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Managed Care - Assumptions . The most appropriate healthcare is not always delivered by professionals who are well-informed Healthcare services are not always delivered in a suited environment and/or timely manner that best accommodates the patient’s health status. Managed Care - Review .

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managed care assumptions
Managed Care - Assumptions
  • The most appropriate healthcare is not always delivered by professionals who are well-informed
  • Healthcare services are not always delivered in a suited environment and/or timely manner that best accommodates the patient’s health status
managed care review
Managed Care - Review
  • A variety of approaches in active coordination and arrangement of the provision of health services and coverage of health benefits
    • Usually involves 3 key things

1. Oversight of the medical care given

2. Contractual relationships/organization

3. Rules/algorithms tied to covered benefits

the three p s
The Three P’s
  • Patients - those who receive or need care
  • Providers - those who give care
    • Physician
    • Hospitals
    • Pharmacy
    • Laboratory
  • Purchasers - those who pay for the care
    • Employers
    • Government
    • Insurance organizations
provider relationships
Provider Relationships
  • Primary Care Physicians (PCP)
    • Goal of managed care is to provide high-quality medical care while limiting costs
    • Focal point and manager of patient care
    • Must be public health aware
      • Assessment of risk factors to facilitate early treatments
      • Diagnostics and screening understanding
provider relationships5
Provider Relationships
  • Physician Extenders
    • Under MC there is an incentive to shift care to lower cost providers when they are professionally qualified to handle the case
    • Patients may benefit from interaction with capable professionals who may be able to listen to questions and answer them in detail
provider relationships6
Provider Relationships
  • Estimated Provider Costs
    • PCPs……………………………….$50.00 per visit


    • PA…………………………………..$40.00 per visit
    • NP…………………………………..$40.00 per visit
    • Clinical Pharmacist……………..$25.00 per visit
    • Telephone Triage Nurse…………$5.00 per call
    • Patient self-care materials………$1.00 each
provider relationships7
Provider Relationships
  • Specialist Physicians and Hospitals
    • Require referral from PCPs
  • Medical Groups
    • Physician groups contracted with a purchaser
    • Organization formed just for the purpose of contracting with health pans (IPA)
key terms and concepts
Key Terms and Concepts
  • Revenue PMPM ($)
  • Medical Expense Ratio (%)
  • Administrative Expense Ratio (%)
  • Hospital Days per 1,000
key terms and concepts9
Key Terms and Concepts
  • Members
    • “Enrollees” or “Covered lives”
    • Subscribers
    • Membership is classified by type of MCO, such as HMO, PPO or EPO
    • Membership is further broken down by purchaser category, including Medicare, Medicaid and Commercial
    • Employer-based members = group members
    • “Member-months”
key terms and concepts10
Key Terms and Concepts
  • Medical Management
    • Quality Management
    • Utilization Management
    • Outcomes Management
    • Demand Management
      • Unfortunately not the focus
      • Role of public health professional
      • Involves patient education materials and resources
    • Disease Management
sharing financial risk
Sharing Financial Risk
  • In MC, providers often bear some level of financial risk
    • FFS = lowest risk
    • Per case payment = moderate risk
    • Capitation and/or salaries = highest risk
  • Capitation = paying a fixed amount of money per member
  • Contact capitation = where provider is paid an amount per qualifying patient
    • Risk taken is only cost of referral not number of referrals
sharing financial risk12
Sharing Financial Risk
  • Others
    • Withholds - a portion of the provider payment is held back and only paid later if certain criteria are met
    • Shared risk funds - physician groups share in a portion of the financial risk and potential profit of hospital or pharmacy costs
      • Funds get paid at the capitation rate
      • Medical expenses are paid from this fund
      • Profits or losses are distributed to the participants
      • Incentives - Sullivan article
premium pricing cycle
Premium Pricing Cycle
  • Premiums drive profits (and profits drive premiums)
  • During profitable periods:

1. Plans want to expand market share

2. Start to lower price to do so

3. Other plans match lower prices

4. Price wars lead to multi-year contract development

  • A downswing results:

1. Due to insulation of capitating risk to providers and time lag on

FFS claims, considerable time elapses before financial

pressures know from lowered premium

2. Due to multi-year contracts and price pressures nothing much

can be done about the problem as it becomes apparent

premium pricing cycle14
Premium Pricing Cycle
  • Eventually enough of the market is losing money so that several major players break rank and begin increasing rates and everyone follows suit
  • Return to Profits
    • The increases continue until profits are being generated and the cycle begins anew
managed care plans products
Managed Care Plans & Products
  • Health Maintenance Organization (HMO)
    • Responsible for financing and delivery of care for prepaid premium
    • Providers are either employed or contracted with HMO
    • Direct contract model HMO is rare
    • PCP as gatekeeper
    • Provider prenatal care, well-baby checks, educational programs, inoculations and smoking cessation programs
      • Staff Model
        • Physicians are employed by the HMO, often work in hospital on salary
        • May receive financial incentives for efficient utilization
        • Kaiser-Permanente
managed care plans products16
Managed Care Plans & Products
  • HMO (continued)
      • Group Practice Model
        • When HMO contracts with a group of physicians representing multiple specialties to provide care
        • Similar to staff, but physicians are not employees of the HMO, but rather members of a medical group
      • Network Model
        • When the HMO contracts with several different physicians and physician groups to construct a network of providers from which the patient member can choose
managed care plans products17
Managed Care Plans & Products
    • IPA Model
      • An Independent Practice Association (IPA) is a group of physicians who contract with HMOs, PPOs, and others to provide care to those companies’ members at a reduced rate
      • The IPA will contract with more than one HMO, which differentiates it from the group practice model
  • HMO IPA Example
    • Physicians at City Memorial Hospital feel their practices are shrinking because so many patients are now members of competing HMOs
    • They band together to form an alliance call City Memorial Physicians Group, an IPA
    • The administrators of the IPA then market the group to HMOs and others
managed care plans products18
Managed Care Plans & Products
  • Preferred Provider Organization (PPO)
    • An organization which creates a network of healthcare providers by contracting with them for discounted rates
    • Providers can be physicians, hospitals, labs, transportation companies, DME suppliers, home health agencies, pharmacies or others
    • Providers sign a contract with the PPO to provider their services to PPO members at a lower rate, in exchange for the advantage of having more clients
    • When the patient sees a physician, the patient’s percentage of costs is much lower when using a PPO physician than a non-PPO physician
    • This contrasts with the HMO where the patient is not given the choice of non-member providers
managed care plans products19
Managed Care Plans & Products
  • PPO Example
    • John Smith is working in his home workshop when he cuts his hand, which appears to require suturing
    • His wife, Mary, looks in the PPO directory and sees that there is a nearby family physician.
    • With John’s plan, if he sees the PPO physician, John will pay only a $5 office visit charge (called a co-pay) and the PPO will pay the physician the remainder of the fee.
    • If John chooses to go to his long-time family doctor who is not a member of the PPO, John will be reimbursed 75% of the cost, providing he has already me the yearly out-of-pocket deductible charge of $500
managed care plans products20
Managed Care Plans & Products
  • Exclusive Provider Organization (EPO)
    • Similar to both PPOs and HMOs
    • Member is given a directory of providers and are limited to choosing these providers
    • Similar to HMO, but differences in legality/regulations
    • 100% Access to network physicians - no PCP referrals
  • Point of Service (POS)
    • HMOs where the patient/subscriber is given the option of going to out-of-network providers at a reduced reimbursement rate
    • Usually a PCP is acting as a gatekeeper in the HMO

Managed Care Plans & Products

  • Provider Sponsored Organization (PSO)
    • Many health care futurists feel that PSOs are the next step in creating a health plan that meets the goals of the patients and the providers
    • Such a system is owned and operated by a network of physicians and hospitals rather than by an insurance company
    • Usually the product of a large multi-service hospital which can provide care any subscriber may need
    • Gives better control and eliminates the middleman
      • More opportunity to put excess premium dollars into healthcare and public health initiatives

Managed Care Plans & Products

  • Super IPAs
    • Management companies that function as administrators for several smaller IPAs
  • Physician-Hospital Organizations
    • Similar to a PSO, but is a part physician owned and part hospital owned
  • Administrative Organizations
    • Third-party administrators (TPA)
    • Utilization Review Organization (URO)
    • Managed Services Organization (MSO)
    • Physician Practice Management Companies (PPMC)

Kip Sullivan Article

  • Compares quality of care provided by MCs to FFS
  • Major themes
    • Financial Incentives of Physicians
    • Patient Behavior
    • Preventive Services
    • Access

Fairfield et al. Article

  • Evolution of Managed Care
    • Fifth Generation Managed Care and Public Health
      • Anticipatory case management
        • Risk assessment
        • Epidemiological Studies
      • Community based needs assessment
        • Integrated efforts with department of public health
      • Targeted disease management
        • Behavioral epidemiology, health education/promotion
      • Integration of clinical services
      • Outcomes based reimbursement
        • Ongoing public health studies
      • Informed consumers - education programs
        • Public health educational interventions

Population-based Medicine

  • Attacking disease across its entire spectrum by treating well people with “preventive medicine” and all symptomatic patients, from minimally afflicted to serious ill
  • Healthcare resources have traditionally been reserved for the more acutely and seriously ill
  • Potential to reduce number of severely ill
  • Discourages unlimited resources for the few

Population-based Medicine Tools

  • Earlier health assessments
  • Health behavior education and management
  • Home environmental assessments
  • Home health services
  • Practice guidelines