HSAD 7301PBHL 5123

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HSAD 7301/PBHL 5123

• MANAGED CARE

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DEFINITION OF MANAGED CARE

• A SYSTEM TO CONTROL THE
• COST, ACCESS , UTILIZATION
• AND QUALITY OF CARE FOR
• A DEFINED ENROLLED
• POPULATION

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MANGED CARE CUBE
MCO
EMPLOYER
PROVIDER
EMPLOYEE
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WHY MANAGED CARE?

• THE INCREASE IN THE COST OF HEALTH CARE IS THE
  MOST IMPORTANT FACTOR IN THE MOVEMENT TOWARDS
  MANAGED CARE
• NATIONAL POLICY SHIFT AWAY FROM A REGULATORY
  APPROACH TO A COMPETITIVE CHOICE APPROACH

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HEALTH POLICY SHIFT
1960-1990 REGULATORY BASED HEALTH CARE SYSTEM
1990S MARKET BASED HEALTH CARE SYSTEM
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WHY MANAGED CARE?

• THREE REASONS
• 1. COST
• 2. COST
• 3. COST

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PROMISES OF 1990s

• MANAGED CARE WOULD REVOLUTIONIZED HEALTH CARE
  DELIVERY
• MANAGED CARE WOULD CONTROL HEALTH CARE COST
• MANAGED CARE WOULD YIELD A MORE EFFICIENT HEALTH
  CARE SYSTEM
• MANAGED CARE WOULD CHANGE PROVIDER BEHAVIOR

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KEY COMPONENTS OF MANAGED CARE

• ENROLLED POPULATION
• FINANCIAL RISK
• HEALTH PLAN (BENEFITS)
• PROVIDER NETWORK AND CONTRACTS
• MEDICAL MANAGEMENT
• INFORMATION SYSTEM
• CLIENT AND PROVIDER SERVICES

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MANAGED CARE

• CONTROL COST
• TC P X Q
• WHERE
• P PRICE
• Q USE X INTENSITY

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MCO FINANCIAL TRIANGLE
UNDERWRITING (PREMIUM)
C O S T
P R I C E
MEDICAL LOSS RATIO
CONTRACTING
USE
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CONTROL PRICE

• CONTRACT WITH NETWORK OF PREFERRED PROVIDERS
• DISCOUNT CHARGES/FEES
• DEVELOP FEE SCHEDULE
• WITHHOLDS (GENERALLY 20)
• TARGETED EXPENDITURES
• PROSPECTIVE PAYMENT SYSTEMS
• GLOBAL FEE
• PER DIEM/PER CASE/PER EPISODE
• CAPITATION

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CAPITATION
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CAPITATION

• THE PROVIDER RECEIVES A FIXED PAYMENT PER
  ENROLLED MEMBER PER MONTH. THE PROVIDER IS AT
  RISK TO PROVIDE THE CONTRACTED SERVICES TO THE
  ENROLLED MEMBERS.
• TYPES OF CAPITATION
• PARTIAL
• FULL

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CAPITATION

• PARTIAL
• PRIMARY CARE PHYSICIAN
• HOSPITAL
• SPECIALISTS
• HOSPITAL AND PHYSICIAN
• FULL
• HOSPITAL, PHYSICIAN AND ANCILLARY SERVICES

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CAPITATION

• ADJUSTMENTS
• CARVE-OUTS
• STOP LOSS
• ANCILLARY SERVICES
• REFERRAL POOL
• HOSPITAL POOL
• OTHER

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GENERAL CALCULATION OF A CAPITATION RATE

• EXPECTED UTILIZATION OF A PROCEDURE PER 1000
  MEMBERS PER MONTH
• X AVERAGE COST PER PROCEDURE COST PER 1000
  PER MONTH
• SUM OF PROCEDURES EQUALS PMPM PAYMENT PER
  ENROLLEE

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CAPITATION

• INCENTIVE
• IF THE PROVIDER CONTROLS COSTS AND UTILIZATION,
  THEY KEEP THE DIFFERENCE BETWEEN THE PMPM PAYMENT
  AND ACTUAL EXPENDITURES
• IF THEY DONT SATISFY MEMBERS, DISENROLLMENT WILL
  RESULT IN REDUCED REVENUE

