Managed Care

1. Managed Care Aaron Liberman, Ph.D.

2. Overview of Managed Care

3. Techniques of Managed Care vs. Organizations Performing Managed Care Functions • Techniques • Financial incentives for providers • Promotion of wellness • Early identification of disease • Patient education • Self-care • Utilization management (UR, QI, QM)

4. Techniques of Managed Care vs. Organizations Performing Managed Care Functions • Organizations • HMO • PPO • EPO • POS Plan • Self-Insured & Experience Rated HMO • Specialty HMO • Managed Care Overlay to Indemnity Plan • PHO

5. Stages of Managed Care • Early Years: Before 1970 • 1792 Shippers of Boston • 1910 Western Clinic of Tacoma Wash. • 1929 Baylor Hospital’s Prepaid Plan for Teachers (BCBS) • 1932 AMA Adopts Stand Anti-Prepaid Group Practices

6. Stages of Managed Care • Early Years: Before 1970(cont.) • 1937 Kaiser Foundation Health Plans • 1937 Group Health Association • 1944 HIP of New York • 1947 Group Health Coop of Puget Sound • 1954 First Individual Practice Association

7. Stages of Managed Care • Early Years: Before 1970(cont.) • Trends • Providers wanted to ensure flow of patients & revenues • Employers began using prepaid plans • Consumers sought access to improved & affordable healthcare

8. Stages of Managed Care • Adolescent Years: 1970-1985 • 1973 HMO Act • Problems with Federal Legislation

9. Features of the 1973 HMO Act • Grants and loans to start HMOs • State laws against HMOsoverridden • Dual choice provisions • Indemnity vs. HMO • Employers with 25+ employees must offer 2 HMO plans for every indemnity plan offered

10. Features of the 1973 HMO Act • Process to become federally qualified • Minimum benefit package • Adequate provider network • QA system in place • Standards of financial stability • Enrollee grievance system

11. 1973 HMO Act: Importance of Federal Qualification • Good Housekeeping Seal • Use as a marketing tool • Dual choice = access to employer market • Preemption of state insurance oversight • Required for receipt of federal grants

12. 1973 HMO Act: Problems with Federal Legislation • Compromise between Liberals & Conservatives in Congress • Liberals wanted National Health Insurance • Goal was to increase access to those without access • Conservatives wanted competition • Goal was to promote plans which gave physicians incentives to constrain costs

13. 1973 HMO Act: Problems with Federal Legislation • Result of the compromise was an open enrollment & community rating system • HMOs were required to accept all enrollees without regard to their health status • Limited the ability of HMOs to relate premiums to health status

14. 1973 HMO Act: Problems with Federal Legislation • Federal government was slow in issuing implementation regulations • Results of regulation attempts = failures of initial HMOs

15. Stages of Managed Care • Coming of Age: 1985-Present • Innovation • Maturation • Restructuring

16. Innovation • PHO as a Contracting Vehicle • Increased negotiating power of providers • Development of Carve Outs • Separated the reimbursement of specific specialized services • Advances Computer Technology • Increased efficiency • i.e. generation of reports, processing of claims

17. Maturation • HMO & PPO growth • Increased enrollment • External Quality Oversight • NCQA (most credible), URAC, AAAHC, JCAHO • Report Card System • Performance measurement systems • i.e. quality, outcomes, etc. • Focus on Cost Management

18. Restructuring • Interplay between managed care & delivery system • Dominance of primary care physicians • Consolidation

19. Health Care Reform

20. Factors Driving Health Policy Formation • U.S. Budget & Deficit / Surplus • Medicare Trust Fund Shortfall • State Budget Shortfalls • Business Profits & Growth • Excessive • Public Demand & Appetite for Change

21. Medicare Payment Policies • Packaged Pricing • Case rate method = DRGs • APCs vs. RBRVS • Risk Based Contracting • Fixed monthly amount • Provider Sponsored Organization (PSO) • Provider-based integrated delivery system

22. Medicaid Payment Policies • Medicaid Managed Care Plans • PCCM • Summary of Principal Efforts • Arizona effort • Virginia effort

23. Ethics in Managed Care(Fraud, Abuse & Emergence of Federal Legislation) • Relationship to Managed Care • Who are Managed Care Stakeholders • Historical Perspective on Federal Legislation

24. Historical Perspective: Federal Legislation • Hill Burton Act 1946 • First National Mental Health Commission • CMHC Acts 1963 • Social Security Act 1965 (PL 89-97) • Medicare (Title 18) • Medicaid (Title 19)

25. Historical Perspective: Federal Legislation • CHP (PL 89-749) • RMPs (PL 89-239) • PSROs 1972 (PL 92-603) • HMO Act 1973 (PL 92-222) • NHRPD Act 1974 (PL 93-641) • ERISA 1974

26. Historical Perspective: Federal Legislation • OBRA 1981 • Medicare & Medicaid HMOs • TEFRA 1983 • PPS • DRGs • Peer Review Improvement Act 1982 • PSROs • PROs

