AHM 250 Summary

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AHM 250 - MANAGED HEALTHCARE: AN INTRODUCTION (Third Edition)

Summary Document For Internal Use Only

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Table of Contents

1. The Evolution of Healthcare Delivery and Financing..................................12. Basic Concepts of Managed Healthcare........................................................83. Managed Care Organizations, Plans, and Products...................................154. Managed Healthcare for Specialty Services...............................................275. Provider Organizations..................................................................................326. Health Systems Management.......................................................................367. Medical Management I...................................................................................438. Medical Management II..................................................................................519. Managed Healthcare Operations I................................................................6210. Managed Healthcare Operations II...........................................................7211. Legislative and Regulatory Issues in Managed Healthcare..................8612. Ethical Issues in Managed Healthcare...................................................106

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1. The Evolution of Healthcare Delivery and Financing

Reading 1A: The Evolution of Healthcare Delivery and Financing in the United States

Define managed care Identify the major factors that influenced the evolution of healthcare delivery and

financing in the United States Describe the role of the government in the development of healthcare delivery and

financing List and describe some factors that limit accessibility to healthcare Discuss how the meaning of quality (as it relates to healthcare) has changed

Reading 1B: Basic Concepts of Benefits, Coverage, and Insurance Explain how traditional indemnity health insurance works List some characteristics of the fee -for-service payment system Define antiselection Explain how deductibles and coinsurance are used in traditional indemnity plans Describe some efforts commonly used to combat the rising costs of healthcare

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Reading 1A: The Evolution of Healthcare Delivery and Financing in the United States

Managed Care System of healthcare financing and delivery or Various techniques of managing the financing and delivery of healthcare or Different Kind of organizations that practice managed care techniques Accepted Definition Integration of both the financing and delivery of

healthcare within a system that seeks to manage the accessibility ,cost and quality of that care

Historical FactorsVariations of Managed care have been around from the 1900’sEarliest example of Managed Care Org 1910 – Prepaid Physicians Group Practices

These offered a range of medical services thru exclusive physicians in return for a monthly premium.

Blue Cross Plans – 1929 for hospital reimbursementBlue shield Plans – 1939 for physicians reimbursementIndividual Practice Associations (IPA’s) which contracted with physicians in independent fee- for-service practices were established in 1954 as a competitive response to group practice based HMO’s

Statistic – 1999 – 81 million people enrolled in HMO’s – nearly as many as those in PPO’’s and other non HMO plans

Federal HMO Act of 1973This was designed to reduce healthcare costs by increasing competition in the healthcare market and to increase access to healthcare coverage for individuals without insurance or with only limited insurance benefits

4 Key Features Federal qualification requirement

o This act established a process by which HMO’s could obtain federal qualification.

o This was optional licensing – (the state licensing was mandatory for all HMO’s).

o Plans who elected for this option were required to meet a series of standards related to

Minimum benefit packages Enrollment and premiums Financial stability and Quality Assurance

Dual Choice Provisionso This required that the employers with more than 25 employees offer a choice

of traditional indemnity coverage or managed care coverage under either a closed Panel HMO or an open panel HMO.

o Federally qualified HMO’s that wanted to be part of this needed to submit a formal request to the employer

Federal Development Grants and Loanso This offered funding to support planning and start of new HMO’s and service

area expansion for existing HMO’so Available only to federally qualified HMO’s

Exemption from State Laws

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o Some state laws restricted the development of HMO’so This act exempted federally qualified HMO’s from these State Laws

Positives The act did accomplish its goals of reducing costs and expanding access to

healthcare services. Federal Qualification did offer competitive advantage to HMO’s entering the

healthcare market. They sort of gave them a ‘stamp of approval’ Allowed the HMO to participate in Medicare without providing additional

documentation The dual choice provision gave the HMO access to the Employer Segment of

the market The Federal grants and loans allowed effective competition to the

indemnity based insurance plans

Negatives

Partly hampered their competitive positiono Needed to satisfy a lot of requirements on Quality and Financial Stability

These did NOT apply to Indemnity based programs or Non-Qualified MCO”s Slow implementation of the laws Amendments between 1976 to 1996

o These eliminated and reduced the strict requirements imposed on Federally Qualified HMO’s

o Dual Choice Mandate repealed in 1995o Allowed greater flexibility in designing and marketing these products and

strengthened their emphasis on Quality

Introduction of New Products and Programs

Preferred Provider Organizations o Services by a network of providers o Limited services provided by a non-network of providerso Visit without a specialist referral

Point of Service Productso Combination of traditional indemnity insurance and managed careo Can take both In or Out of network providerso Non Network providers involve more limited benefits and higher out of pocket

expenseso Visits to network specialists require PCP approval

Physician-Hospital Organizationso Coalitions of hospitals and physicianso Vehicles for contracting with MCO’s

Carve-Outso Organizations that contract with MCO’s to provide specific types of services

Mental Health Chiropractors Dental Vision Pharmacy services thru specialty networks

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Government Influence

Financing Medicare, Medicaid, Federal Employee Health Benefits Program (FEHBP) and State Children’s health Insurance Program (SCHIP)

The government is increasingly turning to managed care as an alternative to traditional fee for indemnity programs.

Statistic – Medicare 6.8 million people enrolled in 1999. Also 17.1 Million Medicaid recipients enroll in some form of MCO. Economic Factors

1. Increased in Healthcare Costsa. Inflationb. Increased cost of service for providers and insurersc. Rapidly Expanding Technology – expensive proceduresd. Increases in Malpractice Lawsuits

i. Award amounts increasedii. Practice Defensive Medicine – unneeded /expensive tests

e. Consumer Expectationsi. Increased health consciousnessii. Cover at whatever cost and Freedom to visit who they likeiii. Unnecessary Treatment –Medically unnecessary procedures – Common

coldf. Lack of Incentive to Control Costs

i. Traditional fee for service – more services more pay!ii. Payment occurred after service rendered

2. Cost Shiftinga. Some coverage to people who can’t pay /can pay at reduced ratesb. Physicians and hospitals receive lower payments for these servicesc. Emergency room treatmentd. Spread these unreimbursed costs to other paying patients – This

Practice of shifting costs from non paying to regular customers is Cost Shifting

3. Frauda. 100 Billion market annuallyb. 10% of national Healthcare billc. $966.14 per family excess cost because of Fraud

Technological Factors

Information management has improved significantly Statistical analysis has helped improve cost and quality Pharmacists can - Determine eligibility/Adverse reaction to a drug/Formulary

compliance/ Preauthorization requirements/Co-payment, deductible and coinsurance requirements

Claims Automationo Reduced Staff/ Increased Accuracy/ Shortened Turnaround times/Turning

health plan data into actual information Paper to Electronic – Costs down by 25% Future Applications of technology

o Administrative – Employee Recruitment/Online formulary/Consulting via email

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o Customer Service – Physician profiles/Customer feedback/Referral automationo Clinical Applications – health and drug info/ disease mgmt/ Medical Call Center

Social FactorsHigher emphasis on Quality and access to healthcare has happened

Maturing Population- Increase in median ageo Higher increases foreseen in the 55 – 64 categoryo Higher illnesses – and better mechanisms to handle these illnesses

Access to Services – 44 Million did not have access in 1998o Most coverage is thru an employer sponsored group plan – as employee or

dependento BUT employment status does not guarantee health coverageo Higher proportion of self employed and private sector firms with < 25

employees are uninsured High Cost Inverse relationship between employer size and premiums

o Poor Health Risks Don’t qualify Could have preexisting conditions

o Uneven Distribution of Medical Services Very low coverage in rural areas Hospitals have closed in these areas and in inner city localities these

are disproportionately higher than the rest of the country Demographically – coverage is lower in South Central and South

Western parts with large rural populations Also lower income/employment/racial and ethnic groups percentage

o Quest for Quality Employers have become more discriminatory on cost Consumers want higher quality as the most important factor How is quality measured

Safety/Preventive Care/ Access to primary and specialty care/care for chronic illness

National Committee for Quality Assurance (NCQA)o Health Plan Employer Data Information Set (HEDIS)

American Accreditation Healthcare Commission (URAC) Joint Commission of Accreditation of healthcare organizations

(JCAHO)

Reading 1B: Basic Concepts of Benefits, Coverage, and Insurance

Statistic – 1988 Traditional indemnity 71% of the market share of Employer Sponsored group Health Plans1996 – 74% were managed care and 26% were indemnity plans

Traditional Indemnity Coverage or Fee-for-service- Payment system

Indemnify means to protect from /provide compensation for loss or damage. This reimburses the insured for amounts paid to cover medical expenses

Employer is Policy Holder Pays premiums can collect part/full from employees

Insured visits doctor receives treatment submits a claim to insurer insurer pays benefit to insured or healthcare provider

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Basic Concepts 1. Risk2. Loss rate – number of times a loss occurs in a group3. Underwriting / Selection of risks – Process of identifying and classifying the potential

degree or risk represented by an insurance applicant4. Anti-selection – Tendency of higher than average risk people to apply for insurance

than below average or average risk people5. Individual insurance evaluation is VERY different from group evaluation

a. Need to provide evidence of insurability in individual insurancei. Activities, health history etc

b. Group – check if the group meets the underwriting requirements6. Group

a. Key question – Can you predict the Loss rate to a great extent?b. Can you avoid Anti selectionc. Prove ‘evidence of Insurability’ if he is a late entrantd. Prove evidence of insurability in case of small groups

7. Characteristics of a group checked includea. Group Sizeb. Groups Composition

i. Steady flow in and out of membersii. Age level of the groupiii. Gender – females are more susceptible than men

c. Level of participationi. Need a 75% or higher to allow otherwise anti-selection danger

d. Level of Benefitsi. Not usually allowed to select benefitsii. But now Cafeteria plans are allowed

e. Occupational Hazardf. Geographic Location

Features of traditional indemnity Plans Deductibles and Coinsurance

o The Coinsurance is calculated on the balance amount after deductible Preexisting Conditions

o Condition for which insured received medical care 3 months prior to coverageo Groups policies say that a condition is NO longer preexisting if

The insured has not received treatment within the last three months for that condition

The insured has been covered under that plan for the last 12 months HIPAA limits this significantly

Initial Efforts to Control and Manage Care

Cost Sharingo Coinsurance, Deductibles and Co-paymentso Higher risk for insured if he increased these 3– but lower premiums

Changing Plan Design/Coverage Optionso Use of Coordination of Benefits

Consider one plan as primary, other as secondary Primary Pays the full benefit amount up to the limit Secondary pays the difference between the amount of expenses and

amount paid by the primary Normally Insured can get COMPLETE REIMBURSEMENT of all expenses

– including out of Pocket expenses

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Now a new Non Duplication of benefits Provision in the secondary payers plan will limit the amount paid by the secondary payer to the difference between the Primary payer paid amount and the amount the secondary payer would have paid if it was the Primary Plan

Implementing Cost Containment Programso Outpatient careo Preadmission testingo Outpatient Surgeryo Utilization review and case managemento 2nd Surgical Opinion

But carries a high cost of second opinion Redundant if you have a good utilization review program

Preventive Care and Wellness Programso Higher coverage on preventive care – checkups, immunizations ,hypertension

screenings , mammograms etco Wellness programs – nutritional counseling , fitness and exercise programs

Managed Care still emerged despite the best efforts of the indemnity insurers

There had to be a logical link created between the financing and delivery! – Managed provided this link

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2. Basic Concepts of Managed Healthcare

Reading 2A: Managed Care - Benefits and Networks Define primary care and describe its role in a managed care plan Define copayment Define network and explain its importance in a managed care plan Describe how managed care plans influence and affect availability of healthcareReading 2B: Financing Managed Care Discuss how managed care plans combine the financing and delivery aspects of

healthcare Define capitation Explain how capitation differs from fee-for-service compensation Identify and describe various financing arrangements between managed care plans and

physicians and hospitals

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Reading 2A: Managed Care - Benefits and Networks

Managed Care and MCOs

Managed Care encompasses more than just cost containment techniques.MCO – Entity that utilizes certain concepts or techniques to manage the accessibility, cost and quality of healthcare.

Difficult to define it very clearly – The following can be described as MCO’s

1. Indemnity Plans with Managed care Components2. PPOs3. HMOs4. POS5. Physician Hospital Organizations6. Physicians Groups7. Physician Practice Management Companies8. Utilization review organizations

Please note that increasing changes in laws and regulations, Mergers and Acquisitions has resulted in the differences between these plans to come down rapidly.

Key Players

1. Providers – Physicians, Nurses, Hospitals, Labs2. Payers – Employers, Federal Agencies, Insurance Firms3. Purchasers – Pay the premium for the healthcare plan4. Members – Enrollees or Customers

Benefits Provide a comprehensive set of Benefits – More than Indemnity These include Physician Services, Hospitalization, Well Child Care, Prenatal Care,

Periodic Health examinations, Eye and Ear Exams, Immunizations, Home Nursing, Emergency Care, Diagnostic services, Outpatient Services, Inpatient and Short Term Rehab services, Physical, occupational and Speech Therapy

A lot of these things were not covered by indemnity – but managed care has found them to be cost effective in the long term.

Some of these services are offered using a small Co-payment. Other Services Provided by MCO’s

i. Ancillary Services – Lab, pharmacy, radiology, physical therapy, medical supplies

ii. Primary care – Care without referral from another iii. Specialty care – secondary care – care delivered by specialists –

outpatient / in patient services provided by acute hospitals

Managed Care have LOWER out of pocket spending than the Traditional Indemnity Plans

They place GREATER emphasis on Preventive Medicine to improve efficiency There are nearly a 1000 MANDATED benefits required by law Legislation is now done by both State and Federal Law

Organized System of Care

‘Network’

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Groups of Physicians, Hospitals and other medical care providers that a specific manage care plan has contracted to deliver medical services to members

Better benefits from choosing in-network providers Contract also provider the utilization and quality assurance There is a SHARED financial Risk now! Location and availability of network providers

o Number of Physicians/hospitals neededo Geographical location of memberso Combination Services – Ancillary and Secondary Care in the same area

Primary Care This is general medical care that is provided without referral from another physician Primarily focused on preventive care and the treatment of routine injuries/illness Contact Point Primary Care Physician - Gatekeeper

o First contact with the healthcare system o Could be GP, Internist, Pediatrician, OB/GYN, Nurse, Physicians Assistanto Also called Personal Care Physician, Personal Care Provider o Manages authorization of all non emergency medical procedures and referrals

to specialists o Follow up on caseso Tries to refer people to specialists in the network itselfo Some Plans allow two PCP’s – women can select an OB/GYN and a normal

practitionero Shift from a Gatekeeper role to ‘Coordinator of Care’ role

Provider Choice Consumers are feeling that their freedom is restricted New products which offer lesser restrictions are being introduced Lots of consumers resisted change initially because of restricted provider choice But the cost differential started pulling consumers towards Managed Care Can control costs by

o Giving Member the Incentive to select doctors in their networko Negotiating favorable rates with these providers

Enhancing Accessibility via the network

There are many ways in which the MCOs can enhance the access to healthcare1. Premium and Cost Sharing Arrangements

a. There are lower out of pockets as compared to Indemnity plans – making the access easier

2. Emphasis on Primary Care, Prevention and Wellnessa. These are little or no out of pocket expensesb. Premium discounts to employees with Wellness Programsc. Greatest incentives to the customers are given if they visit the PCPd. Till now people who did not have access to the PCP tried to go to emergency

rooms to get treated for things which could more cost effectively be done in a primary care setting

Utilization and Quality Management

Utilization Management is a mechanism that involves managing the use of medical services such that the patient receives necessary, appropriate, high quality care in a cost effective manner UM consists of the following basic techniques

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Demand Managemento Strategies designed to reduce the overall demand for services by providing

information to the users Utilization Review

o Evaluation of the medical necessity, efficiency and appropriateness of healthcare services

Case Managemento System of identifying members with specific healthcare needs and

developing a strategy to meet these needs and coordinating and monitoring the delivery of these services

Disease Managemento This is a coordinated method of preventive, diagnostic and therapeutic

measures that focuses on management of specific Chronic illnesses or medical conditions

Quality ManagementOrganization wide process of measuring and improving the quality of healthcare provided. The features of this process include

Quality Assurance program oversight and integrity - Senior Executive Credentialing Members rights and complaints resolution process Monitoring Physician practice

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Reading 2B: Financing Managed Care

Old System – The provider would be rewarded for excessive usage of his service. How does managed care address this issue?

Sharing of RiskFinancial risk – The actual cost of a plan member’s care is diff from projected costThis no longer only rests with the healthcare plan alone – shared by employers/members/payers also

In Fee for Service the cost of medical care is shared by1. Employer – Pays premium

Employee – pays premium/deductibles and coinsurance2. Healthcare Payer 3. Provider – Assumes little or no risk

The two ends of the spectrum – Fee for Service <----------------- CapitationCapitationMethod of paying healthcare services based on the number of patients who are covered for the specific services over a specified period of time – Simple terms – Per Person Per Capita.

How does it work? Critical Metric – The Per person per Month payment Same amount paid irrespective of amount of service The Provider has assumed a lot of the financial risk Highly used in the reimbursement of PCP’s

Capitation increases1. Focus on prevent2. Treatment of illnesses promptly3. Improve the status of health

a. Health screeningsb. Immunizationsc. Follow up care

Making Capitation PaymentsPayments made to

Individual PCP’s Specialty Physicians Group of PCPs Multi Specialty groups of physicians Hospitals and other Providers

Larger the population, more stable is the utilization rates of that population – more reliable estimation of the revenues to cover the costs.

Typical arrangements include1. Global Capitation – Total Capitation. This is a payment that covers virtually all of

the members inpatient and outpatient expenses including physicians, hospitals, specialists and some ancillary services

2. Partial Capitation – A system that may include primary care only (and maybe secondary care ) but no ancillary services

3. Carve out – A medical service that is removed from the scope of service covered by capitation payment and is reimbursed as a separate payment

PMPM payments are influenced by

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1. Age2. Sex3. Number of members4. Usage

Capitation for physicians Need to identify the services to be included in the capitation payment Typically Preventive Services, Outpatient care and hospital visits. Other services may be immunizations, diagnostics testing and some surgical

procedures. There is a written contract on what is included between provider and MCO 1999 – 76% of all HMO plans used capitation as payment for physicians

Capitation for Hospitals Clearly define the scope Enforce the utilization standards – through financial benefits More difficult to manage if the out of network option exists

o Need a DUAL compensation mechanismo Reduces the ‘in-network’ Capitation amount to pay for the out of network

usage. Solution – Recalculate the capitation based on % of member hospital admissions

that month Hospitals which purchase global capitation makes a provision for stop-loss

insurance to transfer risk to a third party

Other Financing ArrangementsThese form part of the spectrum between Fee-For-Service and Capitation

Discounted Fee-For-Serviceo MCO’s seek a discount from the physician’s normal feeso Pay amt BELOW the usual, customary and reasonable Fee (UCR)o UCR Fee was the fee charged by the old indemnity insurance firmso UCR fees are determined bu collecting data on charges for specific conditions

based on the Current Procedural Terminology Codeo CPT was started by the American Medical Association

It’s a 5 digit code which identifies the procedures performed by providers

Fee Scheduleo Also called Fee Allowance , fee maximum or capped feeo MCO determines what it thinks is an acceptable fee for a serviceo Similar to discounted fee-for-serviceo This transfers financial risk from the MCO to the providero The MCO is NOT allowed to bill the “balance bill” - ie the amount above

the max limit to the member Resource-based Relative Value Scales

o Relative Value Scales (RVS) or relative value of serviceso Assigns a weighted average value to each medical procedure or service as

defined by the CPT codeo To determine the amount the MCO must pay to the physician, this is

multiplied by a money multipliero These multipliers are negotiated between the plan and providerso BIG PROBLEM with straight RVS system – Incentive mechanism

Surgery is given more weightage than cognitive services Disincentive to restrict services provided

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o Resource Based Relative Value Scale – This attempts to take into account all the resources that physicians use in providing care to the patients, including physical, procedural, educational, mental and financial

Diagnosis Related Groupso Medicare tried to control costs by implementing a Prospective Payment

System (PPS) for medicare reimbursement hospitalso In the context of medicare, a PPS refers to a system of reimbursement based

on Diagnosis Related Groups (DRG’s)o DRG classifies hundreds of hospital services based on number of criteria like

Primary and secondary diagnosis , Surgical procedures, Age, Gender and Presence of Complications

o The provider is paid a fixed amount based for each DRGo Payment is made on the average expected usage of hospital resources in a

given geographical areao Medicare PPS – saved costs Providers receive a fixed compensation PER

HOSPITALIZATION, regardless of cost/length of stay.o MCO’s have started using this route for reimbursing hospitals

Salaryo Pay salaries to physicianso Based on average earnings and also have performance bonuses and incentive

paymentso Some level of risk sharing

Per Diemso Pay a specific negotiated rate per inpatient Dayo Differs based on serviceo Variation includes a higher per diem charge for the first inpatient dayo There is a ‘Sliding scale’ of reimbursement with the discount increasing

with patient volumeo Works best in hospitals where the utilization patterns are predictable

Other Provisionso Use of Withhold

This is a percentage of the provider’s payment that is held back during a plan year. This is used to offset or pay for any cost overruns for referral or hospital services. The rest of the money is then returned

These are most commonly used for capitation and Fee-Schedule reimbursements

These values range between 5% and 20%o Risk pools for specific services

These could include referral (specialty care), hospital and institutional care and ancillary services

MCO pays Capitation amount to each PCP Additional PMPM into a referral pool PMPM into a hospital pool and PMPM into an ancillary pool

Once these expenses are made, any excess funds are paid to physicians who participate in the pool

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3. Managed Care Organizations, Plans, and Products

Reading 3A: The Health Maintenance Organization (HMO) Identify and describe the general characteristics of HMOsReading 3B: Types of HMO Models Differentiate between a closed-panel HMO and an open-panel HMO Distinguish among the various HMO models in terms of provider relationships and

compensation arrangementsReading 3C: PPOs, POSs, and Managed Indemnity Describe a preferred provider organization and explain how it differs from other types of

managed care plans List and describe two characteristics common to most POS products Describe one major difference between an EPO and a PPO

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Reading 3A: The Health Maintenance Organization (HMO)

Health Maintenance Organization is a healthcare system that assumes or shares both the financial risks and the delivery risks associated with providing the medical services to a voluntarily enrolled population in a certain area in return for a fixed fee

These are also referred to as Prepaid Group Practices Most states require them to be classified as a corporation. Need to comply with regulations in ALL the states they operate. May be for-profit or not-for-profit type of corporations

BackgroundPopular in the 1970’s because of federal legislations the HMO act of 1973 removed some barriersThis act allowed them to be Federally Certified and pre-empt state laws in some cases

To be federally qualified the HMO could noto Exclude preexisting conditions o Offer the following services

Healthcare delivery in a certain geographic area Basic and Supplemental healthcare services Voluntary membership for the enrolled population

Needed to offer mandatory Dual Choice Provisions (both indemnity and Managed Care options)

This federal route provided market access to national employers 1995 – federal law Eliminated the dual choice option The grants have now died out and dual choice has been eliminated – lesser

incentives to form a federally qualified HMO This is still important for Medicare and large employer contracts HMO’s are heavily regulated to ensure solvency and member access to quality

medical care The License they get in each state is called ‘Certificate of Authority’ Try and assure quality by accrediting to national agencies

Benefits

Membership Member = Subscriber + dependent Most of the enrollment is through group plans

o Contracting relationship is with the HMO and Employer HMO offers an employer an OPEN ENROLLMENT PERIOD (usually 30 days) during

which all the employees are to be given automatic admission Federally qualified HMO’s and some state qualified HMO’s must accept the risk for

pre-existing Conditions Individuals are directly contacting the HMO and picking up insurance also Financing could be national but the delivery of healthcare primarily local. Important criteria used for selecting and evaluating HMO’s

o Access , Current cost/premium, Satisfaction, Financial strength, Reputation, Ease of doing business, Outcome of care, Wellness/Prevention Focus, NCQA accreditation, physician turnover

Their market reach stretches right across employees ,dependents ,individuals ,small groups ,large groups, medicare / Medicaid.

