healthcare systems ch. 9 – Managed Care

in managed care, providers were paid on a ____ basis
*health maintenance organization act of 1973*
-aimed to stimulate the growth of HMOs by providing federal funds to establish new HMOs
-medical care under capitation to reduce costs, instead of the traditional fee-for-service payment method
*purpose of managed care*
to limit the QUANTITY of healthcare delivered, and amount of REIMBURSEMENT to providers

managed care = managed costs

managed care organizations garnered enormous buying power by…. (2 ways)
-enrolling a large segment of the insured population
-taking responsibility to obtain cost-effective health care for enrollees
*Managed Care*
mechanism of providing hlth care services where a single organization takes on management and responsibility for:
-delivery of services
*the 3 most common methods of reimbursing providers that MCOs use*
discounted fees
MCOs exercise ___________ ____________ over the utilization of health care services
formal control (especially by reimbursement)
provider is paid a fixed monthly sum per enrollee, often called a per member per month payment
pre established criteria to determine in advance the amt of reimbursement
accreditation of MCOs
-accredited by National Committee for Quality Assurance (NCQA)
-sets standardized performance measures for MCOs
Healthcare Effectiveness data and Information Set (HEDIS)
-contains “report cards” for MCOs
-include a number of different measures on cost & quality
Centers for Medicare and Medicaid Services (CMS)
rate the relative quality of Medicare Advantage Plans (Medicare Part C) on a 1-5 star scale
*managed care and medicare enrollment*
medicare beneficiaries have the choice of enrolling in a managed care plan under the Medicare Advantage program
-this hasn’t been too popular
*managed care and medicaid enrollment*
-medicaid recipients can enroll in MCOs
-Balanced Budget Act gave states the authority to require managed care enrollments
-Medicaid enrollment of in MCOs has grown (especially as MCOs expand to rural areas)
reasons that MCOs backlashed in the 1990s
-consumers mad that there was limited choice in providers & restrictions on specialized services
-providers mad that MCOs control utilization and limit reimbursement
-didn’t like risk sharing under capitation
how did MCOs respond to the backlash in the 1990s (how’d they change to improve?)
-HMOs moved away from tight management of healthcare services
-incorporated fee-for-service reimbursement along w/ capitation
-PPOs emerged, offering greater choice of providers
*3 main approaches MCOs use to control utilization*
1. experts evaluate what services are “medically necessary”
2. determine how services can be provided most inexpensively (IP vs OP)
3. review the course of medical treatment
Utilization Review
-the process of evaluating the appropriateness of services provided

