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Table of Contents
The Evolution of Healthcare Delivery and Financing..............................................1 Basic Concepts of Managed Healthcare................................................................8 Managed Care Organizations, Plans, and Products..............................................16 Managed Healthcare for Specialty Services........................................................28 Provider Organizations....................................................................................34 Health Systems Management...........................................................................38 Medical Management I....................................................................................46 Medical Management II...................................................................................55 Managed Healthcare Operations I....................................................................66 Managed Healthcare Operations II....................................................................77 Legislative and Regulatory Issues in Managed Healthcare....................................91 Ethical Issues in Managed Healthcare..............................................................112

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 anti selection Explain how deductibles and coinsurance are used in traditional indemnity plans Describe some efforts commonly used to combat the rising costs of healthcare

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 Factors Variations of Managed care have been around from the 1900s Earliest 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 reimbursement Blue shield Plans 1939 for physicians reimbursement Individual Practice Associations (IPAs) which contracted with physicians in independent feefor-service practices were established in 1954 as a competitive response to group practice based HMOs Statistic 1999 81 million people enrolled in HMOs nearly as many as those in PPOs and other non HMO plans Federal HMO Act of 1973 This 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 HMOs could obtain federal qualification. o This was optional licensing (the state licensing was mandatory for all HMOs). 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 Provisions o 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 HMOs that wanted to be part of this needed to submit a formal request to the employer Federal Development Grants and Loans

This offered funding to support planning and start of new HMOs and service area expansion for existing HMOs o Available only to federally qualified HMOs Exemption from State Laws o Some state laws restricted the development of HMOs o This act exempted federally qualified HMOs from these State Laws o

Positives The act did accomplish its goals of reducing costs and expanding access to healthcare services. Federal Qualification did offer competitive advantage to HMOs 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 position o Needed to satisfy a lot of requirements on Quality and Financial Stability These did NOT apply to Indemnity based programs or Non-Qualified MCOs Slow implementation of the laws Amendments between 1976 to 1996 o These eliminated and reduced the strict requirements imposed on Federally Qualified HMOs o Dual Choice Mandate repealed in 1995 o 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 providers o Visit without a specialist referral Point of Service Products o Combination of traditional indemnity insurance and managed care o Can take both In or Out of network providers o Non Network providers involve more limited benefits and higher out of pocket expenses o Visits to network specialists require PCP approval Physician-Hospital Organizations o Coalitions of hospitals and physicians o Vehicles for contracting with MCOs Carve-Outs o Organizations that contract with MCOs to provide specific types of services

Mental Health Chiropractors Dental Vision Pharmacy services thru specialty networks

Government Influence

Financing Medicare, Medicaid, Federal Employee Health Benefits Program (FEHBP) and State Childrens 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 Costs a. Inflation b. Increased cost of service for providers and insurers c. Rapidly Expanding Technology expensive procedures d. Increases in Malpractise Lawsuits i. Award amounts increased ii. Practice Defensive Medicine unneeded /expensive tests e. Consumer Expectations i. Increased health consciousness ii. Cover at whatever cost and Freedom to visit who they like iii. Unnecessary Treatment Medically unnecessary procedures Common cold f. Lack of Incentive to Control Costs i. Traditional fee for service more services more pay! ii. Payment occurred after service rendered 2. Cost Shifting a. Some coverage to people who cant pay /can pay at reduced rates b. Physicians and hospitals receive lower payments for these services c. Emergency room treatment d. Spread these unreimbursed costs to other paying patients This Practice of shifting costs from non paying to regular customers is Cost Shifting 3. Fraud a. 100 Billion market annually b. 10% of national Healthcare bill c. $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 Automation o 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 o Customer Service Physician profiles/Customer feedback/Referral automation o Clinical Applications health and drug info/ disease mgmt/ Medical Call Center

Social Factors Higher emphasis on Quality and access to healthcare has happened Maturing Population- Increase in median age o Higher increases foreseen in the 55 64 category o Higher illnesses and better mechanisms to handle these illnesses Access to Services 44 Million did not have access in 1998 o Most coverage is thru an employer sponsored group plan as employee or dependent o BUT employment status does not guarantee health coverage o 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 Dont 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 Plans 1996 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. 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 Basic 1. 2. 3. 4. 5. Concepts Risk Loss rate number of times a loss occurs in a group Underwriting / Selection of risks Process of identifying and classifying the potential degree or risk represented by an insurance applicant Anti-selection Tendency of higher than average risk people to apply for insurance than below average or average risk people Individual insurance evaluation is VERY different from group evaluation a. Need to provide evidence of insurability in individual insurance i. Activities, health history etc b. Group check if the group meets the underwriting requirements Group a. Key question Can you predict the Loss rate to a great extent? b. Can you avoid Anti selection c. Prove evidence of Insurability if he is a late entrant d. Prove evidence of insurability in case of small groups Characteristics of a group checked include a. Group Size b. Groups Composition i. Steady flow in and out of members ii. Age level of the group iii. Gender females are more susceptible than men c. Level of participation i. Need a 75% or higher to allow otherwise anti-selection danger d. Level of Benefits i. Not usually allowed to select benefits ii. But now Cafeteria plans are allowed e. Occupational Hazard f. Geographic Location This



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 coverage o 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 Sharing o Coinsurance, Deductibles and Co-payments o Higher risk for insured if he increased these 3 but lower premiums Changing Plan Design/Coverage Options o 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 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 Programs o Outpatient care o Preadmission testing o Outpatient Surgery o Utilization review and case management o 2nd Surgical Opinion But carries a high cost of second opinion Redundant if you have a good utilization review program Preventive Care and Wellness Programs o Higher coverage on preventive care checkups, immunizations ,hypertension screenings , mammograms etc o 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

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 healthcare Reading 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

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 MCOs 1. 2. 3. 4. 5. 6. 7. 8. Indemnity Plans with Managed care COmponetns PPOs HMOs POS Physician Hospital Organizations Physicians Groups Physician Practice Management Companies 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. 2. 3. 4. Providers Physicians, Nurses, Hospitals, Labs Payers Employers, Federal Agencies, Insurance Firms Purchasers Pay the premium for the healthcare plan Members Enrollees or Customers 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 MCOs 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 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 needed o Geographical location of members o 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 Assistant o 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 cases o Tries to refer people to specialists in the network itself o Some Plans allow two PCPs women can select an OB/GYN and a normal practitioner o 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 network o Negotiating favorable rates with these providers Enhancing Accessibility via the network There are many ways in which the MCOs can enhance the access to healthcare 1. 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 Wellness a. These are little or no out of pocket expenses b. Premium discounts to employees with Wellness Programs c. Greatest incentives to the customers are given if they visit the PCP d. 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 Demand Management o 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 Management o 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 Management o This is a coordinated method of preventive, diagnostic and therapeutic measures that focuses on management of specific Chronic illnesses or medical conditions Quality Management Organization 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