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Table 2.12 Hospital Managed Care Payment
Arrangements, 2000
Most hospitals receive per diem and
fee-for-service payments, a much smaller
number also receive capitated payments.
Source Trends and Indicators in the Changing
Health Care Marketplace, 2002, Kaiser Family
Foundation.
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UTILIZATION MANAGEMENT
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CONTROL USE AND INTENSITY

• DEMAND MANAGEMENT
• LIMITATIONS ON PROVIDER PANEL
• PHYSICIAN PROFILING
• CONTROL SITE OF CARE
• PCP GATEKEEPER/REFERRAL SYSTEMS
• HEALTH RISK ASSESSMENT AND TRIAGE
• PRECERTIFICATION/PRIOR AUTHORIZATION SYSTEMS
• MANDATORY OUTPATIENT
• MEDICAL NECESSITY CRITERIA
• ECONOMIC INCENTIVES
• CONCURRENT REVIEW
• RETROSPECTIVE REVIEW
• CASE MANAGEMENT
• ROUNDING PHYSICIANS (HOSPITALISTS)

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CONTROL USE AND INTENSITY

• DISEASE MANAGEMENT
• CHRONIC DISEASE STATES (ASTHMA, DIABETES,
  CARDIOVASCULAR, CANCER, AIDS)
• FOCUS ON OUTPATIENT MANAGEMENT
• CONTINUUS MONITORING
• PRACTICE GUIDELINES

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CONTROL USE AND INTENSITY

• CASE MANAGEMENT
• FOCUS ON HIGH COST, HIGH VOLUME ACUTE AND CHRONIC
  HEALTH PROBLEMS
• HISTORY OF ER VISITS
• CARDIOVASCULARY SURGERY
• TRANSPLANTS
• HIGH RISK PREGNANCY
• PREMATURE BIRTHS
• MENTAL HEALTH

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MAJOR MANAGED CARE CHOICES THAT HAVE BEEN CREATED

• MANAGED INDEMNITY
• PREFERRED PROVIDER ORGANIZATIONS
• PRIMARY CARE NETWORKS (PPO)
• HEALTH MAINTENANCE ORGANIZATIONS (HMO)
• POINT OF SERVICE PLANS (HMO OR PPO BASED)
• CONSUMER DRIVED MANAGED CARE

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TRADITIONAL INDEMNITY PLAN

• OPEN CHOICE OF PHYSICIAN
• OPEN CHOICE OF HOSPITAL
• DEDUCTIBLES, CO-INSURANCE, CO-PAYMENTS AND
  BENEFIT LIMITATIONS
• FEE FOR SERVICE PAYMENT

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MANAGED INDEMNITY

• OPEN CHOICE OF PARTICIPATING PHYSICIANS
• PRIOR AUTHORIZATION FOR INPATIENT STAYS
• CONCURRENT LENGTH OF STAY REVIEW
• MANDATORY AMBULATORY SURGERY
• MAY HAVE CASE MANAGEMENT

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PREFERRED PROVIDER ORGANIZATION
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PREFERRED PROVIDER ORGANIZATION (PPO)

• MAY BE ORGANIZED BY AN INSURANCE COMPANY, THIRD
  PARTY ADMINISTRATOR OR HEALTH CARE ORGANIZATION
• INSURANCE CONTRACT WITH AN EMPLOYER
• DEFINED (PREFERRED ) PANEL OF PROVIDERS
• PROVIDES BROAD CONSUMER CHOICE OF PROVIDERS

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PREFERRED PROVIDER ORGANIZATION (CONTINUED)

• NEGOTIATED PAYMENT RATE TO PROVIDERS (GENERALLY A
  DISCOUNTED FEE SCHEDULE)
• FINANCIAL INCENTIVE FOR THE CONSUMER TO USE THE
  PREFERRED PROVIDER (NO DEDUCTIBLE, REDUCED
  CO-INSURANCE OR CO-PAYMENT
• LIMITED OR NO RISK TO PROVIDER
• PROVIDER TRADES DISCOUNT FOR PATIENT VOLUME

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PRIMARY CARE NETWORK PPO MODEL

