Managed Care

1
Managed Care

• James G. Anderson, Ph.D.
• Purdue University

2
History of Managed Care

• Early Plans Kaiser-Permanente Group
  Health of Puget Sound Health Insurance Plan, NY
• HMO Act 1973 200 million awarded to
  non-profit groups
• Employers in the 1980s began to contract with
  managed care plans to reduce health care costs

3
History of Managed Care

• Federal and State Governments began to encourage
  Medicare/Medicaid enrollees to enroll in managed
  care plans
• Managed Care Plans begin to withdraw from
  covering Medicare enrollees

4
Major Types of Plans Group or Staff Model

• Group of physicians contracts to provide services
• Physicians are employees and are not organized in
  separate medical groups
• Exercise control over the amount and type of
  care patients receive
• Primary care doctors act as gatekeepers
• Pre-approval of specialty services, expensive
  diagnostic tests, hospitalization
• Incentives to physicians to limit services

5
Major Types of Plans Independent Practice
Association

• Physicians remain in their own offices but
  contract to treat patients enrolled in plan
• Health plan contracts with physicians to provide
  care at a negotiated rate per capita, for a
  negotiated fee, or on a fee-for-service basis
• Physicians may contract with more than one
  managed care plan
• A portion of the physicians fees may be held
  back until the end of the year and distributed if
  there is a profit

6
Major Types of Plans Preferred Provider
Organization

• Physicians remain in their own offices but
  contract to treat patients enrolled in plan
• Health plan contracts with physicians to provide
  care according to a discounted fee schedule
• Physicians may contract with more than one
  managed care plan and can see other patients on
  a fee-for service basis
• Plans generally do not use primary care
  physicians as gatekeepers

7
Major Types of Plans Point-of-Service

• Encourages the coupling of a patient with a
  primary care physician who acts as a gatekeeper
  by offering employee incentives (e.g., more
  benefits, lower co-payments)
• Enrollees have the freedom to seek care from
  nonaffiliated providers but pay substantially
  more out-of-pocket for care

8
Percentage of all Covered Workers By Type of
Plan1996-2002
9
Number of Persons Enrolled in Medicare under
Different Payment Options 2002
10
Number of Medicaid Beneficiaries Enrolled in
Managed Care1990-2002
11
How do managed care plans influence physicians
practice behavior?

• Clinical rules - treatment protocols,
  algorithms, practice guidelines, regulations,
  administrative constraints, utilization review
• Incentives - Reimbursement through per capita,
  discounted fee schedules, bonuses, etc.

12
Care vs. CostExamples of US Healthcare Incentives

• Hospital Stay. If the patients collectively
  average fewer than 178 days in the hospital per
  year, the doctor receives a bonus of 2,063 per
  month. If the patients together spend more than
  363 days, the doctor receives nothing extra.

13
Care vs. CostExamples of US Healthcare Incentives

• Emergency-room Use. If emergency-room costs
  average les than .84 per patient in any given
  month, the doctor receives a 453 bonus for that
  month. If the patients average more than 1.64,
  their doctor receives nothing extra.

14
Care vs. CostExamples of US Healthcare Incentives

• Specialist Referral. If specialist costs per
  patient average less than 14.49 per month, the
  doctor gets a bonus of 1,323 for the month. But
  if the costs rise above 30.49, the doctor
  receives nothing extra.

15
Typical Hospital Stay for New Mothers

• Australia 4-6 days
• Canada 2 ½ days
• France Up to 2 weeks 5-day minimum
• Germany 7 days
• Great Britain 3 days
• Ireland 5-6 days
• Japan 5-7 days
• Netherlands Mostly home births with all-day
  nurse for a week
• Sweden 1-3 days w/ midwife home visit
• United States 24-36 hours

16
Percentage of Mastectomies Done on an Outpatient
Basis
17
Do managed care plans reduce health care costs?

• Plans have a significant impact on use and costs
  of service, although this may not result in lower
  system-wide costs
• A survey of 2,409 employers found that
  respondents spent 14.7 less per employee for
  HMO coverage than the average cost per employee
  of traditional indemnity plans
• The average cost per employee for care delivered
  through PPOs was 6.1 below that of indemnity
  plans
• The average cost per employee of point-of-service
  plans was 7.9 lower than traditional indemnity
  plans

