ReimbursementManaged Care PlansCh-5: Page | 1

Managed care systematically merges clinical, financial, and administrative processes to manage access, cost, and quality of healthcare.

Economic constraints encouraged the growth of HMOs and other managed care as employers sought to reduce costs.

Growth of hybrid managed care is attributed to consumers' desires for freedom of choice and access to specialists.

Health maintenance organizations (HMOs)

Managed care organizations (MCOs)

Balanced Budget Act of 1997 calls managed care, coordinated care plans.

Benefits and Services of MCOs

Levels of benefits depend on premiums and copayments. Typical covered services include:

  • physician services (IP & OP)
  • inpatient care
  • preventive care and wellness

(immunizations, well-child exam, adult periodic health maintenance exam, Pap smear)

  • prenatal care
  • emergency services
  • diagnostic and lab test
  • certain home health services

Primary Care Provider (PCP) holds access to mental and behavior health specialty care through referrals.

Characteristics of MCOs

Quality Care And Cost-Effective Care: 4 ways

1. Selection Of Providers: Based on pre-established procedures and standards whose criteria are based on quality, scope of services, cost, and the patient. Timelines for credentialing and re-credentialing followed.

2. Health Of Populations: MCOs emphasize. They are responsible for the delivery of HC services across the continuum of care in terms of setting and type.

Settings: physician's offices, home health agencies, hospitals

Type: preventive, wellness-oriented, acute, and chronic.

They are clinically responsible for health outcomes of populations.

  • Timely and appropriate testing
  • appropriate assessment and therapeutic procedures for members with chronic conditions, as recommended by evidence-based clinical practice guidelines.
  • Promote wellness programs (healthy lifestyle, smoking cessation, alcohol moderation)

Care Management Tools: (Proper Level of Care)

  • Coordination of care
  • Disease management
  • Application of evidence-based clinical practice guideline

Coordination Of Care: Achieved through use of PCPs who make necessary and appropriate referrals.

Disease management: focuses on

  • preventing exacerbations of chronic diseases,
  • promoting healthier lifestyles for patients and clients with chronic diseases . Monitoring to promote adherence to treatment plan and to detect early signs and symptoms of exacerbations.

Often requires treatment plans with complex medication regimens involving multiple healthcare providers. Therefore care must be synchronized.

Disease Management Initiatives:

Frail Elderly Program

  • 3+ chronic conditions,
  • hospitalized two or more times in previous 12 months,
  • functionally or cognitively impaired

Cost Savings: $396 per member per month and 36% reduction of inpatient admissions.

Pharmacists Cvaluation: of effectiveness of disease management program vs usual care and follow-up

  • no cost savings found

studies have been founded the cult to evaluate, because aspects required to effectively evaluate the outcome appear to be lacking:

  • common definitions of success
  • cost data
  • well-designed studies
  • appropriate analysis of data
  • consistency among reported outcomes

Evidence-Based Clinical Practice Guidelines are the foundation of members care for specific clinical conditions. These are explicit statements that guide clinical decision-making.

  • Key diagnostic indicators
  • Timelines
  • Alternatives in interventions and treatment
  • Potential outcome

Common Equivalent Terms:

  • Evidence-based guidelines
  • Clinical practice guidelines
  • Clinical guidelines
  • Clinical pathways
  • Clinical criteria
  • Medical protocols

Sources of these guidelines: AHRQ, CDC, Am. Coll. of Cardiology, Am. Acad. of Family Phys., Am. Acad. of Opthal., and Am. Coll. of OB/GYN.

These guidelines are benchmarks of best practices in the care and treatment of patients. They address:

  • Entire plan of care across multiple delivery sites
  • Appropriate diagnostic and therapeutic procedures for treating diseases and conditions
  • Reasons for referrals to specialists
  • Clinical decision factors and decision points

Therefore, evidence-based clinical practice guidelines serve as a means to standardize optimal care for all patients to deliver comprehensive, coordinated care across multiple providers.

