After helping lead the charge for more Medicare reimbursements in past years, several for-profit hospital chains have redirected their forces to collect more-and more quickly-from their managed-care contracts, and lawyers are their standard-bearers.
Hospital chains that have facilities in more urban or midsized markets are beefing up departments that craft contracts with managed-care companies, or litigate against them, all to show insurers that they are willing to go to the mat to get what they believe is their due. So far, the result has been fewer but more profitable contracts, they say. Tenet Healthcare Corp., Santa Barbara, Calif., the nation's second-largest for-profit hospital chain with 114 hospitals, earlier this month announced the formation of a new managed-care litigation unit. Attorney Gary Robinson, 52, who was promoted to senior vice president and assistant general counsel at Tenet, will head up the unit.
"Tenet, like many other hospital providers, has experienced greater and greater problems being paid in a timely manner by some, but not all, managed-care payers," Hopkins said. "In the past, our methods really proved somewhat ineffective."
Hopkins would not say how many employees or what kind of budget resources Tenet intends to apply to the new litigation unit, although he said it was a "high priority" and would include lawyers in Tenet's Dallas center and in its divisional offices in Atlanta and Irvine, Calif. The unit has been up and running since June.
"We aren't going to get into details on the budget," he said. "We wouldn't like to discuss that for business reasons."
Previously, the company would negotiate with insurers over disputed claims and turn the case over to a collection agency if payment wasn't forthcoming.
"Now we're trying to reach a more advanced level more quickly," Hopkins said.
Tenet now includes its lawyers in any discussions about payment disputes and tries to meet with the most senior officials at the insurance companies as soon as possible.
"If the negotiating process fails at that point, we will arbitrate or litigate when we feel that we have a legitimate entitlement to be paid," Hopkins said.
The litigation unit may be one means to bolster the bottom line. Additionally, executives at Tenet's individual hospitals are paid incentives for reducing accounts receivables at their facilities.
David Dennis, the company's chief corporate officer and chief financial officer, has said improving the company's cash flow is a particular obsession of his. Indeed, in its most recent quarter ended May 31, Tenet reduced the number of days outstanding in its accounts receivable by 11 days from the year-ago quarter, to 68 days. The industry average is about 70 days, said Michael Zimmerman, executive vice president of Zimmerman & Associates, a Hales Corner, Wis.-based healthcare consulting firm.
Meanwhile, Iasis Healthcare Corp., the struggling Franklin, Tenn.-based hospital chain, also has jumped on the get-tough bandwagon, hiring a new corporate director of managed care, Beth Scarvey, in June. Scarvey reports to Sandra McRee, the company's new chief operating officer. McRee came on board in May, replacing Iasis founder Wayne Gower, who resigned after the company reported several disappointing financial quarters.
"With our revenue mix being very balanced among payer types, our strategies in working with all payers are critically important to our success," McRee said.
The percentage of Iasis' revenue generated by managed-care payers has increased to the point where about half of the hospital company's net revenue comes from private insurers rather than state and federal insurance programs, said Iasis spokeswoman Eve Hutcherson.
"We are centralizing our contracting process and contract management," Hutcherson said. "The purpose of that is to really apply additional resources and focus to this component of our business that comprises more than half of our annual net revenue."
The new department at Iasis' headquarters near Nashville will be closely linked to the company's regional staff. Standardizing the contracts will let Iasis wipe the slate clean of the contracting methods of its hospitals' previous owners.
Iasis now owns or leases 14 hospitals. In October 1999, the company bought 10 hospitals from Tenet and five from Paracelsus Healthcare Corp., which filed for bankruptcy protection in September 2000 and has since changed its name to Clarent Hospital Corp. Iasis closed one of the Paracelsus hospitals, Rocky Mountain Medical Center, Salt Lake City, in June, because it could not attract patients.
"I think this is a real high priority for us," Hutcherson said. "We plan to work as a single company in this regard, and not as four different regions, all operating differently."
In Delray Beach, Fla., Tenet and national insurer Humana walked away from contract negotiations in June after failing to reach agreement on rates, causing Humana to drop Tenet's Delray Medical Center from its network. Humana's Florida spokeswoman Pam Gadinsky said the two sides failed to agree despite talks between their top regional executives.
"That's the level those discussions took place at," she said. "We are not currently talking, but our goal is to have them in the network."
Humana continues to keep other area Tenet hospitals in its network, and Gadinsky described the failed talks as "amicable."
But Zimmerman said the less amicable alternative-litigation between hospitals and insurers-is on the rise.
"I think more of the savvy organizations are doing a real good job of tracking performance," he said.
Keeping track of claims denial rates can give hospitals more ammunition if they decide to go to court.
In May, for example, 225-bed Bon Secours St. Francis Health System in Greenville, S.C., sued Blue Cross and Blue Shield of South Carolina in U.S. District Court in Greenville, alleging the insurer refused to pay some claims.
"We would be pleased if we could move to a settlement," said Margaret Clark, the hospital's spokeswoman.
Donna Thorne, spokeswoman for the Blues, said the lawsuit is still pending.
"I don't know what's going to come of it, but we've been talking with them a great deal," she said. "This is America. Everybody sues everybody."