The HMO Story

1. The HMO Story Emmanuelle Mirsakov Pharm.D. Candidate 2007 USC School of Pharmacy 12-1-06 USC

2. What is an HMO? • Health Maintenance Organization (a type of managed care organization) • An organization that provides comprehensive health care to a voluntarily enrolled population at a predetermined price. • Contract directly with physicians, hospitals, and other health care providers • Providers offer their services at a discounted rate, in exchange, HMOs offer referrals • HMOs emphasize preventative care USC

3. General Overview of How It Functions • Members pay fixed, periodic (usually monthly) fees directly to the HMO and in return receive health care service from the HMO’s network of providers. • Out-of-pocket expenses are typically limited, as long as the member uses providers in the HMO’s network. • Most HMOs use Primary Care Physicians (PCP’s) as gatekeepers • Most HMOs cover basic health services such as physician services, inpatient/outpatient hospital services, emergency visits, referral services, laboratory services, and more. USC

4. Why and When Were HMOs Developed? • Informal HMO structures existed as far back as 100 years ago • HMO Act of 1973 passed by Congress. • The governments attempt to move toward more disciplined control of health care spending and utilization of service • It set requirements for federal qualification and provided for grants and loan guarantees for planning, development, and initial operating costs for those HMOs that met the qualifying standards. • Encouraged enrollment among the public by establishing criteria for HMOs seeking federal qualification USC

5. HMO Act of 1973 • 4 primary attributes: • Feasibility grants and low-interest loan programs made available to encourage interested parties to develop and build HMOs • The establishment of procedures through which health plans would become “federally qualified HMOs” • Inclusion of preventative as well as curative health care benefits • Requirements that employers offer federally qualified HMOs to their employees under certain circumstances USC

6. Who Develops HMOs • Employers • Labor unions • Medical schools • Hospitals • Medical clinics • Insurance companies USC

7. What Are The Different Types of HMOs? • HMOs are organized on a physician basis • 5 types: • Group model • Staff model • Network model • Independent practice association (IPA) model • Mixed model USC

8. What Are The Different Types of HMOs? • Group model: • Contracts with one independent group practice of multispecialty physicians to provide health services, with care usually billed to the HMO on a fee-for-service basis (e.g. Kaiser Permanente) • Physicians are employees of the group practice and are generally limited to providing care for the HMO enrollees • Staff model: • Delivers health services through a physician group that is controlled by the HMO. The physicians are basically employed and paid by the HMO (e.g. Group Health Cooperative of Puget Sound) • The physicians practice in HMO owned facilities and primarily only see the HMO enrollees • Pharmacy services are through in house facilities or through network pharmacy mail order USC

9. What Are The Different Types of HMOs? • Network model: • Contracts with two or more independent group practices (no solo practices) to provide health services (e.g. Health Insurance Plan of Greater New York) • Pharmacy services are provided through in-house pharmacies, a contracted community network of pharmacies, and mail order. • IPA model: • Contracts with physicians from various settings (individual physicians or a mixture of solo and group practices) to provide health services; contracts with community hospitals, laboratories, diagnostic centers. • It is a loosely affiliated group of physicians organized to contract with HMOs and other managed care organizations • The HMO has no medical facilities of their own • Mixed model: • Combines elements of the other models USC

10. What is the Payment Structure?Providers • Fee-for-service • For each unit of service provided, an associated fee is billed • Capitation • Health care providers are paid a fixed amount per member per month regardless of which services (if any) are provided [ adjusted for age and gender] • Pre-paid health plans • Employers pre-pay for expenses their employees will incur by paying a fixed monthly premium to an insurer. Physicians are then paid on a fee-for-service bases • * Take home message: with HMOs it is the health care provider that assumes the risk USC

11. What is the Payment Structure?Patients • Premiums • Deductibles • A cost management tool • Requires patients pay up to a certain amount out of pocket before the insurance pays • Co-payments • A small fee charged for services or medications USC

12. Legal Aspects of an HMO • To be federally qualified, an HMO must be organized and operated and provide health services as prescribed by the law • Please see handout on standards • The HMO Act also mandated that employer contribution must be reasonable and assure employees a fair choice among health benefit plans • HCFA (Health Care Financing Administration) has a final rule for employer contributions to HMOs • Many states have laws meant to promote HMO development while ensuring the quality of care delivered by HMOs USC

13. State and Federal Laws • State laws: • Health plans are covered under the Department of Insurance (DOI) • Some Federal laws: • Employee Retirement Income Security Act of 1997 (ERISA) • Health Insurance Portability Act of 1996 (HIPPA) • Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA) • Omnibus Budget Reconciliation Act of 1993 (OBRA ’93) USC

14. HMO vs. PPO • PPO: Preferred Provider Organization • An organization that arranges contracts between a select group of health care providers and purchasers of health care, but is itself neither a provider nor a purchaser • Payment is on a fee-for-service rather than a capitated basis • Strict utilization controls are combined with flexibility in benefit design and freedom of choice with respect to providers USC

15. HMO vs. PPO USC

16. USC HMO Advantages and Disadvantages

17. Medicaid and Medicare HMOs • In 1982 the Tax Equity and Fiscal Responsibility Act (TEFRA) was passed • Led to Medicare risk contracts, a way for government to introduce HMOs to control the health care costs for Medicare • Medicaid also offers HMO options • Most state managed care Medicaid programs have concentrated on moving only those recipients who qualify under the TANF regulation (young, healthy, female patients with small children) USC

18. Pro Pharma • Survey of Pro Pharma employees: • What is an HMO? • What happens to a patient who has an inadequate primary care physician? • Will an HMO cover emergency services? • Why do some HMOs we deal with here limit the pharmacy you can go to, while other HMO plans do not? USC

19. The Moral of The Story • HMO plans have very strict guidelines, and restrictive coverage • A well-designed HMO model could be a large cost saver for employers • It is important to understand the big picture of HMOs because Pro-Pharma acts as a consultant for many HMO plans (e.g. BCBSRI; Blue Cross Blue Shield Rhode Island) USC

20. USC USC Don’t Let HMOs Make You Cry! 'In sickness and in health? I'll need to run that by my HMO...' USC

21. USC Do you have one saying ‘good luck getting your HMO to pay your claim?’ "I'm referring you to a specialist who knows how to deal with HMO's." 'Do you have one saying 'Good luck getting your HMO to pay your claim'? I’m referring you to a specialist in how to deal with HMOs USC

22. USC Go USC !!!!! Teach the Bruins a Lesson!!!! USC USC USC USC USC USC USC U S C USC USC USC USC USC USC USC USC USC USC USC USC