Quality Assessment and Improvement

accreditation processes and performance improvement initiatives monitored by the following organizations

  • National Committee For Quality Assurance (NCQA)
  • URAC (formerly, Utilization Review Accred. Comm.)
  • Accreditation Association for Ambulatory Health Care (AAAHC, or Accreditation Association)

Performance Improvement Initiatives

  • AHRQ's CAHPS (Consumer Assessment of H Plans)
  • NCQA's HEDIS (HC Effectiveness Data and Info Set)
  • MCOs survey to assess members' feedback

-Satisfaction with administrative, clinical, and customer services

-Perceptions of the plan's strengths and weaknesses

-Suggestions for improvements

-Intentions regarding reenrollment

  • MCOs Survey satisfaction of patients, physicians, providers, customers, employers, and disenrolled members.

Cost Controls:

  • Medical necessity and utilization

Service Management Tools

-Review of medical necessity

-Utilization management

-Case in prescription management

  • Method of reimbursement (Episode of Care, with inherent features of cost reduction)
  • Financial incentives (for providers and members)

MCO is fiscally accountable for health outcomes of its populations.

Medical Necessity and Utilization

Cost controls that contain and monitor use of healthcare services by evaluating the need for and intensity of the service prior to it being provided.

Medical Necessity: A service provided for Dx, Tx, cure, or relief of a condition, illness, injury, or disease. It must be necessary for an appropriate Dx, Tx, cure, or relief of these or their symptoms. It must be within generally accepted standards of medical care in the community. It must not be solely for the convenience of the insured, the insured's family, or the provider.

Utilization Reviewassesses the appropriateness of the setting, but the healthcare service in the continuum of care and the level of service. Review of medical necessity and utilization are often performed concomitantly.

3-step process: steps two and three implemented only if the previous step resulted in negative decision. Process stops with positive decision.

1. Clinical review: review against established criteria

2. Peer clinical review: Performed by clinician qualified to render clinical opinion.

3. Appeals consideration: clinician not involved in initial decision to qualify to render clinical opinion performs clinical review.

Multiple sets of criteria (objective, clinical criteria) used for reviewing medical necessity and utilization (help make decisions).

  • Intensity Service, Severity Of Illness, And Discharge Screens (ISD)
  • Appropriateness Evaluation Protocol (AEP)
  • Managed Care Appropriateness Protocol (MCAP)
  • Milliman Care Guidelines
  • Solucient length of stay guidelines
  • American Society of Addiction Medicine's Patient Placement Criteria, Second Edition Revised (ASAM PPC-2R)
  • Federal-and state-specific guidelines

Medical necessity and utilization are often reviewed for the following services

  • confinement in acute care hospital, long-term acute care facility, LTC facility, psychiatric hospital, partial-day hospital, a recipient of hospice or rehabilitation services
  • surgical procedures
  • emergency room services
  • emergent care received from out of network providers
  • hi-cost or high-risk diagnostic, interventional, or therapeutic outpatient procedures
  • physical, occupational, speech, and other rehabilitative therapies
  • mental health and chemical dependency care
  • home health services, private-duty nurses, and referrals to medical specialists
  • durable medical equipment, aesthetic and orthotic appliances, medical supplies, blood transfusions and administration, and medical transport

(Just about everything except physician visits and outpatient testing.)

Gatekeeper Role of Primary Care Provider

Gatekeeper is a cost control. They may make referrals, if they are worn. They determine the appropriateness of healthcare service, the level of healthcare personnel, and the setting in the continuum of care.

Prior Approval

Another cost control and a formal administrative process. Preauthorization or pre-certification, pre-admission review may be for

  • in patent admissions
  • surgeries
  • visits to medical specialists
  • elective procedures
  • expensive or sophisticated diagnostic tests
  • behavioral or mental health services (may need entire Tx plan approved).

MCOs may deny coverage for which prior approval was not obtained.

Second and Third Opinions

A cost-containment measure. Sought when

  • test, Tx, medical device, or surgical procedure is high risk or high cost
  • diagnostic evidence is contradictory or equivocal
  • experts opinions are mixed about the efficacy.

Utilization Review

a cost control that evaluates both effectiveness and efficiency.

  • Should this healthcare service, but Kerr?
  • If yes, then what setting is the most efficient in terms of delivery and cost?

Determines medical necessity of a procedure in the appropriate setting given the severity of the patient's illness.