• NETWORK OF PRIMARY CARE PROVIDERS
• MEMBERS ENROLL WITH A PRIMARY CARE PHYSICIAN
• PRIMARY CARE PHYSICIANS ACT AS GATEKEEPERS AND
  CASE MANAGERS
• MEMBERS HAVE FINANCIAL INCENTIVES FOR IN-PLAN USE
• MAJOR FINANCIAL DISINCENTIVES FOR OUT-OF-PLAN USE

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RECENT PPO CHANGES

• AGGRESSIVE MARKETING
• INCREASED COST SHARING
• INCREASED OUT-OF-NETWORK COSTS
• HEALTH INFORMATION
• CASE MANAGEMENT-DISEASE SPECIFIC

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ARKANSAS PPO ENROLLMENT(2003 ESTIMATE-866,306)
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HEALTH MAINTENANCE ORGANIZATIONS
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BASIC COMPONENTS OF AN HMO

• PREPAYMENT OF PREMIUM (RISK)
• DEFINED HEALTH PLAN (BENEFITS)
• ENROLLED POPULATION
• LEGAL OBLIGATION TO PROVIDE OR ARRANGE FOR THE
  DELIVERY OF SERVICES IN THE HEALTH PLAN
• OBLIGATION TO ENSURE ACCESS
• OBLIGATION TO ASSURE APPROPRIATENESS OF CARE
• OBLIGATION TO ASSURE QUALITY

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HMO LEGAL REQUIREMENT

• HMOS HAVE A LEGAL REQUIREMENT TO PROVIDE OR
  ARRANGE FOR THE PROVISION OF HEALTH SERVICES
  DEFINED IN THE HEALTH PLAN
• THE NETWORK FOR THE DELIVERY OF HEALTH SERVICES
  IS A CRITICAL COMPONENT OF HMO OPERATIONS

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KEY CONTROL POINTS FOR AN HMO

• COST
• OWN DELIVERY SYSTEM OR NEGOTIATED CONTRACTS BASED
  ON PRICE
• ACCESS
• OWN OR DEFINE BY CONTRACTUAL RELATIONSHIPS THE
  SIZE AND CONFIGURATION OF THE DELIVERY SYSTEM
• UTILIZATION
• PRIMARY CARE GATEKEEPERS, FINANCIAL RISK AND
  AUTHORIZATION SYSTEMS
• QUALITY
• PROVIDER SELECTION AND PROFILING

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HMO STRUCTURE
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TYPES OF HEALTH MAINTENANCE ORGANIZATIONS

• DIRECT CONTRACT MODEL
• STAFF MODEL
• GROUP MODEL
• PHO MODEL
• IPA MODEL
• MIXED MODEL

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HEALTH MAINTENANCE ORGANIZATIONS
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CLOSED PANEL

• PROVIDERS GENERALLY SEE ONLY HMO MEMBERS.
• PROVIDER MUST BE AN HMO EMPLOYEE OR BE AFFILIATED
  WITH A GROUP THAT HAS A CONTRACT WITH AN HMO.
• PROVIDERS OPERATE OUT OF HMO FACILITIES OR THE
  GROUPS THAT HAVE CONTRACTS WITH THE HMO.
• MEMBERS SELECT THE PCP FROM THE HMO NETWORK.

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OPEN PANEL

• PROVIDERS SEE BOTH HMO AND NON-HMO MEMBERS
• PROVIDERS CONTRACT INDEPENDENTLY AND MAY BE
  SELECTED TO JOIN THE HMO NETWORK AS LONG AS THEY
  MEET HMO QUALIFICATIONS
• PROVIDERS OPERATE OUT OF INDIVIDUAL OFFICES
• MEMBERS SELECT THE PCP FROM THE HMO NETWORK

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DIRECT CONTRACT MODEL
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ADVANTAGE OF DIRECT CONTRACT MODEL

• NEGOTIATE INDIVIDUAL CONTRACT TERMS
• CAN DEFINE GEOGRAPHIC NEEDS AND PROVIDERS
• CAN DEVELOP RISK PLAN WITH EACH PROVIDER

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DISADVANTAGES OF DIRECT CONTRACT MODEL

• COSTLY TO NEGOTIATE AND MAINTAIN INDIVIDUAL
  CONTRACTS
• DIFFICULT TO CONTROL COST
• DIFFICULT TO CONTROL UTILIZATION AND QUALITY
• MAY NO BE ABLE TO SIGN UP KEY PROVIDERS