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 Risk Financial risk The actual cost of a plan members care is diff from projected cost This no longer only rests with the healthcare plan alone shared employers/members/payers also In Fee for Service the cost of medical care is shared by 1. Employer Pays premium Employee pays premium/deductibles and coinsurance 2. Healthcare Payer 3. Provider Assumes little or no risk The two ends of the spectrum Fee for Service <----------------- Capitation Capitation Method 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 PCPs Capitation increases 1. Focus on prevent 2. Treatment of illnesses promptly 3. Improve the status of health a. Health screenings b. Immunizations c. Follow up care Making Capitation Payments Payments made to Individual PCPs 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 include 1. 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 1. Age 2. Sex 3. Number of members 4. 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 mechanism o 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 Arrangements These form part of the spectrum between Fee-For-Service and Capitation

Discounted Fee-For-Service o MCOs seek a discount from the physicians normal fees o Pay amt BELOW the usual, customary and reasonable Fee (UCR) o UCR Fee was the fee charged by the old indemnity insurance firms o UCR fees are determined bu collecting data on charges for specific conditions based on the Current Procedural Terminology Code o CPT was started by the American Medical Association Its a 5 digit code which identifies the procedures performed by providers Fee Schedule o Also called Fee Allowance , fee maximum or capped fee o MCO determines what it thinks is an acceptable fee for a service o Similar to discounted fee-for-service o This transfers financial risk from the MCO to the provider o 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 services o Assigns a weighted average value to each medical procedure or service as defined by the CPT code


multiplied by a money multiplier These multipliers are negotiated between the plan and providers BIG PROBLEM with straight RVS system Incentive mechanism Surgery is given more weightage than cognitive services Disincentive to restrict services provided 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 Groups o Medicare tried to control costs by implementing a Prospective Payment System (PPS) for medicare reimbursement hospitals o In the context of medicare, a PPS refers to a system of reimbursement based on Diagnosis Related Groups (DRGs) o DRG classifies hundreds of hospital services based on number of criteria like o o Primary and secondary diagnosis , Surgical procedures, Age, Gender and Presence of Complications The provider is paid a fixed amount based for each DRG Payment is made on the average expected usage of hospital resources in a given geographical area Medicare PPS saved costs Providers receive a fixed compensation PER HOSPITALIZATION, regardless of cost/length of stay. MCOs have started using this route for reimbursing hospitals

o To determine the amount the MCO must pay to the physician, this is

o o

o Salary o Pay salaries to physicians o Based on average earnings and also have performance bonuses and incentive payments o Some level of risk sharing Per Diems o Pay a specific negotiated rate per inpatient Day o Differs based on service o Variation includes a higher per diem charge for the first inpatient day o There is a Sliding scale of reimbursement with the discount increasing with patient volume o Works best in hospitals where the utilization patterns are predictable Other Provisions o Use of Withhold

This is a percentage of the providers 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% 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


Managed Care Organizations, Plans, and Products

Reading 3A: The Health Maintenance Organization (HMO) Identify and describe the general characteristics of HMOs Reading 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 arrangements Reading 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


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

Background Popular in the 1970s because of federal legislations the HMO act of 1973 removed some barriers This act allowed them to be Federally Certified and pre-empt state laws in some cases To be federally qualified the HMO could not o 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 HMOs 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 HMOs and some state qualified HMOs 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 HMOs 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 Offer extensive preventive care programs o Prenatal Care, well baby care, routine examinations, 24 helplines, childhood immunizations are examples o 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 Access o Credentialing what to verify, when to consider recredentialing and peer reviews o 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

Hospitals Same issues of access/credentialing/contract engagements are considered Accreditation by the joint committee on healthcare organizations Ancillary Services These are auxiliary or supplemental services usually used to support diagnosis and treatment of a patients 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 HMOs USUALLY dont impose coinsurance or deductible requirements They will require some level of copayment Negotiated Provider Compensation 1. Fees or discounted Fee schedules 2. Relative Value Scales 3. Capitation 4. Salary 5. Per Diem 6. Diagnosis Related Groups Physicians Typical arrangements include salary, capitation, and FFS compensation Capitation is used for PCPs The type of fee arrangements that an HMO uses distinguishes the various HMO models Many HMOs use the risk pool mechanism to facilitate risk sharing and utilization mgmt

Hospitals HMOs reimburse fees in many ways Depends on factors like State laws Market Competition Hospital Ownership of HMO Level of Predictability of data Incentives like o Service Bonuses o Quality bonuses o Risk Pools Disincentives o Exceeding utilization goals Those providers under DRGs 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 Management


Physicians 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 care Hospitals In-patient utilization review, convurrent and retrospective review of admissions, precertification for inpatient hospitalization, discharge planning and case management COMPLIANCE o All medicare/mediclaim beneficiaries should comply with utilization management requirements set forth by HCFA o 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 HMOs accreditation status in its health plan employer data and information set (HEDIS) measures to evaluate plan quality


Reading 3B: Types of HMO Models Closes Panel and Open Panel HMOs Closed 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 HMOs 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 differences Closed Panel HMOs Providers are HMO contracted to the HMO


Providers operate out of HMO facilities or group practice facilities Providers generally see only HMO members Select PCP from HMO n/w Need PCP referral because the services are only covered if the specialists are in the network HMO Models IPA Model Staff Model Group Model Network Model

Open Panel HMOs Providers are independent and may be selected to join the HMO if they meet the criteria Providers operate out of their own offices See both HMO and non HMO members Select a PCP from HMO n/w Members in a few cases may self refer to specialists inside or outside the n/w without going thru PCP

Distinguished by Contractual relationship, provider reimbursement Early HMOs were Staff or group model HMOs Current 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 They offer contracts with several parties Individual PCPs, Specialists, MultiSpecialty 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 doctors Structure 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 relationship o Duties and responsibilities to be assumed by physicians, the IPA and HMO o 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 board o Direct Contract model HMO recruits a wide range of skillsets Physicians may contract with other MCOs if they wish This is an open panel HMO because all physicians who are qualify the criteria can join Compensation Usually based on fee-for-service (FFS) or through capitation IPA then compensates the member physicians Many IPAs use capitation with PCPs 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 PCPs 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 HMOs and their members by providing a wide range of physician services Have access to medical care at individual physicians offices located throughout the HMOs 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 HMOs


An IPAs 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 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 HMOs 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 PCPs 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 including 1. Preventive care 2. Acute Care 3. Surgery 4. 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 PCPs and specialists Sub contract non supported services to other doctors Structure Physicians 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 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--vis a staff model No need to provider a facility/ No fixed expenses on physicians 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 PCPs refer the members to Share profits when utilization is lower and can see non-HMO members


Features and Comparisons Members have access to a broad range of services (particularly open panel ones)
HMO Model Physician Location Separate physician offices Open Closed Panel Both Physician Relationship PCPs and specialists are both independent PCPs : Employees and Specialists: employees or independent PCPs and specialists are both independent Physician Reimbursement PCPs: Capitation and Discounted FFS Specialists: Discounted FFS PCPs: salaries Specialists: discounted FFS Group Practice: Capitation PCPs: Salaries and Incentives Specialists: varied Group Practice: Capitation PCPs: Salaries and incentives Specialists: varied Advantages to HMOs Provider Choice and lower startup costs Utilization, Quality control, Economies of scale Lower startup costs, utilization and Quality Control Broader range of services and multiple locations Disadvantages Limited Utilization and quality control No economies of scale Provider restrictions Capital Intensive Provider restrictions Potentially limited geographic access Varied utilization and quality control

