Fairleigh Dickinson Executive MBA Health Systems Management

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Fairleigh DickinsonExecutive MBAHealth Systems
Management

• Managed Care and Provider Reimbursement
• Robert Eidus MD, MBA

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This Week

• Medical Management
• Physician Integration
• Groups, GPWW, compensation issues, PPMCs
• Case Study Phycor, PPMCs- Tim
• Mental Health Management
• Case Study- Merck-Medco Ken
• Pharmaceutical Benefits Management
• Case Study Small Area Variation in Utilization-
  John Wennberg MD- Lia
• Utilization Management
• Web-site review doctorquality.com, ncqa.org
• Quality Management

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May 31

• Population Based Health Management
• Preventive Health Services in Managed Care
• Demand Management
• Disease Management
• Case Study- Accordant Health Services
• Final Exam (First Hour)
• Oral Presentations of Project
• Wrap Up

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Final Exam

• Single Essay Question (may have a choice)
• The question will be broad
• You will be expected to think critically,
  analyze, and defend your position
• No memorization required
• Reflect understanding of the managed care
  concepts we discussed that are relevant to the
  question
• To Prepare Review slides and handouts. Review
  synopsis of reading materials. Only study those
  concepts which you dont understand

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Final Project

• Think Critically
• Reflect an understanding of the concepts
  discussed
• Do not regurgitate the slides or reading
  materials
• Personal experiences can be incorporated if
  relevant
• Some external reading or research would be
  expected. Cite external reading material or
  provide quotes.
• Dont be afraid to take a risk
• Its quality, not quantity

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Brief Discussions

• Questions about last week
• Questions about reading

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Recap of Last Two Weeks

• Managed care does not exist in a vacuum
• It responds (and retracts) to societal issues
• Initially the issue was access, then it was cost
• Cost is King
• Managed care exists in a framework that is a
  mixture of capitalism and social service
  entitlements
• There is no perfect system of compensating
  providers
• There is evidence that incentives do influence
  behavior
• Incentives which are excessively strong may
  adversely affect patient care and raised ethical
  questions
• Incentives which are weak are ineffective, so why
  do them?
• Capitation requires a significant infrastructure
  (financial and medical management to be
  successful)

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Quote of the Week

• Physicians are required to do everything that
  they believe may benefit each patient without
  regard to costs or other societal considerations
• Norman G. Levinsky, MD, The Doctors Master, 311
  NEJM. 1573, 1984

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How Is This Weeks Agenda Different From Last
Weeks

• Both Deal With How To Affect Utilization of
  Health Care Services
• Last Week We Dealt Mainly With the structure of
  how Providers are compensated by Health Plans
• This Week We Will Discuss How Providers are
  compensated Within Health Systems
• We Will Also Discuss Ways to Affect the Clinical
  Outcomes of Health Care Beyond Financial
  Incentives

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Finishing Up Old Business

• Medicaid and Medicare

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Medicaid

• Split Funding Between State and Federal
  Government
• Primarily for Indigent People
• Total Funding Based on State Budget
• Health Plans may enroll individuals either on a
  voluntary basis competing with FFS or via a state
  mandated plan
• Very often there is an enrolling agency

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Managed Medicaid

• Created to Address
• Access
• Cost Containment

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Medicaid Health Plans

• Stand Alone- For Profit
• Stand Alone- Non Profit (Usually affiliated with
  Hospital Systems)
• Multiproduct Health Plans

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Managed Medicaid

• Same benefits as FFS
• Often add OTC benefits
• Budgets and Global Cap rates negotiated with the
  state on an annual basis
• Payments to physicians are highly discounted
• Try to use limited hospital networks
• Emphasize DM programs consistent with their
  population- Asthma, AIDS, HTN, Diabetes, High
  Risk Pregnancy

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Managed Medicaid

• Issues
• Provider networks
• Community Health Centers
• Shifting enrollment
• Eligibility verification
• Ability to change health plans

