Managed Care

1. Managed Care

2. What is Managed Care? • Some say: • Patient health is being managed • Physician behavior is being managed • Patient behavior is being managed • Health care institutions are being managed

3. What is Managed Care? • All are correct • In managed care, everything is being managed by the managed care organization (MCO)

4. Managed Care • In the broadest terms, Kongstvedt (1997) describes managed care as a system of healthcare delivery that tries to manage the cost of healthcare, the quality of that healthcare and access to that care.

5. Managed Care • A “managed care” system defines the framework within which a service system’s three principal players (the payer, the service providers, and consumers) interact. • A “managed system” is distinguished from an “unmanaged system” by defining these interactions globally rather than in a piecemeal fashion. • A managed system is organized to achieve key goals and objectives in a systematic fashion. • These goals and objectives typically include cost containment, improved productivity, and better targeting of resources.

6. Characteristics of Managed Care • Managed care is a system that integrates the financing and delivery of appropriate medical care by means of: • Contracting selected MDs & hospitals to furnish comprehensive care • Setting a predetermined monthly, premium fee for services, • Incorporating financial incentives to encourage patients to use only resources in the plan. • Having physicians assume some financial risk for their work --thus the role changes from advocacy to allocation (gatekeeper), and • Monitoring health care providers for quality assurance and utilization management.

7. Managed Care Organizations (MCOs) • MCOs are formal arrangements whereby distinct organizations are made responsible for managing a network of services and supports and are accountable for network performance. • These operational responsibilities are separate and distinct from the policy-level responsibilities of the public agency charged with governing the system. • As a rule, managed care organizations are responsible for keeping spending within established limits.

8. Managed Care Organizations (MCOs) • In health care, the MCO plays a pivotal role in the implementation of managed care. • It manages the delivery system on behalf of the payor by delivering essential health care services at a cost the payer can afford. • In order to play this role, the MCO must serve as a conduit through which all funds are channeled. • The MCO organizes the supplier network, imposes rules on its operation, and serves as the service system’s fiscal intermediary. • Usually the MCO receives a fixed amount of money from the payer to perform these functions and, thus, has a strong economic interest in being a tough negotiator with suppliers, ferreting out over-utilization, and improving system-wide productivity.

9. Characteristics of Managed Care Plans Versus Traditional Indemnity Insurance

10. Common characteristics of managed care plans

11. Common characteristics of managed care plans

12. Differences Between Managed Careand Fee-For-Service Coverage • The most important characteristic that distinguishes managed care from other forms of health insurance is the active influence on medical decision-making through: • Dissemination of clinical guidelines, • Pre-authorization programs for referrals, admissions, and diagnostic testing, • Creation of limited provider networks whose members agree to adhere to the practice standards developed by the plan.

13. Managed Care Organizations

14. Managed Care Organization Continuum • Managed care plans are sometimes described as either loosely or tightly managed, indicating how much they actually manage the care of their members.

15. Managed Care Organization Continuum • A loosely managed program might allow a member to: • Receive specialty care without approval from his/her PCP, • Seek care from a physician who is not part of the plan’s network and have the care at least partially paid for by the plan benefit, • Obtain care at urgent care centers without preauthorization.

16. Managed Care Organization Continuum • A tightly managed program however, would require a member to: • Select a PCP from providers affiliated with the health plan, • Seek routine care from his/her PCP, • Seek prior authorization for urgent/emergent care that is not life threatening, • Request referral for specialty care services from his/her PCP.

