A fully insured business will shop around with different health insurance companies for the best value, including a good network. However, self-funded health plans — which are growing in popularity — contract with a rental network that administers benefits with the help of a third-party administrator.
Smart network provider contracting will maintain lower costs and access to care for members. Many employers only look at the discounts for services in the contract, but there are other methods just as important when evaluating a network.
“There are always some things out of your control, but you try to manage the network and build in predictability to make sure you have control over it rather than the providers,” says Jamie Huether, regional vice president, Network Management, at HealthLink, which rents its network to self-funded entities.
Smart Business spoke with Huether about what to consider when evaluating a network contractor.
How can a network provider maintain lower costs?
A network provider employs a number of contracting methodologies to help health plan clients achieve the best rates. One is having as many fixed rates and as much charge master protection as possible, which limits exposure to provider changes. So, for instance, if a health care provider bills $3,000 for a procedure, and then increases it to $4,000, the network provider’s fixed charge of, say, $900 remains the same.
The alternative is reimbursement methodologies that pay a percentage of the billed charge, which rise as the bill increases. This fully exposes whoever is paying the claim to whatever the providers want to bill.
Why is the network with the highest discount not always the best option?
When evaluating networks, focus not only on the network discount but also the unit of cost, or what the service actually costs. Although the discount can look good, it doesn’t tell the whole story because providers don’t bill the same. Typically, hospitals owned by for-profit entities have a higher billed charge structure than not-for-profit hospitals. So, an appendectomy at a for-profit hospital may have a 75 percent discount for a final procedure cost of $15,000. However, the same appendectomy at a not-for-profit hospital might only have a 30 percent discount but just cost $9,000.
In addition, facilities make charge master — the master list of what they bill for services — changes throughout the year, depending on financial goals. These increases aren’t across the board because some service lines are bigger revenue drivers.
How does the network contractor work with self-funded businesses?
A self-funded plan sponsor contracts with a rental network to help manage costs and plan ahead. For example, one rental network used multi-year contracts to limit uncertainty and keep costs low. By offering stability to the health care providers, who also are trying to budget, it could mean a cost break.
A network contractor shares management reports with self-funded entities to show what they are spending at each facility and the average cost per day. The rental network also can report upcoming negotiations and cost increases that are locked in, giving businesses greater control.
When looking for a health network, what should you ask?
Health plan sponsors need to look for stable, broad networks with good geographic coverage. You don’t want to contract with a network where providers are coming in or out, or that doesn’t include one of the area hospitals. Businesses should ask:
- How much turnover is there in your network?
- Do you anticipate any major provider terminations in the next 12 months?
- What is the network doing with respect to transparency around costs for certain procedures, as well as being able to provide answers about quality?
Another factor is size — a network provider that does a lot of business can use that to leverage better rates from health care providers. Ask about additional services, such as customized directories, and how much help the network will provide to resolve issues related to the pricing of claims. Finally, determine how flexible the network is in addressing issues important to you.
Jamie Huether is regional vice president, network management at HealthLink. Reach her at (314) 923-6756 or firstname.lastname@example.org.
Learn more about HealthLink's broad network of contracted physicians, hospitals and other health care professionals on their website.
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The current economic climate presents significant challenges for manufacturers in the San Francisco Bay Area. Increasing foreign competition, price pressure from weakened demand, tight capital markets and the rising cost of raw materials have combined to create a particularly competitive landscape. However, forward-thinking manufacturers are turning these challenges into opportunities — and using these challenges as a springboard for operational improvement and increased profitability.
“There are many innovative ideas for growing your manufacturing business,” says Karen Burns, assurance partner at Sensiba San Filippo LLP and co-founder of the East Bay Manufacturing Group.
Smart Business spoke with Burns about what manufacturers can do to strengthen their business, such as controlling costs and shoring up financials, best practices for hiring and retaining top talent, and the value of networking effectively.
What are some ways a manufacturer can control rising costs?
Reduce market uncertainty. Consider entering into long-term contracts to stabilize price fluctuation for raw materials. Long-term contracts with customers also can mitigate market swings, albeit negotiated pricing may initially result in reduced margins.
Make safety a priority. Accidents can be costly for your business and your employees. Implementing improvements can decrease downtime and increase your yield.
Encourage innovation by empowering and motivating employees to make product and process improvements throughout the organization. This will lead to your business running smoother and motivating employees to stay longer, which reduces the costs associated with training new hires.
Consider near sourcing. You can gain more control over your manufacturing processes and costs by using suppliers closer to your manufacturing facility. You’ll reduce your shipping costs, too.
Additionally, it’s important to find out what your customers value and focus on delivering what matters to them, then trim costs in those areas that customers do not value. Communicating with your customers is critical. Discussing costs and anticipated cost increases will help strengthen your relationship with them. You can then work together to increase and decrease prices as commodities fluctuate.
Why is it critical now for manufacturers to ‘shore up’ their financials?
Banks and financial institutions are slowly loosening their credit requirements. Venture capitalists and private equity groups also are beginning to invest again. Congress has even established programs that encourage lending to small businesses, such as the Small Business Lending Fund and State Small Business Credit Initiative. Having your financial house in order could make or break your opportunity to secure funding.
Further, merger and acquisition activity is on the rise again. While many business owners do not have a plan in place to sell their company, unsolicited offers are becoming more common. Strategic acquisitions by competitors, vertical integrators and those who have had money sitting on the sidelines for too long create the need to be prepared for this possibility. Ensure your financials are ‘auditable’ and that you have the proper internal controls in place to maximize opportunities such as these.
What advice can you give to business owners for hiring and retaining top talent?
Create a culture that values the whole employee. While pay is important, it is not always the most important motivator. Today’s generation of employees wants it all — good pay, advancement and, most of all, the opportunity to do new and exciting work and have fun doing it. A passionate business leader who treats his or her employees like family and gives back to the community will find employees more willing to follow in his or her footsteps.
Reward innovation at all staff levels and recognize employees for their dedication and achievement. Develop a total rewards strategy that includes compensation, benefits, performance and recognition, and career development opportunities. This will attract the best and brightest, which in turn will help to drive your firm’s brand in the market.
The most competitive edge out there can often be a good network. What strategies can you share with manufacturers on networking?
Networking is necessary, yet can often be a daunting task for many business owners. When an owner starts a business, he or she is usually very good at making his or her product and developing enhancements. While marketing is often not his or her forte, a few simple tools and a little bit of practice can make the most awkward networker into a pro.
Practice your elevator pitch. No one knows your business better than you. Successful networkers practice in advance the answer to, ‘What do you do?’ so that it rolls off the tongue effortlessly. Be brief in your answer to enable others to seamlessly introduce you to others at an event.
Attend interesting events that are a part of your sector. Business events are advertised in newspapers, trade groups, local LinkedIn groups and law firm websites. While the number of potential events may seem overwhelming, business owners who distill their calendar to events with relevant topics will remain motivated to network over time. Attend events that attract a number of prospects. Also keep an eye out for centers of influence — those who can refer business to you or enhance the success of your business.
Create a post-networking communication plan. After an event, successful business owners make the most of their new contacts — and their time — by implementing a pre-set follow-up plan. For business prospects, an email requesting an in-person meeting is appropriate, while many folks you meet will suffice with a reach out on LinkedIn. Inviting centers of influence to lunch or coffee is also an excellent investment in time.
Karen Burns is an assurance partner at Sensiba San Filippo LLP, a regional CPA firm based in the San Francisco Bay Area. Reach her at (925) 271-8700 or email@example.com.
Insights Accounting is brought to you by Sensiba San Filippo