Comprehensive Care

There is a base standard set of benefits given by law

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Offer extensive preventive care programso Prenatal Care, well baby care, routine examinations, 24 helplines, childhood

immunizations are exampleso Wellness programs and health programs

Comprehensive benefits – Comprehensive care and cost effective and timely

Networks

Negotiated Contracts with providers Form its network of facilities and physicians Need to consider

o Accesso Credentialing – what to verify, when to consider recredentialing and peer

reviewso Contract relationships

Employ or buy services? Compensation mechanisms

Physicians

This could be through direct contract or through independent contract Need to contract with sufficient NUMBER and TYPE of physicians Based on

o Size, location, network adequacy, medical needs of members, employer or purchaser requirements, provider education, board certification and work history

Need to verify his credentials This is required to – maintain clinical competence, professional Conduct and

practice management Need to select a PCP from the network

o Usually a internal medicine/family practitioner for adults and pediatrician for children

o Some HMO allow specific conditions like obstetricians to go out of the network

o Also using nurses for PCP function

HospitalsSame issues of access/credentialing/contract engagements are consideredAccreditation by the joint committee on healthcare organizations

Ancillary ServicesThese are auxiliary or supplemental services usually used to support diagnosis and treatment of a patient’s condition and include stuff like

Labs Radiology Other diagnostic services Home health services /nursing home centers Physical Therapy Occupational Therapy Pharmacies Surgery Centers

Financing

Prepaid Care Fixed monthly premium paid in advance of delivery of managed care This generally covers most healthcare services

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HMO’s USUALLY don’t impose coinsurance or deductible requirements They will require some level of copayment

Negotiated Provider Compensation1. Fees or discounted Fee schedules2. Relative Value Scales3. Capitation4. Salary5. Per Diem6. Diagnosis Related Groups

Physicians Typical arrangements include salary, capitation, and FFS compensation Capitation is used for PCP’s The type of fee arrangements that an HMO uses distinguishes the various HMO

models Many HMO’s use the risk pool mechanism to facilitate risk sharing and utilization

mgmt

HospitalsHMO’s reimburse fees in many waysDepends on factors like

State laws Market Competition Hospital Ownership of HMO Level of Predictability of data Incentives like

o Service Bonuseso Quality bonuseso Risk Pools

Disincentiveso Exceeding utilization goals

Those providers under DRG’s of capitation may negotiate a stop-loss-provision in their HMO contracts

Costs beyond this point will be reimbursed by a different payment system like Discounted FFS

Ancillary Service Providers Range from discounted Fee for service to capitation Capitation helps share risk with the provider and manage costs In Return By accepting capitation, the ancillary provider gets a stable and large

income flow Capitation is good for discrete services like diagnostic testing But Capitation and discounted fees arrangements are used home healthcare or

hospice care

Utilization ManagementPhysicians

Managed through risk pools, capitation and physician Practice guideline Referral management, copayments for office visits and options like nurse advice lines

and subacute clinic for emergency careHospitals

In-patient utilization review, convurrent and retrospective review of admissions, precertification for inpatient hospitalization, discharge planning and case management

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COMPLIANCEo All medicare/mediclaim beneficiaries should comply with utilization

management requirements set forth by HCFAo Other requirements may come from accreditation agencies and state laws

Quality Management Credentialing / recredentialing and peer review for PCP /Specialists/ Accreditation

standards for hospitals and ancillary services providers nad overall plan accreditation standards

Compliance with HCFA is essential for medicare and Medicaid Employers review a HMO’s accreditation status in its health plan employer data and

information set (HEDIS) measures to evaluate plan quality

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Reading 3B: Types of HMO Models

Closes Panel and Open Panel HMO’sClosed Panel HMO – Physicians are either HMO employees or belong to a group of physicians that contract with the HMO. This panel is ‘closed’ to other physicians

Closed Access – Plan members are not allowed to obtain medical services from out of the network but only thru PCP.

Open Panel HMO – Any physician who meets the HMO’s standards of care may be eligible to contract with the HMO as a provider. These guys operate from their own offices and see others patients are well as HMO members. This panel is ‘open’ to any physician who is selected by the HMO.

Open Access – Plan members may self refer themselves to a specialist either in or out of the network at full/reduced benefit.

Key differencesClosed Panel HMO’s Open Panel HMO’sProviders are HMO employees/ contracted to the HMO

Providers are independent and may be selected to join the HMO if they meet the criteria

Providers operate out of HMO facilities or group practice facilities

Providers operate out of their own offices

Providers generally see only HMO members

See both HMO and non HMO members

Select PCP from HMO n/w Select a PCP from HMO n/wNeed PCP referral because the services are only covered if the specialists are in the network

Members in a few cases may self refer to specialists inside or outside the n/w without going thru PCP

HMO Models IPA Model Staff Model Group Model Network Model

Distinguished by Contractual relationship, provider reimbursement

Early HMO’s were Staff or group model HMO’sCurrent trend is towards a mixed model HMO – combination of characteristics of > 1 HMO.For e.g. to provider geographic coverage to a multi state employer, an IPA model HMO in one state may contract with a network model HMO in another state.Or a staff model HMO may have separate contracts with specialty group

Independent Practice Association Most comment HMO model today Contract is with one or more physicians in independent practice who agree to provide

medical services to plan members IPA is a separate legal entity established to give member physicians a negotiating

vehicle for contracting purposes Physicians who meet IPA criteria for participating providers may be selected to

contract with the IPA which in turn contracts with the HMO

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They offer contracts with several parties – Individual PCP’s, Specialists, Multi-Specialty Groups ( group of physicians with two or more different specialties)

Variation is the IPA model is a direct contract model HMO – this is also called direct model HMO

o The HMO contracts directly with the individual physicians who provider the medical services to the HMO members

o There is no IPA or legal entity representing the doctorsStructure

This may be a closed panel or Open panel plan Closed Panel IPA model HMO

o A HMO and Community physicians establish an IPA and recruit other physicians

o Because the HMO helped establish the IPA, the contract between the IPA and the HMO is usually an exclusive contract

o Sometimes a hospital helps establish the IPA, which contracts with the HMO to provider clinical services

o Community based Hospital based IPA is usually a closed panel IPA as members must be affiliated with a specific HMO/Hospital to be members

Contract o Nature of physician-patient relationshipo Duties and responsibilities to be assumed by physicians, the IPA and HMOo Open-panel IPA – physicians in the service area independently establish the

IPA They are free to contract on a non exclusive basis An Open-Panel HMO may close its provider panel when it finds that

adequate people are on boardo Direct Contract model HMO – recruits a wide range of skillsets

Physicians may contract with other MCO’s if they wish This is an open panel HMO because all physicians who are qualify the

criteria can joinCompensation

Usually based on fee-for-service (FFS) or through capitation IPA then compensates the member physicians Many IPAs use capitation with PCP’s and discounted FFS basis / resource based

relative value scale for specialists Capitation forms a SIGNIFICANT component of the funds inflow to a IPA Use withholds and risk pools to share incentives Direct Contract Model – Compensate PCP’s through Capitation and specialists

through discounted FFS HMO assumes MOST of the risk associated with providing medical services to plan

members

Features and Comparisons They appeals to both HMO’s and their members by providing a wide range of

physician services Have access to medical care at individual physicians offices located throughout the

HMO’s provider network The combination of choice and private physician practice has given the open panel

IPA HMO models a competitive edge over staff and group model HMO’s An IPA’s participating physicians operate out of their own offices so that the HMO

does not have to incur the expenses associated with buying or building offices Capitation payments & withholds for PCPs and discounted FFS payment for

specialists offer the IPA model HMO and the IPA cost control opportunity Open panel – can have multi HMO contacts increasing access

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However cost control might be an issue – difficult to achieve economies of scale with independent offices

Difficult to achieve consistency in quality and utilization management Under the direct control model – HMO’s have to recruitment physicians directly

Utilization management and quality management are other administrative responsibilities of a direct contract model HMO

Staff Model HMO This is a closed panel Plan – Physicians are employees of the HMO Contractual arrangements are exclusive and they need to become employees HMO needs to employ enough specialists and PCP’s to meet its members needs

Structure Most physicians practice in ambulatory care facilities Definition: An Ambulatory care facility/medical clinic / medical center is a care center

that provides a wide range of healthcare services including1. Preventive care2. Acute Care3. Surgery4. Outpatient care in a centralized facility

A one stop shop – Access to physicians and non physician services Contract with hospitals and pharmacies to provide non physician services

Compensation Distinguishing factor is Reimbursement – Compensation is primarily Salary Now begin to offer financial incentives like withholds and bonuses These are usually tied to medical expenses and other controllable costs The risk here PRIMARILY is with the HMO There are very few FFS patients seen in this model

Features and Comparisons The HMO can achieve economies of scale, manage utilization better and provide

consistent quality and evaluation of performance Convenience and local access to all facilities in one place is a big draw More time Consuming to establish and maintain – huge capital costs Not very fast moving owing to capital costs required to make changes Limited provider choice (for members) and limited access (for providers)

Group Model HMO (Group practice HMO) Contracts with a multi specialty group of physicians - Employees of a group practice Group Practice – Corporation/Partnership/professional association/ legal entity Share office space / Support staff/medical records and medical equipment Consists of both PCP’s and specialists Sub contract non supported services to other doctorsStructurePhysicians are employees of the group practice in which they (may) have an equity interest

Captive group model Physicians sign management services agreement with the HMO and the practice

primarily focuses on the HMOs members This is usually exclusive making it a closed Panel HMO takes care of the management services/admin part HMO may also own the facilities or equipment used by group practice

Independent Group Model Established group practice – usually a multi specialty group – contracts with the

HMO

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The physicians may own or sponsor an HMO but may also contract with other HMOs

Open Panel Plans

Compensation Negotiated Capitation Rate to the group practice Group practice determines the physician salaries and incentives Could include financial incentives for utilization management Group practice bears the risk of providing medical care

Features and Comparisons This has lower startup costs vis-à-vis a staff model No need to provider a facility/ No fixed expenses on physician’s salary Limited by geographic location of the group practice Differing quality between facilities unlike staff models with the ACFs Access may be limited by the closed-panel nature of captive group model

Network Model HMOs Contract with one or more group practice of physicians / specialty groups Extension of a group model Wide range of services Can be either an Open or Closed Panel

Compensation Capitation Basis Physician groups bear most of the risk Group practice compensates specialists who the PCP’s refer the members to Share profits when utilization is lower and can see non-HMO members

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Features and ComparisonsMembers have access to a broad range of services (particularly open panel ones)

HMO ModelPhysician Location

OpenClosed Panel

Physician Relationship

Physician Reimbursement

Advantages to HMOs

Disadvantages

IPA ModelSeparate physician offices

BothPCPs and specialists are both independent

PCPs: Capitation and Discounted FFSSpecialists: Discounted FFS

Provider Choice and lower startup costs

Limited Utilization and quality control No economies of scale

Staff ACFs Closed

PCP’s : Employees and Specialists: employees or independent

PCPs: salariesSpecialists: discounted FFS

Utilization, Quality control, Economies of scale

Provider restrictionsCapital Intensive

GroupSeparate Group Practice

Both

PCPs and specialists are both independent

Group Practice: CapitationPCPs: Salaries and Incentives Specialists: varied

Lower startup costs, utilization and Quality Control

Provider restrictionsPotentially limited geographic access

NetworkSeparate Group Practice

BothPCPs and specialists are both independent

Group Practice: CapitationPCPs: Salaries and incentives Specialists: varied

Broader range of services and multiple locations

Varied utilization and quality control

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Reading 3C: PPOs, POSs, and Managed Indemnity

Preferred Provider OrganizationsHealthcare benefit arrangement designed to support services at a discounted cost by providing incentives for members to use designated healthcare providers (who contract with the PPO at a discount), but which also allows the member to avail of services out of the network.Financial incentives for in-network usage include lower copayments/coinsurance and maximum limit on out-of-pocket cost for in-network usage

Most PPOs Arrangement between a panel of providers and purchasers Preferred providers agree to specified fee schedules in return for preferred status and

have to comply with Quality and Utilization Management targets PPO sponsors vary Physician Groups/ Hospitals/BCBS plans/ TPA’s/

employers/HMO/Independent investors/Joint Ventures However 50% plus of all PPO plans are owned by insurance firms MOST don’t bear any financial risk PPO may be a decentralized n/w of preferred providers which are established by

employers or it could be leased from some other organization Or it could be administratively centralized, with not only a PP n/w but also the

capability to manage administrative functions and assume some financial risk

Benefits Wide range of services including specialty services

o Managed Pharmacy, Psychiatric Mental Health, Chiropractic Care, Podiatry, Case Management , wellness, vision care, dental care, workers compensation, dental care, long term care

Networks Contract with PCPs, specialists/diagnostic facilities/hospitals/ancillary services On average the 1079 PPO’s contracted with 8421 physicians Less restrictive on the out of network usage Can Visit specialist without a referral

Financing Most PPO arrangements did not have providers sharing financial risk They were paid on a FFS basis and passed on risk similar to a traditional indemnity

plan Some have started including this into their contracts PRIMARY FUNCTION: Negotiate contracts between the providers and the

organizations that buy the coverage Most Common compensation:

o Physicians: Fee Schedule or Capped Fee method 82% of all physicians were paid this way

o Hospitals 52% were paid on Per Diem 31% on discounted Charges

Incentive to join PPO? Increased Patient Volume

Utilization Management In house review of utilization BLEND HAPPENING WITH HMOS

o Utilization Management being adopted by PPOo Selection of PCP in PPO too

Quality Management High percentage routinely recredentialed their network physicians

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Also Physician Peer Review

Other Types of Managed Care

Specialty PPOsThese work only in defined areas – physical therapy, dental care, pharma, lab services, chiropractor service, behavioral healthcare

Exclusive Provider Organizations Similar in structure and administration to a PPO Out-of-network care is not generally covered making it like a HMO These are developed by PPO corporations to compete with HMOs LEGAL ISSUE They are regulated by state laws and NOT by state and federal laws

as is true for HMOs Some states have begun to treat EPOs like HMOs

Point of Service ProductsFastest growing productThis is a hybrid product which combines the traditional group insurance with HMOs and PPOs

Point of Service product allows the members to choose at the point of service on whether to go within the plans network or to seek medical care out of the network. This offers a greater amount of coverage within the network and requires members to pay deductibles and coinsurance for coverage out of the network

This combines HMO features and out of network coverage with economic incentives ( like copayment instead of coinsurance)

HMO’s generally offer POS options Out-of-network usage is generally a per person cap and the usage is insured as a fee-

for-service-coverage Most common characteristics

o Freedom of choice – customize healthcareo Cost cutting effort and structure of coverageo PCP is used for medical services and for referrals within the n/w

Capitation is used to compensate the physician These are very popular with employers as they act like a bridge between traditional

indemnity plans and the MCO’s DRAWBACK

o Costlier to administer as compared to traditional group health plan

Managed Indemnity Plans These include managed care overlays like precertification and utilization review Managed care devices are primarily to control costs

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4. Managed Healthcare for Specialty Services

Reading 4A: Managed Healthcare for Specialty Services Explain how an MCO might carve out the delivery of specialty services Define specialty HMOs Describe three types of managed dental plan Describe the four basic strategies that managed behavioral health organizations

(MBHOs) use to manage the delivery of behavioral healthcare services List four activities that a typical pharmacy benefit management (PBM) plan uses to

manage pharmaceutical utilization

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Reading 4A: Managed Healthcare for Specialty ServicesThese are services that are generally considered outside the standard medical-surgical services. They involve different types of providers and delivery systems than do standard medical servicesExamples include

Prescription Drugs , Mental health/substance abuse , Dental, Vision ,Long term Care, Workers Compensation , Chiropractic care, rehab services, home healthcare, cardiac surgery, Oncology, Care for Patient with Chronic diseases, diagnostic services like radiology

Two options for employers and health plans wrt Specialty Services Develop and Maintain their own programs Carve out the delivery and management of these services

Carve out refers to the separation of a medical service(or group of services) from the basic set of benefits in some way

These may be through a different compensation mechanism OR Use of a separate network or delivery system E.g. AIDS services may be carved Freq used services: Dental , Behavioral healthcare and Pharma

Carve Outs EmergeEconomies of scale for certain specialtiesKey Characteristics

1. An easily defined benefit2. Defined Patient Population3. High or rising costs4. Inappropriate utilization Comprehensive Carve-out - Manages all the details including network management /

quality / utilization / case management / claims administration Partial Carve-Out – MCO retains the management of the selected activities Comprehensive Carve-out: Compensation is usually on a CAPITATION BASIS Partial Carve-out: On a FFS or Fee-plus percentage of savings basis Legal Challenges – Some state require HMO’s to retain these services

Some States have provisions for Specialty HMO’s

Dental Care Increasing willingness of Dentists to negotiate with HMOs Increased admin/overhead costs/oversupply of dentists have moved dentists to this

plan Managed care products are cheaper than indemnity products Three types of plans are

o Dental HMOs, Dental PPO’s and Dental POS

Dental HMOs Started in 1950s with the preventive care benefits realized This is an organization which provides dental benefits to its members in exchange for

some form of prepayment No benefits for out of network services This is regulated at state level Has around 18% of the dental insurance market share

Dental PPOs 31% market share in 1999 Provide through network of dentists who offer discounted feeds Visited out of network you get less benefits

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Most compensated on a Discounted FFS basis

Dental POS Option This is generally offered in conjunction with a DHMO The consumer chooses at the time of appointment where they want to go

Behavioral Healthcare

Deals with mental health and chemical dependencyThis has grown in prominence in the last few decades, the cost of delivery has sharply increased. Management strategies to tackle this failed.

Initially they looked to cost sharing as a mechanism to manage costs and also had benefit limits.