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Managed Medicare

• Introduced in the late 1980s
• Recognition by Medicare that it had to do
  something else to control costs
• Provider networks and health plans embraced it
• Enrollment grew quickly, but recently there has
  been dramatic retrenchment

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Managed Medicare

• HCFA may a decision to either get out or minimize
  its exposure for costs
• Made it easy for providers and health plans to
  accept significant risk for Medicare- the most
  risky population to manage

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Managed Medicare

• The basic model
• Medicare allowed health plans to offer
  beneficiaries an HMO product in lieu of their
  traditional benefits
• The benefit package had to be at least as good as
  traditional indemnity insurance, but could be
  better
• The health plans were given a capitated rate for
  the equivalent projected costs under the FFS
  Medicare Program

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Managed Medicare

• The Capitated Rate is known as the AAPCC (Average
  Annual Per Capita Cost)
• Plans received 95 of the AAPCC, which varied by
  region
• Plans were allowed to charge a premium to be in
  the HMO
• Most common added benefit was Rx

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Early Experience

• Many plans, including those that were loosely
  managed, took on Medicare patients at a very
  rapid rate
• Early rapid rise in revenue and profits were
  often replaced by severe losses

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Why was the Initial Experience So Bad?

• Poor benefits design
• Poor marketing and enrollment strategies
• Lack of medical management infrastructure

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Managed Medicare

• Despite these early disasters, many MCOs
  registered large profits for the first decade
• Recently, many plans have exited Medicare in many
  regions due to unprofitable business
• Why do you think we have seen this downturn after
  the initial shakeout?

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Managed Medicare Issues

• Payment adequacy- ratcheting down
• Ability to affect medical expense trend
• Marketing- adverse risk selection
• Benefits structure
• Taking into account general factors affecting
  medical inflation

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Physician Integration

• Why integrate physicians? After all, managing
  doctors is like herding cats
• Opportunities to create economies of scale
• Increase purchasing power
• Increase negotiating leverage
• Increase internal referrals (FFS)
• Potential to improve patient satisfaction
• Potential to improve outcomes and lower medical
  costs
• Potential to take on risk

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Types of Physician Integration

• PHOs, IDS- Previously discussed
• Single and Multispecialty Group Practices-
  Previously Discussed
• IPAs Mainly used for negotiations and as a
  method of accepting risk
• MSOs Mainly used to consolidate administrative
  functions
• GPWWs Almost a hybrid of group and solo
• Offices run as separate profit centers corporate
  structure as a single group, facilities may be
  owned or rented by the group, can negotiate as a
  single entity, some functions centralized
• PPMCs

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PPMCs

• Case presentation Tim
• Phycor, Medpartners
• Why they were created
• What they tried to do
• What they failed

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Why did Phycor fail?

• Operational Efficiencies
• Extra Layer of Management
• Contracting Power
• Assumption of Risk
• Management of Risk
• Management of Physicians
• Were physicians motivated?

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Physician Compensation

• Democracy is the worst form of government,
  except for all the rest W. Churchill

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Reimbursement
Strengths Weaknesses
Fee For Service Motivates Productivity Equitable for those who work harder Can Foster Over-utilization
Capitation Promotes efficient care Can cause under-utilization of services Hard to administer in a group practice or one where there are mixed reimbursement populations
Salary Incentive Neutral to Patient Can create low productivity
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Physician ReimbursementWhat do you do when you
get a call at 430 that a child has a fever and
ear ache?

• FFS Come right in
• Capitation I will call in an antibiotic
• Salary Tell the patient to go to the ER
• No payment system is perfect. In reality, most
  physician payment schemes are hybrids
• Paying physicians based on profitability of small
  operating units that are under their control
  makes sense to me

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Mental Health Management

• Why Manage Mental Health Separately?
• Privacy
• Dont Understand the Business
• Hard to figure out what is appropriate care
• Different nomenclature coding
• Use of psychologists, MSWs
• Considerable variation in benefits structure

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Managed Behavioral Health Organizations

• Largest is Magellan
• Both Non-Profits and For Profits

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MBHOs

• Key Functions
• Access and Triage
• Referral Management
• Authorization of Treatment Plans
• Concurrent UM of Hospitalized Patients
• Some Case Management
• Claims Payment
• Quality Management and Reporting

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Pharmaceutical Benefits Management Companies

• Why Manage Rx?
• Most Rapidly Growing Part of Health Care Market
  Basket
• Difficult to Manage
• Integration Potential with Medical Management and
  Medical Date
• Quality and Outcomes Potential

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Presentation

• Merck-Medco Ken
• How do PBMs create value
• Why was it purchase by Merck?
• Why is Merck now trying to sell it?