18
How do managed care plans affect quality of care?

• Studies have shown that elderly, poor and
  chronically ill patients have worse physical
  outcomes under Managed care
• Hospitals under managed care plans more
  frequently deny admission or prematurely
  discharge mentally ill patients
• HMOs frequently limit access to National Cancer
  Centers and enrollment in clinical trials of
  experimental cancer treatments

19
Potential BenefitsPatients

• Less over-treatment
• More preventive care
• Lower cost
• Minimal paperwork
• Low or no co-payment and deductibles

20
Potential BenefitsPhysicians

• Lower practice start-up costs
• Dependable income
• Regular hours
• Structured practice
• Incentives for cost-effective care
• Assured patients

21
Potential BenefitsPayers

• Lower health care costs
• More predictable costs
• Use of business management practices (e.g., CQI)

22
Potential BurdensPatients

• Incomprehensible benefit plans
• Limits on specialty services, hospitalization,
  etc.
• Physician is no longer the patients advocate

23
Potential BurdensPhysicians

• Physicians role is changed to that of a
  business-person
• The physician is less responsive to the patients
  needs
• Physicians lose clinical autonomy in ordering
  tests, treatment, hospitalization, etc.

24
Potential BurdensPayers

• Complex health care plans
• Inadequate data concerning outcomes, quality of
  care
• Concerns about price-fixing, monopolization
• Uncertainty concerning liability

25
Percent of Public Dissatisfied with Health Care
26
The Backlash Against Managed Care

• AMAs patient Protection Act.
• Patients Rights bills in the U.S. Congress.
• Over 27 states have passed patient protection
  laws that include some or all of the following
• Right to sue External appeals Referra
  l out-of-network Coverage of Emergency
  services Access to prescriptions not
  covered by the plan

27
Conflicts

• Choice
• Cost Quality

28
Employer Backlash

• Minneapolis businesses launched a program to
  overhaul local health delivery systems. Their
  objective was to bypass the region's three large
  health maintenance organizations (HMOs), contract
  directly with doctors and inject a dose of
  free-market economics into medicine.
• No fewer than 26 of the region's largest
  corporations -- including 3M, Honeywell, Dayton
  Hudson, Pillsbury and Carlson Companies --
  entered into the arrangement, which has been
  described as a rebellion.

29
Employer Backlash

• In the new scheme, doctors are free to charge,
  organize and operate as they choose.
• But employees get booklets which rank doctor
  groups on what they charge and how they fare in
  terms of customer satisfaction -- and employees
  who choose expensive doctors must pay the extra
  out-of-pocket.
• Payments to doctor groups are raised if they wind
  up attracting sicker-than-average patients -- who
  cost more to treat.
• Physician groups which find ways to treat
  patients more efficiently get to keep the savings
  -- while inefficient or wasteful doctors who go
  over budget are penalized.

30
Physician-Patient Conflicts

• A number of studies and press reports indicate
  that the financial arrangements Health
  Maintenance Organizations (HMOs) make with
  doctors reward physicians and hospitals for
  deferring or withholding care that is deemed too
  expensive, pitting the financial interest of the
  doctor against the medical needs of the patient.
  For example

31
Physician-Patient Conflicts

• The brain tumor of a 5-year old Florida girl was
  repeatedly misdiagnosed as the flu until her
  mother took her to a facility outside the HMO -
  which refused to pay for the surgery resulting
  from the correct diagnosis.
• Long Island Jewish Hospital in Queens replaced
  private doctors in its anesthesia department with
  lower-paid and less-experienced salaried
  physicians, and in one 10-week period four
  patients died from anesthesia-related
  complications after successful surgery.
• A California HMO was fined 500,000 by the state
  for refusing to refer a young girl to a
  specialist for her Wilm's tumor and instead
  assigning a physician who had never operated on
  children or on a Wilm's tumor.