Then looked to limitation on services covered – for certain illnesses, certain services or certain patient groups

Tried to limit the ACCESS to services – through triage systems and waiting lists based on priority

Managed Behavioral healthcare organizations emerged in the 1980s 1997 – 149million people were enrolled

o Specialized knowledgeo Better outcomes and proper diagnosis and treatmento Techniques used to manage care include

Alternative treatment levels Offered benefit packages that included full coverage Developed clinically reasonable care

o Acute care – continuous intensive monitoringo Post acute care – continuous monitoring in a structured

environ but < Acute Careo Partial Hospitalization o Intensive outpatient care – extensive therapyo Outpatient Care

Alternative treatment settings Acute is in psychiatric hospitals etc , for high risk patient Post Acute – in Skilled Nursing homes Partial Hospitalization in rehab centers or halfway homes

Alternative treatment methods Drug therapy, psychotherapy and counseling Licenses Clinical Social workers (LSCWs) and Marriage, family or

child counselors (MFCCs) Crisis intervention

Directing Patients to appropriate Care Mechanisms to direct individuals to the most appropriate care PPOs and Open access plans – Directly access healthcare services Most other plans – PCP’s or other gatekeepers Need authorization of payment of services before seeing a specialist (278) Assessment could be through a PCP, centralized referral or employee assistance

programs PCPs as gatekeepers

o Focal point for all healthcare needo But PCP’s lack the experience necessary to diagnose and treat these

problems.o Provide educational programs – Clinical Practice Guidelines

Centralized Referral Systems

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o Telephone or in-person referralo This can provide faster access to behavioral healthcare than a PCPo More accurate diagnosis and effective treatmento Not grassroot linked like PCP – disruption in care

Employee Assistance Programso This the first point of contact for this kind of careo Can help trap the problem earlyo Lack of expertise is a problem

Next Generation Started significantly using outpatient treatment Clinical practice guidelines New ideas development of an alternative treatment options, incorporation of

community based resources into healthcare and increased reliance on case management

LAW – Mental Health Parity Act 1996 – Treat the Mental or behavioral health benefits ON PAR with Physical Health services

Pharmacy Benefits Fastest growing market in the US Inappropriate usage of drugs is the reason for 25% of all Medicare admissions A Pharmacy/ Prescription Benefit Management Program

o 88.4% of all HMO’s contracted with PBMso These screen drug interactions by using integrated databases between the

MCO, provider and pharmacy networkServices Offered

Physician Profilingo Data on physician subscribing patterns and comparing these actual

prescribing patterns to expected patterns within a select drug categoryo Peer Comparison is

Drug utilization Reviewo Are the drugs being used safely/effectively/appropriatelyo Quality management – identify problems related to drug ordering ,

dispensing , administration and use of drugs Inappropriate dosage, overuse , underuse, length of time , duplication,

side effects and drug interactionso Monitor patient specific drug problems through prospective, concurrent and

retrospective review. Factors identified include Drug/disease conflict, Drug Control Interactions, Chronic over-

utilization , underutilization, drug/sex drug/age conflicts and drug/pregnancy contraindications

Formulary Managemento Formulary is a listing of drugs classified by therapeutic category or disease

class that are considered preferred therapy for a given managed care population and that are used in prescribed medications

o This is developed by an independent panel of physicians, pharmacistso They can be classified as open or closed

Open formulary – both preferred and other drugs are covered Closed Formulary – only drugs on the preferred list are covered

o These are key tools to get Rebates from the drug manufacturerso Key features of a good Formulary include

Cover all outpatient diseased / Promote Generics/ include all medically necessary drugs/ include the cheapest single source drugs/minimize

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expensive prescribing/ minimize medically unnecessary prescribing / improve overall cost effectiveness of therapy

Need good communication of the Formulary to physicians and to the pharmacists on the relative benefits of drugs etc

Two types of substitution Generic Substitution

o Dispensing of a generic equivalent Therapeutic Substitution

o Dispensing of a different chemical entity within the same drug class

Prior Authorization

o Medical necessity review – certification of medical necessity prior to the drug dispensing

Additional ServicesMail order pharmacy programs – lower cost deliveryNegotiate discounted rates for the same

Pharmaceutical cards – Issued to plan members. These cards must be presented to the pharmacist before receiving benefitsElectronic processing of claimsCard identifies to which plan the patient belongs

New copayment structure1. Two tier copayment structure

a. Lower copay for a generic and higher copay for branded drug2. Three tier Copayment structure

a. Pay one copay for a generic b. Higher for branded drug included in the planc. Highest for branded drug not included in the plan

PBM contractual arrangement Fee for service

a. Create a retail chain / offer discount on prescribed drugs / perform online claim adjudication.

b. Receives a claim administration fee Risk Sharing

a. Agree on a target cost per person per monthb. In case of exceeded/underun of cost PBM shares the losses /savings

Capitation Contractsa. Provide all the care for a fixed dollar amount per monthb. These are gaining popularityc. Not that popular as can’t project what the pharma requirement will be

Move towards mergers and integration with Pharma firms

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5. Provider OrganizationsReading 5A: Provider Organizations Explain what it means for providers to integrate Describe some of the advantages of provider integration Discuss some of the types and levels of provider integration Describe the general characteristics of several types of provider organizations

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Reading 5A: Provider OrganizationsWhy integration

Achieve economies of scale Strengthen their negotiating position wrt MCO’s and payers

Provider Integration

Two or more previously separate providers combine under common control/ownership/business operations

1. Structural integration – Coming under common ownership or control2. Operational Integration Consolidate previous separate operations

Structural IntegrationComplete Integration – Common Ownership AND control e.g Merger/Acquisition

Merger – two or more separate entities are legally joined. This could be to create a new corporation, in which case it’s called Consolidation

Acquisition – One organization buys the otherPartial Integration

Joint Venture / Not a separate legal entity Execute contracts and agree to act as one body in business transaction

Operational IntegrationBusiness Integration – Combine one or more separate business functionClinical Integration – Making a variety of services available from one entity Physician Only Model

1. IPA (least integrated)2. Group Practices without Walls GPWW/ Management Services Org (MSO)3. Physician Practice Management (PPM) company4. Consolidate Medical Group (MOST integrated)

Physician and Hospital Model1. PHO (least integrated)2. Integrated Delivery Systems (IDS) /Medical Foundation (Most integrated)

A high level of structural integration need not mean a high level of operational integration. But in reality usually both go together

Advantages1. Greater Operational efficiency and effectiveness2. Expertise Building – Helps in better planning/marketing3. Improve contracting position with MCOs4. Good for MCO’s as it improves quality and efficiency for their members

Disadvantages1. Loss of autonomy

Provider Integration Models

Independent Practice AssociationsMessenger Model - Simply just negotiate the agreement with MCO and then make its members directly contract. This model is used with FFS or discounted FFS

MCO Contracts with IPAThe IPA then separately contracts with the member physicians

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IPA can limit its risk when it uses Capitation as payment by buying a stop loss insurance protection. If they IPA pays claims more than a defined Maximum for the year, the insurance firm reimburses it

In case the IPA is seen to assume too much risk, then the regulators may classify it as an insurance company

Group Practice without Walls (Clinic without Walls) Legal entity that combines multiple independent physician practices under 1

umbrella and performs a certain business operation for them Can be owned by member physicians/hospital/ by a PPM

Physician Practice Management Organization/ Managed Services Org Owned by hospital / Investors that provides management and admin support to

physicians Relieve physicians of non medical business functions Either provide the functions for a fee or they make the Physicians lease the assets Specific MSO is the Physician Practice Management Company which

purchases the physicians practice assets. All assets – not only tangible ones Physicians could get some equity in this firm too Develop a network of either PCP’s or specialists

Consolidated Medical GroupsFull structural and operational integrationOperates in one or a few facilities and consolidates the operationsAdvantages

1. Lower costs2. Access to a large group of physicians3. Creates an ability to monitor and manage quality/utilization

Integration of Physicians and HospitalsPhysician Hospital Organizations – JV between hospital and physiciansPrimary purpose is contract negotiation with MCOsDo not merge operations apart from contracting and marketingReasonsBetter relations / Increased Collaboration / Shared Financial Risk / Contracting with MCOs / Employer Direct Contracting / Enhancing Quality

Community Contracts with this – Physician Hospital Community OrgTwo types

1. Open PHO Available to all the hospitals eligible medical staff2. Closed PHO Limits the number of specialists by type of specialty

a. Specialist PHO Only one type of specialtyCompensation – Discounted Fees and Capitation (PCPs) and DFSS (Specialists)

Integrated Delivery SystemOperationally integrated – maybe not structurallyEmployment model IDS – the IDS controls the different providersMedical Foundation

Not-for-profit Entity that purchases and manages physicians practices Need to provide significant benefit to the community Used to create an IDS in states where IDSs cannot be business corporations

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Provider Organizations that Bear Insurance Risk IDSs / IPA / PHO / CMGs/ choose to bear financial risk – called AT RISK They need to be able to have expertise in the core insurance functions like actuarial /

underwriting / claims / quality etc May need a HMO or insurance company license These entities can contract directly with employers or Medicare The BALANCED BUDGET ACT (1997) gives rights to organizations who meet basic

standards to contract directly with healthcareo These organizations are known as Provider Sponsored Organizations

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6. Health Systems Management

Reading 6A: Health Plan Structure and Management Describe the most important functions of a managed care organization’s board of

directors Identify a managed care organization’s key management positions and their functions Identify the common medical management committees and describe the committees’

general functionsReading 6B: Network Structure and Management Describe some of the factors commonly evaluated in a market analysis for network

management List the types of providers typically included in a MCO’s network List and explain some of the factors that influence the number of providers included in

an MCO’s network Define credentialing and explain why it is important List some common clauses and provisions in provider contracts

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Reading 6A: Health Plan Structure and Management

Structure of MCOsMost of them are Corporations - Can be party to a legal actionMCO’s may be under a taxable not-for-profit form, tax exempt not for profit and a for profit form

This will affect on taxes, effects on regulation, capital raising considerations

Traditionally – HMOs and BCBS – Not-for-profitBCBS – do not qualify for tax exemption

Adv and Disadv – Not for Profit Plus Tax exemption from federal / state property / state income taxes Minus

a. Adhere to numerous restrictions like Operate only for tax exempt purposes Provide only incidental benefits to private individuals Not engage in lobbying and political activities

b. Careful in transactions with taxable entities Not for profit have Limited ability to raise capital

Advantages and Diadv – For Profit MCOs Minus Pay taxes Plus Can raise capital

Components of organization and organizational structure Board of Directors

Review the activities and finances of the firm Minimum number of directors is specified by the organization charter and the

insurance regulations Inside and outside directors exist Not-for-profit firms have a restriction on number of inside directors Key Responsibilities

o Authorization of major financial transactions – M&A and capitalo Appointment, evaluation of senior management including CEOo Participating in Corporate Strategic Planningo Approval of Organizational operational policies/procedureso Oversight of the Quality Plano Fiduciary responsibility – Act in the best interests of organization

Key Management Positions CEO , Marketing Directors, Finance Director , Director of Operations ,CIO , Medical

Director (Utilization, Quality issues and Operational issues) ,Network Management Director

Corporate Compliance Director – a. Mandated by HIPAA to have a Chief Privacy Officer and Chief Security Officerb. Roles

i. Implement written standards and proceduresii. Assigning upper level personnel to oversee complianceiii. Communicate Standards to all employeesiv. Enforce standards through disciplinary measuresv. Establish and enforce confidentiality and security rules

CommitteesStanding Committee – Long term advisory on financial, compliance, quality management, Utilization Management, strategic planning and Compensation

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Ad Hoc Committee – Convened to address a specific issue

Some Common Committees include 1. Executive Committee – Organizational policy/ LOB / Employment Policy2. Strategic Planning Committee- Direct the MCO strategic direction/goals3. Compensation Committee4. Finance Committee5. Nominating Committee – nominations of company offices

Other Committees include1. Executive Quality Improvement Committee – Quality / Accreditation etc2. Quality management Committee – quality assessment/improvement activities

a. Identifies issues to be monitoredb. Evaluates the results of quality studies to identify opportunitiesc. Develop / Oversee / Monitor quality improvement action plansd. Oversee Accreditation efforts

3. Medical Advisory Committee – policies in clinical mgmt / contracts / compensation4. Credentialing Committee – policies /review /recredentialing5. Utilization Mgmt - review the UM program6. Pharmacy and Therapeutics Committee – Formulary and Regulatory reviews7. Peer Review Committee- review questionable /problematic healthcare services

delivery8. Appeals Review Committee – Medical management or coverage determination9. Corporate Compliance Committee

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Reading 6B: Network Structure and Management

Managing of provider networks is one of the Critical Tasks in the MCO process

Designing a Provider Network

Market Analysis1. Market Maturity – determine the level of managed care activity in a market

a. How receptive are consumers – less receptive would prefer PPO while more receptive would prefer HMOs

b. How much competition exists in the areac. How receptive are providers

2. Provider Communitya. Number of physicians and locationsb. Details on hospital beds/ pharmacies / other ancillary servicesc. Accessibility of providersd. Utilization patterns and average costs for specified services e. PCP’s and their linkages with other specialists – difficult to breakf. Associations within the existing community

3. Competitive Analysisa. Provider Panel Sizes / Premium Levels / cost Containment Strategiesb. Physicians to members ratio in existing network of competitorsc. Levels of provider satisfaction or dissatisfaction with other plans

4. Economic Conditionsa. Size of the employers in the market – large adopt MCO easierb. Growing economy Trigger growth in Young population and medical

community will come in / Vice Versa for declining economy5. Characteristic of the Service Area

a. Is this an urban/rural/suburban area? Rural areas have fewer hospitalsb. Urban areas have higher proportion of specialists and facilities – More choice

but also more cost/quality/satisfaction levels6. Population Characteristics

a. Age/Income/Ethnic background7. Health Plan Characteristics

a. Number & Types of products offered by MCO / geographic scope/market focus / particular population it serves

b. Use diff providers for diff plans (nested/customized/sub networks) 8. Current and Proposed Regulatory requirements

a. Laws address Network adequacy / Patient Access to medical services /Quality of care/ mandated benefits/ Providers right to contract

b. Adequacy – Extent to which a network offers the appropriate types and numbers of providers in the appropriate geographic distribution according to the needs of the plans members

9. Guidelines from Accrediting Agenciesa. These include NCQA / American Accreditation Healthcare Commissionb. Joint Commission on Accreditation of Healthcare Organizations JCAHO

HMO Act 1973Federally qualified HMO’s should 1. Provide geographic accessibility to primary care and most specialty providers with

‘reasonable promptness’ and ‘within generally accepted norms for meeting projected enrollment needs’

2. 24/7 access to emergency services3. Detailed description of service areas/provider locations

Federal Employee Health Benefits Program (FEHBP)

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Requires health plans offering services to federal employees and their dependents to provide1. Immediate access to emergency services2. Urgent Appointments within 24 hours3. Routine appointments once a month4. Average office waiting time of < 30 minutes

NAIC Managed Care Plan Network Adequacy Model ActAdopted in 1996, this act offers guidelines for states to use in measuring network adequacy. Includes Standards for

1. Provider Enrollee Ratios2. Geographic Accessibility3. Appointment Waiting Times4. Hours of Operation5. Volume of Technology/Specialty services available

Any Willing Provider Laws1. This requires health plans to allow provider who is willing to accept the terms and

conditions of the plan to contract with the plans network2. Can include economic criteria. This is regulated by state law and sometime applies

to only PPO’s and not to HMO’sMandated Benefits LawsRequire MCO’s to

1. Include specific benefits in the plans design – Hospice/ maternity/chiropractic2. Include Specified providers or provider classes (Behavioral)3. Access to specified provider classes w/o PCP approval (OB/GYN/Pediatric)

Determining the structure Composition and Size of network Network StructureCan operate as a closed panel (MCO facilities) / Open Panel (Own facilities)

Network Composition1. PCPs – General practitioners / family practitioners / internists / pediatricians /nurse

practitioners/physician assistants (last 2 under physician guidance)2. Specialists3. Hospitalists – PCPs don’t have time to follow up inpatient care / These physicians

coordinate diagnostic/ treatment services @ hospitals4. Healthcare Facilities5. Ancillary Service Providers – Diagnostic/therapeutic care/labs/radiology/ physical

therapy/pharma / home healthcare Network Size

1. Appropriate number of practitioners – This is based ona. Plan characteristics – more closely managed fewer providers

i. MCO requires less than PPO or POSii. Large plans have fewer providers per 1000 membersiii. Based also on geographical spread

b. Provider Accessi. Staffing ratio – number of providers to the number of enrolleesii. Drive time – Time to drive to PCP- 15 min urban / 30 min ruraliii. Geographical Availability – number of PCPs within a radiusiv. Population Characteristics – Demographic characteristicsv. Purchaser and Consumer preferences – Quality , Access and Cost

(check which is most imp) / Large PCP panelvi. Plan Goals – Cost – Quality Tradeoff / Subdivide the panels based on

quality/utilization and cost effectiveness and incentivise consumers

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2. Appropriate Number of Hospitals and Other Facilitiesa. Accessibility, Cost and use of resources, service capacity and types.

Reputation within service area, accreditation status , level of participation

Adding Providers to the Network

Recruiting ProvidersInformation sources include Hospitals already in the network / Provider Directories of Competitors / Local medical societies / Plan purchasers and members

Selecting ProvidersFirst stage is application form with standard questions – education / workex /affiliations etc

CredentialingInformation presented is reviewed and verified in order to determine

1. The current clinical competence of the provider and2. Fit into the pre-established criteria for participation

This Credentialing process is important1. Employers want to offer their members high quality providers2. Ensures certain aspect of their quality program3. Minimize the liability and other legal risks – have good historic record4. Accrediting bodies require it before the accredit the MCO

Who Performs Credentialing?1. Varies from plan to plan2. Some have Credentialing committees / departments3. Others assign to specific person4. External Entities called Credentialing Verification Organization5. Practitioners on committee for review/technical inputs/ peer’s perspective

How does the Process Work?1. When the provider submits the application + supporting documentation2. Review and verification of the documentation3. Check to see if additional documentation is required4. Onsite inspection of providers offices

What standards must be met?1. Have their own guidelines for credentialing2. Written guidelines which access the ability to deliver care

a. Licensure / Training / experience /Disclosure of any Health issues / Appropriate Documentation to be verified

3. Need a primary source verification – Process of validating the credentialing from the organization that originally conferred it

4. Selection is based on needs / qualifications / fair and equitable5. P-PC-7 Standard -American Accreditation Healthcare Commission/ URAC6. Review any adverse claims / malpractice suits / sanctions7. National Practitioner Data Bank - This is a database maintained by the federal

government that lists info on malpractice claims / disciplinary actiona. Maintained by the DHHS – Started in 1990b. Scrutiny of areas of practitioner licensure / membership / malpractice history/

record of clinical privilegesc. Meant to provide a support to the existing state credentialing/licensing boardsd. Types of Queries

i. Mandatory – need to query every two years on practitioner privilegesii. Voluntary – any other general queries

Recredentialing1. This is done every 2-3 years – for changes in licensure / sanctions / certifications/

competence / health status

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2. Incorporates quality management and utilization results3. NCQA data for recredentialing includes

a. CR 9.1 Member complaints , CR 9.2 Information from quality improvement activities , CR 9.3 Member satisfaction

Contracting

Common Provisions1. Use the provider manual as a reference in the contract

a. This document contains the providers rights and responsibilities2. Provisions for Provider Responsibilities

a. Provider Servicesb. Administrative Policies – Follow the MCOs policiesc. Credentialing and Re-Credentialingd. Participation in Utilization and Quality management programse. Maintenance and submission of medical records for all membersf. No Balance billing and Hold Harmless Provisions

i. Requires Provider to accept the amount the plan pays as payment in full and not bill plan members apart from (copy/coinsu/deductibles)

ii. Hold harmless – Forbids providers from seeking compensation from patients if payer fails to compensate providers cos of insolvency etc

3. Provisions for Payer Responsibilitiesa. Payment – how will he compensateb. Risk sharing and Incentive Programsc. Timely Payment – Max time period is specifiedd. Eligibility information – will provide 270 and 271 information to the provider

4. Termination Provisiona. Termination without cause – like 90 day periodb. Termination with cause – if one of the users did follow contract provisionsc. Cure provision (60-90 days) during which the breach an be rectifiedd. Extreme situations may require immediate termination of contracte. Due Process clause – contest/appeal the termination

5. Tone of Contracta. Influences the nature of the business relationship

Network Maintenance and Provider Services Orientation

1. Parameters of the MCO plan2. Training in UR / quality /authorization systems3. Written manual of policies and procedures4. Communication between MCO & network – updates/ bulletins / guidelines / claims

informationPeer ReviewEvaluation of performance by other providers

Provider ServicesPayer staff responsible for maintaining communications with providers

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7. Medical Management I

Reading 7A: Basics of Utilization Management Define medical management and identify its component parts Describe the strategies MCO’s can use to manage member demand for healthcare

services Identify the kinds of cases for which case management is typically used Define disease managementReading 7B: Utilization Review and Authorization Systems Explain the purpose of utilization review Define authorization and explain the criteria MCO’s use to determine whether benefits

are payable Describe the types of services that require utilization review and authorization Identify the three types of utilization review Describe the utilization review process Discuss some of the techniques MCOs use to manage utilization review and authorization

processes

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Reading 7A: Basics of Utilization ManagementSystem that MCOs and their providers use to achieve and maintain both high quality and cost effectiveness is defined as Medical Management

Three Key Areas exist Utilization Management – use of medical services / regulation / planning Clinical Practice Management – development/implementation of delivery techniques Quality Management – process of measuring and improving QOS

Utilization Management FunctionAffects all components of healthcare delivery – primary/specialty/inpatient/pharma/ancillaryApplication depends on nature of patient population

Preventive Care 70% of healthcare costs come from preventive diseases / injuries Center for Disease Control & Prevention – 12% of all hospitalizations were avoidable Reduce need for diagnostic / therapeutic / inpatient care Need to assess individual health risks and ensure targeted care Health Risk Assessment (HRA)

o Process by which an MCO uses information about a plan members health status / personal and family health history / health related behaviors / to predict the likelihood of a specific illness or disease

o Sources – Providers / health plan records / HRA surveyso Use data analysis software to segment the different categories

Preventive Care Initiativeso Mostly received from PCPso Include stuff like Immunization programso Health Promotion Programs (wellness programs – which educate on lifestyle

choices / maternity management / pre natal care)o Screening Programs – check if a health condition is present – blood

pressure/cholesterol checks etc

Self Care Programs Complement physician services Teach how do educate members on distinguishing between major and minor illnesses

and how to effectively treat minor problems Use techniques like members newsletters / how to perform screenings

Decision Support Programs Need to know what is relevant – Decision support programs provide educational

material and advice from physicians Telephone Triage programs

o Usually give inputs for cough / ear pain / skin problems / chest pain / fever /headache / sore throat

o Urgent case - Notify the emergency services / Other cases schedule physician appointments

o Staffed by nurses or nurse practitionerso Clinical staff in triage use decision support tools

Shared decision making programs o Provide patients with in-depth info about diseases/procedures/treatment and

encourage them to participate in healthcare decisionso Sources – Physicians / printed materials / personal or group counseling /

internet/ support groups / interactive computer programsUtilization Review

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Cognizant AHM

UR refers to the evaluation of the medical necessity/ appropriateness/ cost effectiveness of the healthcare services given to a patientCan do it in-house or contract with Utilization Review Organizations

Case ManagementProcess of identifying plan members with special healthcare needs and developing a coordinated effort for monitoring care / needs Improve / stabilize a plan members overall health status by preventing complications Optimize use of healthcare resources Improve member compliance with provider recommendations for care Improve coordination and continuity of care Employed with high risk / high cost cases

o High Risk case is one that involves complex / catastrophic illness or injury that requires extensive medical intervention or treatment plans

o High Cost Case – one that requires a large financial expenditure or human/technology resource commitment

o Chronic Case – persists for long periods of time or patients life Possible Conditions for Case Mgmt include AIDS, Stroke, Burns, Cancer , Neonatal

Complications , brain injuries, congenital defects Identified by UR process, referrals from providers/ employers / payers 5 Basic steps are Case Identification / Assessment / Planning / Implementation and

monitoring / Evaluation Factors to determine health status

o Medical condition or diagnosiso Treatment being receivedo Use of prescription drugso Level of resource utilization o Cost of careo Length and frequency of hospital visitso Financial / social / psychosocial factors

If selected the candidate is assigned a Case Manager (nurse . physicians / social worker or any other healthcare professional) These people should be familiar with

o Benefit plans and how benefits are paid to providerso Legal / regulatory / ethical issues related to case managemento Utilization review processes and techniqueso Availability of community resources and supporto Role of coordinating care and in educating patients and family memberso Evaluation of the overall effectiveness of the case management

Final approval of decisions RESTS WITH THE PHYSICIAN

Disease ManagementDisease state management is a coordinated system of preventive, diagnostic and therapeutic measures intended to provide cost effective quality healthcare for patients who have risk of chronic illnesses or medical condition. Focuses on comprehensive care over a extended period of time rather than individual episodes or medical care

Driving force High level of spending on chronic diseases Proactive engagement helps Pharma firms have proved this – This was in sharp

contrast to the more traditional practice of addressing acute episodes as and when they occurred

Conditions which make a disease management appropriateo High rate of variability in patterns of treatmento High rate of preventable complications – that results in use of costly services

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o Show low rates of patient compliance with recommended treatmento Can be managed on an outpatient basis using non surgical approacheso Are Chronic in natureo Likely to result in high costs over time

Differences from Traditionalo Focuses on managing a population of patients and not individual patientso Highly coordinated and integrate delivery across providers/siteso Apply TQM and continuous quality improvement methods

