The Health Care Industry Part 3 - Managed Care

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The Health Care Industry Part 3 - Managed Care

• Karen F. Nichols, MSA
• School of Allied Health Professions
• University of Nebraska Medical Center

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What is Managed Care?
Managed care is a general term for the activity
of organizing doctors, hospitals, and other
providers into groups in order to enhance the
quality and cost-effectiveness of health care.
Managed care is a broad term and encompasses
many different types of organizations, payment
mechanisms, review mechanisms, and
collaborations.
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Why Managed Care?

• The Cost of Health Care
• Spending for health care topped 1.2 trillion in
  1999, up 5.6 percent from 1998.
• In the late 90s health spending averaged
  increases of 0.5 percentage points less than the
  gross domestic product (GDP) as the shift to
  managed care and impacts from the Balanced Budget
  Act of 1997 resulted in one-time savings. Private
  spending for health care continues to grow more
  rapidly than public spending and is expected to
  continue.
• A steady shift toward health insurance plans with
  small out-of-pocket requirements for drugs has
  raised consumer demand. An increase in the
  number of prescriptions filled, a larger number
  of new drugs in the marketplace, and an increase
  in advertising expenditures, has also contributed
  to the higher spending growth rate for drugs-
  accounting for 9.4 percent of personal health
  spending in 99, and continuing to lead all other
  health care services in cost growth.

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BBA 97-Balanced Budget Act

• In September, 1997, the United States Congress
  passed, and the President signed into law BBA 97.
  The BBA represented a bipartisan commitment to
  balance the Federal budget by the year 2002 and
  implemented many changes designed to cut 115b in
  Medicare costs and 15b in Medicaid costs over 5
  years (1998-2002). Medicare, accounting for 11
  percent of the Federal budget, was given the
  largest cut in the programs history.

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• Since then, spending for Medicare grew by 10.3
  percent in 2001. However, that rate of growth was
  inflated by a provision of the BBA that
  accelerated 3 billion in payments to group plans
  from October to September 2001--or from fiscal
  year 2002 to fiscal year 2001. When spending is
  adjusted for that accelerated capitation payment,
  the underlying rate of growth in 2001 was 8.7
  percent.
• Significant growth resumed in 2001, after
  Medicare absorbed the substantial changes in the
  program's payment rules enacted in the BBA in
  1997. That growth also reflected increases in
  payment rates and other changes enacted in the
  Balanced Budget Refinement Act of 1999 and the
  Benefits Improvement and Protection Act of 2000.
  Net mandatory spending in 2002 is predicted to be
  7.1 percent higher than such spending in 2001,
  after adjusting for the accelerated capitation
  payment.

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• The latest projections from the Congressional
  Budget Office (CBO) forecast that federal
  Medicaid expenditures will rise at an annual rate
  of growth of 8 percent to 9 percent over the next
  several years. This exceeds the rate of increase
  in Medicaid expenditures over the past few years,
  but is below the program's average annual
  expenditure growth rate of 11 percent between
  1980 and 2000.

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• The purpose of these last few slides is to
  provide you with some idea of how complex and
  expensive government health care plans are.
• This is why there is so much debate about these
  topics in the news.
• As healthcare professionals it is your
  responsibility to keep yourselves informed about
  these contemporary issues.

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Critical Access Hospitals (CAHs)

• Since Medicare recipients account for sixty to
  eighty-five percent of rural hospital discharges
  the BBA would have a detrimental affect on
  revenue for rural hospitals. As a result of this
  concern, in the Balanced Budget Act of 1997,
  Congress created the Medicare Rural Hospital
  Flexibility Program. This program established
  Critical Access Hospitals (CAHs), a new category
  of limited service hospitals.

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• The benefit for rural hospitals is that CAHs are
  reimbursed for inpatient and outpatient services
  provided to Medicare beneficiaries at a
  reasonable cost basis, significantly more than
  current Medicare rates. It is also an
  alternative for small hospitals struggling for
  market share and a way to link them to regional
  medical centers.
• States wishing to participate in the Medicare
  Rural Hospital Flexibility Program must develop a
  rural health plan, create rural health networks,
  and designate CAHs. The state Office of Rural
  Health is responsible for submitting the state
  rural health plan to the appropriate Health Care
  Financing Authority (HCFA) regional office for
  review and approval. The program encourages
  providers to fit their service mix to local needs
  including some method of community needs
  assessment and would allow for local differences
  in populations, needs, and resources.

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Managed Care
Now, with that background, lets get back to
Managed Care and the terminology you need to
know.
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Managed Health Care Plan

• A Managed Health Care Plan is an arrangement that
  integrates financing and management with the
  delivery of health care services to an enrolled
  population. It employs or contracts with an
  organized system of providers that deliver
  services and frequently shares financial risk.
  Managed care has effectively formed a
  "go-between", brokerage, or 3rd party arrangement
  by existing as the gatekeeper between payers and
  providers and patients.
• Health Maintenance Organizations (HMOs) offer
  prepaid, comprehensive health coverage by
  contracting with, physicians, hospitals, and
  other health care providers. Members of an HMO
  are enrolled for a specified period and are
  required to use participating or approved
  providers for all health services
• A contractual agreement between an HMO and one or
  more hospitals is called a hospital affiliation
  whereby the hospital provides the inpatient
  benefits offered by the HMO.