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STAFF MODEL HMO STRUCTURE
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ADVANTAGES OF A STAFF MODEL HMO

• COST CONTROL
• ABILITY TO CONTROL UTILIZATION
• ABILITY TO CONTROL QUALITY
• ECONOMIES OF SCALE

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DISADVANTAGES OF STAFF MODEL HMO

• HIGH CAPITAL INVESTMENT
• LIMITED PROVIDERS
• MAY HAVE GEOGRAPHIC COVERAGE LIMITATIONS

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GROUP MODEL HMO STRUCTURE
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ADVANTAGES OF THE GROUP MODEL

• LOWER START-UP COST
• GREATER UTILIZATION AND QUALITY CONTROL
• ABILITY TO MATCH PROVIDER AVAILABILITY WITH
  ENROLLEE NEEDS

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DISADVANTAGES OF THE GROUP MODEL

• PROVIDER CHOICE LIMITED TO THE GROUP
• MAY HAVE LIMITED GEOGRAPHIC COVERAGE
• MAY NOT HAVE PREFERRED PROVIDERS IN THE GROUP

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NETWORK MODEL STRUCTURE
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DISADVANTAGES OF THE NETWORK MODEL HMO

• MORE DIFFICULT TO CONTROL UTILIZATION AND QUALITY
• EXPANSION MAY BE CONSTRAINED BY THE SIZE OF THE
  GROUPS

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INDIVIDUAL PRACTICE ASSOCIATION HMO STRUCTURE
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ADVANTAGES OF THE IPA MODEL HMO

• WIDE GEOGRAPHIC COVERAGE
• PHYSICIANS PRACTICE IN USUAL OFFICE LOCATIONS
• ENROLLEE CHOICE
• PHYSICIANS IN CONTROL OF IPA
• LOWER START-UP COST
• CONTRACT THROUGH IPA

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DISADVANTAGES OF THE IPA MODEL HMO

• MUST TAKE ALL PARTICIPATING PHYSICIANS
• MORE DIFFICULT TO CONTROL UTILIZATION AND COSTS
• LIMITED ECONOMIES OF SCALE

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PHO MODEL HMO STRUCTURE
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PHO MODEL HMO

• MAJOR CONTRACTS ARE WITH PHYSICIAN HOSPITAL
  ORGANIZATIONS FOR BOTH PHYSICIAN AND HOSPITAL
  PARTICIPATION IN THE NETWORK.
• GENERALLY OPEN PANEL HMOS
• CONTRACTS WITH INDIVIDUAL PHYSICIANS AND
  HOSPITALS PART OF THE PHO CONTRACT.
• MAY HAVE OTHER CONTRACTS WITH INDIVIDUAL
  PHYSICIANS, MEDICAL GROUPS AND HOSPITALS.

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ADVANTAGES OF THE PHO MODEL HMO

• PHYSICIANS AND HOSPITAL COVERAGE IN A GEOGRAPHIC
  AREA
• NEGOTIATE ONE CONTRACT
• CAN MONITOR AND COMPARE UTILIZATION AND QUALITY
  IN THE PHO
• SOME ECONOMIES OF CARE

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DISADVANTAGE OF THE PHO MODEL HMO

• MAY NOT SUPPORT THE NEGOTIATED CONTRACT
• MAY BE DIFFICULT TO REACH AGEEEMENT ON A CONTRACT
• ALL PARTICIPATING PROVIDERS IN THE PHO A PART OF
  THE CONTRACT
• MANAGEMENT OF THE PHO MAY BE LIMITED

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MIXED MODEL STRUCTURE
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ADVANTAGES OF THE MIXED MODEL HMO

• CAN ADAPT TO LOCAL PROVIDER STRUCTURES
• BROAD GEOGRAPHIC COVERAGE
• SELECTIVE CONTRACTING

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DISADVANTAGES OF THE MIXED MODEL

• MULTIPLE CONTRACTUAL RELATIONSHIPS
• MAY REQUIRE DIFFERENT MEDICAL MANAGEMENT
  STRUCTURES
• DIFFICULTIES WITH QUALITY AND UTILIZATION CONTROLS