IPA Model





Separate Group Practice



Separate Group Practice


PCPs and specialists are both independent


Reading 3C: PPOs, POSs, and Managed Indemnity Preferred Provider Organizations Healthcare 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/ TPAs/ employers/HMO/Independent investors/Joint Ventures However 50% plus of all PPO plans are owned by insurance firms MOST dont 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 PPOs 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 PPO


o Selection of PCP in PPO too Quality Management High percentage routinely recredentialed their network physicians Also Physician Peer Review Other Types of Managed Care Specialty PPOs These 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 Products Fastest growing product This is a hybrid product which combines the traditional group insurance with HMOs and PPOs Point of Service product allows the members to chose 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) HMOs 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 healthcare o Cost cutting effort and structure of coverage o 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 MCOs 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


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


Reading 4A: Managed Healthcare for Specialty Services These 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 services Examples 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 Emerge Economies of scale for certain specialties Key Characteristics 1. An easily defined benefit 2. Defined Patient Population 3. High or rising costs 4. 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 HMOs to retain these services Some States have provisions for Specialty HMOs 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 PPOs 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 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 dependency This 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 knowledge o Better outcomes and proper diagnosis and treatment o 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 monitoring o Post acute care continuous monitoring in a structured environ but < Acute Care o Partial Hospitalization o Intensive outpatient care extensive therapy o 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 PCPs 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


Focal point for all healthcare need But PCPs lack the experience necessary to diagnose and treat these problems. o Provide educational programs Clinical Practice Guidelines Centralized Referral Systems o Telephone or in-person referral o This can provide faster access to behavioral healthcare than a PCP o More accurate diagnosis and effective treatment o Not grassroot linked like PCP disruption in care Employee Assistance Programs o This the first point of contact for this kind of care o Can help trap the problem early o Lack of expertise is a problem o o

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 HMOs contracted with PBMs o These screen drug interactions by using integrated databases between the MCO, provider and pharmacy network Services Offered Physician Profiling o Data on physician subscribing patterns and comparing these actual prescribing patterns to expected patterns within a select drug category o Peer Comparison is Drug utilization Review o Are the drugs being used safely/effectively/appropriately o 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 interactions o Monitor patient specific drug problems through prospective, concurrent and retrospective review. Factors identified include Drug/disease conflict, Drug Control Interactions, Chronic overutilization , underutilization, drug/sex drug/age conflicts and drug/pregnancy contraindications Formulary Management o 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, pharmacists


o o

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 These are key tools to get Rebates from the drug manufacturers 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 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 Services Mail order pharmacy programs lower cost delivery Negotiate discounted rates for the same Pharmaceutical cards Issued to plan members. These cards must be presented to the pharmacist before receiving benefits Electronic processing of claims Card identifies to which plan the patient belongs New copayment structure 1. Two tier copayment structure a. Lower copay for a generic and higher copay for branded drug 2. Three tier Copayment structure a. Pay one copay for a generic b. Higher for branded drug included in the plan c. 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 month b. In case of exceeded/underun of cost PBM shares the losses /savings Capitation Contracts a. Provide all the care for a fixed dollar amount per month b. These are gaining popularity c. Not that popular as cant project what the pharma requirement will be Move towards mergers and integration with Pharma firms



Reading 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

Provider Organizations


Reading 5A: Provider Organizations Why integration Achieve economies of scale Strengthen their negotiating position wrt MCOs and payers Provider Integration Two or more previously separate control/ownership/business operations providers combine under common

1. Structural integration Coming under common ownership or control 2. Operational Integration Consolidate previous separate operations Structural Integration Complete 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 its called Consolidation Acquisition One organization buys the other Partial Integration Joint Venture / Not a separate legal entity Execute contracts and agree to act as one body in business transaction Operational Integration Business Integration Combine one or more separate business function Clinical 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) company 4. Consolidate Medical Group (MOST integrated) Physician and Hospital Model 1. 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 Advantages 1. Greater Operational efficiency and effectiveness 2. Expertise Building Helps in better planning/marketing 3. Improve contracting position with MCOs 4. Good for MCOs as it improves quality and efficiency for their members Disadvantages 1. Loss of autonomy Provider Integration Models Independent Practice Associations Messenger 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 IPA The IPA then separately contracts with the member physicians 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 PCPs or specialists Consolidated Medical Groups Full structural and operational integration Operates in one or a few facilities and consolidates the operations Advantages 1. Lower costs 2. Access to a large group of physicians 3. Creates an ability to monitor and manage quality/utilization Integration of Physicians and Hospitals Physician Hospital Organizations JV between hospital and physicians Primary purpose is contract negotiation with MCOs Do not merge operations apart from contracting and marketing Reasons Better relations / Increased Collaboration / Shared Financial Risk / Contracting with MCOs / Employer Direct Contracting / Enhancing Quality Community Contracts with this Physician Hospital Community Org Two types 1. Open PHO Available to all the hospitals eligible medical staff 2. Closed PHO Limits the number of specialists by type of specialty a. Specialist PHO Only one type of specialty Compensation Discounted Fees and Capitation (PCPs) and DFSS (Specialists) Integrated Delivery System Operationally integrated maybe not structurally Employment model IDS the IDS controls the different providers


Medical 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 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 healthcare o These organizations are known as Provider Sponsored Organizations


Health Systems Management

Reading 6A: Health Plan Structure and Management Describe the most important functions of a managed care organizations board of directors Identify a managed care organizations key management positions and their functions Identify the common medical management committees and describe the committees general functions Reading 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 MCOs network List and explain some of the factors that influence the number of providers included in an MCOs network Define credentialing and explain why it is important List some common clauses and provisions in provider contracts


Reading 6A: Health Plan Structure and Management Structure of MCOs Most of them are Corporations - Can be party to a legal action MCOs 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-profit BCBS 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 capital o Appointment, evaluation of senior management including CEO o Participating in Corporate Strategic Planning o Approval of Organizational operational policies/procedures o Oversight of the Quality Plan o 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 Officer b. Roles i. Implement written standards and procedures ii. Assigning upper level personnel to oversee compliance iii. Communicate Standards to all employees iv. Enforce standards through disciplinary measures v. Establish and enforce confidentiality and security rules


Committees Standing Committee Long term advisory on financial, compliance, quality management, Utilization Management, strategic planning and Compensation Ad Hoc Committee Convened to address a specific issue Some 1. 2. 3. 4. 5. Common Committees include Executive Committee Organizational policy/ LOB / Employment Policy Strategic Planning Committee- Direct the MCO strategic direction/goals Compensation Committee Finance Committee Nominating Committee nominations of company offices

Other Committees include 1. Executive Quality Improvement Committee Quality / Accreditation etc 2. Quality management Committee quality assessment/improvement activities a. Identifies issues to be monitored b. Evaluates the results of quality studies to identify opportunities c. Develop / Oversee / Monitor quality improvement action plans d. Oversee Accreditation efforts 3. Medical Advisory Committee policies in clinical mgmt / contracts / compensation 4. Credentialing Committee policies /review /recredentialing 5. Utilization Mgmt - review the UM program 6. Pharmacy and Therapeutics Committee Formulary and Regulatory reviews 7. Peer Review Committee- review questionable /problematic healthcare services delivery 8. Appeals Review Committee Medical management or coverage determination 9. Corporate Compliance Committee