27. Historical Perspective: Federal Legislation • DRGs 1985 • COBRA 1985 • Anti-dumping of patients • HCQIA 1986 • National Health Practitioners Data Bank • OBRA 1987 • Nursing home quality care

28. Historical Perspective: Federal Legislation • TEFRA 1988 • Medicare catastrophic coverage • Expanded Parts A & B • CLIA 1988 • Lab standards classifying the complexity of labs • Medicare Coverage Repeal Act 1989 • Congressional back peddling

29. Historical Perspective: Federal Legislation • OBRA 1989 • Physician Payment Reform • Resource Based Relative Value Scales (RBRVS) • HIPAA 1996 • Portability of coverage • Restrictions on use of preexisting condition limits • Establishment of MSAs

30. Contemporary Realizations • Limits on material resources • Limits on health expenditures • Limits on life saving devices • Choices must be made • Oregon legislation • Honest business practices required

31. Compliance: Federal Statutory Requirements • Purposes of Compliance Programs • Detect & prevent violations • Identify areas of vulnerability • Reduce vulnerability

32. Compliance: Federal Statutory Requirements • Objectives of Compliance Program • Decrease risk of culpable actions by employees • Reaffirm key organization themes • Quality • Superior Service • Cost effectiveness • Meet legal & statutory requirements

33. Compliance: Federal Statutory Requirements • Seven Key Steps for Compliance Programs • Establish compliance standards & procedures • Appoint a Corporate Compliance Officer • Delegate discretionary authority • Monitoring, auditing, & reporting • Use of employee hot line

34. Compliance: Federal Statutory Requirements • Seven Key Steps for Compliance Programs(cont.) • Communicate standards to employees • Consistent appropriate disciplinary procedure • Consistent appropriate responses to violations

35. Excesses of Managed Care Organizations as Reflected in State Actions to Limit Powers • 14 States: Guaranteed issue & renewal for individual insured • 37 States: Guaranteed I & R group market • 33 States: Restrict pre-ex limits • 20 States: Authorized MSAs • 10 States: Laws increasing consumer access to ER services • 13 States: Require range of added services

36. Excesses of Managed Care Organizations as Reflected in State Actions to Limit Powers • 15 States: Prohibit Gag Rules • 17 States: Direct access to OB/GYNs

37. What About the Immediate Future • Legislation on Patient Bill of Rights • Personal Responsibility of Insureds • Individual Ethical Code

38. Types of Managed Care Organizations

39. HMO • Both an Insurer & a Delivery System • Primary point of differentiation among HMOs: • How the HMO relates to its physicians

40. HMO • Staff HMO • Doctors are employees • Form a closed panel • Advantage: • Easier to control • Disadvantages: • Costly & expensive • Limited choice of doctors • Productivity problems

41. HMO • Group Practice HMO • Contracts with groups of doctors to provide all services to members • Doctors are not employees of the HMO • Captive vs. Independent Model • Captive = doctors provide services exclusively for the HMO • Independent = doctors provide services for both HMO & non-HMO patients

42. HMO • Group Practice HMO (cont.) • Advantages: • Easier to conduct UM • Lower capital needs than Staff Model • Disadvantages: • Limited choice • Limited locations • Perception of inferior care

43. HMO • Network HMO • Contracts with more than one practice to provide services • Advantage: • Broader physician participation • Disadvantage: • Still limited choice

44. HMO • Individual Practice Association (IPA) • Contracts with an association of doctors • Advantages: • Less capital requirements • Broad choice of doctors • Marketing advantages • Disadvantages: • IPA becomes a de facto union for doctors • UM is difficult because doctors have remained in private practice

45. HMO • Direct Contract HMO • Works directly with large number of doctors • Advantage: • Eliminates possibility of physician bargaining unit by contracting directly with each doctor • Disadvantages: • May assume too much financial risk on behalf of doctors • Difficult to recruit doctors because no clear cut leader

46. PPO • Common Characteristics of PPOs • Select provider panel • Negotiated payment rates • Typically discounted 20-60% • Rapid payment terms • Utilization management • Failure to comply with plan requirements = financial penalty to physician • Consumer Choice • Higher cost sharing if choose non-panel physician or hospital

47. PPO • Advantages: • Independence of providers & consumers • Flexibility of plan • Disadvantages: • Little cost control • Lack of provider concern for fiscal integrity of purchaser

48. EPO • Like PPO except patients may only use panel providers • Advantage: • Control over provider behavior • Disadvantages: • Potentially greater liability exposure for EPO • Disaffection of plan providers

49. POS Plans • Uses primary care physician as gatekeeper • Primary care physicians are capitated • Withhold is prominently used • Member can use non-panel provider but will pay much higher deductible

50. POS Plans • Advantage: • Choice accorded patients • Disadvantages: • Added cost to patients • Lack of cost & underwriting control for POS Plan