (cost per patient seen, not the cost per hour) is found at AOA Website http://www.aoa.org/x5776.xml = cost per hour = $88 per hour

10. Next Consideration:Revenue-per-patient (RPP) • Determine where revenue will come from to cover operating expenses and reach break-even.

11. Next Consideration:Revenue-per-patient (RPP) • Revenue sources... • Exam fees • Ancillary testing • Glasses (less lab bills) • Multiple pairs (less lab bills) • Contact lenses (less lab bills) • Net Revenue beyond break-even becomes profit.

12. Medical Care (BCBS) Examination Additional testing Medical treatment Patient may also purchase Prescription Glasses Additional Pairs Contact Lenses Solutions Revenue per Patient (RPP) • Routine Care (VSP) • Covered Glasses • Additional Pairs • Contact Lenses • Solutions • In addition, Patient’s Medical Ins. may cover: • Additional testing • Medical treatment

13. Analyze RPP for Various patient categories(spreadsheet) • Private pay • Medical Insurance • Medicare • Medicaid • Routine Care Plans (such as VSP)

14. Now, Fill otherwise empty exam slots per week based on • Chair-cost-per-hour • Anticipated revenue-per-patient • Patient Mix (catagories)

15. How to use that information… Example #1: ABC Managed Care • If ABC Managed Care exam pays $45… • If you book appointments every 30 minutes • (Remember, cost is $44 for 30 minutes) • Better off taking a managed care exam at $45 than leaving an appointment slot open • $45 exam reimbursement will cover the $44 clinic expense

16. Remember….Profitability can be enhanced by RPP other than exam fees • Eyewear • Contact lenses • Further diagnostic evaluation • Medical treatment.

17. Example #2: Fast-Bucks Managed Care offers $35 per exam. • Do you decline to participate? • Do you participate? • 1st: consider whether you have open appointment times… • Remember, $0 is less than $35…. • Will you lose current patients if you don’t join?

18. If you decide to Participate, you can always… • Limit accessibility to open appointments • Abbreviate encounter to reduce time with patients • Use technology to enhance productivity • Re-allocate staff to maximize efficiency (delegate) • Increase staff to increase productivity • (Will cause increased chair cost per hour…)

19. Issues besides Chair Cost & RPP(Spreadsheet) • Estimated new patients it will bring to the practice • Estimated number of present patient base you may lose if you don’t participate • Paper work involved/staff efficiency • Marketing advantages… • Listed as provider large employer’s handout • Your name listed on 3rd Party Web Site • You can show acceptance of this 3rd party plan on your own Web Site

20. Final Issues to Consider • Standard of care requirements and limitations • 3rd Partly Contract • State Law • AOA Guidelines http://www.aoa.org/x4813.xml

21. Quick Quack Spreadsheet

22. Final Issues to Consider(Spreadsheet) • Dispensary reimbursement opportunities vs. Dispensary reimbursement limitations • Frequency of visits limitations • Exam frequency • Lens/Frame replacement frequency • Expiration period of contract Brad Williams O.D.President Consulting Solutions at Williams Group

23. “The Power of the Pen” Chuck Brownlow OD AOA 3rd Party Consultant http://www.youtube.com/watch?v=KlRO1cev3DQ

24. Evaluating 3rd Party Plans • Quick review of the basics • Dr. Quack suggests you create an Excel spreadsheet when considering enrollment in various 3rd Party Plans