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 Analysis 1. 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 area c. How receptive are providers 2. Provider Community a. Number of physicians and locations b. Details on hospital beds/ pharmacies / other ancillary services c. Accessibility of providers d. Utilization patterns and average costs for specified services e. PCPs and their linkages with other specialists difficult to break f. Associations within the existing community 3. Competitive Analysis a. Provider Panel Sizes / Premium Levels / cost Containment Strategies b. Physicians to members ratio in existing network of competitors c. Levels of provider satisfaction or dissatisfaction with other plans 4. Economic Conditions a. Size of the employers in the market large adopt MCO easier b. Growing economy Trigger growth in Young population and medical community will come in / Vice Versa for declining economy 5. Characteristic of the Service Area a. Is this an urban/rural/suburban area? Rural areas have fewer hospitals b. Urban areas have higher proportion of specialists and facilities More choice but also more cost/quality/satisfaction levels 6. Population Characteristics a. Age/Income/Ethnic background 7. 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 Agencies a. These include NCQA / American Accreditation Healthcare Commission b. Joint Commission on Accreditation of Healthcare Organizations JCAHO HMO Act 1973 Federally qualified HMOs 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 services


3. Detailed description of service areas/provider locations Federal Employee Health Benefits Program (FEHBP) Requires health plans offering services to federal employees and their dependents to provide 1. Immediate access to emergency services 2. Urgent Appointments within 24 hours 3. Routine appointments once a month 4. Average office waiting time of < 30 minutes NAIC Managed Care Plan Network Adequacy Model Act Adopted in 1996, this act offers guidelines for states to use in measuring network adequacy. Includes Standards for 1. Provider Enrollee Ratios 2. Geographic Accessibility 3. Appointment Waiting Times 4. Hours of Operation 5. Volume of Technology/Specialty services available Any Willing Provider Laws 1. This requires health plans to allow provider who is willing to accept the terms and conditions of the plan to contract with the plans network 2. Can include economic criteria. This is regulated by state law and sometime applies to only PPOs and not to HMOs Mandated Benefits Laws Require MCOs to 1. Include specific benefits in the plans design Hospice/ maternity/chiropractic 2. 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 Structure Can operate as a closed panel (MCO facilities) / Open Panel (Own facilities) Network Composition 1. PCPs General practitioners / family practitioners / internists / pediatricians /nurse practitioners/physician assistants (last 2 under physician guidance) 2. Specialists 3. Hospitalists PCPs dont have time to follow up inpatient care / These physicians coordinate diagnostic/ treatment services @ hospitals 4. Healthcare Facilities 5. Ancillary Service Providers Diagnostic/therapeutic care/labs/radiology/ physical therapy/pharma / home healthcare Network Size 1. Appropriate number of practitioners This is based on a. Plan characteristics more closely managed fewer providers i. MCO requires less than PPO or POS ii. Large plans have fewer providers per 1000 members iii. Based also on geographical spread b. Provider Access i. Staffing ratio number of providers to the number of enrollees ii. Drive time Time to drive to PCP- 15 min urban / 30 min rural iii. Geographical Availability number of PCPs within a radius iv. Population Characteristics Demographic characteristics


v. Purchaser and Consumer preferences Quality , Access and Cost (check which is most imp) / Large PCP panel vi. Plan Goals Cost Quality Tradeoff / Subdivide the panels based on quality/utilization and cost effectiveness and incentivise consumers 2. Appropriate Number of Hospitals and Other Facilities a. 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 Providers Information sources include Hospitals already in the network / Provider Directories of Competitors / Local medical societies / Plan purchasers and members Selecting Providers First stage is application form with standard questions education / workex /affiliations etc Credentialing Information presented is reviewed and verified in order to determine 1. The current clinical competence of the provider and 2. Fit into the pre-established criteria for participation This Credentialing process is important 1. Employers want to offer their members high quality providers 2. Ensures certain aspect of their quality program 3. Minimize the liability and other legal risks have good historic record 4. Accrediting bodies require it before the accredit the MCO Who Performs Credentialing? 1. Varies from plan to plan 2. Some have Credentialing committees / departments 3. Others assign to specific person 4. External Entities called Credentialing Verification Organization 5. Practitioners on committee for review/technical inputs/ peers perspective How does the Process Work? 1. When the provider submits the application + supporting documentation 2. Review and verification of the documentation 3. Check to see if additional documentation is required 4. Onsite inspection of providers offices What standards must be met? 1. Have their own guidelines for credentialing 2. 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 equitable 5. P-PC-7 Standard -American Accreditation Healthcare Commission/ URAC 6. Review any adverse claims / malpractice suits / sanctions 7. National Practitioner Data Bank - This is a database maintained by the federal government that lists info on malpractice claims / disciplinary action a. Maintained by the DHHS Started in 1990 b. Scrutiny of areas of practitioner licensure / membership / malpractice history/ record of clinical privileges


c. Meant to provide a support to the existing state credentialing/licensing boards d. Types of Queries i. Mandatory need to query every two years on practitioner privileges ii. Voluntary any other general queries Recredentialing 1. This is done every 2-3 years for changes in licensure / sanctions / certifications/ competence / health status 2. Incorporates quality management and utilization results 3. 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 Provisions 1. Use the provider manual as a reference in the contract a. This document contains the providers rights and responsibilities 2. Provisions for Provider Responsibilities a. Provider Services b. Administrative Policies Follow the MCOs policies c. Credentialing and Re-Credentialing d. Participation in Utilization and Quality management programs e. Maintenance and submission of medical records for all members f. 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 Responsibilities a. Payment how will he compensate b. Risk sharing and Incentive Programs c. Timely Payment Max time period is specified d. Eligibility information will provide 270 and 271 information to the provider 4. Termination Provision a. Termination without cause like 90 day period b. Termination with cause if one of the users did follow contract provisions c. Cure provision (60-90 days) during which the breach an be rectified d. Extreme situations may require immediate termination of contract e. Due Process clause contest/appeal the termination 5. Tone of Contract a. Influences the nature of the business relationship Network Maintenance and Provider Services Orientation 1. Parameters of the MCO plan 2. Training in UR / quality /authorization systems 3. Written manual of policies and procedures 4. Communication between MCO & network updates/ bulletins / guidelines / claims information Peer Review Evaluation of performance by other providers Provider Services


Payer staff responsible for maintaining communications with providers


Medical Management I
Reading 7A: Basics of Utilization Management Define medical management and identify its component parts Describe the strategies MCOs can use to manage member demand for healthcare services Identify the kinds of cases for which case management is typically used Define disease management Reading 7B: Utilization Review and Authorization Systems Explain the purpose of utilization review Define authorization and explain the criteria MCOs 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


Reading 7A: Basics of Utilization Management System 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 Function Affects all components of healthcare delivery primary/specialty/inpatient/pharma/ancillary Application 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 surveys o Use data analysis software to segment the different categories Preventive Care Initiatives o Mostly received from PCPs o Include stuff like Immunization programs o 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 practitioners o 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 decisions


