Managed Care

 Organized delivery system adopted by insurers to manage the cost of care, the quality of care, and access to care  Both public and private sector engage in managed care  Evolved from conventional health insurance (**indemnity insurance) – protected from financial losses in terms of medical expenses  has progressed/ transitioned to managed health care  **Managed care: wide array of techniques and structures promoted by purchasers to obtain more control - Structure are techniques and tactics such as gatekeeping, authorization for services, utilization review, quality assessment, evidence based medicine (all are techniques promoted by purchasers) -2 types of purchasers: employers (companies, government) -Structures are the different types of plans  Plans become the agent for the purchaser of the health benefit  Managed care plans: organized finance and delivery systems to provide care: Include the following elements: -Provider network: physicians (both primary care and specialist), health care organizations (health system, hospitals, skilled nursing facilities, home health services – any continuum of services) -Integrated delivery of care: coordination of service delivery across the providers within the system/plan (can positively impact patient flow & referrals, efficiency and accuracy in information flow, can promote better quality of care b/c patients are receiving only necessary and appreciate services) -Incentives for cost consciousness: (on part of providers as well as consumers) being reasonable about expenditures. (cost-sharing, utilization review, reimbursement/ payment method- i.e. capitation) -Standardized practice (evidence-based guidelines): plans developing clinical guidelines/protocols based on the best practice of providing diagnostic and treatment for patients who are members of these plans, there is a right/best way based on medical knowledge and practice, plans use these to standardized practice and create opportunity for the best outcome  Key definitions  Managed Care Organizations (MCO): licensed & regulated by the state to offer these various insurance plans and product  Enrollee/covered life: sometimes we use the term member or beneficiary, plans have lots of covered lives because they serve lots of employer groups  “Old” Model of Health Care Delivery: **1985 & earlier, 4 party model, there is a reason why the provider is at the type – in the old 4 party system the provider is at the type figuratively & literally b/c they are calling the shots in terms of what services are going to be provided, how those services are going to be available, had the power to control service delivery (provider meaning largely physicians), physician determined type and scope of services available to the insured, the insurer simply made available indemnity services and paid the bills once the claim was submitted by the provider and there were no questions asked, the employer (at the bottom) basically only offered one plan, a certain type of indemnity insurance plan, employers, employees and or their dependents took advantage of that particular

indemnity plan, consumers had a large opportunity to make decisions and consume services b/c the consumer was able to go to lots of different providers, plan was open, had free choice to seek care from whatever provided they wanted under these indemnity policies -This is a recipe for disaster. No continuity of care, no exchange of information among providers (impacts quality), no oversight, no gatekeeping, using services they may not need, duplicated services, inappropriate services (could be harmful but also costly), physician-induced services, significant variation in the quality of care provided b/c there was no oversight -This system was untenable and had to be changed. Premiums started to increase significantly (double digit increases beginning shortly after 85)  “New” model of health care delivery. Employer has become active purchaser and is now at the top of the system (wanted to cost control and promote quality) the insurer has transitioned into a managed care organization, the consumer has transition to an enrollee of a plan, the provider is still the provider but are now at the bottom of the 4 party system b/c they are no longer calling the shots, decisions are limited due to regulation from health plan, physicians are becoming employees of organizations, provider is influenced by managed care plan policies & procedures (i.e. quality measures, must use certain network providers for diagnostic testing, subject to utilization review), Enrollee now must typically stay in network (may have option to go outside of network but at a higher cost for enrollee), less freedom of choice to see different providers, restrictions created by MCO, The purchaser contracts with an MCO (usually for several different plans that can be made available), that purchaser is influencing the nature of the services provided under the plan (plan becomes the agent for the purchaser), MCO meets the needs of the purchaser, restricted network of physicians that have been selected  Individual Market- Health Care Exchanges, has been transformed by ACA, created to help individuals and families take advantage of health insurance  Managed Care Products (term products and plans are used interchangeably) -Graph shows relationship of freedom of choice for consumer juxtaposed against cost control or particular product or plan -HMO shows high ability to control costs, low freedom of choice -PPO greater opportunity for freedom of choice, midrange level of cost control -Indemnity doesn’t offer really anything for cost control and is wide open in terms of choice (we don’t really have indemnity polices today but the ones that do exist are managed)  Managed Care Plans -some characteristics of one plan have morphed over to others plans (plans no longer as distinct) -relationships between purchaser & plan, and providers & plan -plan has to create these networks (these plans and MCOs are kind of like brokers, they have to create the plan by identifying who they want in the contract with them to be participating providers)  MC Plan Affiliation Model -dotted line represents contractual relationships -Managed care plan can be an HMO, PPO, EPO, point of service plan, etc.

