Managed Care Plans were created to:
1. Eliminate the fact that more frequent visit by patient to doctor means more financial benefit for doctors.
2. Broaden the circle of financial risk to include health care providers. Health care providers should be encouraged to deliver the necessary care in a cost-effective way.
Utilization management: Process by which a plan manages an insured’s use of medical services and assures that she receives necessary, appropriate, high quality care in a cost effective manner.
Utilization management broadens and combines utilization review and case management techniques.
Utilization Review is a process by which a plan evaluates the necessary and quality of a patient’s medical care.
UR includes:
1. Preadmission certification: Insured must contact a UR agent if he wishes to get admitted to hospital. UR agents then determines the kind of service needed and makes proper arrangements
2. Concurrent review: While patient is in hospital, UR staffs monitors the condition 3. Retrospective reviews: Same as preadmission but is done after the patient’s release from hospital. This is a concurrent review step of the whole analysis. This might reveal erroneous charges and billing errors.
Case Management
Case Management is an extension of UR and is a process by which a plan evaluates not only the medical necessity of care but also alternative treatments or medical care.
Health care coverage Continuum:
Pure Managed Care plans PPO
Traditional Indemnity Plans
Gatekeeper PPO
Open ended HMO
HMO
Health Maintenance Organizations (HMO)
A HMO is a health care financing and delivering system that provides comprehensive health care services for subscribing members (Subscribers) in a particular geographic area. HMOs can be owned or sponsored by many different types of organizations: by national HMO organizations, by commercial insurers, and by medical schools and hospitals. HMOs can be operated as either not-for-profit or for-profit organizations.
Characteristics of HMOs
1) Comprehensive Care: HMO subscribers are eligible to receive comprehensive health care services, including impatient and outpatient treatment in a hospital. Unlike traditional indemnity plans, HMO emphasize the practice of preventive care, including routine physical examinations, diagnostic tests, pre-natal and well-baby care, and immunizations.
2) Prepaid Care: In a traditional HMO, subscribers receive comprehensive health care in exchange for the payment of a periodic fixed fee. Most HMOs require the subscriber to pay an additional fee (co-payment) for certain medical services. HMOs shift all or part of the financial risk to the health care providers.
3) Network Providers and Negotiated Fees: HMOs contract with physicians and hospitals to make up a network of health care providers. HMO subscribers must choose their medical care providers from within this network. By Contracting, HMOs achieve advantages like:
Can control the quality of the providers
Can negotiate fees and thus reduce the cost
These are the fee structure arrangements that are used to pay the providers.
Capitation: Under this arrangement the providers gets paid PMPM (per member per month) for a subscriber regardless of number of visits. But PMPM may be different for each HMO subscriber
Salary: Physicians get a pre-determined salary based on the average salaries of local physicians in the same field. They also receive certain types of performance bonuses or incentive pay.
Discounted fee-for-service: HMO pays physicians a certain percentage of their normal fees (like 90%). It is not as widely used as other fee structures.
Fee Schedule: The HMO will pay up to a specified maximum fee for each procedure. In this case it is transferring more risk to the service providers.
4) Intensive Use of Managed Care Techniques: HMO requires subscribers to select Primary care physician (PCP) who serves as the first contact with the HMO. If additional care needed, PCP refers the subscriber to specialists within the network. That is why they are often called gatekeepers.
Types OF HMOs
Open Panel HMO: any physician or provider who meets the HMO’s specific standards can contract with the HMO (2 type)
Closed Panel HMO: physicians either must belong to a special group of physicians that has contracted with the HMO or must be employees of the HMO (2 type)
Mixed Models: combine characteristics of two or more methods.
Open Panel
Individual Practice Association (IPA) model: Under this arrangement, HMO enters into a contract with an IPA, which is an association of physicians (independent practitioners) that agrees to provide services. Physicians provide services to their own patients as well as to the HMO subscribers. This model requires less start-up capital and can offer a broad range of specialists. IPA model is generally compensated by ‘capitation’ or ‘discounted fee-for-service’
arrangements. Some HMO requires subscribers to pay co-payment also. But in this case the financial risk rests with an IPA.
Direct Contract HMO: HMO contracts directly with the physicians (primary care physicians or specialists), not thru any associations or middleman. Fee structure, financial risk, less start-up capital (own clinic and staff) – same as above
Closed Panel
Staff Model: Physicians are actually employees of the HMO and generally out of offices in the HMO’s facilities. The staff model HMO may own or contract with hospitals, laboratories, pharmacies, and other organizations to provide non-physician medical services. Uses ‘Salary’ structures. Financial risks on the HMO, costly to start up but have greater control over physicians so can manage utilization of health care services better than other models.
Group Model: Functions same as a staff model, except that the physicians are employees of a physicians’ group practice, rather than employees of the HMO.
The physicians in such a group share office space, staff, and medical equipment at a common health center or clinic. Ex: Kaiser Permanentre in the US. If the group HMO contracts with more than a group, then it is called a network model HMO.
Pay to the group by ‘capitation’ method, group pays the physician ‘salaries’ based on their performance, expertise and amount of administrative work. Financial risk on the physicians’ group.
Preferred Provider Organizations (PPO)
Unlike HMO, PPO does not provide health care directly rather it acts as a broker or middleman by contracting between health care providers and health care purchasers (employers, third-party administrations, insurance companies, and unions). PPOs can be organized or sponsored by group of physicians, hospitals, Blue Cross or Blue shield
plans, TPAs, or employers. In the US, insurance companies are the dominant sponsors of PPOs.
PPOs also use a network of providers but also offer some coverage for members who choose to use the services of non-network or out-of-network providers. Out-of-pocket expense (generally 30%) will be more in case of out-of-network provider selection, only to encourage the subscribers to choose the network provider.
PPOs typically compensate health care providers on a fee-for-service basis. As a result, PPOs do not accept the financial risk of providing health care services to insureds but they pass it on to either the insurer or the policyholder.
Hybrid Plans
Open-ended HMOs or Point of service (POS) Plan: This plan has some features of a traditional HMO and some of a traditional indemnity plan. The subscriber of this plan either uses the HMO network or may choose to use a provider that does not participate in the HMO. The subscriber typically pays higher out-of-pocket expense than under a traditional indemnity plan. But this plan contains financial incentives to encourage subscribers to use network providers.
Gatekeeper PPOs: This PPO plan requires plan members to choose PCP (gatekeepers) within the PPO network of physicians. In this case, the out-of-pocket expense will be lower than the usual PPO.
Another difference is this plan is the compensation method to the providers. Here PCP is compensated on a capitation basis. Thus gatekeeper PPOs transfer
financial risk to providers.