Sources Physicians / printed materials / personal or group counseling / internet/ support groups / interactive computer programs Utilization Review UR refers to the evaluation of the medical necessity/ appropriateness/ cost effectiveness of the healthcare services given to a patient Can do it in-house or contract with Utilization Review Organizations o Case Management Process 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 diagnosis o Treatment being received o Use of prescription drugs o Level of resource utilization o Cost of care o Length and frequency of hospital visits o 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 providers o Legal / regulatory / ethical issues related to case management o Utilization review processes and techniques o Availability of community resources and support o Role of coordinating care and in educating patients and family members o Evaluation of the overall effectiveness of the case management Final approval of decisions RESTS WITH THE PHYSICIAN Disease Management Disease 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 appropriate o High rate of variability in patterns of treatment o High rate of preventable complications that results in use of costly services o Show low rates of patient compliance with recommended treatment o Can be managed on an outpatient basis using non surgical approaches o Are Chronic in nature o Likely to result in high costs over time Differences from Traditional o Focuses on managing a population of patients and not individual patients o Highly coordinated and integrate delivery across providers/sites o Apply TQM and continuous quality improvement methods Tools 4 specific tools are used o Disease Modeling life cycle / interventions o Customized clinical guidelines o Clinical practice processes o Measurement and improvement systems Pharma Industry o Treatment Guidelines o Provider Education and Compliance o Patient education and compliance o Pharmacotherapeutic outcomes research Disease Management and Managed Care o Integration into managed care with the help of Pharma firms o STILL a NEW approach and its effects on outcomes and cost effectiveness has not been yet established o This is usually set up as a voluntary outreach and support program plan

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


Reading 7B: Utilization Review and Authorization Systems Utilization 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 type o Provider Information PCP / referring Provider/ In-Patient facility o Service Information Referral service/ date of service / diagnosis codes/treatment codes / hospital admission and discharge date etc Reasons for conducting UR Reduce Unnecessary Practice Variations o Caused due to reimbursement methods / population morbidity / lack of scientific evidence and current medical practice information o Variance will remain Need to however reduce Unnecessary variance Make appropriate authorization decisions o Authorization is a health plans system of approving payment of benefits for services that satisfy the plans requirement for coverage o 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 care o 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 unit o B Days per time unit o C Number of Plan members Services that Require Utilization Review for Authorization Framework to evaluate UR Access requirements Frequency of Utilization Cost per procedure Total Cost Level of Inappropriate utilization Cost of Review

Access requirements


o PCP / direct access for OB/GYN or pediatric / dermatology/ DV o Serious Chronic conditions allowed direct access o Complimentary and alternative medicine (CAM) Frequency of Utilization o Dont target very routine services o Need authorization for complex procedures Cost per procedure o High cost or high risk procedures and treatment Total Cost o Cost of service * Frequency of use Level of Inappropriate utilization o Higher the denial rate more likely is the service will require UR/authorization Cost of Review o Balance Cost of review vis--vis benefit received

Types of UR 1. 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 problems o 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 well o 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 admission o 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 progress o Tracking the total length and Cost of Care o 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 are o Emergency Departments 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 individuals health in jeopardy 26 states have adopted this standard Urgent Care Centers Problems that are not life threatening but that require immediate attention. The cost of care is higher than that in a PCPs office but lower than hospital ED Observation Care Units Designed to address the immediate care needs of patients who require continuous monitoring but not emergency/acute care Sub Acute Care Facilities Addresses continuing care needs of patients who dont need hospitals but cant be treated from home 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 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 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 Find Coding Errors procedures dont 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 criteria o 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 convenience o 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 Evaluation o Evaluation of Non Clinical Aspects of Coverage o Evaluation of medical necessity and appropriateness of proposed care o Administrative Review Compare the proposed medical care with applicable provisions in the purchaser contract to determine coverage If its not satisfied the claim is denied o 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 Process Some 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


Medical Management II
Reading 8A: Quality Assessment and Improvement 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 MCOs commonly use to improve performance and quality Reading 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


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 MCOs 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 MCOs success in meeting non clinical customer needs and expectations. Will include details like o how long a member had to wait to see a doctor o how friendly office staff are o how well the MCOs 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 Quality Consumers consider it to be an important factor in deciding which health plans to offer Source of competitive advantage that helps organizations compete successfully

Importance of Quality for Patient Safety o This enhances patient safety and decreases medical errors o Medical error occurs when a planned treatment or procedure is delivered incorrectly or when a wrong treatment or procedure is delivered o Medical errors are caused MORE by breakdown in the Healthcare system rather than provider errors o 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 Errors o Faulty or Inadequate Communication Physicians 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 treatment 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 oversight 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 Lack of Verification Procedures


Treatments based on individuals analysis of results, without secondary verification. Very high error rates are caused by this 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 include o 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 members needs Quality is in the eyes of the customer Its the patients opinion which matters more than the physicians or MCOs 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 measures o 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 Quality o 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 MCOs IS Availability of educational material for members


PCPs) , process linked (length of stay, accuracy , efficiency) or outcome measures (Member satisfaction, compliant resolution) Assessing Healthcare Quality o This can be evaluated using structural ,process and outcome measures o Structural Measures Number of PCPs 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 care o 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 process o Outcome Measures

o Use structural (no: of service reps, processing capabilities , number of

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 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 Data o 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


Performance reports serve two primary purposes internally , they help MCOs improve the quality of the healthcare and service plan members receive by identifying the plans strengths and weaknesses 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 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 MCOs 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 MCOs 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 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 levels External Standards are based on outside information such as publishing industry wide averages or best practices. MCOs use internal standards to measure the quality of administrative services and External Standards to evaluate healthcare services. Accreditation This 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 Organizations Commission on Accreditation of Healthcare Organizations Developed in 1951 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 accredited o JCAHO also accredits MCOs and healthcare Networks o Accreditation Process

Accrediting Joint o o

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 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 On Jan 2001 JCAH) introduced new standards on Pain Management and Patient Safety Accreditation decisions There are six types of decisions reached Accreditation without Type I recommendation- Demonstrate satisfactory performance in all JCAHO performance areas 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 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 Assurance o 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 them o 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)


o o o

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 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 Reviews processes for reviewing and authorizing medical care, quality of provider networks, members rights and responsibilities, preventive health activities and medical records. Also address Consumer protection issues related to internal and external systems for reviewing and evaluating medical appeals Also coordination of access to behavioral healthcare. 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 Accreditation Process Desktop review of documentation of plan policies and procedures Onsite visit to verify the accuracy of documentation and plans compliance with accreditation Quality Standards QM Structure, Organization and Staffing Nature and Scope of the QM program Systems for addressing Complaints, corrective action and disciplinary action 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 Accreditation Decisions Need to 100% satisfy Shall standards and 60% Should Remains effective for 3 years

Performance Measures This 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 etc o Getting better sick ppl getting better o Living with illness people with chronic / ongoing illnesses reduce symptoms, avoid complications and maximize quality of life o Changing Needs caring for people when their need changes dramatically o They Dont 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 NCQAs 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 satisfaction o Health Plan Stability practitioner turnover / total membership o Use of Services well child visits/ cesarean section rate o Informed Health Care Choices management of menopause o 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 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 Agency for Healthcare Research and Quality (Agency for Healthcare Policy and Research) Primary Research arm of the US Department of Health and Human Services One imitative is CAHPS AHRQs Computerized Needs Oriented Quality Measurement Evaluation System (CONQUEST) Quality Improvement System for Managed Care Part 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 / Mediclaim These standards are to be met to be Medicare Contractors


