Clinical Risk
Clinical Risk Refers to People
Who Provide Patient Care
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Nursing services
Physicians
Support Staff
Social Workers
Dietary
Pharmacy
Lab Services
Licensed and/or certified people
Liability Suit
• Insurance company will cover
unless it is criminal activity
• Insurance cannot cover license
status
Major Issues in Clinical Risk
Management
• Must have qualified staff
• Check licenses and certifications
routinely
• Non-proficient staff must work in
tandem with qualified person
• Universal precautions
– i.e. gloves
Major Issues in Clinical Risk
Management
• Have policies & procedures that are
attainable
• Have attainable standards of care
Negligence
• Elements necessary for liability
– Duty to perform
– Breach of duty
– Personal injury or monetary damage
– Proximate cause
• Causal relationship breach of duty &
damage
Incident Reporting Process
• Peer reviewed
• Report within 72 hours to Risk
Manager
• Process for review
• Aggregate data to Risk Management
Committee
• Data to Governing Board
How to Gain Physician Support
• Demonstrate benefits
– Personalize the benefits
– Decreases insurance costs
• Develop personal relationships with
leading physicians who have power
in the organization
• Stress educational benefits
• Develop training around topics of
interest to physicians
How to Gain Physician Support
• Develop physician handbook
– System for identifying & reporting
potential losses or injuries
– What physicians should do with
summons or complaints
– Informed consent
– What to do if called by a lawyer
– Legal requirements for reporting
certain types of incidents
What Physicians Dislike Most
• Completing an incident report
– Involve physicians in developing
policy for handling complaints
Types of Exposure When an
Incident Occurs
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Property
Income
Personnel
Liability
Standard of Care
• Prescribed mode of treatment
according to an expectation
Tort
• An injury
• Intentional Tort
– Touching a person without consent
• Unintentional Tort
– Negligence created without intent, duty
of care, breach, foreseeability,
proximate cause, damage
Golden Rule
• How do you feel about what you
have done
Battery vs. Assault
• Battery
– Injuring person
• Assault
– Put someone in fear of injury
Reasonably Prudent Person
• What one would expect from a
competent person
Res Ipsa Loquitur
• Defendant’s burden to prove he/she
is not negligent
Joint & Several Liability
• Defendants can be sued together
• They sort out who was responsible
between them
Impact Rules
• Just scaring someone not enough to
sue
• Must actually impact the person &
injure him/her
General Issues of Clinical Risk
• Assessment Exposures
– Failure to include all elements of an
assessment
• Bottom line = documentation
• Personal & family history
• Medications
• Allergies
• Chief complaints
• Physical assessment
• Mental & emotional status
• Lifestyle habits
General Issues of Clinical Risk
• Assessment Exposures
– Failure to secure above information
will increase exposure to liability
• Do assessment ASAP
• Answer all questions on form
• Focus questions on chief complaint
• Always return to patients to validate
incomplete information
• Observe patients with adequate frequency
General Issues of Clinical Risk
• Assessment Exposures
– Failure to communicate
• Must recognize certain information must
go to the physician
• Certain information should trigger an
immediate intervention
• If physician is unavailable, contact
immediate supervisor
General Issues of Clinical Risk
• Planning Exposures
– No or low data
• Perform thorough assessment
– Failure to note patient problems
• Demonstrate your knowledge about
patient
– Non-specificity of data
• Do not use vague terms
General Issues of Clinical Risk
• Planning Exposures
– Failure to encourage shift continuity
• Document carefully & directly in the
patient chart
– Poor discharge instructions
• Good written discharge instructions
regarding after-care
• Allow time to ask questions
• Note in chart that patient verbalized an
understanding
General Issues of Clinical Risk
• Intervention/Treatment Exposures
– Misreading orders
– Patient identity mistakes
– Errors in patient positioning
– Medication errors
• Hospitals = 1/7 prescriptions
• Surgery = 1/12 prescriptions
– Inappropriate use of restraints
– Improper patient instructions
Development of Proactive Risk
Management Program
• Identifies areas of potential risk
• Develop means of addressing risk
exposures
Elements of Proactive Risk
Management Program
• Identification of high risk exposure
in clinical departments