-These plans opened up because employees wanted to open up choice for enrollees -However, enrollment in point of service plans have dropped significantly (probably correlated with high deductible)  The type of HMO is a function of relationship between the HMO and the physicians that operate within that plan -Pre-paid fixed fee basis is really the premium -Uses only HMO affiliated providers -Maintenance of people’s health (keeping people healthy more of a push on this plan) -Financial risk is assumed by the HMO in some form, that risk is frequently extended to the participating physicians though various payment methods  Different models (although they may be mixed in same HMO) (1) Staff Model: physicians are employed by HMO (ex: Kaiser Permanente), they employ their physicians and the physicians work solely for the plan (2) Group Model: HMO contracts with a single multi-specailty physician group -Can be a captive group or independent group (no restricted to that HMO, can see others) (3) Network Model: HMO contracts with multiple group practices to provide physician services to those HMO members -Closed Panel: the group or groups is exclusively contracted with the HMO -Open Panel: those physician groups can see other plan’s patients as well, open to other plans and other types of patients (even private pay) (4) Independent Practice Association Model (IPA): sometimes called independent physician association, a legal entity, an association on physicians, physicians come together and create this legal entity and then the HMO contracts with the IPA, largely office-based practice (5) Direct Contract Model: HM0 contracts with individual doctors directly in their practices 1/13/17 **Employers are encouraging HDHP largely b/c of cost-sharing ERISA regulates pensions and health benefit plans at the federal level

**Different features of co-insurance and deductibles for different plans 1/18/17 – Primary Care in Managed Care Plans Primary care - point of contact, help plan meet plans objectives in terms of cost, quality, and access Closed Panel: closed to the physicians whoa re practicing/ affiliated with that plan, those physicians only see the plans members (1) Staff model HMO -employ the physicians (2) Group model HMO -contract with a select group (to see only managed care members) Open Panel: plan contacts with physicians to provide care in their own offices -Can see other managed care plan members that they contract with **most of the growth in these two categories of plans have been in the open panel Reasons for use of non-physician providers in closed panels - can increase productivity, they are less costly, and can afford to more time with members of the plans than with physicians Key issues in physician staffing (1) Availability: given the size of the plan and enrollment, do you have enough physicians/staff to take care of members (2) Scope of practice: etc. do physicians in the plan handle babies/ OBGYN (3) Acceptance by consumers/ members of exam: do members accept the types of primary care physicians offered in the plan, do members want family physicians to deliver babies, do they accept the non-physician providers who may work with the primary care physicians, etc. Recruitment Issues (Staff Model HMO) (1) Length of time involved – takes a lot of time to recruit these physicians, takes several months to build relationship with candidates and recruit someone, more and more physicians coming out of medical school/ residencies want to work for an HMO (don’t have costs of setting up your own practice, reduce responsibilities, can focus more on taking care of patients, timely payment/ don’t have to worry about reimbursement for services, can make a comfortable salary working a 40 hour work week and not have to worry about administrative stuff, security/ work-life balance, etc.) (2) Identify and use resources for recruitment (3) Screening/interview/ selection process 2 types of salary models in closed panel staff model arrangement: (1) Salary -Straight salary (don’t have to take call b/c schedule’s are set)

-Expand to a new service area of an existing market they are in -They may introduce a new plan or a new product to an existing market (ex: may introduce a Medicaid managed product or POS plan into an existing market they are serving) -Can also reconfigure the network to accommodate changes that occurring (if physicians decide they can’t accept new or lower reimbursement rates, they must drop out & plan has to decide who is going to take their place) Network Development (Open panel plans in primary care) -Want to target potential new members & use certain preferred hospitals that are also apart of our network -Need to consider physicians that will be in the network at the same time we consider the hospital that will be in the network (these physicians may hospitalize patients or see them on an out-basis so they must have privileges) therefore these decisions must be made together -Ratios must be hire b/c you need to ensure that there is adequate coverage in your plan since there is an out-of-network option -# of physicians required by the plans really depends on required ratios specified in physician/plan contract (**this takes precedence in terms of determining how many primary care physicians you need) Geographic Access -Plans must build this into their supply of PCPs -Must be able to accept new patients, must match location/ residence requirements of enrollees -MCOs complete a geo-access analysis to demonstrate enrollee access to PCPs (due this analysis based on location of physicians & locations of enrollees in a specific group) -Reasonable distance/ drive times 20 minutes Geo-Access Analysis -Analyzes employee locations relative to PCPs -Plan might set a standard of 2 PCPs within 10 miles -Doesn’t tell us if PCPs within distance are accepting new patients, how full their practice is, how long we would have to wait for an appointment, etc. Methods of Identifying Physician Candidates (for open panel plan) (1) Knowledge of Medical Director (2) Physicians with privileges at contracted hospitals (3) Physicians affiliated with competitor hospitals (can be a strategy used to pull these in physicians in) (4) Medical Society listings (5) State license listings for physicians Physician Recruitment (for open panel) -Physicians would want to see sample benefit plan to see what services they would be covering (maybe would not want to participate if some services are excluded)