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


Reading 9A: Healthcare Marketing for MCOs Marketing Terms Marketing 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 Ps of marketing Product, Price, Promotion and Place (Distribution) Product - Benefits that MCO designs (through research etc) Price Premium you charge Promotion Communicate this to the users Place Sales reps / employers Key questions How 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 competitors products and service offerings? Which distribution channel members will be most effective for selling this product? Customers Role in Marketing Decisions Customers 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 MCOs? 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 PPOs / toll free lines Product Use branding to distinguish products Need to develop high quality products that meet consumers needs Development and Benefit Design


Benefit Design and Pricing are two important processes. 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. HMOs typically will have more benefits included while PPOs are more flexible Secondly, can exclude experimental procedures and cosmetic procedures from this set Lastly 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 MCOs 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 Price Discussed in section 9B Promotion Inform the consumers about the product and price Persuade them to buy it and remind them the benefits of choosing our organization Differentiate 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 Distribution 5 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 o Lines of products like HMOs, PPOs, POS etc o Market segments sales to groups or non group markets o Group Size Large , small o Population Served Medicare / Medicaid / workers compensation o Geography metropolitan area / rural area Agents This 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. Brokers Salesman 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 insurer These broker services groups comprise of 2 to 1000 agents and are compensated mostly on commission basis. Employee Benefit Consultants This 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 Marketing Use 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 Markets Market segmentation is the process of dividing the market into smaller more manageable segments. Top level segmentation is generally group vis--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 Market o 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 / advertising


o Sales personnel Agents and Internal Sales force

o o

MCOs health screen members to prevent anti-selection 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 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,


o Sales team: Internal sales force

Medicaid Market o 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 regulations o Requiring preapproval of all forms of written and verbal communication between MCO and Medicaid recipient o Preauthorization of marketing materials , programs, brochures, flyers etc o Prohibiting giveaways or sales promotion items o Prohibiting door to door or telephonic solicitation o Distribution: Informal discussions / direct mail / TV advertising


o 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 Market The 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 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 important o 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 govts o 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 Financing Underwriting The 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 Selection Underwriters 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. 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 level o Average risk of loss is typically called standard risk o Lower than average risk is called Preferred Risk o Higher than average risk is called substandard or unacceptable risks Group evaluation Focus on the group as a whole o Reason for groups existence o Size of Group o Flow on new members in and out of the group o Stability of the group o Number of eligible members who will participate in the plan o Way in which benefit levels will be determined o 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 part o Benefit limitations - a lifetime max of bed days / dollar amt for a condition o Benefit deductible o Coinsurance o Enrollment restrictions allow members only in certain time windows


Health statements submitted by members when they join

New Business Underwriting First 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 assumptions The 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 groups 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 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 risk o Some states deny the above right to the firm o Then need to price the increased risk into the base rates of HMO Federally qualified HMOs 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 Rating This 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 Methods Managed care uses a variety of rating methods to develop premiums Community Rating o 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 spread o Not used for large groups (except when specified by state law) o This rate is generally used to calculate a reference rate o Some state and federal initiatives have mandated this for small groups o 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 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 Rating o This is a method under which the past record is analyzed and used to calculate premium partly /completely based on the groups experience o Lower premium for lower utilization and vice versa o Use at least two years of experience to calculate these rates o Most experience rated firms have 1000 plus members o 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 method o 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 experience o Credibility Factor measures the statistical predictability of groups experience o Large groups have more credible experiences than small groups o Blended rate = experience group rate * credibility factor + manual rate * (1credibility factor)

Legal Requirements Amendments to the HMO act 1973 permitted federally qualified HMOs to use the community rating, CRC or ACR but not retrospective experience rating.


Federally qualified HMOs need approval for ACR cant 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 cant 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 Financing File an annual statement with NAIC for each state they do business in. Some critical finance terms 1. Income statement 2. Revenues 3. Expenses admin + stop loss premiums + reimbursement costs + utilization costs 4. Assets value of all items company owns 5. 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 7. Surplus = assets liabilities 8. Forecasting Predicting an MCOs 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 Plans o Employer or group Sponsor is financially responsible o May be partially or fully funded o ERISA these plans are exempt from specific state insurance regulations o 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 period exceed certain amount in a specified period 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

o Aggregate Stop Loss coverage provides benefits when total claims



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 MCOs 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


Reading 10A: Information Management Information Technology Needs Information Management is a combination of systems, processes and technology that an MCO uses to provider the Companys Information users with the Information they need to carry out their job responsibilities Typical 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 Capabilities An 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 it Need 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 analysis Other 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 it 2. Contract Management a. Can be very complex (esp with Capitation) b. If costs are not calculated properly, the are likely to lose money in bidding for future contracts c. Need to have access to accurate lists of covered individuals d. MCOs need to reconcile capitation payments and manage risk pools e. Need to check the eligibility status very carefully f. Contract Management System incorporates membership data and provider reimbursement data and analyzes transaction according to contract rules g. Systems have support of decision making, modeling and forecasting, cost reporting an contract Compliance Tracking 3. Utilization Management Software a. Need to manage authorization transactions and utilization b. Pre-established Guidelines determine authorization and payment c. Can automate this process and monitor the actual costs of care d. Need systems to manage access, utilization and quality of care under care management or disease Management programs 4. 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



7. 8. 9.

a. This helps detect under/over utilization and inappropriate utilization of medical resources Enterprise Scheduling a. Need to control usage of resources like MRI and surgery b. Enterprise Scheduling System permits users within an enterprise to function as a single organization in arranging access to facilities / resources Claims Processing a. Need a vast amount of data accumulated b. Used by all segments of the company Marketing a. Need to communicate information to purchasers and members Member Services Fast/Convenient access to information, transaction processing and other types of services for members

Challenges 1. MCO needs to manage large volumes of internal and external data 2. Need to manage different types of data clinical/regulators/legal /quality/ 3. Need to acquire complete, accurate and consistent data different codesets etc 4. Data that is readily available and easy to collect may not be the most relevant may need to modify the data through additional analytic tools 5. 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 vary 7. Laws which are stringent on the usage of e-PHI and protecting it Information Technology This 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 Commerce 2. Electronic Data Interchange 3. Decision Support Systems DSSs 4. Data Warehouses 5. 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 use


o Growing usage among the general population o Cooperative oversight and ready availability no one dominates the net o Interoperable Communication o Low Cost o Direct access to current and potential consumers Potential Disadvantages of Internet Usage o Concerns about Security need to have secure enterprises o Use secure internet and intranets o Extranets are used to connect providers / members / regulatory bodies o Types of securities employed include Firewalls unauthorized access to internal network Anti virus programs Encryption Digital Signature

Electronic Data Interchange Computer 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 systems Organization who do business using EDI are called Trading Partners EDI is used for 1. Transmission of claims and encounter reports from providers to health plan 2. Transmission of data from Claims database Medical management departments 3. Transmission of data among different MCO departments or geographic locations 4. Exchange of data between MCO and regulatory body or accrediting agency 5. Transmission of member eligibility data from an MCO to its providers 6. Exchange of information between an MCO and its providers regarding requests for authorizations of services and referrals