• Identification of key staff who can
assist in recognition of behaviors
leading to injuries or their potential
• Identification of types of clinical
incidences which always result in
departmental or interdisciplinary
reviews
Elements of Proactive Risk
Management Program
• Coordinate with hospital
departments in order to create
change
• Focus on the process of delivering
quality care rather than patient
injury
Motives of Malpractice
Plaintiffs
• 40%
Felt humiliated by their
experience with their physician
• 50+% Felt betrayed by their
physician
• 80+% Felt embittered by physician’s
responses to their complaints
& questions
Motives of Malpractice
Plaintiffs
• 90+% Were very angry at their
physicians
• 24% Felt physicians were
dishonest and misled them
• 20% Felt “court was the only way
to find out what happened”
• 19% Wanted to punish the doctors
What Could Have Been Done
to Prevent Litigation
• 35%
• 25%
• 16%
Apologize or offer further
explanations
“Correct the error”
Wanted compensation
Types of Damages
• Compensatory
– Non-Economic
• Pain and suffering
– Economic
• Loss of income & inability to work
• Punitive
– Egregious offenses
Credentialling
Three Part Process
• Credentialling
• Privileging
• Reappointment
Content of Credentialling
Packet
• Establishes initial applicant
qualifications
• Signed application
• Drug Enforcement Agency
certificate
• Certificate from medical specialty
board
• Certificate of insurance
Content of Credentialling
Packet
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Current license
Other state license(s)
Pre-medical college degree
Medical school diploma
Certified copy of exchange
certificate for foreign medical
graduates
Content of Credentialling
Packet
• Detailed explanations for “yes”
answers to specific questions
• Names of three references with
completed reference forms
• Evidence of F/U calls to references
• National Health Practitioner Data
Bank (NHPDB) inquiry
Privileges
• Individually tailored scope of care
granted
• Provider qualifications
• Provider competence
• Support of medical staff
Contents of Reappointment
Packet
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Recredentialling & reprivileging
Signed & dated attestation
DBPR & NHPDB inquiry results
Insurance company information
regarding litigation
• Updated copies of license(s)
• Continuing Education course credits
Contents of Reappointment
Packet
• Specialized training certification(s)
• Checking delinquency status of
signed medical records
• Disciplinary proceedings or
sanctions by medical staff
Governing Board
Responsibilities
• Policy maker
• Delegates implementation &
management
• Retains responsibility for overall
control
• Fiduciary duty to patients to
maintain, guard, & preserve quality
of care
Governing Board
Responsibilities
• Appoint qualified physicians
• Have systems in place to verify
credentials of physicians
• Have systems in place to monitor
work of practitioners
Peer Review Duties of Medical
Staff
• Authority delegated & granted by
governing board
• Bylaws, rules, & regulations are an
instrument of delegation
• Peer review then becomes an
instrument for action against a
colleague
• Legitimate peer review is protected by
privilege, statute, & public policy
HealthCare Quality
Improvement Act of 1986
Purposes
• To address medical staff
incompetence
• To prevent incompetent physicians
from relocating
• To reduce malpractice claims
Expectations
• Increase in anti-trust litigations
Prescription
• Provide a safe harbor for physicians
& others when participating in:
– Credentialling
– Issuing of clinical privileges
– Peer review
Three Results of HCQIA
• Limited immunity
• Reporting to NHPDB
• Permissive access to information
maintained by NHPDB
Who Has Immunity
• Those serving on professional
review bodies
• Those assisting review body
• Those serving as witnesses on
behalf of review body
• Those under contract to review body
• Those serving on staff review
bodies
Activities Protected
• Professional activity involving:
– Credentialling
– Clinical privileges
– Membership
• Review of :
– Competence
– Professional conduct
Standards of HCQIA
• No private agendas
• Must obtain all available facts
regarding the matter
• Must provide for due process of
clinician under review
• Must believe actions taken were
warranted by facts
• Must not lie
What Must Be Reported to
NHPDB
• Malpractice payments
• Licensure sanctions
• Professional review actions
Who Reports to NHPDB
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Insurers
Hospitals
Multiple payers
Practitioners
Licensure Sanctions Reported
to NHPDB
• License revocation
• Reprimand or censure
