business of pediatrics

Negotiating the Rules of Managed Care Plans

Many pediatric practices are familiar with managed care plans, which came on the healthcare scene in the early 1970s with the encouragement of the government to create Healthcare Maintenance Organizations (HMOs). In the 21st century, managed care plans have developed into health coverage options that significantly affect both patients and pediatricians. In this post, we speak to Dr. Suzanne Berman, MD FAAP, who co-authored the AAP’s guidance on managed care plans, and PCC’s Chip Hart, who shares advice for pediatricians negotiating the rules of managed care.

What is a Managed Care Plan?

According to, Managed Care is “a health care delivery system organized to manage cost, utilization, and quality.” PCC’s Director of Pediatric Solutions Chip Hart explains further: “[The goal is to] in theory provide the patients with more efficient and effective care than they’d get on their own. The concept is that health insurance was a free-for-all before. Managed Care was an effort by insurance companies to restrict the amount of utilization patients have with their care – to reduce the frequency you go to the doctor, and drive you to the least expensive option.”

Under managed care plans, patients and physicians must adhere to the plan’s guidelines in when, how often, and with whom the patient seeks care, and how physicians will be paid for their services. Many states have Medicaid managed care plans, resulting in the need for most American pediatricians to consider carefully how they will engage with the managed care system in their state.

Dr. Suzanne Berman, MD FAAP, of Plateau Pediatrics in TN and co-author of the American Academy of Pediatrics’ guidance on managed care plans for pediatricians, describes managed care this way: “Managed care is designed to optimize good care and diminish bad care. Kids don’t need to be going every day to get their ears checked. Should urgent care non-pediatricians be paid $100 for checking a child’s ears every day? No, that’s ridiculous. There are unsavory docs out there who will do just that. Managed care is a way to put utilization rules out there for patients and doctors who need them."

Goals of Managed Care

The goals of managed care plans in the United States are simply to reduce costs and improve efficiency for both state-funded Medicaid programs and for private health insurance companies. The way that managed care plans aim to achieve these goals are through reducing redundant or needlessly expensive visits, such as a patient going directly to a specialist or seeing the doctor more often than necessary.

“We can argue which rules [in managed care plans] are appropriate – rules like how the speed limit near a school zone should be different than on a freeway. “No rules at all” is not realistic. The AAP paper tries to provide reasonable rules in a way that thinks about pediatrics and special nuances. Well intentioned but pediatric-blind managed care people forget the special needs of children.”

Dr. Suzanne Berman, MD FAAP

As the pediatric specialty requires that children visit their medical home regularly, there are some concerns among pediatricians trying to follow managed care plan guidelines. The AAP’s Guiding Principles for Managed Care Arrangements for the Health of Newborns, Infants, Children, Adolescents and Young Adults is intended both for pediatricians to understand the regulations under which they must practice under a managed care plan, and for managed care plan creators to better understand the needs of children, which differ from the needs of the adult population in many ways.

Opinions differ on the value of managed care in pediatrics. Here, we’ll examine both sides of the argument: the benefits of managed care, plus the precautions pediatricians should take in negotiating these contracts.

The Pros of Managed Care: Guidelines, Medicaid Payments

Dr. Berman’s view of managed care plans is that of a set of rules to regulate healthcare for the benefit of both children and physicians. She argues that the guidelines help remove the possibility of nefarious behavior from pediatricians seeing children more often than necessary, even if this scenario isn’t common. “It’s just like traffic laws,” she explains. “You’re not going to run a stop light, but would you rather that the traffic law to not run stop lights not exist?”

She also points out that pay-for-performance opportunities within managed care plans enable pediatricians to receive better payments from plans like state Medicaid. Pay-for-performance indicators are often a tool plans use to measure improvement of practice quality, and meeting or exceeding the standards can result in better payments for little effort for practices.