Advantages of EDI o Speed of data Transfer and Improved Data Integrity o 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 productivity o 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 essential o Set of syntax / Grammar that forms part of the basis of standard usage o 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 ANSIs 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 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 obvious o 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 patients 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 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 its 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 Care o MCO reviews claims, can match diagnosis treatment codes/ verify authorization, and record utilization information o 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 guidelines o Better Measurement of provider performance o Increased efficiency and accuracy of information about healthcare services rendered to members o Reduced Exposure to liability for poor care o Improved ability to meet reporting requirements Disadvantage o 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 MCOs proprietary information and external interference with MCOs systems Outsourcing Information Management Hiring external vendors to perform specified management activities functions like data and information


Reading 10B: Claims Administration for Managed Care Claim is an itemized statement of healthcare services and their costs provided by physicians 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. HMOs 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 Administration This is the process of receiving, reviewing, adjudicating and processing claims This 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 held o Assessing medical information o Requesting additional information needed to determine benefits o Determining the person or entity to pay o Calculating payable benefits o 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 , EPO o Claim function COB etc o Type of Claim Hospital , physician, outpatient surgery o Client Grouping MCOs with large clients o 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. 3. 4. 5. 6. 7.

Was the provider in the network of the plan? Was treatment provided medically appropriate and necessary? Was a preauthorization or referral given for the service or treatment? Is the service covered under the plan? What benefits are payable? Does the member have other health insurance coverage?

Verifying Members Status Routine step happens automatically as it is electronically maintained Verify Provider Status Most 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 information o Illogical responses or codes contained on the claim form o Treatments or procedures not covered by the health plan. o Verification of member eligibility o Prior authorization requests o Appropriateness of medical care. These are programmed into the claims processing system Verifying Authorization Could 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 procedures o HCFA 1500 Providers to bill professional feeds to HMOs, insurers etc o Superbill this lists the specific procedures or medical services provided by a physician. It has check boxes Determining the Amount of benefits to Pay The factors considered include compensation arrangements, authorization requirements, any copayment or coinsurance requirements, Coordination of Benefits Automation of Claims Process Used to verify member eligibility and provider status More sophisticated plans get claims through EDI Data that is potentially required includes


1. Member data age / sex/ PCP / dependents 2. Predetermined Fee Schedules for service types 3. 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 4. Authorization requirements and utilization information 5. 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 Act o 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


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 plan o Health related information or both Typically the following information is provided to all plan members o Description of services covered and excluded for diff types of care o Responsibilities in the care delivery process copay/ deductible / referrals / authorization o Differences between in network and out of network benefits o Services requiring authorization of payment and guidelines for the same o Preventive care / screenings / disease management / triage services details o Health related information of interest to the general population o 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 newsletters o 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 Requests Four key areas Administrative Issues some e.g. o Identity card out of date o Please send me new provider directory o PCP moved out of an area o Mailing address for claim? Coverage Issues o 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 Programs


o Who do I call if I am not sure abt the care I need? o What are the preventive care and wellness programs? Access Issues o 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 include o 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 works o Forms for filing for claims or filling prescriptions o 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 CRP o Track and report complaints o Comply with specific timeframes when responding to complaints o 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 affairs and physicians (in case a medical opinion is required) and from plan members o Have a maximum time frame for conducting the inquiry o 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 decision o Commercial health plan members appeal insurance dept for a state o 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 whole o Their access to healthcare services o Quality of the medical care received from providers o Quality of non clinical services received from the plan and its providers o Plans administration The results are benchmarked with the company / industry / external stds Two Primary Way of measuring it Member Satisfaction Surveys Parameters like o Satisfaction with the authorization processes for hospital admission o Satisfaction with care from hospital staff o Aspects of experience that can be improved 3 imp purposes o Assessment of members satisfaction with various aspects of a health plan o Method for collecting data to assess quality and identify opportunities o 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 dont leave! CAHPS Most popular Consumer Assessment of Health Plans o Questionnaires, directions for interviews and reporting results Complaint Monitoring Members 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 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 Services Need to display attributes like 1. Competence 2. Strong Communication Skills 3. Professional Demeanor 4. 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 hours o Some plans extend these services for phone and faxes beyond these hours and on weekends o Off hours provide limited services through IVR or websites o 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 services o Need months of training before they are put in stream o 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 Technology o CTI helps improve productivity o Technology is expensive in the short term Performance of services o This addresses the quality and cost effectiveness of services o Satisfaction surveys and complaint reports o Key statistics include Turnaround time 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 assistance o There is sometimes listening in on calls o 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 benchmarks o Try to use First Contact Resolution at the cost of wait time to improve service levels and solve the problem first up


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 marketplace Reading 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 regulation Reading 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


Reading 11A: Federal Laws and Regulations General Business Legislation There 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 Age Discrimination in Employment Act (ADEA) Who Comply must Protected Class Employers aged over 40 Effect of Legislation on Healthcare 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 This Prohibits discrimination based on race, color, religion, sex or national origin. Need to be sure that their policies dont 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 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

Employers with > 20 employees

Title VII of the Civil Rights Act

Employers > 15 employees engaged in interstate commerce

All employees

Family and Medical Leave Act FMLA

Employers that have > 50 Employees

Birth/adoption or provide care to seriously ill family members / themselves

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 include Charging different prices for different purchasers of same product without justification Giving distributors rights to sell a product only if he agrees not to sell a competitor product The 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 include Regulation of unfair competition and deceptive business practices, also to pursue violators


of the Sherman Antitrust Act 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 cant 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 other 4. Horizontal Division of Markets two companies decide to divide areas 5. 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 cant 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 MCOs Medicare and Mediclaim contracts Employee Benefit Legislation Employee Retirement Income Security Act This 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 plans o 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 insurers premium income) 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 MCOs 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 hours o Divorce or death of a covered employee o 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 dont 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 MCOs are considered part of the financial services industry This act looks at o How financial services industry will be structured in the future o How the financial services industry will be regulated and supervised o 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 HMOs 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 insolvency o Quality Assurance Establish ongoing quality assurance program in line wth HCFA 300 HMOs meet these requirements even though it is optional HIPAA 1996 Outlines 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 markets Two 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


If he loses job and new job does not give coverage he qualifies for individual coverage Group Coverage Provisions o 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 Cant 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 o Small groups are defined as 2 to 50 employees cant exclude employees or employee dependents based on health status 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 this o 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 Womens 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 Codesets The Data covered includes 1. Health claims or encounter data 2. Health Plan eligibility inquiries and responses 3. Provider referrals and authorizations 4. Claims status inquiries and responses 5. Health plan enrollment and disenrollment requests 6. Claim Payment and remittance 7. Health Plan premium payment 8. Coordination of Benefits Information At the moment ICD9-CM must be used along with CPT-4 Privacy and Security Need an individuals 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 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