-Would want a provider directory to get a sense of what other providers are in the network in terms of specialty care etc. (they know who they can work with & who they respect as clinicians), may question the quality of the network they are joining if low quality providers -List of clients/list of employers that have already contracted with the plan/ those they are considering contracting with (gives physician size & future/ scope of plan – is it growing?) Types of contracting (in terms of open panel) -PHO (Physician Hospital Organization) : legal entity comprised of two parties (1) a hospital (2) members of their medical staff (physicians who have privileges at that particular hospital) advantage here is that there is more leverage in negotiating payment from health plans in part of both hospital and physician Faculty Practice Plan: suggests a network may want to include the medical faculty from universities/medical schools who are expert in their field & have high knowledge that they can bring to the health plan -providers higher level of expertise to a medical plan Plan May Solicit Proposals -Request for proposal (RFP)** -An RFP includes the information that the plan requires to assess whether or not they are going to go with a physician group to be a participating provider in their network. The RFP contains the information they want to know. Response from RFP comes from the physician group (what they are willing to accept in terms of payment, services provided, etc.) -Plan issues RFP to select # of physician groups that they want to consider in being participating providers -These physician groups want to be participating providers so they are willing to go through this process & do a good job Contract Negation Protracted (drawn-out, takes a lot of time, may involve other professionals) Deselecting providers -Removing providers/eliminating providers from a network is increasingly common -Results from change in contracting arrangements, quality issues, unacceptable costly practice style (heavy users of services), failure/refusal to abide by policies of the plan -Isn’t going to happen overnight, will be drawn out **but causes serious disruption to employees & their dependents, becomes a real challenge for people who have developed relationships with physicians -May cause public relations particularly if media gets involved (if you drop a physician that’s widely known in the community – can reflect very poorly on the plan) 1/20/16 - Reimbursement of Primary Care Physicians in Open Panel Plans 2 general categories of reimbursement: (1) Fee for Service

-ACA required this ratio (85% in large groups, lower in individual markets) -Effects profitability & HCOs ability to do business **Largest MCO in the country 1/25/17 Utilization Management and Authorization Systems  Activities that an MCO/plan engages in to manage use of services and medical costs  Utilization ensures we are providing needed, effective, and appropriate services  Helps to ensure healthy members and plan performance  80/20 rule: applies to managing utilization services Common Utilization Measures  # Of inpatient hospital admissions  Inpatient hospitals admissions per 1,000 members  ALOS – average length of stay in the hospital for an enrolled member in the plan  Total bed days per 1,000 members  Out patient procedures **first four very indicative of high cost care (keeping track of use of inpatient care) -Outpatient care at the bottom (number of physician visits, encounters, per 1,000 etc.) -Use these performance measures to evaluate how we are doing throughout the year -Plan can then make adjustments on how they are managing utilization to better achieve targets **Discussion in textbooks Key Activities  Plan design (covered benefits): plan can design to impact the use of services, some of these things cuts back on use  Demand Management: trying to reduce need/ demand for service,  Authorization and utilization review: approval of services & care provided under the plan to ensure appropriateness & effectiveness 2 questions that need to be asked & answered: (1) is the service covered under the plan? (some or partial) (2) notion of medical necessity – is it needed? Is it justified? Authorization: key element of managing medical delivery- what is authorized and by whom Focuses on two things (1) Non PCP services (outpatient testing etc.) – things not provided by the PCP but PCP has to initiate authorization for that type of service **has to be approved by PCP (2) High cost care area: the involved high cost care for specific clinical conditions has to be approved **has to be approved by managed care plan