-3 types!
1. prospective
2. concurrent
3. retrospective

*prospective utilization review*
-medical necessity for certain treatments is determined BEFORE the care is delivered
-EX: decision of a physician to refer or not to refer a pt. to a specialist
-PURPOSE: to prevent unnecessary institutionalization or treatments
*Concurrent Utilization Review*
-decisions regarding appropriateness of care are made DURING the course of health care utilization
-EX: monitoring the length of IP stays based on how the pt is doing during the stay
***discharge planning***
discharge planning
-component of concurrent utilization review
-evaluates any special requirements that are necessary for a pt. after discharge
*Retrospective Utilization Review*
-determines the appropriateness of utilization AFTER services have already been delivered
-decides what they’ll pay for based on how necessary the care was
-based on an exam of medical records to assess the appropriateness of care
*3 factors critical in differentiating between the different types of MCOs*
-choice of providers
-different ways of arranging services
-payments and risk-sharing
*HMO plans* (focus? type of payment?)
-oldest type of MCO
-focus is on wellness care (prevention, & care during illness)
-capitation & fee-for-service payments
-enrollees must use “In-Network providers”
-“carve outs”
carve outs
special contracts outside regular capitation, which are funded separately by HMOs
*distinguishing factors between HMOs, PPOs, and POSs*
page 223 table
*4 common HMO models*
-staff model HMO
-group model HMO
-network model HMO
-independent practice association model -HMO
*Staff Model HMO*
-employs its own salaried physicians (in all specialties that are paid fixed salaries
-operates OP clinics & contracts w/ hospitals for IP services
-lots of control of delivery of services
-high phys salaries require lots of members
-limited choice of provider
*Group Model HMO*
-contracts w/ a multispecialty group practice and hospitals to provide comprehensive services
-physicians are employed by the practice, not the HMO
-HMO pays an all-inclusive capitation fee to the practice to provide physician services to its enrollees
*Network Model of HMO*
-contracts w/ more than 1 med group practice
-adaptable to lrg metropolitan areas & widespread geog regions
-group practices responsible for providing ALL phys services
-able to offer more choice
-disadvantage: less utilization control
*Independent Practice Association Model HMO*
-most successful in enrollment
-establishes contracts w/ solo or group practices
-functions as an intermediary representing many physicians
-disadvantage: if a contract is lost, the HMO loses a large %age of physicians
*PPO plans (preferred provider organizations)*
-a type of MCO that uses discounted fee payments instead of capitation
-25-35% off providers’ regular fees
-enrollees can use in-network preferred providers, or physicians outside the network who cost more
*POS plans (point of service plans)*
-combine features of classic HMOs w/ the pt choice found in PPOs
-free choice of providers, but high out-of-pocket costs
MCO’s impact on Cost Containment
-responsibility of the private sector
-MCOs successfully began controlling costs in 1990s
-backlash led to premium increases which led to increased cost-sharing to control costs
MCO’s impact on access
-enrollees have good access
-fewer disparities in access & utilization
MCO’s impact on quality of care
-same quality of care as non-HMO plans
-quality improved over time (b/c of earlier detection and treatment)
-demographics have little/no effect on quality under managed care
-for profit MCOs have lower quality of care than non-profit MCOs
*Integrated Systems*
-reduce costs & deliver services efficiently to populations spread over large geographic areas
-integration of networks to help minimize financial uncertainties
*Integrated delivery system (IDS)*
-includes several organizations under the same ownership that provide an array of health care services to large communities
-reduce costs
-difficult to manage (complex)
*a fully integrated health network typically includes what 6 things*
– 1 or more acute care hospitals
– OP clinics & surgical facilities
– 1 or more physician group practices
– 1 or more LTC facilities
– home health & hospice
– ownership or contract w/ 1 or more MCOs
Accountable Care Organizations
integrated groups of providers who take responsibility for improving overall health status, efficiency, & satisfaction w/ care for a population
-authorized by the CMS
physician-hospital organization (PHO)
-legal entity that represents an alliance btwn a hospital & local physicians, and combines their services under the support of a single organization
-provide the benefits of integration, while preserving autonomy of physicians
-have declined in recent years
*Acquisition vs merger*
-purchase of 1 organization by another
-the purchased company is absorbed under the name of the purchasing company

-a mutual agreement to unify 2 or more organizations
-both former entities cease to exist, and a new corporation is formed

*Joint Venture*
-jointly created independent organization
-share resources and have JOINT ASSETS
-ea. member conducts business independently
-cooperation instead of competition
-helps the joint owners diversify into new services
-agreement btwn 2 organizations to share their resources WITHOUT joint ownership of assets
-cooperation instead of competition
-eliminates duplication of services
-little financial commitment – can easily be dissolved
*Virtual Organization*
-formation of new organizations based on contracts
-require less capital to enter new geog/service markets
-help bring together scattered entities under 1 arrangement
-EXAMPLE: IPAs -independent practice association
virtual integration
formation of new organizations based on contractual arrangements
*horizontal integration*
-growth strategy in which a hlth care organization extends its core product or service
-PURPOSE: to achieve geographic expansion
*Vertical Integration*
-links services that are at different stages in the production process of health care
-PURPOSE: incr comprehensiveness & continuity of care
-diversification strategy
-can be achieved thru acquisitions, mergers, joint ventures, or alliances

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