• Surrender of license
Hospital Actions Reportable to
State Board & NHPDB
• Professional review actions
• Surrender of privileges while under
investigation
Quality Management in
Managed Care
Traditional Quality Assurance
• Structure Criteria
– Refers to such contextual issues as
licensure of a facility & capacity to
provide services it proposes to offer
– Disadvantage:
• No clear linkage between structure &
either quality or capacity
Traditional Quality Assurance
• Process Criteria
– Evaluates the way in which services
are provided
• i.e. number of referrals out of network,
number of preventive services offered
– Disadvantage:
• Linkage between process & outcome not
clear
Traditional Quality Assurance
• Outcome Criteria
– Infection rates, morbidity, & mortality
– Disadvantage:
• Does not indicate causes of poor
performance
Traditional Quality Assurance
• Peer Review
– Comparison of a provider’s practice by
peers or against a standard of care or norm
– Disadvantages:
• Peer review requires conformance & this
may shut out opportunities for innovation &
improvement
• Agreement on what quality is among peer
reviewers is not consistent
• Peer review limited by scope of processes
or indicators under review
Method of Developing QI
Program Agenda
• Identify patient need to be addressed
• Evaluate evidence of the need to
improve
• Assess probability of measurable
impact
• Estimate likelihood of success
• Identify impact generated in meeting
patient need
Process Model: Quality
Management Program
Using a TQM/Continuous Quality
Improvement process
• Understand customer need
– Complaint analysis
– Satisfaction surveys
Process Model: Quality
Management Program
• Identify outcomes meeting customer
need
– Facility access represents needs
– More flexible hours of operation
represents adjustment to meet that
need
Process Model: Quality
Management Program
• Assess performance compared with
professional or best of class
standards
– Benchmarking
– Outcomes assessment
– Appropriateness review
• Providing necessary care & not providing
unnecessary care
– Peer review
Process Model: Quality
Management Program
• Define indicators to measure
performance
– Determined according to populations
of patients served
– Case mix approach used to evaluate
appropriateness of care & encounter
outcomes
Process Model: Quality
Management Program
• Establish performance expectations
– Measure against best of class
standards
– These can be internal or external
standards
• Monitor performance & compare
with expectations
– Complete at regular intervals
Process Model: Quality
Management Program
• Provide feedback to providers &
patients
– Profiles & report cards can be used
effectively
– Examples of criteria to be profiled &
reported amount of billings
– Nosocomial infection rates
Process Model: Quality
Management Program
• Implement improvements
– Practice guidelines, case management,
quality improvement teams, &
consumer education can be used
Changing Provider Behavior
in Managed Care Plans
Challenges in Modifying
Physician Behavior
• Very strong autonomy & control
needs
– In terms of where care is provided
– In terms of how care is administered
• Role conflict
– Needs of the plan vs. needs of the
patient
Challenges in Modifying
Physician Behavior
• Lack of understanding of insurance
function of plan
– Particularly difficult are exclusions &
limitations
• Bad habits
– Keeping patients in the hospital too
long
– Not making rounds on a particular day
– Lengthening stay unnecessarily
Challenges in Modifying
Physician Behavior
• Poor understanding of economics
– Capitation
– Performance based reimbursement
systems
Challenges in Modifying
Physician Behavior
• Poor differentiation of competing
plans
– Benefits same
– Payments same
– Requirements of plans vary
• i.e. paperwork, forms
• Obstinance & arrogance
Methods of Changing Behavior
Throughout the Program
• Translate goals & objectives in
understandable terms
• Establish positive reinforcement for
compliance
• Maintain active line of
communication
• Formal continuing education
Methods of Changing Behavior
Throughout the Program
• Providing data & feedback face to
face
• Develop practice guidelines with
physician input
– Extra difficult in open panel plan
Methods of Changing
Individual Physician Behavior
• Collegial discussion
– Physician to physician
• Positive feedback when things are
done well
• Persuasion
– NHPDB
• Firm direction of policies reminding
physician of contract
Methods of Changing
Individual Physician Behavior
• Sanctions
– Ticketing = verbal reprimand
– Disciplinary letter
• Contract termination
Using Data in Medical
Management
Requirements for Using Data