Utilization review saves money through its prevention of overutilization.

Overutilization is the unnecessary consumption of healthcare services for the consumption of unnecessarily expensive or sophisticated healthcare services.

Case Management

Coordinate the efforts of multiple healthcare providers at multiple sites over time.

Goals include continuity of care, cost-effectiveness, quality, and appropriate utilization.

Prescription Management

A cost control manager. Expands the use a formulary to a comprehensive approach to medications and their administration.

Considering the cost of medications, prescription management is a powerful tool of cost-containment.

Pharmacy (Prescription ) Benefit Managers (PBMs) . These are subcontractors who administer health care, insurance companies' prescription drug benefits. They

  • Develop and manage formulary and preferred drug lists.
  • Negotiate contracts with drug manufacturers, including discounts and rebates, and with pharmacies, including payment levels.
  • Manage programs of prior authorization, drug utilization review, patient compliance, and cost effective coordination of patients' drug regimens.
  • Processing and analyzing prescription claims.
  • Operating mail-order pharmacies.

PBMs are currently the predominant infrastructure for administration of prescription benefits in the United States.

Episode of Care Reimbursement Method

This reduces the inflation of costs in a fee-for-service reimbursement environment.

Based on averages, the MCO pays providers one pre-determined amount for all of the care a patient may receive during a period.

MCOs , most commonly used capitation and global payment.

Capitation: a predetermined fixed amount per member per month. Volume of services and expense do not affect the reimbursement.

Global Payment: extends the scale of capitation. Providers in an integrated delivery system or other type of network received one fixed amount for members of the MCO, thus increasing capitation from the single group to an entire delivery system.

Financial Incentives: prevent the waste of financial resources. For providers, incentives involved. The provision of cost-efficient care. Meeting targets for cost efficiency.

  • Referrals to specialists.
  • Use of the Lab or other ancillary services.
  • Inpatient admissions were days.
  • Settings of care, such as office, referred to emergency room.
  • Productivity, in terms of number of visits per day.
  • Pharmaceuticals.

Positive Incentives: Bonuses given for meeting cost-containment targets. At the end of the period, surplus withheld funds are disbursed for meeting efficiency (utilization) or performance targets.

Negative Incentives: penalties include a percentage reduction of the PCP's salary if the provider does not meet the target of or the loss of withholds (physician contingency reserve [PCR]). A withhold is a part of the provider's capitated payment that the MCO deducts and holds to pay for excessive expenditures for expensive HC services such as referrals to specialists. This withholds transfer risk to the providers.

For a group practice, the withholds from individual providers are combined to form a withhold pool.

Medicare and Medicaid Programs: Requirements For Physician Incentive Plans And Prepaid Healthcare Organizations. Federal rule that prohibits incentives to limit medically necessary referral and requires MCO's to report information about financial incentives regarding referrals.

For members: MCOs set varying rates of cost sharing. High out-of-pocket payments. When members use out of plan providers. With drug benefits, the most restrictive formulary is the least expensive, whereas the members cost sharing increases with the liberality of the formulary.

Incentives influence members' behavior without eliminating freedom of choice.

Contract Management: providers and plans must be able to accurately project their expenditures in order to negotiate contracts that cover the costs of treating members.

Know what's working and what's not when going into contract negotiations.

Carve-outs are contracts to separate out services or populations of patients to decrease risk and costs.

Services or populations carved out typically require long-term management, our high cost, can be managed by one group of specialists, and not usually managed by PCPs. The provision of care for these services or to these populations is contracted out to vendors. (Carve-out is what is being subcapitated.)

A common payment for specialist services is subcapitation (how it is done). This reduces cherry-picking up members.

Potential disadvantages of carve-outs include fragmentationof care and decreased access.

The benefits of managed care's coordination of care are negated without close synchronization between the gatekeeper and the provider of carved out services.

Also the geographic dispersion of vendors of specialized services, may prevent utilization of the specialized services. By all persons who need them.

Types of MCO's: A continuum of control.

HMOs = most controlled

PPOs = least controlled (Preferred provider org.)