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Table 1.18 Managed Care Enrollment by Type of
Plan, 1984-2000
Mixed model HMO plans have shown rapid growth.
80.1
63.3
38.8
31.4
15.1
NA 19.5 23.3 43.6 13.6
NA 43.0 18.0 25.4 13.6
17.3 41.7 10.0 24.8 6.2
36.4 43.4 5.3 13.7 1.2
Mixed IPA Network Group Staff
40.0 41.9 8.9 8.8 0.4
Source Trends Indicators in the Changing
Health Care Marketplace, 2002 Chartbook.
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NATIONAL HMO ENROLLMENT GROWTH
Interstudy HMO Reports
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Table 1.17 Concentration of Managed Care
Enrollment, 1988-2000
Two-thirds of managed care enrollees are enrolled
in the nations 10 largestmanaged care firms.
Note The largest national managed care firms
include Blue Cross and Blue Shield plans, Aetna
US Healthcare, Kaiser Permanente, United Health,
and PacifiCare. HMO enrollment includes enrollees
in both traditional HMOs and point of service
plans. Source Trends Indicators in the
Changing Health Care Marketplace, 2002
Chartbook.
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ARKANSAS HMO ENROLLMENT1999-2002

• 1999
  2002
• HEALTH PARTNERS 165,907 96,558 -42
• UNITED HEALTH 46,921 57,558
  23
• QUALCHOICE 49,896 33,686
  -32
• HEALTHLINK 30,609 14,431
  -53
• CIGNA 15,510
  0 -100
• PRUDENTIAL 11,964 0
  -100
• TOTAL 320,807 202,233
  -37
• Arkansas Insurance Commission

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HMO CHANGES

• RELAXATION OF AUTHORIZATION SYSTEMS
• OPEN ACCESS (FULL OR LIMITED)
• TOUGH NEGOTIATIONS OVER PRICE
• PREMIUM INCREASES
• SELECTIVE MARKETING

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POINT OF SERVICE PLAN
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POINT OF SERVICE HEALTH PLAN

• MAY BE AN HMO OR PPO
• MEMBER IS ALLOWED TO MAKE A CHOICE OF COVERAGE AT
  THE POINT OF SERVICE
• MEMBER PAYS A HIGHER DEDUCTIBLE OR CO-INSURANCE
  IF THEY USE AN OUT-OF-PLAN PROVIDER
• MEMBERS MAY BE SUBJECT TO ADDITIONAL COST SHARING

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POINT OF SERVICE PLAN

• A CHOOSE CARE FROM MY PARTICIPATING
  PRIMARY CARE PHYSICIAN
• B CHOSE CARE DIRECTLY FROM A NETWORK
  SPECIALIST
• C CHOOSE CARE FROM AN OUT-OF-NETWORK PROVIDER

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POS ECONOMIC INCENTIVESFOR ENROLLEES

• IF A, NO CO-INSURANCE
• IF B, 20 CO-INSURANCE
• IF C, 35 CO-INSURANCE
• ECONOMIC INCENTIVE FOR PRIMARY CARE PHYSICIAN
• PCP WILL INCREASE PERFORMANCE BONUS IF MEMBER
  SELECTS OPTION A

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CONSUMER DRIVEN HEALTH PLANS
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CONSUMER

• FLEXIBLE ACCOUNTS
• DEFINED CONTRIBUTION PLANS
• CONSUMER DRIVEN HEALTH PLANS

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CONSUMER FOCUSED MANAGED CARE

• DEFINED CONTRIBUTION PLANS
• EMPLOYER PAYS FIXED AMOUNT FOR PREMIUMS
• EMPLOYEE SELECTS PLAN BASED ON COST, QUALITY OR
  OTHER CRITERIA
• ARKANSAS STATE EMPLOYEE, TEACHERS, ETC.

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CONSUMER FOCUSED MANAGED CARE

• COST SHARING TO INFLUENCE BEHAVIOR
• INCREASE CO-PAYMENTS
• INCREASE DEDUCTIBLES
• INCREASE COINSURANCE
• PREVENTIVE COVERAGE

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CONSUMER DRIVEN HEALTH PLANS
PERSONAL HEALTH ACCOUNT
HIGH DEDUCTIBLE INSURANCE PLAN
INTERNET BASED CONSUMER INFORMATION