Tools – 4 specific tools are usedo Disease Modeling – life cycle / interventionso Customized clinical guidelineso Clinical practice processeso Measurement and improvement systems

Pharma Industryo Treatment Guidelineso Provider Education and Complianceo Patient education and complianceo Pharmacotherapeutic outcomes research

Disease Management and Managed Careo Integration into managed care with the help of Pharma firmso STILL a NEW approach and its effects on outcomes and cost

effectiveness has not been yet establishedo This is usually set up as a voluntary outreach and support program plan

Clinical Practice GuidelinesThis is a UM and quality management mechanism designed to aid providers in making the most appropriate course of treatment for a specific clinical caseThe ultimate goal of clinical practice guidelines is to achieve the best clinical result in the most cost effective manner

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Reading 7B: Utilization Review and Authorization SystemsUtilization Review

Manage the overall cost effectiveness of healthcare services Managing the costs of paying healthcare benefits Information collected includes

o Patient Information – Demographic / eligibility / Plan typeo Provider Information – PCP / referring Provider/ In-Patient facilityo Service Information – Referral service/ date of service / diagnosis

codes/treatment codes / hospital admission and discharge date etcReasons for conducting UR

Reduce Unnecessary Practice Variationso Caused due to reimbursement methods / population morbidity / lack of

scientific evidence and current medical practice informationo Variance will remain – Need to however reduce Unnecessary variance

Make appropriate authorization decisionso Authorization is a health plans system of approving payment of benefits for

services that satisfy the plans requirement for coverageo Usually Payers pay only if

Service is covered under the benefit plan Considered medically necessary and appropriate – These are

services or supplies as provided by physician or other healthcare provider to identify and treat a members illness or injury which are

Consistent with the symptoms/diagnosis/treatment In Accordance with the standards of good medical practice Not soles for convenience reasons Furnished in the least intensive type of care required

Authorization could begin from the PCP Improve the quality of Patient Care

o Use of physician based decision making systems Physicians have training / experience to determine appropriateness They are familiar with a wide range of treatment options

Improve the Cost effectiveness of patient careo Good metrics include Hospitalizations / member/year , hospital bed days/

admission , hospital bed days/ admission , specialists encounter per member, referrals per PCP per 100 encounters

Number of bed days per 1000 members (normalized for the year) [A / (B / 365) ] / (C/ 1000)

o A – Gross bed days per time unito B – Days per time unito C – Number of Plan members

Services that Require Utilization Review for AuthorizationFramework to evaluate UR

Access requirements Frequency of Utilization Cost per procedure Total Cost Level of Inappropriate utilization Cost of Review

Access requirementso PCP / direct access for OB/GYN or pediatric / dermatology/ DVo Serious Chronic conditions allowed direct accesso Complimentary and alternative medicine (CAM)

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Frequency of Utilizationo Don’t target very routine serviceso Need authorization for complex procedures

Cost per procedureo High cost or high risk procedures and treatment

Total Costo Cost of service * Frequency of use

Level of Inappropriate utilizationo Higher the denial rate– more likely is the service will require UR/authorization

Cost of Review o Balance Cost of review vis-à-vis benefit received

Types of UR1. Prospective Review

Review and possible authorization of proposed treatment plans for a patient before the treatment is implemented

This is a preferred option Accomplished through precertification or prior authorization requires plan

members to notify the plan in advance for a particular treatment Helps evaluate reasons for request / determine most appropriate course of

treatment / intervene to alter the care Tools include

o Utilization Guidelines – accepted approach to care for common problemso Site Appropriateness listings – most appropriate settings for procedures o Experience Based Criteria – based on medical directors / provider

experience ; for procedures which are not performed /documented wello Length of Stay Guidelines – Average length of stay based on a patients

diagnosis, severity of patients condition and types of services Length of stay – number of days (From admission to day of

discharge that a plan member spends in hospital / other facility Mechanisms to limit LOS include

o Preadmission testing – tests before inpatient admissiono Discharge Planning – determine what activities must occur before patient

is ready for discharge and conduct them efficiently. 5 key activities What treatment and procedures have been prescribed Determine other services required prior to admission Establish length of stay Determine where patient goes after hospitalization Determine what equipment/ services will be needed after discharge

2. Concurrent Review Treatment is in progress ; Applies to services that continue over a

period of time Used to evaluate outpatient courses of care – chemotherapy /

radiotherapy/ physical therapy / home healthcare and counseling or In Patient care

Coordinated by the UR nurse who services as a liaison between physicians / hospital staff / health plans medical management and UR staff

o Gathering information about a members progresso Tracking the total length and Cost of Careo Continuing Discharge Planning

Plan can intervene in the middle to help direct course of care Alternative Care Settings and Levels of Care

Primary purpose is to determine the proper setting for patient care. Some areo Emergency Departments

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These are essential to the immediate diagnosis and treatment of critical illness/ severe injuries

To avoid liability for payments , some plans require the authorization of payers within 24 hours of admittance

Plans conduct retrospective review of claims for emergency services to determine the necessity /appropriateness of care

Federal Emergency Medical Treatment and Active Labour Act 1986 says hospitals that receive Medicare/Medicaid grants are required to screen / stabilize all patients who come to their emergency depts.

Further some states prohibit precertification requirements for emergency services

“Prudent Layperson Standard” of the Balanced Budget Act of 1997 also limits precertification and retrospective review in making coverage decisions. According to this standard

A condition is considered to be an emergency if a prudent layperson (person who has average knowledge of health and medicine) could reasonably expect the absence of medical attention to put the individual’s health in jeopardy

26 states have adopted this standardo Urgent Care Centers

Problems that are not life threatening but that require immediate attention. The cost of care is higher than that in a PCP’s office but lower than hospital ED

o Observation Care Units Designed to address the immediate care needs of patients who

require continuous monitoring but not emergency/acute careo Sub Acute Care Facilities

Addresses continuing care needs of patients who don’t need hospitals but can’t be treated from home

o Step down Units Ward or section of ward in a hospital that is devoted to delivering

sub acute care to patients following acute care Alternative to sub acute care facilities Intermediate – Critical Care units and Regular Nursing Units

o Home Healthcare Need intermittent rather than 24 hour care Usually used by Medicare patients Also seen younger people recovering from acute episodes Services Include

Basic nursing care , Wound care , Pharma care , respiratory care, rehab services, nutrition care , social work assistance, provision for durable medical equipment

o Hospice Care Set of specialized healthcare services that provide support to

terminally ill patients and their families Services address medical / nutritional / social /psychological and

spiritual needs Medicare Specifies that these benefits come to patients

who have a life expectancy of 6 months or less

3. Retrospective Review This occurs after the treatment is completed Evaluation of medical necessity is based on claims data and medical records

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Find Coding Errors – procedures don’t match diagnosis Upcoding – Involved using a procedure code more complex than actual code Unbundling – Separating a procedure into parts

Utilization Review Process Data Collection

o Prospective review – does he satisfy criteriao Concurrent review – Document patients progress

o Retrospective review – address utilization of services/ patient outcomes/ costs Data Transmittal

o Manual transmittal - Manual / Paper Based Advantage – High degree of physician acceptance; can be completed

at their own convenienceo Telephone Transmittal

Requires providers to call a central number and relay authorization via IVR over the fone

Faster / less cumbersome / less labor intensive Plans like fone transmittal as its more accurate/complete/error free

o Electronic Transmittal Faster / less labor / less Error/ > Scrutiny and stringent regulations

Data Evaluationo Evaluation of Non Clinical Aspects of Coverageo Evaluation of medical necessity and appropriateness of proposed careo Administrative Review

Compare the proposed medical care with applicable provisions in the purchaser contract to determine coverage

If its not satisfied – the claim is deniedo Medical Review

In case the above is satisfied – there is an evaluation of the medical necessity and appropriateness

Nurses can approve authorization requests Physicians can approve and authorization of payments In case there is a dispute on any issue – the authorization is delayed.

This then becomes a PENDED Authorization

Managing the Utilization Review ProcessSome more tools to manage the utilization process

Single Visit Authorization - PCPs submit separate requests for each visit to the specialist

Limited Visit Authorization – Plan members make a specified number of visits before approval is required again

Prohibition of Secondary Referrals - Specialists cannot make a referral without plan authorization.

Exceptions to these rules could be made for chemotherapy and radiation therapy, mental health and substance abuse therapy

Authorization can be extended to manage complex cases

8. Medical Management II

Reading 8A: Quality Assessment and Improvement

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Identify the two types of quality delivered by MCOs Describe the methods MCOs use to assess the quality of administrative and healthcare

services Describe the advantages and disadvantages of using structure measures, process

measures, and outcomes measures to evaluate healthcare quality Discuss three tools MCO’s commonly use to improve performance and qualityReading 8B: Quality Standards, Accreditation, and Performance Measures Identify the major agencies that provide accreditation for healthcare organizations Explain the role of quality standards in the accreditation process Describe the most important sources and types of performance measures

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Reading 8A: Quality Assessment and Improvement

Two Key areas – Quality assessment activities and quality improvements activities

What is Quality?Quality in a managed care context refers to an MCO’s success in providing healthcare and other services in such a way that plan members needs and expectations are met.Quality delivered by an MCO can be divided into two key areas

Service Quality – MCO’s success in meeting non clinical customer needs and expectations. Will include details like

o how long a member had to wait to see a doctoro how friendly office staff areo how well the MCO’s members explain the details of coverage

Healthcare quality is “the degree to which health services for individuals and populations in crease the likelihood of desired health outcomes and are consistent with current professional knowledge”

If a plan member goes to a provider the healthcare quality refers to the manner in which the physicians treats the members condition

Importance of QualityConsumers consider it to be an important factor in deciding which health plans to offerSource of competitive advantage that helps organizations compete successfully

Importance of Quality for Patient Safety –o This enhances patient safety and decreases medical errorso Medical error occurs when a planned treatment or procedure is delivered

incorrectly or when a wrong treatment or procedure is deliveredo Medical errors are caused MORE by breakdown in the Healthcare

system rather than provider errorso Adverse Event – Harm a patient suffers that is caused by factors other than

the patients underlying condition – Need to see if the adverse event was random or if it was caused by medical errors or deficiencies

What are the factors that contribute to medical Errorso Faulty or Inadequate Communication

Physician’s handwriting is acknowledged as the leading cause of medical error

Illegible prescription can lead to improper dispensing of medications Illegible orders can lead to inappropriate procedures and course of

treatmento Inconsistent Quality Oversight

Every state has different licensing requirements for healthcare professionals. Accreditation programs are also widespread

Very little overlap exists to promote uniform quality oversighto Lack of Compliance with internal and external reporting

requirements Most healthcare organizations have internal systems for reporting

adverse drug interactions and minor medical errors Any disciplinary action that limits physicians clinical privileges for > 30

days MUST be reported to the National Practitioner Data Bank 95% of the adverse drug reactions go unreported

o Lack of Verification Procedures Treatments based on individual’s analysis of results, without secondary

verification. Very high error rates are caused by this

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IOM report to Bill Clinton – Now they required a nationwide mandatory system of collecting/ analyzing and reporting information on Medical Errors

Other Mechanisms to Combat this includeo Medical Error Reporting Systems that allow healthcare providers and

facilities to analyze common errors and identify error causing processes in healthcare delivery

o Medical Alert systems that apply preprogrammed online criteria to identify test results that fall outside acceptable ranges

o Drug Checking systems that link physician and pharmacy order entry information systems and automatically alert physicians and pharmacists of possible drug interactions or allergic reactions to prescribed drugs

o Electronic Medical Record systems that allow providers and health plans to track and analyze clinical data and provide reminders for needed services

Assessing Quality in an MCO Difficult to define what quality is and based on that definition determine whether an

MCO is delivering that quality Performance Management can help an MCO determine how well it is doing in meeting

member’s needs Quality is in the eyes of the customer – It’s the patients opinion which matters more

than the physicians or MCO’s opinion Quality Measures

o Structure Measures – Relate to the nature, quantity and quality of resources that an MCO has available for member service and patient care

o Process Measures – Methods and Procedures an MCO and its providers use to furnish services and care

o Outcome Measures – Gauge the extent to which services succeed in improving or maintaining satisfaction and patient health

o Most measures till now have been structure and process measureso All three measures are interdependent – structure and process are important

because the lead or are believed to lead to better outcomes – but outcome is the end result

o The Most useful outcome measures are those that can be related to specific processes or structures

Assessing Service Qualityo Provider Service quality issues include

Ease which members can get through to a clinicians office by fone Length of time patients must wait for an appointment Length of time patients must wait in office to be seen by a provider Attitude, Competence and efficiency of office staff Clinicians Bedside Manner – friendly/ listener / explanations

o Administrative Service Quality Phone wait times when calling MCO Attitude, Competence and efficiency of member services staff Accuracy and timeliness of claims payment and provider

reimbursements Speed with which member services representatives can retrieve

needed information from the MCO’s IS Availability of educational material for members

o Use structural – (no: of service reps, processing capabilities , number of PCP’s) , process linked (length of stay, accuracy , efficiency) or outcome measures (Member satisfaction, compliant resolution)

Assessing Healthcare Qualityo This can be evaluated using structural ,process and outcome measures

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Cognizant AHM

o Structural Measures Number of PCP’s in the network , % of providers who are board certified Education, training and experience of Plan providers Number of providers accepting new patients Number and distribution of specialists in the plans service area Geographic dispersal of providers Physicians turnover in the plan Hospitals included in the plans network Number of hospital beds available Physical conditions of hospitals and other facilities Emergency room access Availability of member education programs Credentialing Main advantage – Easy to identify and report / intuitively

linked to quality of careo Process Measures

Some look at illness prevention measures and others look at how the Providers treat sick patients

Preventive care statistics are the MOST popular measures used during quality assessment – statistics are easy to measure and understand and they fit well with the emphasis on prevention

% of children receiving immunization percentage of adults receiving regular checkups percentage of members receiving screening exams like

mammograms, pap smears or cholesterol screening % of members receiving advice on smoking cessation

Important factor – appropriateness of the care delivered Inappropriate care can be divided into

Overuse of care – antibiotics to treat viral infections etc Underuse of care – provider fails to provide care that would

improve the patients health e.g. Beta blockers not administered to patients following a heart attack

Misuse of Care – wrong treatment is provided for patients illness or correct treatment is delivered incorrectly

Standards of Care are diagnostic and treatment processes that a clinician should follow for a certain type of patient/illness/clinical circumstance

Published by American Medical Association (AMA) , American Academy of Pediatrics (AAP) etc

Advantages Easy to identify , measure and report Lead to improved health outcomes in some cases But … no link between process and improved outcome has been

defined for many processo Outcome Measures

3 key activities – Clinical Status, Functional Status, Patient Perception Clinical Status – Relates to biological health outcomes e.g. cancer

treatments are judged using 5 year survival rates / change in tumor rates. Other examples could include

No: of hospital admissions for certain condition Average length of hospital stay by type of injury/illness No: of patients contracting infection in hospital Survival rate of people who received angioplasty Incidence of certain conditions that commonly afflict long term

diabetes patients – foot ulcers , blindness

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Occurrence of low birth weight infants or premature births Functional Status – Functional status relates to patients ability to

perform activities of daily living Patient Perception – How the patient feels

o Advantage of outcome Ability to demonstrate improved clinical and functional status over time

o Outcomes are effective measures of MCO or provider performance only if they can be linked to structures or processes and only if they are sensitive to modifications in those structures or processes by the MCO or provider

o Disadvantages Not feasible in all situations like long treatment plans Other disadvantages Inconsistency of source data , need to provider

risk adjustment, difficulty & cost of obtaining outcomes data, problems with incentives

Need to adjust outcomes to account for risk – The response to treatment depends on factors that independent of the quality of care provided - Risk adjustment or Case –Mix Adjustment is the statistical adjustment of outcome measures to account for these factors

Evaluation of performance of providers is very difficult – in case outcomes are made public and used to judge providers – some might be reluctant to treat the sickest patients

Collecting and Analyzing Quality Assessment Datao Financial Data

Describe the costs of physical , technological and human resources needed to provide administrative and healthcare services to plan members.

o Clinical Data This includes both disease specific data and data related to general

health and functional status. Provide in depth overview of outcomes associated with a particular

healthcare process and structure Patient records / claims and encounter forms / are primary sources Tools used include – SF-36 and HSQ-39 (health status questionnaire)

o Customer Satisfaction Data How do members / providers / purchasers view the delivered services? Telephone or email surveys Widely used Consumer Assessment of Health Plans (CAHPS) developed

by the Agency for Healthcare Research and Quality (AHRQ) Reporting Quality Assessment Information

o Performance reports serve two primary purposes – internally , they help MCO’s improve the quality of the healthcare and service plan members receive by identifying the plans strengths and weaknesses

o Externally performance reports address accountability to the health plans customers and to outside agencies

Quality Improvements Haphazard Change/ Random Change – unplanned/ uncontrolled & produces

unpredictable results e.g. Explosion of healthcare costs resulting from unlimited utilization

Reactive Change – Controlled – but leads to positive/negative/unintended results Planned Change – Deliberate, controlled, collaborative and proactive Need to do the following to make changes effective

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Cognizant AHM

Planned – Identify where improvement / define desired outcomes/ define barriers or roots causes for problems / decide what actions are most likely to achieve the desired outcomes

Communicated – Process of Transmitting information and results upward/downward /horizontally through the organization and outward to its external customers

Implemented – Implementation of quality improvement initiatives turns intention into action by providing a method for responsible parties to complete assigned tasks in a specific timeframe

Documented – Accrediting organizations and regulatory bodies require MCO’s to provide documentation of three major components of quality improvement – performance assessment , program planning and program evaluation

Evaluated – Provides a measure of how well the MCO’s improvement plans achieved stated goals by comparing performance before and after changes

Strategies and Tools for Improving Quality

Benchmarking Most effective mechanism – Key Tasks include Identifying best practices and best outcomes for a specific process Emulating the best practices to equal or surpass the best outcome Best practices – are the latest treatment modalities and accepted by providers

are the most effective and efficacious approach to medical care Clinical Practice Guidelines

Provide consistent delivered services that will improve plan members health Jointly developed inhouse plus plan/provider committees or from outside

sources such as National Guideline Clearinghouse (NGC) , a Joint Venture of AMA, AHRQ and the American Association of Health Plans (AAHP)

Provider Profiling Involves collecting and analyzing information about the practice patterns of

individual providers Uses credentialing and recredentialing to determine how well a provider

meets MCO standards Identifies those providers who practices vary from the norm either because of

Usage of medical resources higher /lower than normal Use of resources in a manner noticeably different from other providers

Peer Review System in which the appropriateness of healthcare services delivered by a

member are evaluated by a panel of medical professionals This can focus on a single episode of care or on the entire program of care Results are used to

Provide Measures of overall quality Identify opportunities for improvement in provider performance Serve as a general learning tool for members of the panel

Peer review is REQUIRED for services provided by Medicare and Medicaid Recipients

Peer review participation is voluntary for services provided to commercial plan members

Reading 8B: Quality Standards, Accreditation, and Performance Measures

Standards are defined by the Institute of Medicine as “Authoritative Statements of Minimum levels of acceptable performance or results excellent levels of performance or results and the range of acceptable performance or results”

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For them to represent valid measures of quality and performance – They have to satisfy three requirements –

They must relate to the conditions that are important to the plan/ members Standards must focus on structures, processes or outcomes that can be influenced

through quality improvement initiatives Standards should address situations that are controllable by the organization

Internal standards are developed by the MCO and based on their historic performance levelsExternal Standards are based on outside information such as publishing industry wide averages or best practices. MCO’s use internal standards to measure the quality of administrative services and External Standards to evaluate healthcare services.

AccreditationThis is an evaluative process in which a healthcare organization undergoes an examination of its operating procedures to determine if they meet designated criteria as defined by the accrediting body and to ensure that they meet a specified level of quality

Use a combination of document review, onsite review, interviews, medical record review and evaluation of member services systems.

External accreditation is becoming more and more important as states and purchasers are requiring firms to undergo some kind of review process.