HMOs: Conditions for a federally qualified HMO:

  • a minimum benefits package,
  • open enrollment,
  • community rating (premiums determined by geographic area, rather than age, health status, or company size)

3 Basic Types:

  • Staff model
  • Group Practice Model
  • Independent Practice Association (IPA)
  • Network Model

HMOs share the following characteristics:

  • Organized system of healthcare delivery to a geographic area
  • Established set of basic supplemental health maintenance treatment services
  • Voluntarily enrolled members
  • Predetermined, fixed, and periodic repayments for enrollees.

Offsetting the loss of freedom is the reduced out-of-pocket expense in a wide range of benefits.

Staff model (closed panel): HMO owns the facility. Physicians are employees and pay a salary or capitated basis. PCPs strictly controls, referrals to specialists within the HMO.

Group Practice Model: HMO contracts with a medical group. Physicians provide services of a fee-for-service or capitated basis. The medical group bears the risk.

Network Model: same as a group model, but contracts with two or more independent group practices.

Independent Practice Model: an individual practice Association (IPA) , where participating physicians maintain their private practices. The HMO contracts with the IPA, which in turn contracts with individual health providers. He HMO lead versus the IPA on the capitated basis. The IPA may reimburse physicians on the capitated basis or on a fee-for-service basis. The physician practices, have patience, who are members of the HMO as well as patients who are not.

IPA is a middleman. This way physicians can more easily maintain a private practice if there are not enough HMO patients in the area.

Preferred Provider Organization (PPO): NTT contracts with employers and insurers to render healthcare services to approve the members.

  • Virtual rather than physical entity.
  • Decentralized.
  • Flexibility of choice for members.
  • Negotiated fees (may include discounts).
  • Financial incentives to induce members to choose preferred option.
  • No prepaid capitation (retains aspects of fee-for-service).
  • Not subject to regulatory requirements of HMOs.
  • Limited financial risk for providers.

The PP of contracts with providers for healthcare services at fixed or discounted rates. The network consists of physicians, hospitals, and other healthcare providers.

Members pocket expenses are low or if they used in network providers.

Point of Service Plan: members choose how to receive services at the time they need them. They decide whether they want an HMO, PPO, or a fee-for-service plan.

Provider sponsored organization (PSO) . Similar to plaintiff service plan at the physicians who practice in a regional or community Hospital organize the plan.

Exclusive provider organization (EPO): and MCO is sponsored by self-insured employers Association. A hybrid. Characteristics of an HMO and PPO.

EPOs Ensure cost efficiency by aggressively reviewing medical necessity and utilization.

Special Needs Plan (SNPs) is a form of Medicare advantage plan, established by MMA of 2003.

3 Types of SNPs

  • people qualified for both Medicaid and Medicare, known as dual eligibles or duals (D-SNP). Largest
  • I-SNP, institutionalized Medicare beneficiaries
  • C-SNP, Medicare beneficiaries with severe chronic or disabling conditions (ESRD, ALS)

Medicare is primary payer.

State Medicaid programs are secondary payers to Medicare.

Integrated Delivery Systems (IDS): a generic term referring to the collaborative integration of healthcare providers. The goal is seamless delivery of care along the continuum of care.

4 Types of IDS:

  • Hospital led IDS.
  • Physician led IDS (Mayo Clinic)
  • physicians-Hospital organization (PHO)
  • insurance-led IDS.

If IDS includes health care plan, is covered by applicable state and federal regulations for healthcare plans, insurance, or HMOs, as relevant. Otherwise it is covered by the regulation for each type of organization in the entity.

The variance in the degree of integration has more complexity to the sector of the industry. Affiliation, acquisition, consolidation, and merger.

Affiliation is the least binding, the components influence one another.

Acquisition one complement purchases part or all the assets of the other component.

Consolidation is a term in which operations are legally combined.

Merger are two similar components permanently combined to form one unit.

Partnership can refer to all four of the decrease of integration, and any other integrated effort.

Integrated Provider Organization (IPO): All falls under one entity. An IPO is the corporate number above for the management of an IDS.

Group Practice Without Walls (PWW) / Clinic Without Walls (CWW): a group practice with physicians have maintained their separate practices and offices in a geographic area. Individual practices share administrative systems to form the group practice. ADV: to gain bargaining power in negotiation of managed care contracts.