17. Managed Care Continuum Use of Managed Care Techniques Less More Traditional Indemnity Health Plan Traditional with Cost Containment POS PPO HMO

18. Types of Managed Care Organizations • HMOs (Health Maintenance Organizations) • Group • IPAs (Independent Provider Associations) • PPOs (Preferred Provider Organizations) • POS (Point of Service Plans)

19. Health Maintenance Organizations (HMOs) There are 2 types: • One group of HMOs consists of MDs who contract with an HMO • Doctors sign up and work exclusively for HMO • Patients enrolled in HMO must use their own or contracted facilities for health care • Patients can only see HMO’s health care providers

20. Health Maintenance Organizations (HMOs) • Independent practicing MDs join an association (IPAs) which contracts with an HMO (most MDs are here) • These doctors retain their own individual practices (have own offices) • They are reimbursed via capitation* or at a discounted rate for health services

21. HMOs • The HMO is generally the most tightly managed form of managed care. • This term describes a plan in which routine care is provided exclusively by physicians who are affiliated (or contracted) with the plan. • In most HMOs, primary care providers may act as “gatekeepers” and be required to approve all ancillary services. • Prior authorization may also be used to review non-emergent or non-urgent procedures and services. • This usually means that a request is sent to the health plan for a procedure or service before it occurs, allowing the plan time to review the request and determine if it is a covered benefit under the member’s policy and meets clinical guidelines for care. • If the plan does not feel the service is medically necessary or if it does not fall within the benefit structure, payment could be denied.

22. HMOs • It is important to note that the MCO is not saying the patient cannot have the care or service, simply that it will not be paid for under their benefit.

23. PPOs • PPO describes an organization where independent physicians agree to provide services at discounted rates. This differs from an HMO because in PPOs contracts are not generally prepaid but are paid as services are delivered.

24. Preferred Providers Organization (PPO) • Group of health care providers contract with an organization to negotiate contracts • Providers are paid at a discount rate (e.g. paid 80%) • Patients enrolled in PPOs do not have gatekeepers and don’t need permission to see a specialist by their PCP • Patients are restricted to a panel of doctors and cannot see anyone outside the health plan • Often times, there is a greater monetary cost to patients/employers (co-payments, deductibles, etc). E.g. Patients may have to pay a $500 deductible before the PPO/ or insurance company “kicks in”

25. Health Care System or Insurance Company Contracts PPO Independent Practitioners Independent Practitioners Independent Practitioners Independent Practitioners Independent Practitioners Independent Practitioners Independent Practitioners

26. Point of Service • Similar to PPO except patients can use other facilities and doctors outside of plan • Cost to patient is much higher than a PPO

27. POS • The Point of Service (POS) product is less tightly managed than the HMO, allowing members to choose whether they will go to a provider within or outside of the plan’s established network at the time medical services are needed. • The member will generally pay a larger co-pay or percent of the total cost for care provided outside of the network. • This plan structure was originally created as a transition product to move patients from indemnity to managed care coverage with a higher level of comfort about their ability to seek care from a wider variety of providers. • However, it has become one of the most popular managed care plan structures as Americans continue to equate choice with quality in healthcare.

28. Practitioners May Contracts With Many Insurance Plans or MCOs Independent Practitioner MD, Dentist, Pharmacist PPO #1 PPO #2 PPO #3 HMO #1 HMO #2 HMO #3 POS #1

29. The Problems With Contracting • Health professionals such as doctors often contract with a number of HMOs and PPOs. • This is why they often ask you, as the patient, what type of insurance (MCO plan) you have. • Each plan has its own restrictions on care and reimbursement scale. So this can be very confusing and time consuming to those who work in the provider’s office.

30.     Specialist Specialist Hospital Hospital  PCP Indemnity Insurance 80% 80% 80% 80% 80%

31.     Specialist Specialist Hospital Hospital  PCP Indemnity Insurance with Utilization Review Managed Care Plan 80% 80% 80%  80% 80%