32
Public Misunderstanding of HMOs

• Some 55 percent said they have either never heard
  the term "managed care" or didn't have a good
  understanding of what it means.
• Nearly one-third said they have never heard the
  term "health maintenance organization" -- or had
  heard it but didn't know its meaning.
• Only 52 percent knew that HMOs put emphasis on
  preventive care.
• One in three who knew what HMOs were didn't know
  that they provide coverage for set monthly fees.
• Moreover, one in four in an HMO didn't know that
  their choice of physicians was limited.

33
Patients Bill of RightsEnrollment

• Prohibit managed care plans from refusing to
  enroll patients with preconditions.

34
Patients Bill of RightsPatient Information

• Publish managed care plans performance ratings.
• Establish and inform members of grievance
  procedures.
• Ban physician gag clauses in contracts.

35
Patients Bill of RightsMandated Services

• Require coverage for a 48 hour hospital stay
  after delivery and mastectomies.
• A Hospital patient who is too sick to be
  discharged may request their case be reviewed by
  an impartial arbiter.
• Require coverage for emergency room visits when
  there is a reasonable expectation that an
  emergency exists.
• Guarantee patients right to be referred to a
  specialist when they require specialty care..

36
Patients Bill of RightsMandated Services

• Permit members to seek care from providers
  outside the plan when more experienced providers
  exist for the illness.
• Cover prescription drugs not on the plans
  approval list if the patient can show a need for
  the drug.
• Permit members to enroll in clinical trials for
  new drugs and therapies.

37
Patients Bill of RightsIncentives

• Prohibit managed care plans from paying bonuses
  to doctors who delay or withhold treatment for
  patients.
• Prohibit capitation payments to family physicians
  and internists.
• If a health plan cancels or refuse to sign a
  contract with a doctor, require the plan to
  explain its reasons. Permit the doctor to appeal
  and request a hearing. a

38
Patients Bill of RightsGrievances

• Establish independent boards to review decisions
  to deny coverage for specific procedures.
• Require plans to respond within three hours to a
  doctors request to extend a patients hospital
  stay.
• Plans must rule on patient request for services
  within 14 days or 72 hours in urgent cases. They
  must respond to an appeal within 30 days or 72
  hours in urgent cases.
• Allow patients to sue their managed care plan
  when medical benefits are improperly denied.

39
The Changing Face of Managed Care

• Broader and more inclusive provider networks
• Elimination or modification of Gatekeepers
• Reintroduction of prior authorization
  requirements for selected services
• Expanded investment in disease and case
  management
• Increased consumer cost-sharing and introduction
  of consumer-directed plans
• Capitated payment arrangement with providers
  scaled back or eliminated

40
Questions

• How much control over access to specialized care
  and clinical decisions should the managers of
  managed care be able to exercise?
• How much autonomy should physicians have
  in Setting fees? Ordering diagnostic
  procedures? Referral of patients to
  specialists? Ordering hospitalization?
  Enrolling patients in experimental
  therapies?

41
Questions

• What is the quality of care delivered by NPs and
  PAs compared to care delivered by MDs?
• Does the substitution of lesser trained personnel
  for RNs adversely affect the quality of care?

42
Heart Attack Death Rate Higher In HMOs

• Health Maintenance Organization (HMO) enrollees
  with cardiac disease are twice as likely to die
  after a heart attack as those with traditional
  fee-for-service coverage, says cardiologist Paul
  Casale in a report to the American Heart
  Association.

43
Heart Attack Death Rate Higher In HMOs

• Casale studied 4,000 heart attack patients
  admitted to Pennsylvania hospitals in 1993.
• He found HMO patients are less likely to receive
  two surgical procedures common after heart
  attacks -- heart catheterization and angioplasty.
  
• However, Casale's study did not have data on how
  long patients waited to get care -- considered
  the best predictor of heart attack survival
  rates.
• But Casale notes that HMO policies discouraging
  emergency room use could have delayed patients
  seeking treatment.