“We recently opened a new practice,” says Dr. Berman. “[The managed care organization] offered us the same rates that we get at Plateau Pediatrics for Medicaid plans, which were better than the default rates. We said ‘OK, how about your pay-for-performance contracts?’ Now a year in, the practice is approaching  volume to get pay-for-performance. [With] good patient experience scores, good well visit and immunizations – it’s saving ] money by not sending every kid with ADHD to a neurologist. Most managed care plans are more eager to pay more money for pay-for-performance [than for specialists].”

Dr. Berman emphasizes that just like any other contract, pediatricians – especially new practices – should take a careful look at managed care plan contracts and evaluate the pay-for-performance offers and payment system before signing the dotted line. “There’s no perfect contract out there, but there are certainly some that are better or worse than others. Avoid the worse ones and you’re doing yourself a favor.”

Cons of Managed Care: Network Restrictions, Limits to Care

PCC's Chip Hart comes down on the opposite side of the value of managed care plans, though he is quick to point out that the article co-authored by Dr. Berman is an invaluable resource for pediatricians dealing with the reality of managed care plans, and a useful tool in their negotiations.

Hart’s concerns lie in the structure of managed care plans to limit the frequency patients visit the doctor, to see the doctors they want to, and the lack of evidence of quality measures.

While limiting frequent visits to the doctor makes sense for the adult population, who not only visit the doctor less than children but often have much more expensive healthcare needs, such as surgery, diabetes care, and cardiac care, Hart points out that the goal of pediatrics is often to get children into the office much more often. 

“A properly managed healthcare system would encourage more well child visits,” he said. “Because we presume preventive care reduces the cost of future care.  And standard ambulatory pediatric business is a fraction of a percent of the healthcare system - independent pediatricians are not the source of overspending.”

He continues, “Primary care for pediatricians is totally different from other parts of the healthcare system, because we need to generally increase the utilization of services. Managed care is founded on the premise that people go to the doctor too much or for the wrong reasons. While that may be true, in pediatrics that premise is bogus – overutilization issues are dwarfed by underutilization issues. We know this because we have data at PCC that more than half of teens in the U.S. haven’t had a depression screen this year. MIllions of kids are missing HPV vaccines, behavioral screens, well child visits.  Our clients are really good at what they do – but still 30% of patients haven’t been in for their well child visits in more than a year. Even when the managed care companies intend to promote preventive care, it’s often done in a punitive manner using measures that don’t make sense in a practical space”

Hart also says that the managed care companies’ habit of limiting networks can have negative implications for families, who may need to spend much more time and money to visit a hospital for a specialist further away simply to see an in-network provider. On the other hand, Dr. Berman argues that at least in her more rural community, patients expect the increased travel costs to get to a hospital, as there are no specialists near Dr. Berman’s practice for them to consider.

Finally, Hart considers the tendency of managed care organizations of measuring quality in pediatricians to be not well-founded in evidence. Indeed, there are physicians and experts that consider the lack of evidence for quality measures, increase in administrative costs, and lack of clarity in HMOs and MCPs lead to “white noise” instead of real quality and cost improvements for either consumers or states.

Negotiating a Managed Care Plan

Whether your practice has received a new managed care offer or simply reconsidering your relationship with your managed care organization, negotiation is a key skill in ensuring that your patients have adequate access to pediatricians’ care, and that pediatricians are fairly paid for their services. The AAP’s article co-authored by Dr. Berman is an excellent resource for pediatricians considering the details of their plan – both Hart and Dr. Berman encourage physicians and practice owners to consider the article’s guidelines carefully, ideally before signing contracts.

“Don’t get me wrong -- managed care is here to stay, and the AAP provides an amazing blueprint of the challenges to consider when dealing with the payors. I refer to them often!”

What do other practices do to handle managed care contracts? Learn how Tommie Angel, the office manager at Sanford Pediatrics, uses PCC’s analytics tools like a pro to track quality improvement projects that will get her practice paid. Read more and hear from Tommie in this PCC Success Story.

Sanford Pediatrics' PCC Success Story


Allie Squires

Allie Squires is PCC's Marketing Content Writer and editor of The Independent Pediatrician. She holds a master's in Professional Writing from NYU.