32.     Specialist Specialist Hospital Hospital  PCP POS Managed Care Plan 70% 70% 30% 30% 70%

33.     Specialist Specialist Hospital Hospital  PCP PPO Managed Care Plan 80% 80% 0% 0% 80%

34.      Specialist Specialist  Hospital Hospital Referral Admission  FCP HMO Managed Care Plan 0% 0% 0% 90% 90% 0%

35. Outcomes of Managed Care

36. MCOs and Controlling Costs • MCOs do so by controlling • MDs • Patients • Health Care Institutions

37. Managed Care Controls Costs by Controlling MDs Behaviors • Specialists • In HMOs, patient needs a referral by a PCP • Reimbursed via capitation/or discounted fee • Utilization Management- MCOs monitor what resources doctors use—too much expenditure, you’ll hear about it • Quality Assurance- doctors are monitored for how well they do. Patient satisfaction surveys are common ways of evaluating doctors. • Bonuses- doctors may be given bonuses if they do a good job for their work or for saving money (not using too much resources)

38. Managed Care Controls Costs by Controlling Patients • Permission from MD or gatekeeper (HMO) to get treatment • Co-payments • Deductibles • Nurse phone service (prevent access to care) • Need approval for experimental or expensive Rx • Follow rules of MCO’s plan or you will pay

39. Managed Care Controls Costs by Controlling Institutions • For some providers, capitation • DRGs: one fee for everything • Accountability-audits are done to evaluate quality of care • Performance Evaluation- patient satisfaction surveys

40. Studies have shown some outcomes on Managed Care • PPOs don’t save money • HMOs do save money • Patient satisfaction survey results show consumers: • Don’t like bureaucracy • Like low costs for HMOs (compared to PPOs) • Don’t like the idea that MCOs can deny essential care • Public outcry about managed care has caused lawmakers to write laws to protect the consumer.

41. Studies have shown some outcomes on Managed Care • Health outcomes: • basically managed care and “fee for service” (FFS) are comparable in terms of health outcomes. • In some studies, managed care patients do better

42. Patients Satisfaction • One 1997 national survey reported 79% of PPO members, 83% of HMO members, and 81% of POS members were satisfied with their health plan compared to 75% of fee-for-service members.

43. Patients Satisfaction % of Enrollment Plan Type 1996 1999 FFS 26% 9% HMO 33% 28% PPO 25% 38% POS 16% 25% KPMG Peat Marwick, Health Benefits in 1996 Kaiser Family Foundation & Health Research Education Trust, 1999 annual survey

44. Main Questions to Ask

45. Main questions to answer about MCOs: • Whether the MCO will be expected to serve all individuals or whether some will be kept outside the agreement. • A managed care approach can wrap around the full range of persons served in a system or it can be designed only to address the needs of pre-designated populations (e.g., “people who require 24-supervision”) with the needs of other individuals addressed through alternative configurations.

46. Main questions to answer about MCOs: • The scope of benefits, services, and supports that an MCO will be contractually obligated to deliver to individuals. • This benefit package defines the contractual obligation of the MCO to the payor (the state). • In determining the scope of benefits, the payor must decide whether some services/supports will be placed outside the agreement (e.g., “carved out”) and thus be paid for separately.

47. Benefit Structures of Managed Care Products • The typical benefits offered in managed care plans are: • physician services (ambulatory and inpatient), • hospital services, • well-child care (including immunizations), • prenatal care, • periodic health maintenance exams, • some home care services, • emergency services, • diagnostic and laboratory tests.

48. Main questions to answer about MCOs: • The conditions under which the MCO must furnish contracted benefits to its enrollees. • These are sometimes referred to as “care criteria”. • Such criteria may take many forms. In essence, however, they define the core of the system’s response to consumer needs. • These criteria describe the MCO’s obligations under its contract with the payor. • Care criteria also serve as the basis of MCO utilization management activities as well as service substitution strategies.

49. Main questions to answer about MCOs: • The payor must decide whether it will contract with a single MCO or multiple MCOs and the criteria it will use in selecting such organizations. • There are various pros and cons in using a single MCO versus multiple entities.

50. Main questions to answer about MCOs: • The payor can decide to restrict its contracting to nonprofit entities. • It also may impose other requirements (including consumer involvement in the MCOs governing structure).