MANAGED CARE March 1998. ©1998 Stezzi Communications
Managed care means many things including, in our capitalist society, managing to outperform your competitors. How? Information that can give you an edge is easier to obtain than you think.
Information fuels managed care. It dictates mergers and acquisitions, determines reimbursement rates and defines strategic goals, helping to preserve and expand market share. But many physicians, managed care executives and plan administrators often ignore information that is at their fingertips.
Face it. Free enterprise or not, government meddles in health care. Many services are paid by Medicare and Medicaid. Federal and state governments fund research and site development. Providers and health plans are licensed and regulated by government of one level or another.
Government is the Big Brother of health care. And Big Brother has rich treasure chests of seemingly confidential information waiting for you. All you have to do is ask.
FOIA--first and foremost
The federal government has a Freedom of Information Act, and so does each state. FOIA makes potentially privileged information public. The theory behind FOIA is simple: Much as shareholders own a slice of a corporation, residents, in theory, own a piece of government. As owners, they have a right to know certain information in government files. It's part of the doctrine called checks and balances.
Congress created the act partly in response to the Watergate scandal. Lawmakers wanted to establish guidelines to shed light on areas where abuse of power might occur.
FOIA is a complex area of law. Thousands of sometimes conflicting court decisions define FOIA, establishing the boundaries of how public private information really is. Typically, FOIA is inapplicable to private companies and organizations and to persons or organizations that receive government contracts. Often, FOIA exempts from disclosure, among other things, trade secrets and confidential business information. Detailed information about a company's strategic plans or financial statements may qualify as confidential business information.
So what's so great about FOIA? Federal FOIA gives you a license to peek inside the records of executive agencies — the Departments of Health and Human Services and Labor, the Health Care Financing Administration and other agencies that regulate health care or health care services.
These agencies have a morass of regulations that govern hospitals, physicians, HMOs and others. They are repositories for reports, audits and compliance reviews. Many documents are submitted by plans and providers. Some are generated by the agencies. If analyzed properly, these documents, laden with strategic information, can help you gauge competitors, develop and assess new markets and foster integrated relationships.
Freedom-of-information acts in many states are more liberal than the federal law. In some states, they apply to any public entity created by the state or a municipality. In some states, some providers, especially community hospital associations and public university-affiliated hospitals, are quasi-governmental agencies. The municipality may own the hospital's assets or the university hospital used to teach medical students.
FOIAs may make these hospital associations and university hospitals an open book, allowing you to obtain information that's inaccessible from other hospitals. For example, West Virginia University Hospitals, a private tax-exempt entity, is subject to FOIA. While the boundaries of FOIA are resolved case-by-case, competitors could potentially obtain a competitive advantage by using FOIA to identify the organization's strategic plans and determine its market.
Likewise, hospitals that derive substantial financial support from the government may be subject to some state FOIAs. For example, public university hospitals or those that receive substantial grants from the state or have rich contracts to serve state employees may be trapped in FOIA.
Hospitals aren't the only organizations that may be snared. Some state FOIAs cover documents related to home-health agencies, behavioral health centers and other health care organizations. For example, home-health agencies created by or affiliated with a municipality or a university hospital may have to answer to FOIA.
Unlike the federal FOIA, state FOIAs may nab some seemingly private companies, private organizations and persons or organizations that receive government contracts, giving potential adversaries free competitive intelligence.
Tricks of the trade
Sound too good to be true? For you Doubting Thomases, take a look at your consultants' reports. Where do you think your high-priced expert, pillaging through mounds of paper, gets his information? Most of it is a matter of public record --demographics, billings, census, payer mixes and so on. There's nothing wrong with consultants spinning straw into gold, or in this case, public information into mega-dollars. That's commercialism. But much of the information they turn up is one simple letter away.
At the same time, don't be oversold on FOIA. It is not a consultant replacement act and it certainly won't displace them. But FOIA may help you identify issues that may require further scrutiny by a capable consultant.
FOIA's boundaries have not been established. So before you fire your consultant you should learn FOIA's parameters — how FOIA works and how you can make FOIA work for you.
Open-hospital-meetings acts, which exist in some states, may complement FOIAs. Not-for-profit hospitals that are owned or operated by a not-for-profit organization or a municipality are subject to these laws. Like "sunshine laws" that require open meetings of governmental agencies, open hospital acts require boards of directors of certain hospitals to conduct their meetings in an open forum. Competitors may attend board meetings, potentially gaining a glimpse into a hospital's strategic goals. Hospital boards that close their meetings or shut out competitors risk violating the act, potentially nullifying action the board took in the closed session.
There's also a school of thought that a document becomes a public record when it is discussed or referred to at an open hospital board meeting. For example, suppose a consultant prepares a market assessment or a strategy for creating an integrated delivery system — privileged information that in a competitor's hands could be enormously damaging. But under the act, if the consultant or board member uses or refers to the document in the meeting, the otherwise privileged paper may become a public record.
The theory behind these laws is that not-for-profit hospitals are subsidized by the state and its citizens have a right to know how their taxes are spent. Ironically, laws created to aid citizens may benefit competitors even more, giving potential foes information about the hospital that the public or subsidized community hospital is unable to obtain from the competitor.
Taxes — a double sting
The public availability of tax information may also create a competitive disadvantage. Not-for-profit health care organizations are required to file a Form 990 with the IRS. Form 990 is the annual return of tax-exempt organizations. Under the Taxpayer Bill of Rights of 1996, not-for-profit organizations are required to make available the organization's Form 990 for each of the past three years, the organization's exemption application and supporting documents and IRS determination letters. Tax-exempt organizations with gross receipts in excess of $1 million that violate this act risk penalties up to $50,000.
Examine Form 990 sometime. It contains plenty of useful competitive information — balance sheets, for-profit activities, financial information and the like. While Form 990 alone may not give you insight into a not-for-profit health care organization's activities, it may be a good complement to FOIA and the open-hospital-meetings act.
In these times where managed care is a flashy euphemism for bare-knuckles competition, competitive intelligence becomes increasingly important. Excess bed capacity, diminished reimbursement and provider overflow require creative marketing and sage strategic planning.
FOIA, open-hospital-meetings acts and tax information may give you a peek inside the minds of your adversaries, helping you to develop markets and assess marketing strategies.