Employers use this to determine if the plan meets standards for quality care – serves as a stamp of approval

Accrediting Organizations Joint Commission on Accreditation of Healthcare Organizations

o Developed in 1951o Evaluates and accredits nearly 12000 hospitals and home care agencies and

7000 behavioral ,long term care , ambulatory care and clinical lab facilities o Hospitals receiving Medicare / Medicaid Funds MUST be JCAHO accreditedo JCAHO also accredits MCOs and healthcare Networkso Accreditation Process

Complete Onsite Surveys conducted every three years Organizations central office and any non JCAHO accredited network All high risk services provided by the organization and a sample of the

low risk services A sample of practitioners offices and records

o Quality Standards JCAHO focuses its review of health plan delivery system and proc on

Rights / Responsibilities and ethics Continuum of care Education and Communication Health Promotion and Disease prevention Leadership Management of Human Resources Management of Information Improving network performance

o On Jan 2001 JCAH) introduced new standards on Pain Management and Patient Safety

o Accreditation decisions – There are six types of decisions reached Accreditation without Type I recommendation- Demonstrate

satisfactory performance in all JCAHO performance areas

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Accreditation with Type I recommendation – Awarded to organizations that fail to satisfy JCAHO standards in one or more performance areas. Need to resolve it in a defined timeframe

Provisional Accreditation – Comply with a subset of JCAHO standards based on a preliminary onsite evaluation. This remains effective till the whole survey is done. That must be done within 6 months of this provisional decision

Conditional Accreditation – Awarded to organizations that Fail to demonstrate compliance in multiple performance areas,

but are considered capable of achieving compliance within a specified period of time

Persistently unable or unwilling to comply with JCAHO stds Fail to comply with one or more accreditation requirements

Preliminary Denial of Accreditation – Awarded when the JCAHO determines that denial or accreditation is justified but decision is subject to review

Accreditation Denial - Awarded when JCAHO determines that denial of accreditation is justified and all appeal processes are exhausted

o Can also place organizations on an accreditation watch when an important event occurs and the root cause analysis and corrective action have not been done correctly. This holds till JCAHO deems that it be removed

National Committee for Quality Assuranceo This accredits MCOs, Managed care Behavioral Organizations, Credentials

verification organizations (CVOs) , PPOs , disease management organizations and physicians organizations

o More than half of the nations MCOs are accredited by themo Accreditation Process – Two parts

Onsite survey of administrative and healthcare services Offsite evaluation of audited results of selected effectiveness of care

and consumer satisfaction measures included in NCQA Health Plan Employer Data and Information Set (HEDIS)

Consumer satisfaction - NCQA uses a CAHPS – 2.0H survey – this is a combination of the original HEDIS member satisfaction survey & CAHPS survey developed by the Agency for Healthcare Research and Quality (AHRQ)

The Core CAHPS survey questionnaire are administered separately to Medicare / Medicaid and Commercial populations

ONSITE review is at least one every three years HEDIS results are evaluated annually

o Quality Standards – During onsite review , the following stds are measured Program structure Program Operations Physician Contract Requirements Availability of Practitioners Accessibility of Services Member Satisfaction Assistance for people with Chronic health conditions Clinical practice Guidelines Continuity and Coordination of Care Clinical Measurement activities Intervention and follow up of Clinical Issues Effectiveness of the Quality improvement program Delegation of QI activity

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o Reviews processes for reviewing and authorizing medical care, quality of provider networks, members rights and responsibilities, preventive health activities and medical records.

o Also address Consumer protection issues related to internal and external systems for reviewing and evaluating medical appeals

o Also coordination of access to behavioral healthcare.o Accreditation Decisions

Results are organized into 5 categories Access and service Qualified Providers Staying Healthy Getting better Living with illness

The scores are tallied and used to arrive at a accreditation decision 8 Categories exist

Excellent – exceed or meet requirements/ HEDIS top results Commendable – meet or exceed requirements Accredited – meet most basic requirements Provisional – meets some requirements but not all Denied – does not meet requirements Suspended – NCQA has withdrawn accreditation till it conducts

review and corrective action taken Under Review – initial decision made – but this is being

reviewed under request of the plan NCQA discretionary review – NCQA reviews in order to assess

the appropriateness of its decision 75% weightage Compliance with NCQA 25% - HEDIS results National Health Plan Report Card – Health accreditation status

American Accreditation Healthcare Commission (URAC)o The following organizational and component accreditation program

Health Plans, Health Networks , Health Call Centers , Case Management Organizations, Credentials verification organization, health provider organization, health utilization management, Workers Compensation network, utilization management for workers compensation and external review

o Accreditation Process Desktop review of documentation of plan policies and procedures Onsite visit to verify the accuracy of documentation and plans

compliance with accreditation o Quality Standards

QM Structure, Organization and Staffing Nature and Scope of the QM program Systems for addressing Complaints, corrective action and disciplinary

actiono Two types of standards – SHALL and SHOULD

Shall address essential issues and define minimum levels of acceptable quality

Should standards identify desirable levels of quality Should gets changed to Shall over a period of time URAC Does NOT include performance data as part of the accreditation

process. However they do require health plans to engage in quality improvement initiatives

o Accreditation Decisions Need to 100% satisfy Shall standards and 60% Should

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Remains effective for 3 years

Performance MeasuresThis is a qualitative measure of quality of care provided by a health plan or provider that consumers, payers, regulators and others can use to compare plans or providers

Foundation of Accountability (FACCT) This is created and governed by a coalition of consumer organizations, corporate and

government healthcare purchasers Supports a number of initiatives intended to improve healthcare quality and help

consumers make healthcare decisions based on Quality The information collected is classified into the following areas

o The Basics – delivery of good care including access/skills /Communication /coordination /follow up

o Staying Healthy – avoid illness etco Getting better – sick ppl getting bettero Living with illness – people with chronic / ongoing illnesses reduce symptoms,

avoid complications and maximize quality of lifeo Changing Needs – caring for people when their need changes dramaticallyo They Don’t collect / measure performance – just guidelines

HEDIS Administered by NCQA – Performance Measurement Tool designed to help healthcare

purchasers and consumers compare the quality offered by different MCOs Specified HEDIS effectiveness of care measures are used as part of NCQA’s

accreditation program for MCOs There are 7 key domains for HEDIS

o Effectiveness of Care – 16 reporting measures like Immunization status/ screening programs etc

o Access/Availability of Care – 5 reporting measures – prenatal and postpartum care / pediatrics / dental visits

o Satisfaction Experienced with Care – member satisfactiono Health Plan Stability – practitioner turnover / total membershipo Use of Services – well child visits/ cesarean section rateo Informed Health Care Choices – management of menopauseo Health Plan Descriptive information – physician board certification

Updated annually to enhance quality evaluation HEDIS 2000 added measures for chronic conditions / ongoing treatment programs

for menopause / cholesterol management and BP monitoring

ORYX JCAHO initiative – incorporates the outcome and other performance measures into

the accreditation process. This focuses on OUTCOME – the actual results of care Participating healthcare organizations collect from at least 6 measures JCAHO plans to identify standard core performance measures for ORYX

Additional Sources of Quality Standards, Performance Measures and Data

Quality Compass NCQA offers this - A national database of performance and accreditation information

submitted voluntarily by manage care organizations nationwide This draws performance measures from HEDIS Although its voluntary – companies are finding it useful to compete effectively

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Agency for Healthcare Research and Quality (Agency for Healthcare Policy and Research)Primary Research arm of the US Department of Health and Human ServicesOne imitative is CAHPSAHRQs Computerized Needs Oriented Quality Measurement Evaluation System (CONQUEST)

Quality Improvement System for Managed CarePart of the Balanced Budget Act of 1997 – Healthcare Financing Administration Service Quality Improvement System for Managed Care QISMC to monitor quality improvement efforts of Medicare / MediclaimThese standards are to be met to be Medicare Contractors

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9. Managed Healthcare Operations I

Reading 9A: Healthcare Marketing for MCOs List the elements of the marketing mix and describe their role in the marketing process List several forms of marketing research that MCOs use to obtain information about their

customers Explain the major objectives of benefit design Describe the market segments that comprise the non-group market Explain the impact of state regulations on marketing to the Medicaid population Explain the differences between small groups and large groups that affect marketing

efforts directed to each of those segments Explain which promotion tools and forms of distribution are used most frequently in the

non-group and group markets

Reading 9B: Underwriting, Rating, and Financing Define underwriting and explain the differences between new business underwriting and

renewal underwriting Identify and describe the characteristics of typical rating methods used by MCOs in

setting premiums Identify and define key accounting and financial reporting terms for MCOs Explain the differences between fully funded and self-funded health plans

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Reading 9A: Healthcare Marketing for MCOs

Marketing TermsMarketing – “Process of Planning & executing the conception, pricing, promotion and distribution of ideas, goods, and services to create exchanges that satisfy individual and organization objectives”Other key terms to know A market, Marketing Research, Market Segmentation , Positioning, Product , branding , product line, promotion , advertising, personal selling , telemarketing, sales promotion, publicity, press release

An exchange occurs when one party gives something of value to the other party for something of value in return.

4 P’s of marketing – Product, Price, Promotion and Place (Distribution)Product - Benefits that MCO designs (through research etc)Price – Premium you chargePromotion – Communicate this to the usersPlace – Sales reps / employers

Key questionsHow should the product be positioned relative to the other products in market?What promotional tools will be the most effective for communicating?How will MCO respond to competitor’s products and service offerings?Which distribution channel members will be most effective for selling this product?

Customers Role in Marketing DecisionsCustomers could be individuals / employers / government / association / broker / employee benefits consultant / in network or out of network provider

What do employers and employees want in a health plan? Are members needs being satisfied by their MCO’s? Do physicians and hospitals need additional support or continuing education to help

them provide better quality services? Are our products being offered at a competitive price? How can we satisfy our customers demands for quality care and service in a cost

controlled Environment?

Marketing Research for MCOs Critical issue – Markets are local and not national Different areas have different needs for different healthcare facilities Techniques used include written /fone surveys , one-on-one interviews , focused

group discussions Focused group Interview - unstructured informal session in which six to ten people

participate led by a moderator who guides the group Examples of adv establishment of PPO’s / toll free lines

ProductUse branding to distinguish productsNeed to develop high quality products that meet consumer’s needs

Development and Benefit Design

Benefit Design and Pricing are two important processes.

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Benefit Design is used to determine which level of benefits will be offered to its members, the degree to which members will be expected to share the costs of such benefits and how the members can access medical care through the health plan

Definitions will include Healthcare services covered by the plan and the UR for those services Any exclusion or limitations that will apply Requirements on deductibles or copayments Decide on prescription benefit, level of benefit, form of benefit Decide on Vision / Dental and other ancillary benefits Decide on the network providers who will support you / credentialing Determine which services may be obtained by members to be covered by the plan Determine the roles and responsibilities of a coordinator of care or PCP in the plan Decide which benefits will be carved out and delivered to specialty services Satisfy applicable regulatory requirements

Need to decide the level of benefits to include in the Plan. HMO’s typically will have more benefits included while PPOs are more flexibleSecondly, can exclude experimental procedures and cosmetic procedures from this setLastly determine which cost sharing features to include

Copayments – differential rates for different levels Coordination of care – PCP appointment / nature of self referral Deductibles and coinsurance Coordination of Benefits Out of Pocket Maximums – dollar limits set by MCO’s on what you might have to pay

out of pocket for the services Annual and Lifetime Maximum benefits Penalty provisions – decreased benefits for not complying with the plan e.g.

admission to hospital without notifying the plan

Innovations in benefit design PCP / POS were innovations PCP now is a ‘coordinator of care’ – enlarged role and responsibility Diversification of product offering out of Initial scope – Customer want one stop shop Challenge to provide marketing support for a diverse product line

PriceDiscussed in section 9B

PromotionInform the consumers about the product and pricePersuade them to buy it and remind them the benefits of choosing our organizationDifferentiate on basis of Quality / Customer Service / Cost / Convenience / Accessibility of healthcare services / Preventive medicine or health promotion services

4 tools used Advertising, personal selling, sales promotion and publicity

Distribution5 key categories for selling – Internal Sales force, agents, brokers, employee benefit consultants and direct marketing

Internal Sales Force Sales manager directs the roles of brokers and agents. Sales person and sales

support staff are employees of the firm. Organization of Sales force

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o Lines of products like HMOs, PPOs, POS etc o Market segments – sales to groups or non group marketso Group Size – Large , smallo Population Served – Medicare / Medicaid / workers compensationo Geography – metropolitan area / rural area

AgentsThis is a person who is authorized by the MCO to act on behalf of the insurer to negotiate, sell and service managed care contracts.Captive agents represent only the MCO while Independent agents can represent anyone. They are compensated in the form of Commission.

BrokersSalesman who has obtained a license to sell and service contracts of multiple health plans or insurers and who is ordinarily considered to be an agent of the buyer, not the health plan or insurerThese broker services groups comprise of 2 to 1000 agents and are compensated mostly on commission basis. Employee Benefit ConsultantsThis is a specialist who is hired by a group buyer to provide advice on which plan to purchase This guy evaluates the proposed benefits plans and recommends the best choice to his clients. Factors including accreditation etc are also considered.The consultant is paid a fee by the client. He offers in some sense a more objective judgment on the various plans

Direct MarketingUse one or more media to elicit an immediate and measurable action from a client or prospect. Use tools like direct mail, newspaper, television.Database Marketing – Creation of a DB record of information about each customer or customer prospect that is used to narrow the focus of the organizations direct marketing effort.

Segmentation and Positioning for Healthcare MarketsMarket segmentation is the process of dividing the market into smaller more manageable segments. Top level segmentation is generally group vis-à-vis non group. Others include Geographic, Product, Demographic and Distribution Channel.

Non Group Market

Three key classifications – Individual market, senior market and the Medicaid Market

Individual Marketo Composed of customers not eligible for Medicare or Medicaid who are covered

under an individual contract for health coverage. These are sub divided into Former Customers group – Guys who retained individual coverage

after changing jobs. This contract is called a non group contract Regular Individual Market Customers –Students / self employed

o Channels used for this market are direct mail /telemarketing / advertisingo Sales personnel – Agents and Internal Sales forceo MCOs health screen members to prevent anti-selectiono Individual market consumers not meeting eligibility requirements alone are

often eligible to enroll through their affiliation with a professional association such as the Chamber of Commerce

The Senior Market

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o The segmentation is generally based on age.o The HCFA protects the consumers interests by enforcing regulations that

affect the marketing of managed healthcare products to seniors. o HCFA must approve ALL marketing materials including membership and

enrollment materials used by MCOs to market managed care products to the medicare population.

o Other regulations include prohibition of Door-to-door selling, misrepresentation, discriminatory marketing methods, and use of misleading marketing material or practice.

o Medicare Managed Care National Marketing Guideline – Ensure uniform interpretation and to provide beneficiaries with accurate & clearer information

o Basically the senior market can choose from Traditional Indemnity Coverage under Medicare –

Medicare Part A - provides hospital insurance and Medicare Part B -Covers cost of physicians professional services Can purchase a Medicare Supplement to cover the Gaps in this MEDIGAP Policies – cover out of pocket expenses / routine

services like physical examination / prescription drugs / glasses Managed Care Coverage under Medicare+ Choice

Chose from a variety of plans HMOs / POS /PPOs / Competitive Medical Plans and private FFS plans.

Cover AT LEAST Medicare A & B - But can offer other packages Significant benefit is elimination of paperwork, Coverage

of services not covered by Medicare, generally accept all applicants (irrespective of preexisting conditions)

o Distribution: Informal discussions, direct mail, television, newspaper, telemarketing

o Sales team: Internal sales force

Medicaid Marketo JV between Federal and States which targets hospital/medical expense

coverage for the low income aged and disabled citizens. Some states require these people to join a managed care plan.

o Opportunity that is tempered with strict regulationso Requiring preapproval of all forms of written and verbal communication

between MCO and Medicaid recipiento Preauthorization of marketing materials , programs, brochures, flyers etco Prohibiting giveaways or sales promotion itemso Prohibiting door to door or telephonic solicitationo Distribution: Informal discussions / direct mail / TV advertisingo Sales Team: Some states require Independent enrollment broker / Benefits

counselor should manage enrollment. Other states MCOs can engage independent brokers / agents / internal sales force

Group MarketThe Key groups include

Employer Employee Groups – private / public / federal govt Multi-employer groups – trade associations / labor unions / Affinity Groups – Professional associations / business associations / fraternal orgs Debtor-Creditor Groups – people who have borrowed funds from a bank etc

Small Group Market Classified as 2-99 members

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Generally seek basic healthcare products with cost mgmt features Price is the most critical decision for small businesses – lowest price/longest period

with a 2 to 3 year rate lock guarantee This segment tends to switch frequently Heavy reliance on the sales representative – agent/ broker Started joining employee purchasing alliances / Health insurance purchasing

Coops / Purchasing Pools / Employer Purchasing Coalitions / Purchasing Coalitions Offered through the local chamber of commerce or small business dev association Distribution:

o Personal Selling is the most effective method – specifically telemarketing has proved to be the most effective

o Direct Mail is also another tool Sales Team

o Agent is most importanto Local Chamber of Commerce – discounted rates for all members

Large Group Market Size > 250 (or 500 or 1000) Members These plans may be self funded – employer bears the financial risk Two key markets

o Large Local groups – manufacturing / municipal / state govtso National Accounts – Large group accounts that have employees in more than

one geographic area Usually use employee benefit consultant Want uniformity in price/ product / service

Seek cost management strategies Important factors: Quality /Diverse product range / access / service / high quality

provider networks/ employee satisfaction / accreditation / self funding capability Expectations – Customized products / high levels of service / continued

enhancements / proof of value / Ability to report utilization data Distribution:

o Personal selling is the most effective tool o Dual or multi level – need to communicate to employees and

employers Employer – target CFO / CEO / Employee benefit consultant Sometimes ask for RFPs to multiple firms

o Employees – Group meetings / Health fairs / promotional info / internet Sales team

o Internal sales force / Employee benefit consultants

Intermediate Group Market Not too large not too small Cost and price sensitive but may fully fund their coverage and offer employees only

one type of plan Negotiate lower premiums as relatively stable claims experience Limited influence on Benefit design

Reading 9B: Underwriting, Rating, and FinancingUnderwritingThe process of identifying and classifying the risk represented by an individual or group is called underwriting.Those individuals who have a greater than likely risk of loss are likely to take up insurance – this tendency is known as Anti-Selection or Adverse SelectionUnderwriters Key Task – Analyze each individual or group applying for insurance in order to identify the characteristics that contribute to risk, measure the amount of risk and determine if this is acceptable.

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Key tasks Assessment of typical incidence of illness / injury among individuals of same age/sex Consider the effect of risks specific to the individual such as occupation/health status Underwriting Manual – document that provides background information about

various underwriting impairments and suggests the appropriate action to take if such impairments exist

o Underwriting impairments increase an individuals risk above normal levelo Average risk of loss is typically called standard risko Lower than average risk is called Preferred Risko Higher than average risk is called substandard or unacceptable risks

Group evaluation – Focus on the group as a wholeo Reason for groups existenceo Size of Groupo Flow on new members in and out of the groupo Stability of the groupo Number of eligible members who will participate in the plano Way in which benefit levels will be determinedo Activities of the group

Does the group represent a good risk as a whole ? Some states MCOs conduct medical underwriting for small groups – give out health

questionnaires submitted by all proposed plan members. Based on the results the MCO may recommend the following

o Waiting Periods – period of time during which the insured groups medical expenses are not covered

o Preexisting conditions – limit or exclude coverage for conditions that arose before coverage date

o Benefit exclusions – coverage for specific health conditions not allowed Critical balance between very strict and very lenient underwriting Common underwriting requirement include

o Min participation requirements – min % of total emp who should take parto Benefit limitations - a lifetime max of bed days / dollar amt for a conditiono Benefit deductibleo Coinsuranceo Enrollment restrictions – allow members only in certain time windowso Health statements – submitted by members when they join

New Business UnderwritingFirst issues coverage to a group – the rating structure is used as a basis for negotiation. Charges these exact premium rates only if the group satisfies the risk assumptionsThe rate is adjusted based on the following information

Age and gender distribution Level of participation in the health plan Benefits offered Occupational hazards common to the group Group Size History of persistency with the carrier Previous claims experience where permitted by state law

Renewal Underwriting Review all the selection factors that were considered when the contract was issued Compare the group’s utilization rates to those the MCO predicted Reevaluation of two factors – Groups Experience and level of participation in plan Group experience – Cost of providing care to the group during the period

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Degree of employee participation to avoid antiselection Need to track utilization , demographic factors, cost per member

Legal Requirements Some states prohibit MCO from charging more than base rate listed for specified

products/plans like HMOs. o First ploy – decline coverage to any group with more than average risko Some states deny the above right to the firmo Then need to price the increased risk into the base rates of HMO

Federally qualified HMO’s cant medically underwrite any group – incl small groups Non federally qualified HMOs are subject to state laws and can do this

o However they also are restricted in underwriting Medicare risk

RatingThis is the process of calculating the appropriate premium to charge purchasers, given the degree of risk represented by the individual or group, the expected cost of services, and the expected marketability and competitiveness of the plan.The professionals who perform the mathematical analysis for setting up insurance premium rates are called actuaries

Rating MethodsManaged care uses a variety of rating methods to develop premiums

Community Ratingo This is a rating method which sets the premiums for financing medical care

according to the health plans expected costs of providing medical benefits to the community as a whole and not any sub group

o Both low risk and high risk are factored and the risk is spreado Not used for large groups (except when specified by state law)o This rate is generally used to calculate a reference rateo Some state and federal initiatives have mandated this for small groupso Standard Community rating/ Pure Community Rating

Consider ONLY community wide data and establishes same financial performance goals for all risk classes

No adjustment for age / gender / industry / experience Can vary rates within a plan by dividing members into tiers based on

number of individuals covered. Can have upto four or five tiers. E.g. Tier 1 – employee only tier 2 – employee + one dependent

o Community rating by class (CRC) - NIAC in 1991 adopted a Small Group Model Act that allowed health plans to use a modified form of community rating to underwrite small groups

Divided into 9 rating classes based on demographic factors / industry characteristics / experience

The average premium in any class could NOT be more than 120% of the average premium in any other class

o A 1995 amendment eliminated the class rating rules and required plans to use the Adjusted Community rating (ACR) / Modified Community Rating.

The health plan divided the members into classes /groups based on geography / family / age etc and charges all members of the same class or group the same premium

The Plan cannot consider experience in developing these rates This law did not repeal the state laws – they can still allow

rating based on experience factors Manual Rating / Book rates

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o This is a rating method in which the health plan uses the plans average experience with all groups to calculate the premium for the group

Experience Ratingo This is a method under which the past record is analyzed and used to

calculate premium partly /completely based on the groups experienceo Lower premium for lower utilization and vice versao Use at least two years of experience to calculate these rateso Most experience rated firms have 1000 plus memberso Two types

Prospective Experience Rating – Past experience to estimate the groups expected experience. Premiums calculated on this expected experience. Health plan absorbs gains/ losses for variance from this

12 months is a typical prospective experience rating period for primary care / shorter rating periods happen for specialty services

Retrospective Experience Rating - looks back at end of the rating period and evaluate gains/losses and pass this onto the group.

Federally qualified HMOs cannot use this rating methodo Pooling – Combining a number of small groups and evaluating the

experience of the large group. Lower premiums achieved Blended Rating

o Not very extensive claims experience. o Partly on manual rates and partly on experienceo Credibility Factor measures the statistical predictability of groups experienceo Large groups have more credible experiences than small groupso Blended rate = experience group rate * credibility factor + manual rate * (1-

credibility factor)

Legal RequirementsAmendments to the HMO act 1973 permitted federally qualified HMO’s to use the community rating, CRC or ACR but not retrospective experience rating. Federally qualified HMO’s need approval for ACR can’t charge > 110% of the rate with pure community rating.

Other states force community rating for individuals and small groups. HFCA requires all health plans to assume Medicare risk using ACR.

To obtain federal contracts for the Federal Employee Health benefit program – an MCO can’t charge the government more than it charges other groups of similar size.

NIAC Small Group Act - Rate Spread – The difference between the highest and lowest rates that a health plan charges is to a ratio of 2: 1

FinancingFile an annual statement with NAIC for each state they do business in.Some critical finance terms

1. Income statement2. Revenues 3. Expenses – admin + stop loss premiums + reimbursement costs + utilization costs 4. Assets – value of all items company owns5. Liabilities – all debts and obligations of a company. Most significant are the

reserves (estimates of money that an insurer needs to pay future business obligations). These include Incurred but not Reported (IBNR) Claims.

