Managed care for companion animals

Proponents, opponents discuss development of a new pet health network
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Managed health care for pets could be coming soon.

Managed care for people, according to an American Medical Association policy, is "those processes or techniques used by any entity that delivers, administers, and/or assumes risk for health care services in order to control or influence the quality, accessibility, utilization, or costs and prices or outcomes of such services provided to a defined enrollee population."

Managed care in human medicine is generally part of a health insurance program. Now managed care in veterinary medicine appears to be taking its own shape.

Pethealth Inc., provider of PetCare insurance, and USA Managed Care Organization Inc., a preferred provider organization for people, have announced plans to offer a form of managed care for cats and dogs by creating the USA Pet Health Network.

Mark Warren, Pethealth president and chief executive officer, said pet owners would participate by paying for an annual membership card. Then, network veterinarians would charge cardholders for services according to network rates.

"I think that it will benefit everyone. Let's face it, veterinarians do spend money trying to attract new customers." Warren said. He said network veterinarians might also receive more revenue from cardholders, who are less likely to go price shopping.

Warren noted that the USA Pet Health Network will not be an insurance program and will not handle payments. It will simply be a network to negotiate rates, he said, though it might evolve over time.

While no AVMA policy mentions managed care for animals, the AVMA has established guidelines on pet health insurance and other third-party animal health plans. According to the AVMA guidelines, animal health plans should allow each veterinary facility to establish its own fee structure.

"As a general rule, the AVMA does not advocate that veterinarians discount the fees they charge for services," said Dr. Bruce W. Little, AVMA executive vice president.

"The charge for a specific service can vary greatly from one geographic area to another or even from one animal hospital to another in the same area. There is no standard rate from hospital to hospital for most of these services. Therefore, it might be difficult to establish a standard discount across a wide number of animal hospitals for any specific service."

Both proponents and opponents of managed care will be following the evolution of the USA Pet Health Network.

The plan

The USA Managed Care Organization, which has offices in Texas and Arizona, is developing the network of veterinarians. Pethealth, which has headquarters in Oakville, Ontario, will direct pet owners into the network through certain other company programs. Specifically, Warren said, Pethealth will market the network to pet owners who adopt animals from shelters participating in the company's 24PetWatch microchip identification program.

Warren said USA MCO and Pethealth believe some pet owners do not wish to purchase pet health insurance to protect against accidents or illness—but do want to be part of a network that negotiates service rates. He said the USA Pet Health Network will provide managed care for the pets of such owners in select states with market potential, starting in Texas. The rates for veterinary services likely will vary regionally, such as from urban to rural areas.

The network will not operate in Canada because that country doesn't allow managed care for pets or people.

Warren said the network will not be so dissimilar from other animal health plans to control costs. Groups of animal hospitals—such as Banfield, The Pet Hospital, and Veterinary Centers of America—attract clients through sale pricing and prepaid health care packages. Outside of corporations, individual veterinary clinics can participate in savings programs and discount networks for clients. The Pet Assure program, for example, offers a 25 percent savings on veterinary services.

Some of Pethealth's competitors in the insurance market also attempt to influence fees through benefit schedules, Warren said. A benefit schedule determines how much an insurance company reimburses a client for veterinary services, while the USA Pet Health Network's service rates would determine how much the veterinarian charges the client.

"We're not really doing anything that's different," Warren said. "We just believe we have a better model."

Warren added that Pethealth will not launch the network in any state before meeting with the state veterinary medical association.

Elbert C. Hutchins, EdD, director of the Texas VMA, already has spoken with Warren about the pet health network. They discussed the business model and veterinarians' concern about discounting services.

"My sense is that his company is reputable," Dr. Hutchins said.

He added that he expects the network will see some success in Texas.

The issue

The implications of managed health care for pets worry some insurers as well as private practitioners, however.

Dr. Kent Kruse, director of provider development at Veterinary Pet Insurance, said managed care in human medicine has been an attempt to handle skyrocketing fees.

"Bringing managed care to somehow manage veterinary fees is a solution for a problem that doesn't exist," he said.

Dr. Kruse believes that fees continue to be too low in veterinary medicine.

"The margins on many veterinary procedures are so slight that it might well be impossible to discount those procedures and still maintain a profit," Dr. Little agreed.

Dr. Kruse added that managed care, when part of an insurance program, sometimes imposes a cost limit for treatment of a condition.

"That's when the quality of care starts to suffer, and I think we've seen plenty of evidence of that in human medicine," he said.

Veterinarians might agree to join a network despite drawbacks, Dr. Kruse said, because they fear that they will lose clients to network veterinarians otherwise.

According to the AVMA guidelines, an animal health plan should allow pet owners freedom to select a veterinarian of their choice. The USA Pet Health Network would allow pet owners to select any veterinarian, but veterinarians outside the network would not charge network rates.

The debate about managed care continues in the veterinary community. At the same time, Warren expects that the USA Pet Health Network will be ready to go in the second quarter of this year.