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Primary Care is medical practice based on direct
contact with the patient without referral from
another physician. Such practice is undertaken
by physicians trained in various ways including
pediatricians, general internists, family
physicians, and general practitioners. The
Primary Care Provider (PCP) is a physician
selected by the member upon enrollment, who is
trained in one of the primary care specialties
such as a family practitioner, general internist,
pediatrician, and sometimes an OB/GYN.
Generally, a PCP serves as the initial interface
between the member and the medical care system.
The PCP supervises, coordinates, and provides
medical care to members assigned to his/her plan.
The PCP initiates all referrals for specialty
care, also know as the Gatekeeper. In order
for a patient to receive a specialty care
referral or hospital admission, the gatekeeper
must preauthorize the visit, unless there is an
emergency. A Primary Care Network (PCN) is a
group of primary care physicians who share the
risk of providing care to members of a given
health plan. Community Care Networks (CCN)
provide coordinated, organized, and comprehensive
care to a community's population. Hospitals,
primary care physicians, and specialists link
preventive and treatment services through
contractual and financial arrangements, producing
a network that provides coordinated care.
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A Participating (or Preferred) Provider is a
provider who has contracted with a health plan to
provide medical services to members. The
provider may be a hospital, pharmacy, other
facility, or a physician who has contractually
accepted the terms and conditions set forth by
the health plan.A Preferred Provider
Organization (or Physician Provider
Organizations) (PPO) is a health care delivery
system that contracts with providers of medical
care to provide services at discounted fees to
members. Members may seek care from
non-participating providers but generally are
financially penalized for doing so by the loss of
the discount and subjection to co-payments and
deductibles. Generally, PPOs offer more choice
for the patient and will provide higher
reimbursement to the providers.An Exclusive
Provider Organization (EPO) is a managed care
organization that is organized similarly to PPOs
in that physicians do not receive capitated
payments, but that only allows patients to choose
medical care from network providers. If a
patient elects to seek care outside of the
network, then he or she will not be reimbursed
for the cost of the treatment.
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The ICD-9-CM, or ICD Code is an acronym for the
International Classification of Diseases, 9th
Edition (Clinical Modification) (ICD-9-CM). It
is a list of diagnoses and identifying codes used
by physicians for reporting diagnoses of patients
in a health care plan. The coding and
terminology provide a uniform language that can
accurately designate primary and secondary
diagnoses and provide for reliable, consistent
communications on medical insurance claim
forms.The principal or primary diagnosis is the
medical condition that is ultimately determined
to have caused a patient's admission to the
hospital.Diagnosis Related Groups (DRGs) are
part of a reimbursement system used by Medicare
for classification of inpatient hospital
services. They are based on the primary ICD Code
and modified by secondary diagnosis, surgical
procedures, age, sex, and the presence of
complications. They are used as a means of
identifying costs for hospital and selected other
provider services.
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Patients Bill of Rights Bill

• The financial incentives for providing care vary.
  Under fee-for-service, providers are paid for
  every service they provide, so they have an
  incentive to provide more care - potentially too
  much or inappropriate care.
• Under managed care, health plans and/or their
  subcontracting providers, may be paid preset,
  per-month or discounted fees, regardless of how
  much care a patient needs or uses. Payment
  mechanisms reward lower utilization - potentially
  rewarding inappropriate limitations on needed
  care.
• Does managed care provide the opportunity to hold
  health plans and their providers accountable for
  the quality of care they provide?
• Holding health plans accountable for quality care
  is important especially in the context of health
  plans that are paid with taxpayer's dollars. This
  has led to much the debate on the Patients Bill
  of Rights.

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What Rights do patients have?

• All patients, rich or poor, have a right to
• Be treated with dignity and respect
• Have conversations with doctors and health
  workers and medical records kept confidential and
  not be released to outside agencies without
  written consent
• Be told in detail what is wrong with them and how
  their condition can be treated
• Refuse treatment altogether
• Be told of the risks and possible side effects of
  treatment
• Choose between different possible forms of
  treatment
• Change their mind in the middle of treatment and
  refuse further treatment
• Read and make changes in printed forms they are
  asked to sign
• Ask for a different doctor
• Refuse to be used for teaching or research
  purposes

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Rights of patients are guaranteed by court
decisions, statutes and regulations, and medical
and hospital ethics.
The Patients Bill of Rights deals with issues of
liability and quality of care. Mostly, it deals
with legal liability.
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Patients' Bill of Rights
The dramatic growth of health maintenance
organizations (HMOs) has prompted calls to give
patients a stronger voice in decisions about
which medical procedures will be covered by
insurance and has lead to heated political
debates over the Patients Bill of Rights.
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This is The End of Part 3

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