to Manage a Health Delivery
System
• Data must have integrity
• Data must be consistent
• Data must be valid
• Data must be meaningful
Requirements for Using Data
to Manage a Health Delivery
System
• Sample size must be adequate
• Data must encompass adequate
time period
Provider Profiling
• Definition
– Collection, collation, & analysis of data
to develop provider specific profiles
Provider Profiling
• Sample data for collection
annualized
– Outpatient services
• Average # visits/member/provider
– Specialty services
• Average # visits/member/specialist
– Diagnostic services
• Utilization/provider/visit
– Inpatient admissions
• # admits/provider/year
Provider Profiling
• Matching clinical data & budget
information
• Cross tabbing clinical data &
revenues
• Cross tabbing clinical data &
expenses
Authorization Systems
Definition
• Management review of case for
medical necessity
• Channeling care to most appropriate
location
• Provision of timely information to
Large Case Management
• Providing assistance in estimating
medical expenditures each month
Categories of Authorization
• Prospective
– Issued before service is provided
– Elective services
• Concurrent
– Generated at time service is provided
– Urgent service
Categories of Authorization
• Retrospective
– Takes place after the fact
– Life threatening emergency
• Pending
– Medical review for necessity
• Denial
– No authorization forthcoming
Categories of Authorization
• Subauthorization
– Authorization for hospitalization &
surgery may carry with it a
subauthorization for use of anesthesia,
radiology, pathology, surgery
consultant fee, etc.
Rating & Underwriting
Rating vs. Underwriting
• Rating
– Expected case specific premium for
medical service product
– Book rate formula
– Manual rate
• Underwriting
– Uses rating results along with
discounts & credits to produce final
rates.
Cost & Revenue Targets
• Variables driving costs
– Utilization/1,000
– Allowed average charge
– Frequency of copay
Cost & Revenue Targets
• Rate structure variables
– Measurable variables
• Age
• Gender
• Industry
• Trend during time period measured
• Benefit level
• Geographic service area
Cost & Revenue Targets
• Rate structure variables (cont.)
– Non-measurable considerations
• Health of overall population
• Case management projected impact (i.e.
utilization level, average charges for
services)
Types of Premium Rates
• One Tier
– Employee (Ee) only or composite rate
• Two Tiers
– Ee only or Ee + family
• Three Tiers
– Ee only, Ee + 1, Ee + 2 or >
• Four Tiers
– Ee only, Ee + spouse, Ee + child(ren),
Ee + spouse + child(ren)
Credibility of Premium Rates
• Refers to likelihood of accuracy of
projections for future claims
experience as a function of past
experience
• Based upon number of years of
claims experience available
• Credibility factor ranges from 20%
for one year to a maximum of 70%
after three years
Credibility of Premium Rates
• Consequence:
– Aggregate stop loss (frequency of
claims) is pegged at 125% of expected
claims
– Specific stop loss (severity of claims)
is negotiated with client
– Refer to specific stop loss
Credibility of Premium Rates
• Trends
– Measured by utilization levels &
charges
– Relate to aggregate stop loss
• Corridors
– Refer to costly claims requiring LCM
intervention
Credibility of Premium Rates
• Bottom line:
– Experience ratings are based on past
utilization data
– Expected utilization for the next year
has an inherently large margin of error
built in
– Hence underwriters strive to protect
company from excessive losses
Common Problems in
Managed Care Plans
Undercapitalization
• Unable to make needed repairs
Predatory Pricing & Lo-Balling
• Buying market share
• The HealthSouth experience
Overpricing
• Reasons:
– Panic response to previous lo-balling
– Carrying excessive overhead
– Failure to control utilization
– Adverse selection
– Greed (avarice)
– Genuine belief that quality of product
will cause prospective clients to shop
the product instead of the price
Unrealistic Projections
• Underestimating medical expenses
• Overestimating enrollment
Uncontrolled Growth
• Leads to saturation of delivery
system
• Inability of management to
administer growth
Improper IBNR Calculations or
Accrual Methods
• Need lag studies to verify accuracy
of accruals
Failure to Reconcile Accounts
Receivable & Membership
• Paying medical expenses of
members no longer eligible
• Failure to collect premiums of new
members
• The Oxford Health Plan experience
Overextended Management
• Limiting control to few managers
• Overreliance on central decision
making
• Heavy hands-on involvement by
senior management