Reading 11B: State Laws and Regulations Key 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 HMOs Before the HMO act of 1973, managed care laws were designed to regulate insurance companies or hospitals NIAC Health Maintenance Organization Model Act HMO Model Act This 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 cant 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 HMO o Reduce the volume of new business they accept o Take steps to reduce their Expenses o 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 dont 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 adequacy o Quality Assurance Statement of HMOs 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 years Laws Governing Preferred Provider Arrangements 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 requirements o HMO is linked to State HMO laws o PPO are regulated by state insurance laws o 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 providers o Include the mechanism for minimizing of the cost of the healthcare plan o Provide plan members with reasonable access to covered services o Also need to give adequate benefits to coverage outside this network o 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 laws Utilization 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 UROs 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


o o o o

criteria / and appeals process and report annually on the program Use and make publicly available upon request , documented clinical review criteria Use qualified health professionals including clinical peers where appropriate , to administer the program Not tie reviewer compensation to the number of adverse determinations Establish written procedures for adverse determinations and appeals 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 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 TPAs 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 TPAs COA if o The TPA in financially unsound o Using practices that are harmful to the insured persons or the public o 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 TPAs COA if the TPA has o Violated State Insurance Laws o Refused to be examined or to produce its records for examination o Refused without just cause , to pay claims or perform Services under its agreement o Been placed under suspension or revocation in another state Health Plan Accountability Laws NAIC models include Health 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 o o o o

professionals in accordance with written procedures that must be disclosed upon written request to any applying healthcare professional Providers should be given an option to review and correct any information submitted for verification Collection of a minimum set of credentialing information by either primary or secondary verification. Recredentialing must be done every 3 years 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 NAICs Quality Assessment and Improvement Model Act which requires MCOs 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 for termination of a providers license o File a written description of quality assessment programs with state Commission for insurance o Describe quality programs to consumers through marketing and education materials o Meet specified data confidentiality requirements o 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 Act All 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 nd 2 level review in which the covered persons are allowed to review the relevant information and make a representation Privacy 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 regulation o When authorization is required for disclosure of non public PHI o Requirements for a valid authorization o 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! 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 Medicare Federal program established under Title XVII of the Social Security Act of 1965 to provide hospital expense and medical expense insurance to elderly and disabled persons Benefits 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 A This provides basic hospital insurance that covers 1. Cost of in patient services 2. Confinement in nursing facilities / extended care facilities 3. Home care services 4. 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 services o Medical Supplies and equipment o Hospital outpatient services o Diagnostic tests o 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 + copays Medicare+ Choice rd The Balanced Budget Act 1997 created a 3 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 Initially Medicare available only on FFS Medicare+ Changes this to o Coordinated Care Plans CCPs HMOs (with/without POS) , PPOs and Provider sponsored organizations o Private FFS plans Coverage provided by private insurers o 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% st No new enrollees to MSA plan Is suspended as of Jan 1 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 companies o These are developed by the NAIC and are 10 standard policies A J o Benefits vary by plan, but not by state or insurer o Costs can vary o 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 alphabet o 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 provider o Enrollees were required to pay a large part of healthcare expense through premiums and deductibles o Could Contract for Only Part B or for both part A and Part B Only Part B Healthcare Prepayment Plans (HCPPs) Risk Contracts o Monthly payments from HCFA PMPM o 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 month o This was phased out from 1st July 2002 to an annual period o If you fail to make a choice default is traditional FFS Medicare Utilization of Services o Higher incidence and chronic illnesses o 2-3 times the care of a normal commercial member o Need better UM / communications / IS and personnel Benefits Packages BBA mandates that o Access to 24 hr emergency services


o o

o o o Total

o o o o

Coverage for unforeseen non emergency services outside plan service area Coverage for renal dialysis treatment outside service area 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 Out Patient self Management training services & equip for diabetic patients Coverage for bone density exams for high risk people Vaccine outreach program for seniors Care Management Approach includes Prevention and Early detection of disease identify potential conditions/ promote effective chronic illness care/ delay disability Coordinated Patient Care CCPs place primary care at the center of the delivery system and focus on managing patients care at all levels Alternatives to inpatient hospitalization for acute and chronic needs use case management and disease management programs home health / step down units / community based services 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 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 HCFA o 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 CCPs o Went into effect in 1998 Quality Improvement o 1996 HCFA established the Quality Improvement System for Managed Care (QISMC) to strengthen MCOs 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 care


HMOs PPOs PSOs are expected to satisfy this MSA and PFFS have to meet a subset of these standards PPOs are required to meet only those standards which apply to PFFS and non network MSAs Came into effect in 1999 o o o

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 include o Children and low income adults who qualify for Aid to Families with Dependent Children (AFDC) benefits o 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 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 Benefits Fairly comprehensive Federally Mandated Benefits include Physican Hospital services Lab services Home healthcare visits Long term custodial care Others include o Prenatal Care o Vaccines for children o Family Planning services and supplies


o o o o o

Nursing Midwife Pediatric and family nurses Rural Health Clinic Services Federally qualified Health center (FQHC) services Ambulatory services of a FQHC that would be available in other settings

States can increase benefits to cover dental /vision / prescription drugs Medicaid 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. 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 Childrens 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 status o Need significant outreach to connect to PCP rather than emergency rooms for primary care o 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 Providers o Accept Medicaid payment as payment in full o Nominal out of pocket expenses o 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 agencies o Independent third parties enroll plan members o Need state approval for distributing marketing information o No Door to door or telephonic solicitation Quality Assessment and Improvement o QISMC from Medicare Applies here also o This is not mandatory for Medicaid MCOs depends on state laws o 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. 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 Access o BBA granted this permanent program status and an optional for Medicaid State Childrens Health Insurance Program BBA established the state childrens health insurance program


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 state o 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 old o Not currently eligible for Medicaid or other insurance o Resides in a family with income below the 200% of the federal poverty level or 50% points above the states established eligibility limits o

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 preexisting o Mental health parity act o Meet Womens health and Cancer Rights Act 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 Plans o 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 fees Managed Care Features Preventive Care , self care and decision support programs Utilization Management o Review o Discharge planning o Disease/condition management o Demand Management Case Management broad spectrum case management - needs of groups along the entire healthcare continuum BCM includes o Population based case management o Disease Management approach o Care Coordination o Individual Case Management: Appeals and Grievances Quality Initiatives Accreditation and Performance measures

Workers 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 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


Cant 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 cant 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


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 culture Reading 12B: Ethical Issues in Managed Healthcare Explain the Patient Bill of Rights Discuss some of the ethical issues MCOs are currently confronting


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 else 5 Key Principles 1. Autonomy The patients should be able to make decisions on their lives 2. Non-Maleficence MCOs cant harm their patients 3. Beneficence Promote the good of the members as a group 4. Justice/Equity Fairly distribute the benefits and burdens among members 5. Promise Keeping/Truth telling be truthful! Further Virtue Creating an 1. 2. 3. 4. 5. Ethical Corporate Culture Better communication between entities Honor codes Educating members on the system Educating employee/providers and members about the issues Policies or procedures which provide guidance when confronted with ethical issues 6. Culture where ethical considerations are integrated into decision making 7. The contracted organization must have similar systems in place 8. 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 rights a. Information , choice , access , participation , respect and non discrimination, confidentiality , complaints , responsibilities 2. 5 issues to take care of a. Resource Allocation fair/equitable b. Financial Incentives to providers c. Clinician Patient Relationship d. Confidentiality e. Employee trust


Key Concepts Tested in Sample Test Case Mixed Adjustment or Risk Adjustment Statistical adjustment of the outcome based on factors like patients 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 HCFAs 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