6. Capital

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7. Surplus = assets – liabilities8. Forecasting – Predicting an MCO’s incoming and outgoing cash flows – Primarily

revenues and expenses and predicting the value of its assets, liabilities and capital.9. Budgeting – process that includes creating a financial plan of action that an

organization believes will help it achieve its goals given the forecast

Concerned with statutory solvency ability to maintain at least its minimum amount of capital and surplus specified by state insurance regulators

NIAC requires at least $1 million. HMO Model act requires – specified % of annual premiums and expected expenses Variance Analysis – difference between budgeted and actual income and expenses

Plan Funding Method that an employer or plan purchaser uses to pay medical benefit costs. Health plan may be financed or funded in a variety of ways – Fully funded plans and

self funded plans Fully funded Plans MCO bears full financial responsibility of guaranteeing claim payments paying for all

incurred covered benefits and administering the health plan – this is the traditional way

Self Funded Planso Employer or group Sponsor is financially responsibleo May be partially or fully fundedo ERISA – these plans are exempt from specific state insurance regulationso Mechanism – the money is deposited in a Funding Vehicle. Company only

pays for incurred healthcare costs. o In case of catastrophic medical claims – the employer will not have funds.

Then he utilizes Stop Loss Insurance to cover the risk.o Individual Stop Loss Coverage/Specified stop loss coverage – provides

benefits for claims on an individual that exceed a stated amount in a periodo Aggregate Stop Loss coverage – provides benefits when total claims

exceed certain amount in a specified periodo Administrative functions

Do it themselves Self pay – employer administers the plan by hiring staff/ systems TPA – no financial risk

Administrative Services Only – fixed fee per employee

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10. Managed Healthcare Operations II

Reading 10A: Information Management Describe the kinds of information and information systems capabilities needed by

managed care organizations Discuss some of the primary challenges for managing data and information Discuss the use of the following information technologies in managed care

environments:- Electronic commerce- Electronic data interchange- Decision support systems- Data warehouses- Electronic medical records- Health information networks

Reading 10B: Claims Administration for Managed Care Define encounter Describe some of the key positions in a claims administration department Explain the steps followed to process a managed care claim Describe some types of information an automated claims database needs to contain Reading 10C: Member Services Describe four types of member services activities commonly conducted by MCOs Describe several ways in which MCO’s use technology to facilitate the delivery of

member services Explain how MCO arrangements for providing member services vary from company to

company Describe the considerations for managing accessibility, people, processes, technology,

and performance for member services

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Reading 10A: Information Management

Information Technology NeedsInformation Management is a combination of systems, processes and technology that an MCO uses to provider the Company’s Information users with the Information they need to carry out their job responsibilitiesTypical information used will include

Description of benefits structures for the products Member eligibility rosters Current information about provider networks Reimbursement arrangements with participating providers Information to support authorization processes Reports on Utilization and Quality Management Programs Member satisfaction surveys Claims processing / billing and payment information Performance measures of various departments Financial information for accounting and reporting purposes

Needs for Information System CapabilitiesAn information system is an interactive combination of people, computer hardware and software, communication devices, and procedures designed to provide a continuous flow of information to the people who need itNeed to assist people in the day to day operations and need to support analysis and accumulated data and information and report the results of this analysisOther specialized systems include

1. Credentialing System – Plan Managers need to review documentation of the healthcare professionals and institutional providers

a. Licensure, Certifications, evidence of malpractice insurance, history etc

b. Need to track the credentialing information and regularly update it2. Contract Management Can be very complex (esp with Capitation)

a. If costs are not calculated properly, the are likely to lose money in bidding for future contracts

b. Need to have access to accurate lists of covered individualsc. MCOs need to reconcile capitation payments and manage risk poolsd. Need to check the eligibility status very carefullye. Contract Management System – incorporates membership data and

provider reimbursement data and analyzes transaction according to contract rules

f. Systems have support of decision making, modeling and forecasting, cost reporting an contract Compliance Tracking

3. Utilization Management Softwarea. Need to manage authorization transactions and utilizationb. Pre-established Guidelines determine authorization and paymentc. Can automate this process and monitor the actual costs of cared. Need systems to manage access, utilization and quality of care under care

management or disease Management programs4. Quality Management

a. Positive outcomes of treatment or lower incidence of illness are valued by members

b. Need to store, analyze and report large amounts of clinically significant data over time to support development of quality indicators, outcome measures and clinical protocols and guidelines

5. Provider Profiling

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a. This helps detect under/over utilization and inappropriate utilization of medical resources

6. Enterprise Schedulinga. Need to control usage of resources like MRI and surgeryb. Enterprise Scheduling System permits users within an enterprise to function

as a single organization in arranging access to facilities / resources7. Claims Processing

a. Need a vast amount of data accumulatedb. Used by all segments of the company

8. Marketinga. Need to communicate information to purchasers and members

9. Member Services – Fast/Convenient access to information, transaction processing and other types of services for members

Challenges1. MCO needs to manage large volumes of internal and external data2. Need to manage different types of data – clinical/regulators/legal /quality/ 3. Need to acquire complete, accurate and consistent data – different codesets etc4. Data that is readily available and easy to collect may not be the most relevant –

may need to modify the data through additional analytic tools5. Need to manage different data formats – from providers and plans / diff databases /

paper transactions / 6. Need to produce many different reports at different frequencies – format/ length /

type of information / level of detail all can vary7. Laws which are stringent on the usage of e-PHI and protecting it

Information TechnologyThis refers to the wide range of electronic devices and tools used to acquire, record, store, transfer or transform data or information. Devices and tools used include

1. Electronic Commerce2. Electronic Data Interchange3. Decision Support Systems DSSs4. Data Warehouses5. Electronic Medical Records (EMRs)6. Health Information Networks (HINs)

Electronic Commerce MCOs use of Computer Networks as a means to perform Business Transactions and to

facilitate the delivery of healthcare and Non Clinical Services to MCO members Use it to communicate within the Health plan and with plan members/purchasers /

providers / regulators / accrediting bodies / and potential members and purchasers E-Commerce helps expand document access Long term cost savings – Increased speed / access to information Most of the traffic is via the internet Use of websites – Informational Purposes and Transactional Purposes Informational – Marketing / Explaining Plan benefits / Lifestyle / Reporting info/

Eligibility information , Clinical Practice Management and Formularies Transactional – Changing members information / changing PCP / Prescriptions/

Status of Claims / Processing authorization requests / update eligibility / payment E-Health – Used to refer to concept of and strategies for providing health related

information, products and services online Advantages of the Internet

o Worldwide useo Growing usage among the general populationo Cooperative oversight and ready availability – no one dominates the net

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o Interoperable Communicationo Low Costo Direct access to current and potential consumers

Potential Disadvantages of Internet Usageo Concerns about Security – need to have secure enterpriseso Use secure internet and intranetso Extranets are used to connect providers / members / regulatory bodieso Types of securities employed include

Firewalls – unauthorized access to internal network Anti virus programs Encryption Digital Signature

Electronic Data InterchangeComputer to Computer transfer of data between organizations using a data format agreed upon by sending and receiving parties. Information is routed through network systems and follows standards and procedures that allow output from one system to be processed directly as input to other systemsOrganization who do business using EDI are called Trading PartnersEDI is used for

1. Transmission of claims and encounter reports from providers to health plan2. Transmission of data from Claims database Medical management departments3. Transmission of data among different MCO departments or geographic locations4. Exchange of data between MCO and regulatory body or accrediting agency5. Transmission of member eligibility data from an MCO to its providers6. Exchange of information between an MCO and its providers regarding requests for

authorizations of services and referrals

Advantages of EDIo Speed of data Transfer and Improved Data Integrityo Elimination of unnecessary paperwork – Cost saving in administrative costs

Largest cost of claims processing is labor Data entry and examination functions

o Reduction in processing time – increased productivityo Improved Business Methods – Focus on improving the details of repetitive

transactions and to upgrade the internal procedures Technology requirements for EDI

o Internet serves as the communication link o Standardized Data format is essentialo Set of syntax / Grammar that forms part of the basis of standard usageo Need an industry agreement on standards – examples include

ANSI – Voluntary national standards organization – creates a consensus based process by which fair and equitable standards can be developed. This serves as a legitmizer of standards

ASC X12 – ANSI’s Accredited Standards Committee X12 was created in 1979 to develop the EDI standards. X12 operates with committees and subgroups. Insurance Subcommittee came in 1989

American Health Information Management Association – Focuses on EDI standards for exchange of clinical data

American College of Radiology and National Electronic Manufacturers Association – ACR-NEMA Xray imaging standards DICOM 3

HL7 – Health Level 7 - Scope is information exchanges among computer application systems. HL7 developers are working with X12

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standard developers and with the American Society for Testing and Materials to coordinate interchange of Clinical Health Data

American Dental Association – Reporting standards/Guidelines / for the dental system

Computer Based Patient Records Institute – CPRI – These standards are related to the Computerization of Medical Records

Decision Support Systems This uses databases and decision models to enhance the decision making process for

MCO executives / managers/ clinical staff and providers Use – Identify the most effective medical intervention, provider profiling and tracking

of provider reimbursement Expert System – knowledge based computer system – Purpose: Provide expert

consultation to information users for solving specialized and complex problems – Primarily used in Claims Administration but also used in medical management decisions

In case of providers, the focus is on supplying the providers with information they need at the time clinical decisions are made – one e.g. is embedding clinical decision support criteria into decision support software

This helps develop treatment guidelines based on specific diagnosis of problems, warnings of drug interactions.

Facilitators – not replacement!

Data Warehouses Legacy systems – need for function / high cost of replacing Searching from multiple unlinked DBs is time consuming A data warehouse is a specific database – containing data from a variety of sources

that are linked by a common subject This data is integrated and presented in a non repetitive standard format Data can be from both internal and external sources – and can be queried from a

single interface A consistent format for data helps them compare data across different types of MCO

products and against other MCOs Advantages and disadvantages

o Pros Simplify the process of extracting useful information Relieves the individual DBs from having to store large amounts of

redundant data not needed for daily operations Help detect trends or relationships between data that is not

immediately obviouso But

Very Costly and Complex to implement Time consuming and requires technological expertise and cash The ROI might not be realized very quickly

Electronic Medical Records / Computer Based Patient Record Computerized record of a patient’s clinical, demographic and administrative data Include Medical History, Current and past medications, diagnoses of illness, test

results and current treatment status Could also include Digital Images, MRI images, X Rays etc Organized along Individual Patients and not providers EMR software can be designed to Alert a provider to possible drug interactions in

case of patient receiving multiple medications

Health Information Networks

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This would be more efficient if it is transferred across the entire network of providers Health Information Network is a computer network that provides access to a

database of medical information – Proprietary to the Organization Community Health Information – CHIN – it’s used by several organizations Health Data Network HDN – links to the data warehouse that stores very large

amounts of data that reside in the medical records of an entire provider network Access to this using a secured extranet / distributed database Most HINs are internet based rather than built on proprietary computer networks Advantages and Disadvantages of HINs

o These have the potential to increase the quality of Medical Careo MCO reviews claims, can match diagnosis treatment codes/ verify

authorization, and record utilization informationo Allows Multiple professionals at different locations to access a

member chart simultaneously Key Benefits

o Improved Care and Service to Members – Timely cost effective o Lower Costs of Information administration - o Improved outcomes measurement – Extract trends/ develop guidelineso Better Measurement of provider performance o Increased efficiency and accuracy of information about healthcare services

rendered to memberso Reduced Exposure to liability for poor careo Improved ability to meet reporting requirements

Disadvantageo Significant costs and risks including

Cost of equipment Cost of planning , installing and maintaining network and software Extreme technical complexity of achieving the reliability and speed Labour costs for training providers and their staff Lack of standardization of the EMRs Resistance to change among the providers Security issues concerning privacy , protection of the MCO’s

proprietary information and external interference with MCOs systems

Outsourcing Information ManagementHiring external vendors to perform specified functions like data and information management activities

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Reading 10B: Claims Administration for Managed Care

Claim is an itemized statement of healthcare services and their costs provided by physician’s organizations and other providers.Claims are submitted to the insurer or managed care plan by the member / provider.

Claims in Managed Care Claim form is the application for payment of benefits to the health plan The nature of claim function varies with the type of plan and compensation

arrangements that the plan has made with its providers. PPO would be like a traditional billing approach, while HMO Capitation would simply

require the HMO to state the services provided An Encounter is a healthcare visit of any type by an enrollee to a provider of

healthcare services. HMO’s receive an encounter report supplies management information about the services provided each time the patient visits a provider – and these could be considered as surrogates for insurance claims.

These can be used to track utilization of services

Claims AdministrationThis is the process of receiving, reviewing, adjudicating and processing claimsThis is the Primary information source for the MCO for compensation, utilization, financial, provider, marketing, information management, medical management, provider relations, contracting etc

Claims Administration Department Generally a Director / VP as a head Oversees entire claims function from planning and management perspective Claims Manager - Oversees the day to day running of the claims department,

including staffing functions and managing the people and systems Claims Supervisors – Oversee the work of several claims examiners – support their

staff and establish efficient claims handling procedures. Further, they may handle difficult and large amount claims and make work assignments for claims examiners

Claims Examiners / Analysts consider all the information pertinent to a claim and make a decision about the MCOs payment of the claim. Key responsibilities include

o Analyzing claims to determine the type of coverage heldo Assessing medical informationo Requesting additional information needed to determine benefitso Determining the person or entity to payo Calculating payable benefitso Explaining claims denials, payments and contract provisions

Other posts include Claim reviewers, quality control reviewers, claims adjudicators, nurse or utilization reviewers, clerks and admin support function

Functions might be organized on o Lines of Business – PPO, HMO, POS , EPOo Claim function – COB etco Type of Claim – Hospital , physician, outpatient surgeryo Client Grouping – MCO’s with large clientso Origination of the claim – in network or out of network

Claim Decision Process Key steps

1. Was the member eligible to receive coverage under the plan at the time of service?2. Was the provider in the network of the plan?3. Was treatment provided medically appropriate and necessary?4. Was a preauthorization or referral given for the service or treatment?

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5. Is the service covered under the plan?6. What benefits are payable?7. Does the member have other health insurance coverage?

Verifying Members StatusRoutine step – happens automatically as it is electronically maintained

Verify Provider StatusMost plans give higher level benefits in the network than outside

Determining Appropriateness of treatment provided They determine this by developing edits into the claims decision processing system.

Edits are criteria that if unmet will prompt further investigation of a claim – These in effect KICK OUT claims for further review.

This may be triggered if o Missing or conflicting informationo Illogical responses or codes contained on the claim formo Treatments or procedures not covered by the health plan. o Verification of member eligibilityo Prior authorization requestso Appropriateness of medical care.

These are programmed into the claims processing system

Verifying AuthorizationCould be issues like pre-admission testing before surgery or referral to specialist by PCP

Verifying that the Service is covered by the Plan

Verifying that the Service was actually provided The Claimant supplies on the claim form much of the info to verify this The standard terms used for this are Diagnostic and Treatment Codes. These are

brief, specific description of each diagnosis or treatment and a number used to identify each diagnosis and treatment.

These include ICD 9-CM (diagnostic codes) and CPT (Treatment Codes) Can explain conflicts between diagnostic codes and treatment codes The standardized claims forms are

o UB -92 requires hospitals to follow specific billing and itemization procedureso HCFA 1500 – Providers to bill professional feeds to HMOs, insurers etco Superbill – this lists the specific procedures or medical services provided by a

physician. It has check boxes

Determining the Amount of benefits to PayThe factors considered include compensation arrangements, authorization requirements, any copayment or coinsurance requirements, Coordination of Benefits

Automation of Claims ProcessUsed to verify member eligibility and provider statusMore sophisticated plans get claims through EDIData that is potentially required includes

1. Member data – age / sex/ PCP / dependents2. Predetermined Fee Schedules for service types3. Provider Information profiles that contain information on the provider who

participate in the plan, type of compensation arrangement , presence of any risk pooling arrangements, any special discount that applies to provider fees, and restrictions on the type of service provided

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4. Authorization requirements and utilization information5. Use of coordinator of care function (Use of a provider such as PCP)

Still collect information about he medical condition that prompted an encounter to analyze utilization and provider practice patterns. This data is used as a basis for next years capitation payment

Nowadays we use a combination of discounted FFS and capitation

Investigation of Claims This is the process of obtaining information necessary to determine the appropriate

amount to pay on a given claim. The majority of claims do not require investigation Extent of investigation depends on – exact type of claim, information needed to make

an appropriate decision and the difficulty encountered in obtaining information Sources of info – attending physicians, labs, Medical directors and members NIAC Unfair Claims Settlement Practice Act – Specifies standards for the

investigation and handling of claims. A practice is considered improper if o Committed Flagrantly and in conscious disregard of the Acto Committed so frequently that a general business practice to engage in that

type of conduct is indicated Need to obtain a valid authorization from the member to obtain the claims

investigation data from various sources and certain investigation techniques may be prohibited by federal or state statutes and regulations. Violations of such laws and regulations subject the MCO to liability for payment of legal damages

Claims Administration as a Customer Service Function Information resource for the rest of the firm and is vital customer service role First contact point apart from enrollment Prompt processing makes a lasting impression on a customer

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Reading 10C: Member Services

Member services is a broad range of activities that an MCO and its employees undertake to support the delivery of the promised benefits to members and to keep members satisfied with the company.

There are two key segments Inbound member contacts – member initiated requests for information, transactions,

service and assistance with problems Outbound member contacts initiated by the MCO

Type of Member Service Activities

Member Education

Need to understand their roles and responsibilities Need information that would help manage & improve their health Education is in the areas of benefits, cost sharing responsibilities, health plan

authorization systems BEFORE they need the services is a good way to reduce member confusion about access and payment

Reduce the incidence of disputes and claims Preventive care measures are proactively pitched – Member OUTREACH programs

o Focus on the administrative information about the plano Health related information or both

Typically the following information is provided to all plan memberso Description of services covered and excluded for diff types of careo Responsibilities in the care delivery process – copay/ deductible / referrals /

authorizationo Differences between in network and out of network benefitso Services requiring authorization of payment and guidelines for the same o Preventive care / screenings / disease management / triage services detailso Health related information of interest to the general populationo Options for resolving complaints and appealing to health plan decisions

Another mechanism is identification of groups of members with common characteristics (sex / age / ethic background) and sending them health related info

Communication channel o Mass mailing of letters and Health plan newsletterso Internet email o Websites – FAQs , directions , general wellness and prevention information

Need to customize the educational information based on target audience

Assistance with Questions, Transactions and other Service RequestsFour key areas Administrative Issues – some e.g.

o Identity card out of dateo Please send me new provider directoryo PCP moved out of an areao Mailing address for claim?

Coverage Issueso What type of benefit do I have for so and so?o Does the plan pay for prescriptions from out-of-network providers?

Health Plan Programso Who do I call if I am not sure abt the care I need?o What are the preventive care and wellness programs?

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Access Issueso How do you get authorization for so-and-so?o Do you need a referral for so and so?

Telephone is the preferred communication channel – need a toll free line Use Computer / Telephony Integration – CTI – a technology that unites a

computer system with the telephone. Two common applications includeo Automatic Call distributor ACD –

Device that answers calls with recorded messages and routes to the appropriate department

User keys in the info for identification etc This prevents receiving a busy signal – and expedite the connection

o Interactive voice response (IVR) – Is an automated system that answers calls with recorded or synthesized

Self service for a certain set of transactions Can switch to an operator in case not satisfied

Paper mail is a substantial part of MCOs inbound and outbound contacts MCOs use letters to send updates to its members Also used to deliver important notifications, and handle payment updates, address

changes, claims processing and EOB Fax is another common communication tool Combine IVR + FAX to create a fax-on-demand system e.g.

o Description of health plan, benefits and how it workso Forms for filing for claims or filling prescriptionso Descriptions of common injuries and their treatment options

Websites are used to enable changes to profile etc Email – Some transactions are restricted for security and privacy

Complaint Management Complaints about the Plan

o Rudeness, payment authorization, PCP selection Complaints about Providers

o Late appointments, non returning of calls, waiting times, staff, service levels Unresolved complaints move to appeals – kill it early Need a Complaint Resolution Process (CRP) Need to address informal complaints as well as formal appeals Employer Sponsored health plans must provide avenues for appeal

o Otherwise they breach the ERISA – Employee retirement income security act State laws for CRP requirements include

o Inform all members about the CRPo Track and report complaintso Comply with specific timeframes when responding to complaintso Provide an option for independent external review of complaints when internal

reviews are exhausted The Appeal Process

o A dispute is reviewed and resolved by a party other than the person who made the initial decision or performed the service that lead to the complaint

o There are at least two levels of appeals Level One Appeal to the Medical Director or other officer of the MCO

to review the original decision and any additional supporting information submitted by the complaining member. Decision communicated to all members

Level Two Appeal – Level Two appeals are handled by an appeals committee which consists of people from various areas including utilization review, member services, health plan operations and legal

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affairs and physicians (in case a medical opinion is required) and from plan members

o Have a maximum time frame for conducting the inquiryo Arbitration appeals to government agencies or independent external review

are often available to the member This is the process of parties to a dispute submit their dispute to an

impartial third party for final binding decisiono Commercial health plan members appeal – insurance dept for a stateo Federal Employees may appeal to the Office of Personnel Management o HCFA hears appeals regarding Medicare Plans and State Departments

handle Medicaid appeals Independent External Review – Conducted by a third party that is not affiliated to the

health plan or provider – These are called independent review organizations (IROs) Considers all info abt the dispute and may seek additional info from the plan/

member/ provider Either mediate the process of appeal OR provide a decision which is binding

Member Satisfaction Measurement and Reporting On Details like

o Satisfaction with the Plan as a wholeo Their access to healthcare serviceso Quality of the medical care received from providerso Quality of non clinical services received from the plan and its providerso Plans administration

The results are benchmarked with the company / industry / external stdsTwo Primary Way of measuring it

Member Satisfaction Surveys Parameters like

o Satisfaction with the authorization processes for hospital admissiono Satisfaction with care from hospital staffo Aspects of experience that can be improved

3 imp purposeso Assessment of members satisfaction with various aspects of a health plano Method for collecting data to assess quality and identify opportunitieso Facilitates relationship building with plan and member

Survey the general member population also – low utilizers cross subsidize the higher ones – so need to take care of them so they don’t leave!