• Result is paralysis
• The Maxicare Health Plan experience
Failure to Use Underwriting
• Risk of adverse selection
• Inadequate premiums to pay claims
• Rate setting must be geared to the
particular market
• However, following the market to
artificially lower rates leads to
financial disaster
• The 1985 insurance crisis
Failure to Understand Sales &
Marketing
• A major error committed by
provider-sponsored health plans
• Multi-choice environment increases
the chance of adverse selection
• Cannot gauge characteristics of
enrollees of your plan
Management Failure to
Understand Reports
• Occurs most frequently when
management not involved in
developing format of reports
Failure to Track Medical Costs
& Utilization
• Develops false sense of security
• Unnoticed increases in utilization
can portend disaster
System’s Inability to Manage
the Business
• Occurs during merger activities
• Hospital-based MCOs most vulnerable
due to:
– Lack of understanding of the insurance
function
– Law of large numbers
• Danville Regional Medical Center
experience
• Aetna/U.S. Healthcare A/R experience
Failure to Educate &
Reeducate Providers
• Problem most evident in open
panels
• Must communicate regularly with
providers
• Must curtail open ended
authorizations to specialists
Failure to Deal with
Non-Compliant Physicians
• Direct result is expense associated
with uncontrolled utilization of
resources
• Indirect result is effect of negative
attitude on members
Failure to Control
Inappropriate Business &
Marketing Practices
• State enacted managed care laws
Medicare & Managed Care
Adjusted Average Per Capita
Cost (AAPCC)
• Payment basis to HMOs &
Competitive Medical Plans (CMPs)
under a contract to HCFA
– 1 of 142 possible monthly cap amounts
applied to each county in the U.S.
• Actuarial projection of what Medicare
expenses would have been had
beneficiary remained in traditional
Medicare program
Comparison of Adjusted
Community Rate & AAPCC
• If projected premium (ACR) exceeds
projected payment (APR), then:
– Revenue is less than the cost of
providing care
– Practice receives difference up to 95%
of AAPCC
Comparison of Adjusted
Community Rate & AAPCC
• If ACR is less than APR, must either:
– Return surplus to HCFA
– Return difference to beneficiaries by
reducing premium
– Offer enriching benefit package
• HCFA will not pay greater than 95%
of the AAPCC
Requirements to Obtain a
Medicare Contract
• Must be a federally qualified HMO or
CMP
• Membership
– At least 5,000 prepaid capitated members
– 1,500 members in rural area
– 50/50 rule: Medicare/Medicaid
membership balance must not exceed
50%
Requirements to Obtain a
Medicare Contract
• Medical Services
– Provide or arrange for all medical
services in service area
– 24 hour emergency services
• Range of Services
– Provide or arrange for all Medicare
A&B
Requirements to Obtain a
Medicare Contract
• Open Enrollment
– 30 day open enrollment every year
• Can be waived if 50/50 rule will be violated
or if organization cannot accommodate
new enrollees
• Marketing Rules
– No redlining
Requirements to Obtain a
Medicare Contract
• Ability to Bear Risk
– Adequate capital & surplus
• Administrative Ability
– Can carry out terms of contract
• Quality Assurance
– Must qualify QA program as part of
HMO qualification process
Requirements to Obtain a
Medicare Contract
• Right to Inspect Records
– Government has right to inspect &
evaluate records
• Medical Records Confidentiality
– Adhere to provisions of Privacy Act
Options Now Available for
Medicare Eligible
• Medicare Select
– Program offered by Medicare
Supplemental Insurance Companies
– An incremental program because
going out of network is not heavily
penalized
Options Now Available for
Medicare Eligible
• PPO
– 20%coinsurance outside of network
– Case management employed
• Cost Contracting
– This is on way out due to:
• Lack of cost controls
• Lack of incentives for providers to control
costs
Options Now Available for
Medicare Eligible
• POS
– Can be offered as supplemental benefit
or optional benefit
• Medicare Choices
– Broad range of options including
shared risk contracts
Medicaid Managed Care
(MMC)
Most Significant Contribution
of MMC
• Use of primary care case
management
– Integral part of the managed care
process
Medicaid Demonstration
Projects
• Arizona HealthCare Cost Containment
System
– Four key objectives
• Competitive bidding for prepaid contracts
• Development of primary care doctor
gatekeeper network
• Copays to control inappropriate utilization
• Restricted freedom of choice after selecting
a plan
Medicaid Demonstration
Projects
• Arizona HealthCare Cost Containment
System (cont.)