Purposes of Authorization 1. Review for coverage and medical necessity to ensure authorization appropriate services 2. Channel care to most appropriate location/setting b/c some settings provide lower cost, more appropriate settings than others (i.e. not going to ER but family physician is lower cost more appropriate alternative) 3. Provide information relevant to concurrent review - review of the episode of care while it is being provided, continue to authorize certain services that might be needed 4. Assist in estimating accruals - helps us estimate accruals or total expenses/ costs Categories of UM 1. Prospective Review 2. Concurrent Review 3. Retrospective Review 4. Pended (for review) 5. Denial (no authorization) 6. Sub-authorization – blanket overall approval (all subsequent care necessary for a patient has been approved in advance) Methods 1. Prospective (in advanced) – certifying or approving the service before its received, looking forward (Admission to hospital, PAT – preadmission testing, outpatient diagnostic imaging) 2. Concurrent review – managing the use of service during the course of care or hospitalization (cancer treatment, physical therapy) -UM nurses make rounds, assess patient & appropriateness of plan -appropriateness & progress 3. Retrospective: Looking backwards, reviewing the case after care is provided & the patient is discharged or has finished treatment (1)Claim Review or case review: examining the submitted claims by the provided for improprieties or error in order to verify that services have been delivered & determine any errors in the claim’s data (upcoding, unbundling, etc.) (2)Pattern Review: looks at patterns of utilization & the care thats provided in order to provide better ways to provide the care in the future (such as other locations, maybe on an outpatient basis, etc.) Other Techniques for utilization (textbook) Case Management – focus on high cost & complex care for chronic illness, high cost generator patient , plan assigns case manger – typically a nurse – to manage the case (manage costs & quality of care) Disease management: care & management of selected chronic diseases (20% that’s generating 80% of costs pulled into these programs) focus on care for these populations to

-Federal government funds Medicaid using various formulas based on per capita income in the state (pays between 50-80% of total for Medicaid coverage) Medicaid Beneficiaries -Broad program that includes various different individuals that fit the categories of eligibility Traditional Medicaid -Has been a fee for service system -Providers have been paid on a fee schedule -No provider choice restrictions -FFS was considered the payment in full (physician cannot bill Medicaid beneficiary for the different between what they charge and what they’re being paid under FFS – this is referred to as Balanced Billing ) Problems in Traditional FFS Medicaid -Low fees -Low participation (difficult to find providers to participate) -No control over where beneficiaries receive care, not coordination of care, etc. -High need population  high costs -Medicaid beneficiaries drop in and out of coverage depending on income status (also leads to administrative problems determining if they have coverage) Medicaid and Managed Care -There has been rapid growth since 1980 -77% of beneficiaries enrolled in some type of managed care (55 million) **significant shift over the past 30 years in terms of placing these individuals in Medicaid managed care models Why the rapid growth? -Growth in Medicaid eliblity -Recession – people lose jobs & may need to become eligible for Medicaid -Cost inflation -Want to experience same savings as in private sector -CMS has encouraged managed care in Medicaid -Not just about cost- also about quality, continuity of care, access, etc. -DMAS (state agency in Virginia that manages the Medicaid program & handles Medicaid managed care efforts) look for “plan partners’ – states contract with Medicaid only plans (ex: Virginia Premiere) – that only exist to serve Medicaid populations through their managed care program & commercial MCOs who have a Medicaid plan that they offer as one of their problems (ex: Anthem, United Health care) -Two ways states do this (1) contract with Medicaid only plans (2) contract with commercial MCOs Medicaid Managed Plans -Presently, all but 2 states have at least one Medicaid managed program

-Medicaid managed care is concentrated in 7 states, which account for 47% of the total Medicaid managed care enrollment (CA, NY, FL, ILL, MI, PA, TX – populated states, changing demographics, etc.) Covered Services Under Medicaid Managed Care (Examples) Medicaid Managed Care Arrangements 2 ways: (1) HMOs : paying that particular plan on a capitated basis to take care of Medicare beneficiaries (80% of Medicaid beneficiaries) (2) PCCM – primary care case management model: Fee for service model based upon gatekeeping function where PCPs serve as gatekeepers in states that have this model, PCP is paid a monthly fee on top of their FFS to handle gatekeeping function to ensure cost-effectiveness and access (20% of Medicaid beneficiaries) Virginia Medicaid Managed Care -Has the HMO model – all Medicaid beneficiaries are required to be in a Medicaid managed care arrangement except for those that are institutionalized (Medallion 3.0) -DMAS partners with six different health plans to handle the Medallion program (anthem Aetna, INTotal, Kaiser, Optima, & Virginia premier) -These plans have to have networks -State pays the plan a per capita per month based on the number of enrollees in that plan & those services must be made available under the plan Appeal of Managed Care - **Provides a medical home for enrollees ( did not have under traditional Medicaid) so that they have somewhere to connect with, build trust, & develop a relationship with -Reduce use of inappropriate and costly sites for uncoordinated, episodic care -Greater continuity of care (increases quality) -Greater prenatal care, getting a better start to life, better health care in general Impact of Medicaid Managed Care nationally -Reduced expenditures -Quality of service is comparable (not necessarily higher) than FFS -But, access to service is better than FFS -Some Medicaid eligible populations not covered in managed care -Many commercial HMO plans have dropped out