CAHPS – Most popular – Consumer Assessment of Health Planso Questionnaires, directions for interviews and reporting results

Complaint Monitoring Member’s complaints as opportunities for improvement Encourage members to give positive and negative feedback Categorize, report and monitor or complaints by type Helps improve the quality and service delivery Identification , investigation and resolution of serious or recurring problems

Methods of Delivering Member Services Some - dedicated member services, others source personnel from diff departments Plans with defined networks, authorization systems and a variety of programs to

manage quality and utilization have separate member services department because the receive a high volume of inquiries and services requests from members

Fewer member services like PPOs generally have these handled through other departments

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Some have specialized member services for different products or particular accounts An MCO can divide its member services into groups specialized in different

means of communication like telephone, email , fax, correspondence, websites or Groups specified in terms of Function – Claims or Authorization

Managing Member ServicesNeed to display attributes like

1. Competence2. Strong Communication Skills3. Professional Demeanor4. Empathy – understand the members emotional condition

Need to manage the following aspects of member services Accessibility – what communication channels? Hours of operation? Staffing Levels?

o Members and purchaser Expectations? Competitor Levels of accessibility?o Most Member services are available only during business hourso Some plans extend these services for phone and faxes beyond these hours

and on weekendso Off hours provide limited services through IVR or websiteso Staffing levels will determine the wait time / these are affected by the service

reps responsibilities, nature of the plan, availability of self service options, and members willingness to use these options

o A broad scope of responsibilities, a complex benefit structure and complicated authorization requirements can increase the staffing needs

o Effective use of telephones and computer technology can reduce staffing needs

o Average Staff to member ratio is 1:5000 Personnel who have contact with members

o Need to have an aptitude and attitude for providing serviceso Need months of training before they are put in streamo Need to educate them on – Company products/procedures/computer and

phone systems/ general principles of customer service / sensitivity training/ active listening / problem solving / dispute resolution / handling angry customers

o Subjected to high stress and a burn out – need to create incentives Processes for Delivery

o Need to support the member service reps with strong workflow processes – This could include

Fulfilling requests for provider directories EOB for different types of services Changing a members PCP Assisting in getting authorizations for payments Investigating claims Welcome calls to new members Handling Complaints

Supporting Technologyo CTI helps improve productivityo Technology is expensive in the short term

Performance of serviceso This addresses the quality and cost effectiveness of serviceso Satisfaction surveys and complaint reportso Key statistics include

Turnaround time

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First contact resolution - % of transactions completed in the initial point of contact

Error rate – accuracy of information given and transaction proc Wait time – length of time on average members stay on hold Call abandonment rate – how many members hang up before receiving

assistanceo There is sometimes listening in on callso Measures of Cost Effectiveness Typically focus on productivity of the team

Time per call Amount per each customer contact Amount on admin duties – like documenting / follow up/research

o Set Service Levels – based on industry /company benchmarkso Try to use First Contact Resolution at the cost of wait time to improve service

levels and solve the problem first up

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11. Legislative and Regulatory Issues in Managed Healthcare

Reading 11A: Federal Laws and Regulations Identify and describe federal laws and regulations that apply to MCOs Explain the role that federal laws and regulations play in protecting consumers and

maintaining a level playing field in the marketplaceReading 11B: State Laws and Regulations Compare the key components of state regulations for HMOs and other MCOs Describe the major functions that MCOs perform that are subject to state regulationReading 11C: Government-Sponsored Programs Describe the role of the federal government as purchaser of managed healthcare

benefits for the elderly (Medicare), those with low income (Medicaid), federal employees and dependents (Federal Employee Health Benefits Program [FEHBP]), and inactive and retired military personnel (TRICARE)

Discuss the application of managed care principles to workers’ compensation

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Reading 11A: Federal Laws and Regulations

General Business LegislationThere are a lot of general laws which affect the structure and operation of MCOs – These include Federal Antitrust Laws, employee benefits legislation and financial services legislation

Legislative Act Who must Comply

Protected Class Effect of Legislation on Healthcare

Age Discrimination in Employment Act (ADEA)

Employers with > 20 employees

Employers aged over 40

All active employees irrespective of age must be eligible for the same healthcare coverage and cannot be required to pay more than the younger guys

Title VII of the Civil Rights Act

Employers > 15 employees engaged in interstate commerce

All employees

This Prohibits discrimination based on race, color, religion, sex or national origin. Need to be sure that their policies don’t impact one protected class. Pregnancy Discrimination Act (an amendment to this act) requires health plans to provide coverage during childbirth and related medical conditions on the same basis as they provide coverage for other medical conditions

Family and Medical Leave Act FMLA

Employers that have > 50 Employees

Birth/adoption or provide care to seriously ill family members / themselves

Can take upto 12 weeks of unpaid leave in a 12 month period. Employers need to maintain the coverage of group health insurance during this period

Anti Trust Legislation The federal government protects the business environment through antitrust legislation. These laws are designed to protect commerce from unlawful restraint of trade, price discrimination, price fixing, reduced competition and monopolies.

Three most important acts are Sherman Antitrust Act (1890)Establishes as the national policy the concept of a competitive marketing system – This prohibits the companies from Monopolizing any part of trade or commerce Engage in contracts, combinations and conspiracies in restraint of trade Applies to all companies engaged in interstate commerce and foreign commerce

Clayton Act (1914)This act forbids actions that lead to monopolies. These includeCharging different prices for different purchasers of same product without justificationGiving distributors rights to sell a product only if he agrees not to sell a competitor productThe act applies to insurance companies to the extent that the state laws do not regulate it

Federal Trade Commission Act (1914)Establishes the FTC and gave it power to enforce the Clayton Act. Key functions includeRegulation of unfair competition and deceptive business practices, also to pursue violators of the Sherman Antitrust Act

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McCarran Ferguson Act 1945 placed the primary responsibility for regulating health insurance companies and HMOs on the State

The state laws apply sometimes over these national laws in some cases. But they need to comply with provisions of the Sherman Antitrust Act relating to boycott, coercion and intimidation. The following areas would warrant violation of the antitrust agreement

1. Price fixing – two or more competitors on the prices or fees to be charged- for e.g. they can’t cooperatively agree to accepting ONLY capitation payments

2. Horizontal Group Boycott – two competitors agree not to do business with another competitor or purchaser

3. Tying arrangements – Conditions on the sale of one product on the other4. Horizontal Division of Markets – two companies decide to divide areas5. Use of Exclusive Provider Contracts – In most cases it is legal for MCO to

contract only with selected providers. The regulation only restricts this if it creates a restraint on trade. The MCO can’t prohibit its provider from contracting with any other MCO. MCOs can prevent anti trust claims by establishing alternatives to exclusive contracts by dealing with IPAs or PHOs

Ethics in Patient Referrals Act 1989 – Starks Laws These guard against anti trust activities in the healthcare market This prohibits physicians from referring patients to a lab/radiology/ diagnostic/ home

health/ pharma / therapy services in which he has a financial interest Some exceptions have been bought in for rural providers, HMOs and group practices.

Healthcare Quality Improvement Act Exempts Hospitals, group practices and HMOS from antitrust provisions applying to

credentialing and peer review as long as these entitlements adhere to due process standards that are outlined by the HCQIA

An MCO who declines to retain a physician must provide due notice of the same and also inform the National Practitioner Data Bank of its decision

Other laws cover the MCO’s Medicare and Mediclaim contracts

Employee Benefit Legislation

Employee Retirement Income Security ActThis is a broad reaching law that establishes the rights of pension plan participants, standards for investment of pension plan assets, and requirements for the disclosure of plan provisions and funding. This applies to all employer sponsored pension plans and to all benefit plans that provide healthcare services.

Key facts Strict reporting rights to all employers and plan fiduciaries (persons who

have discretionary authority over other peoples money) Requirement to distribute summary plan descriptions and file reports with the

department of labor and IRS Most SIGNIFICANT feature – Preemption Provision – It takes precedence over

state laws that regulate employee welfare benefit planso The preemption provision leaves to the state the authority to regulate

insurance, banking and securities For e.g. – State laws apply to group plan if it is insured but not to self

funded group plans Self funded plans are exempt from paying premium taxes @ state level

(State income taxes leveled on insurer’s premium income)

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This encourages large employers to create their own insurance like mechanism on a self funded basis

Employees who legally challenge authorization of payment decisions must file their case at a federal level and ERISA governs this

This is GOOD for MCO’s as ERISA limits the damages that can be awarded in lawsuits to the cost of non authorized treatment. No punitive damages are allowed to be claimed

There is a call for proposals to remove this preemption privilege

Consolidated Omnibus Budget Reconciliation Act of 1986 This deals with the continuum of healthcare coverage on termination of employment The original HMO act contained these provisions – but they were only being applied

by HMOs – a need to change this caused the law to be passed in 1986 COBRA requires each group health plan to allow employees and certain dependents

to continue their group coverage for a stated period of time following a qualifying event that causes the loss of group health coverage. These could include

o Reduced working hourso Divorce or death of a covered employeeo Termination of employment

Applies to firms with > 20 employees After the qualifying event has occurred there is a specified timeframe in which the

member must apply for continuation of group benefits This must be identical to the benefits received by the members of the group plan Allowed to continue coverage for UPTO 18 MONTHS Spouse and Dependents are covered UPTO 36 Months following an employees

death or divorce Dependent child who ceases to be eligible can continue for UPTO 36 months Following the last month of eligibility under COBRA – the employees have a right to

convert to individual health plan IF they don’t have any other coverage The Plan administrator may add the admin fee of 2% to the cost of plan

Financial Services Modernization Act of 1999 – Gramm Leach Bliley Act This allowed the Convergence of the various components of the Financial Services

industry – banks, securities firms and insurance companies MCO’s are considered part of the financial services industry This act looks at

o How financial services industry will be structured in the futureo How the financial services industry will be regulated and supervisedo The rights of customers to protect the privacy of financial information and

remedies for violations of the privacy provisions Title V of the BGLB Act

o Disclose their privacy policies regarding the sharing of non public personal information with both affiliates and third parties

o Notify customers of any sharing of non public personal information with non affiliated third parties

o Provide customers with an option to ‘opt out’ of non public sharing of personal information subject to certain regulations

NIAC has come out with a Privacy of Consumer Financial and Health Information Regulation to govern the activities of healthcare organizations and insurers

Healthcare Legislation

HMO Act of 1973 Instrumental in defining the structure and operations of HMOs and paved the way for

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HMO’s to enter the healthcare market Requirements were established to become federally qualified – they include

o Benefits – need to offer a comprehensive benefits package which includes inpatient and outpatient services, unlimited home healthcare benefits, outpatient behavioral healthcare – these services are deliverable only through Staff or Group Models, IPAs or direct practice arrangements

o Enrollment – Need to enroll individuals eligible for group coverage without regard to health status

o Financing – Need to be financially sound and protect against insolvencyo Quality Assurance – Establish ongoing quality assurance program in line wth

HCFA 300 HMOs meet these requirements even though it is optional

HIPAA 1996Outlines the requirements that employer sponsored group insurance plans, insurance companies and MCOs must satisfy in order to provide health insurance coverage in the individual and group marketsTwo main categories

Title 1 provisions are designed to increase the continuity of coverage o These are not preemptive of state laws– they only apply when the state

laws do not cover this topic or are not very comprehensive Title 2 calls for administrative simplification

Title 1 These are divided into group and individual health coverage Individual Coverage Provisions

o Guarantees the availability of coverage for individuals who meet specified qualifications

o Specifies that all qualified individuals who apply for insurance from a private insurer must be issued a policy automatically without a medical examination and without regard to preexisting conditions

o Someone qualifies for this is he has in the last 18 months group coverage but is now ineligible for either group coverage or Medicare/ Medicaid

o If he loses job and new job does not give coverage – he qualifies for individual coverage

Group Coverage Provisionso Limitations on the use of preexisting conditions

Preexisting condition treatment/diagnosis should have been received 6 months prior to enrollment date

The period for which a preexisting condition is exclude should not exceed 12 months after enrollment date (18 months for late enrollees)

Need to reduce the length of preexisting condition based on the creditable coverage received uner previous group plans, or benefit programs from the sate and federal government.

The Creditable coverage is credited only if the period was not followed by a break in coverage of 63 days or more.

Waiting period under employee sponsored plan does not constitute a break in coverage

Pregnancy cannot be treatment as a preexisting condition Can’t impose preexisting conditions on a newborn child / adopted child

< 18 if the child is covered within 30 days of birth/adoption o Guaranteed availability of coverage for small groups

Small groups are defined as 2 to 50 employees – can’t exclude employees or employee dependents based on health status

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o Guaranteed Renewability of coverage for all groups Need to renew group policies for all big and small groups Renew individual policies also – they can be modified only if the whole

class of policies is being modified and CANNOT be on the basis of health status

o Special enrollment Need to allow employees who declined health coverage initially but

experienced a qualifying event to accept group coverage ant any time In cases like child birth – coverage obtained can be retroactive

Modifications to thiso Mental Health Parity Act – MHPA of 1996

Prohibits group health plans from applying more restrictive annual or lifetime limits on coverage for mental illness than for physical illness

DOES NOT require health plans to offer Mental health – but imposes restrictions on those who do

o Newborns and Mother Protection Act (NMHPA ) 1996 Group health plans or insurers cannot mandate that hospital stays

following child birth be less than 48 hours for normal deliveries or 96 hours for cesarean birth

Does not require group plans and insurers to offer maternity hospitalization benefits – instead it imposes requirements on those plans that do offer these benefits

o Women’s Health and Cancer Rights Act 1998 – Health plans offering medical and surgical benefits for mastectomy to provide reconstructive surgery following mastectomy

Title II –Administrative Simplification EDI Standards, Privacy and Security Regulations Clearinghouse – Public/Private Entity which converts provider data into correct

format for each health plan and coverts health plan data into provider format Billing services, repricing companies, community health MIS and value added

networks are considered to be healthcare clearinghouses Large health plans > $5 million will have 24 months to comply while small health

plans get 36 months to comply Penalties could range from $100 per violation to $250,000 and imprisonment for upto

10 years for violating privacy standards

Electronic Transmission and CodesetsThe Data covered includes

1. Health claims or encounter data2. Health Plan eligibility inquiries and responses3. Provider referrals and authorizations4. Claims status inquiries and responses5. Health plan enrollment and disenrollment requests6. Claim Payment and remittance7. Health Plan premium payment8. Coordination of Benefits Information

At the moment ICD9-CM must be used along with CPT-4Privacy and Security

Need an individual’s written consent to use e-PHI for treatment, payment or health operations

Generally prohibit transmission of identifiable e-phi for purposes other than medical treatment, payment or healthcare operations without the patients written authorization

Allow patients to access medical records and request amendments or corrections for

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incomplete medical information Allow patients to request restrictions be placed on the accessibility and use of PHI Require entities that request, use, or disclose protected health information to limit

themselves to the minimum amount of information necessary Security Standards are meant to be scalable – irrespective of size and scope of firm

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Reading 11B: State Laws and RegulationsKey entities are the state Department of Health, State department of insurance and the NIAC – the former looks at healthcare delivery and quality issues while the latter looks at financial issues in regulation

State Regulation of HMOsBefore the HMO act of 1973, managed care laws were designed to regulate insurance companies or hospitals

NIAC – Health Maintenance Organization Model Act – HMO Model ActThis regulates HMO operations in two critical areas – financial responsibility and healthcare delivery. These are addressed through licensing requirements and financial standards. It addresses healthcare delivery by establishing requirements related to network adequacy, quality assurance and grievance procedures. This also looks at filing and reporting requirements to HMOs

Financial Responsibility Requirements Need to obtain a Certificate of Authority (COA) from the state Provides proof that the organization has met the licensing requirements and

demonstrated that it is dependable, fiscally sound and able to meet quality standards Have financial standards on – net worth, financial reporting, liquidity, accounting and

investment practices COA requires $1.5 Million of net worth. Insolvency occurs when an organizations assets are not enough to cover its

obligations MCO is insolvent if it can’t pay its current and future obligations In case the HMO is insolvent –the NAIC commissioner will intervene and

o Monitor a corrective plan developed by the HMOo Reduce the volume of new business they accepto Take steps to reduce their Expenseso Prohibit from writing new business for a specified period of time

In case these are inadequate – they will allow the commissioner to take over the management of the HMO

o Administrative supervision involves placing the HMO operations under the direction and control of the state commissioner of insurance or a person appointed by him

o Receivership – the state commissioner (with directive from the court) takes control of and administers the assets and liabilities of the HMO

o In case these don’t work – the organization is liquidated and all the business and assets are transferred to other carriers

Healthcare Delivery Requirements Three key aspects are focused on

o Network adequacyo Quality Assurance

Statement of HMO’s goals and objectives Documentation for all QA activities System of periodically reporting program results to HMOs stakeholders

o Grievance procedures Reporting Requirements

Satisfy a variety of filing and reporting requirements - e.g. submitting copies of proposed provider/ group contract forms, evidence of coverage forms and premium methodology as part of the COA process

All these programs are examined and reviewed every 3 yearsLaws Governing Preferred Provider Arrangements

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PPA - This is a contract between a healthcare insurer and provider or group of providers who agree to provide services to persons covered under the contract

PPOs and EPOs are examples of health plans who are using this arrangement Laws vary according to the state in which the contracting plan operates and structure

of the plan For e.g. HMOs offering a POS product and PPOs both provide enhanced network

benefits – but are subjected to different regulatory requirementso HMO is linked to State HMO lawso PPO are regulated by state insurance lawso HMO by state HMO laws and EPOs by state insurance laws

Differences between these laws could include – premiums difference, covered services, benefit levels and nature of funding

To bring some uniformity, the NAIC proposed a Preferred Provider Arrangements Model Act – PPA Model Act. This requires PPAs to

o Clearly identify any differences in benefits levels for services of preferred providers and non preferred providers

o Establish the amount and manner of payments to preferred providerso Include the mechanism for minimizing of the cost of the healthcare plano Provide plan members with reasonable access to covered serviceso Also – need to give adequate benefits to coverage outside this networko Not many states have similar to this law – but have some legislation on PPOs

Laws Regulating other Types of MCOs Increasingly HMOs are being allowed to offer POS options It can be offered directly in some states while other states it can be offered with an

Indemnity Wraparound Policy – out of plan product offered through an agreement with an insurance company

This is a regulatory challenge – POS products have features of regular HMOs and indemnity insurance and can be subject to sate HMO laws OR state insurance laws

There are also certain functions regulated by lawsUtilization review Laws

Entities that perform utilization review are called Utilization Review Organizations (UROs) – They can be in house departments of the MCOs or they can be external entities. Utilization Review is generally subjected regulation if the recommendations affect an MCO decision to cover a specific service

URO’s laws vary but most states require them to be licensed and to obtain certification, the personnel of a URO must satisfy certain criteria related to education, training and experience

Need to meet accessibility standards of medical information NAIC approved a Utilization Review Model Act in 1996 – All UROs must

o Implement a written utilization review program – sources / review criteria / and appeals process and report annually on the program

o Use and make publicly available upon request , documented clinical review criteria

o Use qualified health professionals including clinical peers where appropriate , to administer the program

o Not tie reviewer compensation to the number of adverse determinationso Establish written procedures for adverse determinations and appealso Cover emergency services necessary to screen and stabilize a covered

person, without preauthorization, if “a prudent layperson” would believe an emergency exists. Health carriers would also be required to pay non contracting providers for such services if a prudent layperson believes that using a contracting provider would result in delays that would worsen the

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emergency or if a federal state or local law requires the use of a specific provider

Third Party Administrator Laws Provide administrative services to MCOs, employers, or other plan sponsors Some of these services include underwriting and claims and so these TPA’s are

subject to state regulation The important act here is NAIC Third Party Administrator Model Act In order to act as a TPA

o Obtain a certificate of authority form the state insurance department designating the organization as a TPA

o Maintain as a business record for each client organization, a written agreement describing the duties the TPA will perform, the compensation it will receive, and the standards that pertain to the business the TPA is in

MCO is still responsible for the premium rates, benefits, underwriting criteria and claim payment procedures for ensuring that its plan is administered properly

The TPA serves as fiduciary TPA Model Act specifies the mandatory suspension or revocation of a TPA’s COA if

o The TPA in financially unsound o Using practices that are harmful to the insured persons or the publico Failed to pay any judgment rendered against it within 60 days of judgment

The State insurance department has discretionary authority to suspend or revoke a TPA’s COA if the TPA has

o Violated State Insurance Lawso Refused to be examined or to produce its records for examinationo Refused without just cause , to pay claims or perform Services under its

agreemento Been placed under suspension or revocation in another state

Health Plan Accountability LawsNAIC models includeHealth Care Professional Credentialing Verification Model Act

Specifies requirements MCOs must satisfy in order to ensure that the network providers meet minimum standards of professional qualification. These requirements include the following

o Verification of the credentials of all contracted healthcare professionals in accordance with written procedures that must be disclosed upon written request to any applying healthcare professional

o Providers should be given an option to review and correct any information submitted for verification

o Collection of a minimum set of credentialing information by either primary or secondary verification.

o Recredentialing must be done every 3 yearso Establishment of a process for providers to use to review and correct

credentialing information

Quality Assessment and Improvement By 1998 – 27 states introduced bills to create or expand quality standards for MCOs These laws have been patterned after the NAIC’s Quality Assessment and

Improvement Model Act which requires MCO’s to establish and report their systems for assessing the quality of care and services that they provide. They are required to

o Establish an appropriate system for assessing the quality of care that they provide for each type of network

o Report to licensing authorities any problems that would offer grounds

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for termination of a providers licenseo File a written description of quality assessment programs with state

Commission for insuranceo Describe quality programs to consumers through marketing and

education materialso Meet specified data confidentiality requirementso Closed Plans

Those MCO plans which the member is required to use the participating providers under the terms of the Managed care plan

Closed plans need to develop treatment protocols, practice guidelines and other quality improvement strategies and to report annually the impact of these strategies

NIAC Network Adequacy and Accessibility Model ActAll managed care plans would be required to

Meet specified adequacy and accessibility standards Hold covered persons harmless against provider collections and provider

continued coverage for uncompleted treatment in the event of plan insolvency Develop standards to use in selection of providers Adhere to specified disclosure requirements – including 60 day written notice

to providers before terminating a contract – ‘without clause’ and 15 day notice to patients of provider contract termination

File written access plans and sample contract forms with the State Commissioner of Insurance

Not induce provider to deliver medically necessary care, prevent provider from discussing treatment options with patient or penalize providers for whistleblower activates against the plan

Need to implement this within 18 months of the effective date of the act

NAIC Health Carrier Grievance Procedure Model Act Written procedure for handling all subscriber grievances Internal 1st level grievance review 2nd level review in which the covered persons are allowed to review the relevant

information and make a representationPrivacy of Financial Healthcare Information Nov 13th 2000

GLB act calls for state regulators to enact laws to regulate insurance activities and govern the use of e-PHI.