– Result
• Cost savings averaged 7% during first 11
years
Medicaid Demonstration
Projects
• Virginia Approach
– Incrementalism
• Phase 1: restricted freedom of choice &
mandatory fee for services PCCM
(Medallion Program)
• Phase 2: voluntary HMO Choice for those
opting out of Medallion
• Phase 3: establish multiple competing
HMO options & mandatory HMO
enrollment
Impact of Medicaid Managed
Care
• Cost Savings
– Ranged from 5-15% per enrollee
• Utilization, Satisfaction, & Quality
– Use of emergency room care reduced
• Administrative Costs
– Serious limits in securing budget
predictability of future expenditures
– Due to challenges of working with
individual physicians
Future Trends
• Greater variability between states
– Less uniformity
• Growth of prepaid managed care
– FFS cannot guarantee cost containment
• Mainstreaming
– Enrollment in traditional established
HMOs having broad base of membership
– Tends to spread the risk more equitably
Future Trends
• Vulnerable populations
– Can poor people with complex chronic
problems fit into a mainstream
environment?
– Will traditional carriers accept this
burden & level of risk?
Future Trends
• Public & private purchaser
convergence
– Efforts to align public programs with
private efforts
• Achieve economies of scale
• Compatible systems development
Future Trends
• Sustainable profitability of Medicaid
product line
– Unclear whether rates paid for
Medicaid beneficiaries will be sufficient
to sustain a program alignment
between for profit & public programs
State Regulation of
Managed Care
Current Regulatory Processes
HMO
• Licensure
– Must secure certificate of authority
(COA)
– Unusual because Insurance
Department has little or no direct
authority over ERISA qualified HMOs
• Certificate of Need (CON)
– 34 states have CON laws
– 25 state CON laws apply to HMOs
Current Regulatory Processes
HMO
• Enrollee Information
– Availability of plan document &
summary plan document
• Access to Medical Services
– Must assure access & availability
• Provider Issues
– Written contracts with providers
– Risk transfer vs. risk sharing with
providers
Current Regulatory Processes
HMO
• Reports & Rate Filings
– File annual report with Insurance
Department
• QA & UR
– Must have plan in place before
obtaining license
• Grievance Procedures
– HMO Act requires written protocol
Current Regulatory Processes
HMO
• Solvency Protection
– HMO Act requires $1.5M net worth
– Most state insurance departments
require capital & surplus of up to $10M
• Financial Examination & Site Visits
– Involves finances, marketing activities,
& QA programs
Current Regulatory Processes
HMO
• POS Offerings
– Most state laws require HMO to enter
wrap around agreement with insurance
carrier to cover out of plan usage of
benefits
• Carrier must be licensed & admitted vs.
surplus line company
• Multi-State Operations
– Compliance with regulations of each
jurisdiction
Current Regulatory Processes
PPO
• Regulation
– By state Insurance Department
– Not as intensely scrutinized as HMOs
Current Regulatory Processes
PHO
• Regulation
– No licensure requirements in most
states
Current Regulatory Processes
Self-Funded Plans
• Regulation
– Most are ERISA qualified
– States are preempted from regulating
them
Current Regulatory Processes
TPA
• Regulation
– TPAs normally assume no insurance
risk
– Come under the Secretary of State &
Department of Corporations
• Not the Insurance Department
Anti-Managed Care Legislation
Most serious threats to Managed Care
• Preferred Provider Arrangements
– Mandatory POS offerings
– Burdensome due process for
aggrieved physicians
– Prohibition & disclosure requirements
& financial incentives
– Establishment of duplicate health plan
standards
Anti-Managed Care Legislation
Most serious threats to Managed Care
• Any Willing Provider
– 33 laws adopted in 27 states
• Direct Access Legislation
– May threaten viability of HMOs in some
cases
• Mandated Benefit Requirements
– Several cases in response to physician
pressures