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
• 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
• 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
• 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 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 Relationships
• Estimated Provider Costs
– PCPs……………………………….$50.00 per visit
vs
– 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………$1.00 each
Provider Relationships
• Specialist Physicians and Hospitals
– Require referral from PCPs
• Medical Groups
– Physician groups contracted with a purchaser
– Organization formed just for the purpose of
contracting with health pans (IPA)
Key Terms and Concepts
• Revenue PMPM ($)
• Medical Expense Ratio (%)
• Administrative Expense Ratio (%)
• Hospital Days per 1,000
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 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
• 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 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
• Premiums drive profits (and profits drive
premiums)
• During profitable periods:
1.
2.
3.
4.
Plans want to expand market share
Start to lower price to do so
Other plans match lower prices
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 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
• 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 & 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 & 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 & 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 & 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-ofpocket deductible charge of $500
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