The NAIC – has Privacy of Consumer Health and Financial Information Regulation Rules governing the use and disclosure of health information are included in Article

V of the regulationo When authorization is required for disclosure of non public PHIo Requirements for a valid authorizationo Conditions under which authorization requests and authorization forms must

be delivered to customers This regulation would apply to all licensees of state insurance department, including

MCOs MCOs and other licensees that comply with the GLB act are exempt from the

provisions of the Article V of the regulation The regulation does not supercede any existing regulation on privacy &

health Only Nevada has adopted this yet

Reading 11C: Government-Sponsored Programs Federal Programs have encouraged innovation Government is a very big Payer too!

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Established Standards for Medicare Providers, federally qualified HMOs and health plans for federal employees

At the moment most beneficiaries receive care through FFS – but this is changing HFCA (part of DHHS) administers Medicare and Medicaid Medicare – Federal and Medicaid – Federal and State Partnership

MedicareFederal program established under Title XVII of the Social Security Act of 1965 to provide hospital expense and medical expense insurance to elderly and disabled personsBenefits are available to

Persons > 65 and eligible for social security or railroad retirement benefits Persons with qualifying disabilities (regardless of age) Persons with end-stage renal disease (ESRD) or their dependents

HCFA has delegated the claims processing and related tasks to third parties.These 3rd parties are called ‘intermediaries’ under Medicare Part A and ‘Carriers’ under Medicare Part B and are usually insurance companies

Program components

Medicare Part AThis provides basic hospital insurance that covers

1. Cost of in patient services2. Confinement in nursing facilities / extended care facilities3. Home care services4. Hospice Care

Anyone who satisfies Medicare eligibility is automatically enrolled here Funding – Primarily comes from a Payroll tax imposed on employers and workers +

from social security taxes No premium is paid for Part A Need to pay an Annual Deductible for Inpatient Care Coinsurance for inpatient and skilled nursing care These requirements are reviewed annually

Medicare Part B Covers

o Cost of physicians professional services – in hospitals / physicians offices / extended care facilities / nursing homes / insured homes

o Ambulance serviceso Medical Supplies and equipmento Hospital outpatient serviceso Diagnostic testso Other services necessary for diagnosis or treatment of illnesses

Voluntary Program – need to enroll for the service Most eligible people do enroll Funding comes Primarily from enrollee premiums and copayments Pays monthly premium deducted from Social security benefits Also annual deductible and coinsurance Pay 20% of all incurred costs – Medicare pays other 80% Additional funding – general tax revenues

o These pay 65% of the costs not covered by premiums + copaysMedicare+ Choice

The Balanced Budget Act 1997 created a 3rd component This addresses how the covered services are delivered to enrollees and

increases the number and type of organizations allowed to participate in Medicare Successor to the Medicare Risk program

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Initially Medicare available only on FFS – Medicare+ Changes this to o Coordinated Care Plans – CCPs – HMOs (with/without POS) , PPOs and

Provider sponsored organizationso Private FFS – plans – Coverage provided by private insurerso Medicare Medical Savings Account Plans – High deductible catastrophic

insurance policy and a tax preferred medical savings account MSA Purchase a catastrophic healthcare policy with a high deductible and

out of pocket plan not more than $6000 annually HCFA deposits the difference between the specified Medicare payment

and policy premium into the beneficiary MSA Beneficiaries can use the MSA funds to pay the catastrophic policies

required deductible and out of pocket expenses After the beneficiary has paid deductible and out of pocket expenses

out of the MSA funds – the Medicare covered services are paid 100% No new enrollees to MSA plan – Is suspended as of Jan 1st 2003

All Medicare + plans should cover part and part b benefits These plans have federal exemption from state mandated benefits & provider

requirements

Medicare Supplements Deductibles and Coinsurance costs exist FFS Medicare does not pay for prescription drugs, glasses, hearing aids, routine

physical examinations and basic dental services To cover this ‘gap’ between the FFS Medicare and actual cost Not necessary for Medicare+ Choices - they are COMPREHENSIVE benefits packages Two choices Medigap Policies – individual medical expense policies sold by state licensed

private insurance companieso These are developed by the NAIC and are 10 standard policies A – J o Benefits vary by plan, but not by state or insurero Costs can varyo Coverage - Offer balanced policies that include the following

Coverage for Medicare A and Medicare B coinsurance Coverage for 365 hospital days after Medicare benefits end Coverage for the 1st three pints of blood used every year

o Plan A – Simplest and coverage increases in complexity with alphabeto Plan J – All benefits including prescription drugs and preventive care

COBRA – Access to Medicare SELECT – Medicare Supplement that can be used in a PPO to supplement Medicare B coverage but Does not apply to Medicare A benefits

Medicare and Managed Care Introduced cos of the Tax Equity and Fiscal Responsibility Act TEFRA 1982 MCOs enter into contracts with Medicare to provide Part A and/or Part B coverage at

a cost basis or risk basis Cost contracts

o Monthly payments from government for covered services – these based on reasonable cost of delivering the services, but could be adjusted to reflect actual costs

o The MCO accepted NO risk and allowed beneficiaries to use any providero Enrollees were required to pay a large part of healthcare expense through

premiums and deductibleso Could Contract for Only Part B or for both part A and Part B

Only Part B – Healthcare Prepayment Plans (HCPPs) Risk Contracts

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o Monthly payments from HCFA PMPMo Available to federally qualified HMOs and health plans and heath plans

classified as Competitive Medical Plans The above is a federal designation which exempts MCOs from

needing federal qualification as a HMO before entering Medicare

The Balanced Budget Act replaced all TEFRA RISK contracts in 1999 by Medicare+ Choice Contracts – all contracts were phased out by 2002

Medicare+ is the most popular choice now

Service Requirements established by the BBA Enrollment and Disenrollment procedures

o Option to enroll and disenroll from Medicare+ Choice CCPs each montho This was phased out from 1st July 2002 – to an annual periodo If you fail to make a choice – default is traditional FFS Medicare

Utilization of Serviceso Higher incidence – and chronic illnesseso 2-3 times the care of a normal commercial membero Need better UM / communications / IS and personnel

Benefits Packages – BBA mandates thato Access to 24 hr emergency serviceso Coverage for unforeseen non emergency services outside plan service areao Coverage for renal dialysis treatment outside service areao Extended coverage of preventive benefits – including annual prostate cancer

screenings to males > 50 and older mammograms / pelvic exams and pap smears – with Part B deductibles waived

o Out Patient self Management training services & equip for diabetic patientso Coverage for bone density exams for high risk peopleo Vaccine outreach program for seniors

Total Care Management Approach includeso Prevention and Early detection of disease – identify potential conditions/

promote effective chronic illness care/ delay disabilityo Coordinated Patient Care – CCPs place primary care at the center of the

delivery system and focus on managing patients care at all levelso Alternatives to inpatient hospitalization for acute and chronic needs –

use case management and disease management programs – home health / step down units / community based services

o Coverage for services not available under Part A and Part B

Quality Assessment and Improvement

Quality Review – Need to do this periodically as part of the Healthcare Quality Improvement Program. This is initiated by HCFA to improve quality of care

o Agree to a quality review and improvement organization called Peer Review Organization for each Medicare Plan they operate

o Peer Review Organization PRO is a organization or physican group that iis paid by the federal govt to review the serices of other practitioners and monitor the quality of care to Medicare patients

o This review could be waived if a plan has excellent quality record and complies with Medicare+ Choice requirements

o Plans are deemed to have met these requirements if they are accredited by an organization that meets HCFA standards

Performance Management

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o Quality assessment programs – CCPs should report results to HCFA on HEDIS measures that apply to a Medicare Population

o Includes – Flu vaccinations, mammography screenings, diabetes retinal screenings, smoking cessation programs

o Also submit CAHPS data to HCFAo HCFA - Health of Seniors Survey to measure patients functional status o HCFA has developed a Health Plan Management System – a database of

information on Medicare Part A and Part B recipients who are enrolled in CCPso Went into effect in 1998

Quality Improvemento 1996 HCFA established the Quality Improvement System for Managed Care

(QISMC) to strengthen MCO’s efforts to protect and improve the satisfaction of Medicare and Medicaid enrollees

o Requires CCPs to follow series of quality standards and guidelines Operate a quality assessment and performance improvement program

that achieves demonstrable results Collect performance data using standard measures of health quality Comply with admin structures and operational requirements for quality

of careo HMOs PPOs PSOs are expected to satisfy thiso MSA and PFFS have to meet a subset of these standardso PPOs are required to meet only those standards which apply to PFFS and non

network MSAs Came into effect in 1999

Medicaid Title XIX of the Social Security Act of 1965 – Medicaid Joint State and Federal Program that provides hospital expense and medical expense

coverage to low income population and certain aged and disabled individuals The guidelines have been established through HCFA – and partial funding for the

states is provided and minimum eligibility standards and provider participation and reimbursement

Program Funding Federal Funding is based on Per capita income in each state Payments range from a minimum of 50% of total Medicaid costs to 83% of

total costs – with poorer states receiving a higher percentage of funding Individual states contribute additional funds and determine the reimbursements for

individual providers and health plans

Eligibility Requirements Grafted into the state Welfare Program and Eligibility was based on monthly income

and financial resources Individuals who received Medicaid benefits because of their welfare status and were

classified as Categorically Needy Individuals – These includeo Children and low income adults who qualify for Aid to Families with Dependent

Children (AFDC) benefitso Low income aged / blind / disabled individuals who qualified for supplemental

security income benefits

Medically needy Individuals are those people who meet the financial requirements of categorically needy individuals but whose monthly income exceeds specified maximums

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States could provide coverage for people whose incomes are upto 100% of the federal poverty level or who spent excess income on medical care to reach the threshold

Dual Eligibles - Those elderly people who qualify for Medicare coverage also

New plan which partially replaces AFDA - called Temporary Assistance for Needy Families – TANF

BenefitsFairly comprehensive – Federally Mandated Benefits include –

Physican Hospital services Lab services Home healthcare visits Long term custodial care Others include

o Prenatal Careo Vaccines for childreno Family Planning services and supplieso Nursing Midwifeo Pediatric and family nurseso Rural Health Clinic Serviceso Federally qualified Health center (FQHC) serviceso Ambulatory services of a FQHC that would be available in other settings

States can increase benefits to cover dental /vision / prescription drugsMedicaid is the SECONDARY payer of benefits

Medicaid and Managed Care Pre BBA contract to three types of organizations

o MCOs and health insuring organizations , Prepaid Health Plans, and Primary Care Case manager programs

o HIO is an organization that contracts with state Medicaid agency as a fiscal intermediary – does not provide services directly

o Primary Care Case Manager – PCP who contracts with the state to provide case management services – receive a case management fee plus a reimbursement for medical services on FFS basis

Post BBA – Included Provider Sponsored organizations Most used plan type – Comprehensive MCO

Some states make managed care enrollment Mandatory through waivers provided under Section 1915(b) and Section 1115 (b) Waivers – “Freedom of Choice” waivers allowed states to manage Medicaid recipients access to providers by assigning recipients to a Primary care Case Manager. The Goals was to reduce emergency department use, increase preventive care and improve overall effectiveness by fostering a close physician patient relationship between PCP and Medicaid Patients.

Section 1115 waivers allow the state to offer more comprehensive services to specified categories of Medicaid recipients through demonstration projects

BBA – no need for mandatory enrollment of Medicaid recipients in managed care programs – No need to submit formal applications for section 1915(b) and section 1115 waivers

Existing waivers and demonstration projects that started as a result of Section 1115 Waivers are still an integral part of Medicaid managed care

In place of waivers – states that wish to mandate managed care enrollment must give Medicaid recipients a choice of enrollment options.

Enrollment in non rural areas given a choice of at least 2 managed care plans.

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Enrollment in rural areas must be given a choice of at least 1 PCCM MCOs and PCCMs that contract with Medicaid to provide healthcare services to Medicaid recipients must satisfy BBA mandated contractual and quality requirements

Contractual Requirements BBA imposes contractual requirements on organizations Eligibility

o BBA grants states the authority to provide Medicaid coverage to individuals in expansion populations

o Expansion populations include individuals who do not meet categorically needy or medically need criteria – this could include

Children eligible for medical benefits under the State Children’s Health Insurance Program (SCHIP)

Individuals who do not satisfy federally eligibility criteria and do not qualify for federal funding – can provide out of state funds

Elderly individuals eligible for long term care under Programs of All Inclusive Care for Elderly – (PACE)

Initially set up for Medicare beneficiaries but now its scope is extended to Medicaid eligible enrollees

Individuals are not required to be enrolled in Medicare to receive these benefits

Access to services o Adequacy of Network / hours of operation / location / referral to providers / no

discrimination against enrollees based on health statuso Need significant outreach to connect to PCP rather than emergency rooms for

primary careo PCCM / availability of extended Primary care hours, expanded out patient

hospital facilities , transportation arrangements to PCP operations, are some methods used to reduce over-utilization

o Other things include child care, early detection of diseases Benefits

o Unique features – Provision of early and periodic screening, diagnostic and treatment services for children under 21

Early and periodic screening, diagnostic and treatment (EPSDT) services cover vision hearing , dental services

Reimbursement for Providerso Accept Medicaid payment as payment in fullo Nominal out of pocket expenseso No copay for emergency services and pregnant women, children < 18,

hospitals or nursing home patients, or categorically needy HMO enrollees Marketing Practices

o Direct and individual – community service agencieso Independent third parties enroll plan memberso Need state approval for distributing marketing informationo No Door to door or telephonic solicitation

Quality Assessment and Improvemento QISMC from Medicare Applies here alsoo This is not mandatory for Medicaid MCOs – depends on state lawso Can accept accrediting by private agencies

Programs for All inclusive Care for the Elderly (PACE) Grants waivers of certain Medicare and Medicaid requirements to a limited number

of public and non profit community based organizations providing integrated care to the elderly.

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o Comprehensive long term and acute care to individuals > 55 years and nursing certifiable based on the patients care and needs

o No limits on the amount ,duration, scope of service and requires no deductibles, coinsurance, copayment or other cost sharing features

o 24x7 Accesso BBA granted this permanent program status and an optional for Medicaid

State Children’s Health Insurance Program BBA established the state children’s health insurance program

o Designed to provide health assistance to uninsured, low income children either through separate programs or through expanded eligibility under state Medicaid programs

If the state has separate program o Benchmark Coverage

Equivalent to standard BCBS PPO under the federal employee health benefits program

A health benefit plan that is offered and generally available to state employees or

HMO plan with he largest commercial enrollment in the stateo Benchmark Equivalent Coverage

Aggregate actuarial value at least equivalent to one of the benchmark packages and must include basic services like in patient and out patient services, labs , xrays, well baby and well child care, including immunizations

o Existing Comprehensive State based Coverage Range of benefits funded and administered by the state

o Secretary approved coverage Any coverage tat the secretary of the DHHS approves

No favouring of richer kids No preexisting conditions exclusions States need to file a State Child Health plan with the Secretary of HSS – Funding is based on the total number of uninsured low income children in the state

and geographic cost factors SCHIP available to children who meet

o Under 19 years oldo Not currently eligible for Medicaid or other insuranceo Resides in a family with income below the 200% of the federal poverty level or

50% points above the states established eligibility limits

Federal Employee Health Benefits Program Voluntary health insurance program for federal employees, retirees, and their

dependents Administered by the Office of Personnel Management Choice of FFS or MCO to 10 million people 15 FFS health insurance plans and 350 MCOs participating in this Largest employer sponsored group healthcare plan in the US Need to meet federal and state licensing agreements Satisfy OPM requirements on access of care, benefit design and patient safety Some provisions

o Federal requirements on maternity under Newborns and Mothers health protection act

o Pregnancy is not a preexistingo Mental health parity acto Meet Womens health and Cancer Rights Act

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o Develop patient safety initiatives

Tricare Military Health System – Worldwide healthcare system operated by the US DoD Integrates the service delivery of healthcare services for active duty personnel,

retirees and families of the same Active personnel get treated through – Military Treatment Facilities – Army, Navy,

AirForce, Coast Guard Operate – Exist in 11 TRICARE regions in US and 3 overseas TRICARE was called CHAMPUS

o Integrates the Military and Commercial networks Managed by TRICARE Management Activity (TMA) Coverage

o Most inpatient and outpatient services, physicians and hospital charges, medical supplies and equipment and mental health services

Three Planso TRICARE Standard – FFS – use authorized providers or non network providers

Deductible and Coinsurance Out of pocket under this are higher than other options

o TRICARE Extra – Reduced FFS plan similar to the network part of PPO Deductibles and coinsurance In network costs are lower than out of network Out of pockets lower than TRICARE standard No need to enroll to participate in TRICARE extra

o TRICARE Prime - enrollment based MCO to provide care using a Primary care Manager – similar to PCP –

No out of pocket for military doctors Services from civilian providers have copayments

o Active Duty personnel are automatically in TRICARE prime – while their dependents and eligible retirees are covered under TRICARE prime only if they enroll

o Retirees and family need to pay enrollment feesManaged Care Features

Preventive Care , self care and decision support programs Utilization Management

o Reviewo Discharge planningo Disease/condition management o Demand Management

Case Management – broad spectrum case management - needs of groups along the entire healthcare continuum

BCM includeso Population based case managemento Disease Management approacho Care Coordinationo Individual Case Management:

Appeals and Grievances Quality Initiatives Accreditation and Performance measures

Worker’s Compensation State mandated program that provides healthcare benefits for costs and lost wages

to qualified employees and dependents in case the employee is injured Every state has this and 47 states require that employers offer this Employers purchase workers compensation insurance

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It is mandated that coverage be provided for all employees including part time workers

No deductibles and Coinsurance – Do not specify a life time maximum benefit for medical costs Can’t limit provider choice for work related ailments ONLY BENEFITS for work related injuries Employers are NOT allowed to deny liability if they are not at fault In exchange for this – need employees to comply with – Exclusive Remedy

Doctrine – they can’t sue employers for additional amounts Additional Benefits – Workers Compensation Indemnity Benefits – for loss of pay

Manage Workers Compensation 24 hour Coverage – Employers group health plan, disability plan and workers

compensation program are merged and integrated (or coordinated) depending on a states regulation into a single Health benefit plan that covers employees 24 hrs/day

Advantage : This helps in coordination of claims processing Disadvantage: Administrative cost of coordinating separate plans is often handled by

different departments – need to work with employers benefits department and risk management department

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12. Ethical Issues in Managed Healthcare

Reading 12A: Introduction to Ethics in Managed Healthcare Define ethics and explain the difference between ethics and laws Describe some ways that MCOs can foster an ethical corporate cultureReading 12B: Ethical Issues in Managed Healthcare Explain the Patient Bill of Rights Discuss some of the ethical issues MCOs are currently confronting

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Reading 12A: Introduction to Ethics in Managed Healthcare

Ethics are not the same as laws - Both Reflect the values of the Community but laws are enforceable while ethics are not

Hippocratic Oath – Patient above all else5 Key Principles1. Autonomy – The patients should be able to make decisions on their lives2. Non-Maleficence – MCO’s can’t harm their patients3. Beneficence – Promote the good of the members as a group4. Justice/Equity – Fairly distribute the benefits and burdens among members5. Promise Keeping/Truth telling – be truthful!

Further Virtue

Creating an Ethical Corporate Culture1. Better communication between entities2. Honor codes3. Educating members on the system4. Educating employee/providers and members about the issues5. Policies or procedures which provide guidance when confronted with ethical issues6. Culture where ethical considerations are integrated into decision making7. The contracted organization must have similar systems in place8. Make a formalized method for managing ethical conflit – ethics task force or bioethics

consultant

Reading 12B: Ethical Issues in Managed Healthcare

1. Patients Bill of rightsa. Information , choice , access , participation , respect and non discrimination,

confidentiality , complaints , responsibilities2. 5 issues to take care of

a. Resource Allocation – fair/equitableb. Financial Incentives to providersc. Clinician Patient Relationshipd. Confidentialitye. Employee trust

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Key Concepts Tested in Sample Test Case Mixed Adjustment or Risk Adjustment – Statistical adjustment of the

outcome based on factors like patient’s age and seriousness of patient condition Adverse Event Cost Shifting Receivership – state commissioner takes control of assets and liabilities – primary

goal is to rehabilitate the organization COA – Need proof that MCO has met the state licensing requirements, specified

quality standards and also financial standards on net worth, capital, liquidity and accounting standards – initial net worth of 1.5 million Dollars

HMOs needs to be licensed in each state it does business in and MOST HMOs are subject to state enabling statutes and requirements of the state department

Pooling – Grouping a large no: of small groups- Experience rate and offering lower premiums to all small groups

JCAHO – evaluate central office and non JCAH) accredited networks, all high risk services provided and a sample of the practitioners offices and records

Hospitals receiving Medicare Funds must be JCAHO accredited JCAHO places organizations on a accreditation watch when a sentinel event occurs

and root cause analysis and corrective action have not been completed in time WHCRA – does NOT require plans to have mastectomy benefits but does

require medical and surgical benefits for mastectomy to provide coverage for reconstructive surgery following mastectomy

HCQIA – exempts hospitals, group practices and HMOs from certain antitrust provisions as they apply to credentialing and peer review so long as these entities adhere to due process standards that are outlined in the HCQIA

NMHPA – 48 hrs min for child birth and 96 hours min for cesarean – Does not require group plans to have maternity benefits but regulates those which do

Therapeutic – different chemical entity and same class – needs physician approval Generic – same chemical composition - no physician approval GLB – Disclose privacy policies / notify customers if info is shared / opt out provision GLB – Financial information – NAIC amendment Health Information also HIPAA – preexisting condition cannot be excluded from coverage 12 months after

enrollment – 18 months for late enrollees The CREDITABLE coverage reduces this preexisting condition limit and can make it

zero – if he has stayed for a year HMO Act - Network adequacy / Quality Assurance / Grievance Procedures Process – Methods and Procedures that an MCO uses to Furnish Care Structure - Measures of healthcare performance that relates to the nature, quality

and quantity of resources that an MCO has Outcome - Extent to which the MCO succeeds in improving or maintaining

satisfaction and patient health Non Duplication of Benefits Provision TPA – Get COA from the state insurance department and not federal Federal Qualified HMOs cannot use Retrospective Rating 1995 – NAIC Small Group Act Amendment Eliminated class rating rules and required

plans to use ACR for small groups Pure & Std Community rating are the same thing – ONLY GEOGRAPHIC DATA Messenger Model IPA Medicaid PCCM Programs are exempt from HCFA’s Quality Improvement System

for Managed Care Standards Indemnity Wraparound Option – Out of plan product that a health plan offers

through an agreement with an insurance company – In some states HMOs can offer POS ONLY as an indemnity wraparound option

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Documents

AHM 250 Summary