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Pharmaceutical Benefits Management

• Benefits Design
• Covered Benefits
• Formularies
• Discounting of Medications
• Often tied to formulary
• Discounts received from Manufacturer, although
  product purchased from distributor
• Manufacturers rebates
• Passed through to health plan or insurer
• Occasionally tied to formulary

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Pharmaceutical Benefits Management

• Retail Store Management
• Drive Hard Discounts (AWP, filling fee)
• Retail Utilization Management
• OTC Switch
• Brand/ Brand switch
• Brand/ Generic Switch
• Mail Order
• The origination of PBMs
• 90 fills
• Lower copay (single copay)
• PBM functions as a pharmacy

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Pharmaceutical Benefits Management

• Utilization Management
• Patient profiling (unauthorized refills)
• MPA
• Vioxx, for example
• Costly, with minimal, if any advantaged over
  other NSAIDS
• Orthopedists give it out like water
• If you are a hammer, everything looks like a nail

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Quality Management

• Takes advantage of a rich data base
• Adherence Programs
• Testing reminders
• Patient education
• Disease Management

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Case Discussion

• Small Area Variation John Wennberg, MD
• Lia

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Utilization Management

• Principle is that there is significant
  over-utilization of health care services which
  does not help and may detract from quality and
  outcomes
• Fueled by lack of counterbalancing incentives
  between patients and providers (both want to do
  more)
• Different from financial/ payment structuring to
  reduce utilization
• Under-utilization can be dealt with separately

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Three basic types

• Prospective
• Referral Management
• Prior Authorization for surgery
• SSO
• Concurrent
• Is continued hospitalization still necessary?
  Transfer to lower level of care
• Retrospective
• Carve out excess length of stay and un-necessary
  services (not needed fro in-lier DRG payments)

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Referral Management

• Members need to go to PCP first
• PCP then authorizes referral to participating
  specialist
• Some services (eg specialized x rays may still
  need prior authorization from health plan
• Sometimes includes number of visits and
  procedures or tests
• Opposite is direct access
• Health Plans that use referrals often have
  exception for certain services
• Womens health maintenance with Ob/Gyn
• Special situations eg cancer care
• Eye care

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Referral Management

• Rationale
• Puts up a barrier to access
• Assumes that PCPs can manage most illnesses
  better
• Allows PCPs to be at risk for system wide costs
• Mimics the British system
• Emphasizes preventive health
• Allows PCP capitation
• Can be administratively linked with prior
  authorization

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Referral Management

• There is some evidence that PCPs manage a broad
  range of illnesses more cost effectively or
  better than specialists
• There is some evidence to support the contention
  that specialists manage some illnesses better
  than generalists
• There is virtually some that referral management
  programs contain costs

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Referral Management Systems

• Pros
• Makes sense
• May contain costs
• May avoid un-necessary procedures
• Better coordination of care
• Supports PCP capitation
• Supports preventive services better

• Cons
• Another layer of management
• Resented by many specialists and patients
• Mixed response at best from PCPs
• May prevent appropriate care or timely
  intervention for some illnesses by some providers

47
Prospective UM

• Prior authorization (also known as MPA,
  Precertification)
• Participating Provider (usually specialist, but
  may be hospital, diagnostic treatment center, or
  PCP) is required to notify health plan of
  requested serviced and get authorization for
  specific services, number of visits, length of
  treatment)
• Providers who perform services which require
  prior authorization without obtaining prior
  approval risk not getting paid member is held
  responsible
• In indemnity plans, it may be the insured who is
  responsible for prior authorization

