Case of the De-Capitated Audiologists

Hearing Health & Technology Matters
April 6, 2011

I’d like to kick start this blog by sharing an interesting query that arrived in my email this week from Rick Lazich, AuD:

Dear Dr Dunn.  We are a two member audiology group that provides services/hearing aids onsite in long term care facilities in (state). We have done a fee for service practice for the past seven years. Medicaid has been the primary payor for our services and hearing aids during this time period.
We have been approached by a dental group to provide services on a capitated basis via an insurance product. We have been working through our statistics to develop a capitated rate. I referenced your book chapter on MCOs as was looking for any statistics already developed. You referenced [a hearing healthcare benefits group] with regards to utilization rates but they could not expand on that for my purposes. What I am looking for is any published data on utilization rates for audiology and hearing aid services in a managed care system. Also, I have been unable to find any formula/spread sheet/guidelines for calculating cost/capitation rate. I would like use our data to objectively determine a capitation rate and compare it to any published data. If you can suggest any references or individuals to contact for guidance in this project, it is deeply appreciated.

To which I answered:

Alas, your question does not have a good answer, at least as far as I know. As you note, most companies hold their numbers close, so we don’t have the luxury of national databases as, for instance, pharmaceuticals would. You might try contacting [name],  who is very knowledgeable and might provide some insight. As for my own experience — I just remember back-breaking hours for several weeks pouring over spreadsheets I created in Excel, trying to project and determine break-evens, cost benefit, etc. I ended up spending more on massage therapy to fix my back than I probably made from the contracts I eventually signed! But, no doubt you MUST do the analyses and determine whether you want to do it at all. Good luck and do let me know what comes of this.

To which Rick answered:

Thanks for the response. I have solicited similar responses from [membership organizations]. I have decided to contract with a local consulting group of actuaries to put this together. They are eager to take it on (pricey of course). I will follow up with you when we get this finished and vetted through the insurance company that is writing and submitting the policy to the state. And yes, please submit this “problem” to your blog and forward me the URL. Any ideas or knowledge on this would be great.

So there you have it – our first post on this blog section and it’s a cliff hanger.  Imagine hiring actuaries!  Our profession is getting so cool and sophisticated.  Stay tuned for future posts when we hear how Rick and his partner are doing.  Use our handy Reply box to send Rick suggestions, data, spreadsheet formats, whatever you’ve got!  Eventually, we need to find out why this plan is being put together by dentists.  Any help on that one?

  1. We are working to finish the insurance product to submit to the state. I will fill in the details when they become clear to me and I can articulate them better. We have run into one big snag though. This policy will service patients only in a long term care setting. An insured patient could take this coverage to another provider to whom we would have to pay the claim amount. This would be for the hearing aids. We have built into our capitated rate many services that are connected with the hearing aid cost. Consequently if we have many outside claims to pay it would not be good. The underwriter wants protection from this and wants us to find a licensed PPO in the state to take a capitated payment to be the PPO if someone goes out of facility. My search has not revealed any PPO for audiology that are licensed with the state. The exposure is minimal but the underwriters are sticklers for details which is probably good. Any information on this issue is appreciated.

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