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Mandatory Prior Authorization

• Common uses
• Surgeries such as hysterectomy
• Diagnostic testing (PET scans, MRI)
• Pharmacy ( Lamisil,Cipro,Clarinex, Growth
  Hormone, Ribavirin, Vioxx)
• Trend is to narrow the MPA lists to those where
  continuing to manage this way is felt to be
  beneficial and there are no other alternatives

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Mandatory Prior Authorization

• Pros
• Effective in many areas
• Can link to case management and disease management

• Cons
• The quintessential hoops and hurdles management
  initiative
• Docs learn to game the system
• Another layer of management

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Concurrent Utilization Management

• Generally done my nurses
• Can be telephonic or on-site
• Targets the last days of a hospital admission
• Not needed for DRG in-liers
• In the early days, was the single most effective
  way of managing costs
• May use Max LOS as an alternative or as a trigger
• Use national criteria (Interqual, MR)
• Intensity of service, severity of illness

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Concurrent Utilization Management

• Pros
• Felt to be effective
• Good link with care management

• Cons
• Requires systems and hiring large numbers of
  nurses
• Adversarial with hospitals and sometimes with
  physicians
• Telephonic less effective than on-site

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Retrospective UM

• After the service has been rendered
• For participation providers only
• Generally for emergency admissions or instances
  where prior authorization was required but was
  not received
• Participation provider at risk
• No balance billing of member
• Medicare now required signed consent prior to
  delivering services which may not be covered by
  them

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The Managed Care Dashboard
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Range of U/M Data
Loosely Managed Moderated Managed Well Managed
Admits / 1000 83.70 70.80 57.42
ALOS 5.38 4.19 3.11
Days / 1000 450 296 178
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Discussion

• doctorquality.com
• ncqa.org

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Other Quality Sites

• Various government sites (State and Fed)
• Some Health Plans
• www.consumerlab.com (herbs and supplements)
• www.hi-ethics.com (evaluates health sites on the
  web)

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Quality Management

• What is the case for quality?
• The best quality is also the lowest cost
• Price does not track with quality
• Good quality reduces re-work

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Why Did Health Plans Embrace Quality Management

• As a defense against allegations of
  under-utilization causing worse quality
• To allay fears
• Marketing/ In response to some employers
• To meet Federal Qualifications and Accreditation
  Standards
• It meshed with their systems
• Some pioneering spirit

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Traditional QM Activities

• CME- Doesnt work
• Guidelines Promulgation- Make good door stops
• Case review- only deals with complaints
• Randomized audits- not systematic doesnt point
  to a fix
• Peer review- bad apple management

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QM Tactics Employed by Health Plans

• Provider Directed
• Guidelines
• Disease Registries
• Notification of outliers
• Incentives
• Mirror HEDIS indicators
• Disease Management activities

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QM Tactics Employed by Health Plans

• Patient Directed
• Pt education
• Reminders
• Care management
• Disease management
• Incentives

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Contribution of Managed Care To Quality

• Prevention
• Childhood immunizations
• Mammography
• Colon Cancer Screening
• Adult immunization
• Chronic illness
• Asthma
• Diabetes care
• Beta blockers after heart attack

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Next Week

• AM RUGS, MDS and long term care (Mike McDonough,
  St. Barnabus Health System).
• Financial indicators of hospital performance
  (John Hazel, NJDHSS)
• PM Managed care and provider performance
  measurement (Don Zimmerman, CHMS, FDU).
• Readings In class handouts

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Final Session

• AM Examination (60 minutes)
• In-Class presentations and submission of Final
  Research Project
• PM In-Class presentations and submission of
  Final Research Project- (cont.)
• Emerging issues in managed care and
  reimbursement. Population based health
  management. The role of prevention in managed
  care. Prospective care management
• Readings Konsveldt Chapter 19, pp. 822-832,
  Chapter 13, Chapter 11 pp. 198-202