27. Managed Care

Question 1

Managed Care Organisations

Answer 1

For-profits entities owned by shareholders that combine clinical and statistical/ financial techniques to manage risk, reduce cost and improve quality by encouraging the delivery of cost-effective, high-quality healthcare

• aim to address third-party-payer problem - where providers provide more expensive treatment than necessary, and users abuse the “free” service
• response to increase in healthcare costs
• aim to manage claim costs while maintaining/ improving access to quality healthcare services

System provides insurer with some control over healthcare service providers - thus integrating delivery and financing of healthcare

Question 2

Reasons for increased cost of healthcare

Answer 2

• misalignment between incentives between provider and payer (no incentive for healthcare providers to limit unnecessary care)
• medical technology advancements, user expectations resulting in high cost treatment
• cost increases due to ageing population
• fraud

Question 3

Objectives of managed care organisations (BL)

Answer 3

• reducing cost of medical events
• improve quality of care provided
• ensure medical services are provided in appropriate setting
• ensure high-risk members are managed and receive appropriate care
• reduce the number of unnecessary medical services

Question 4

Risks in managed care transferred between funder and provider

Answer 4

price risk
- fee received does not cover variable costs, make inadequate contribution to overhead and profit

intensity risk
- more services needed in the encounter than anticipated

severity risk
- cases more severe than anticipated

frequency risk
- more people need treatment than anticipated

actuarial and marketing risk
- actuarial risk - risk demographics not as anticipated and thus pricing is not correct
- marketing risk is the risk demographics not as anticipated and contributes to actuarial risk

Question 5

Strategies used by MCOs to meet objectives and minimise risk

Answer 5

• provider networks (volume discounts, may use protocols)
• reimbursement methods (fee-for-service, capitation, per diem, salary, pay-for-coordination, pay-for-participation, pay-for-performance)
• risk-sharing (natural response vs desired objective, provider control, realistic goals, education and support, provider involvement, simplicity)
• risk adjustment
• formularies, treatment protocols

Question 6

Concerns with managed care

Answer 6

• provider networks may restrict access to care -
• providers may resent external parties imposing clinical protocols on them and influencing the way they practise medicine
• may compromise quality of care to patients by encouraging under-servicing
• formularies and other financial-based managed care initiatives may result in additional cost transferred to member, with no overall cost reduction - patients may be aggrieved when find out claim declined having to use alternative as result of protocols
• more restrictive protocol –> higher potential cost saving –> risk that restrictive protocols aggravate policyholders

managed care protocols need to be updated continually as new treatments and medicines are made available
- will need to comply with regulations insofar as they cannot unreasonable restrict access to healthcare for policyholders

Question 7

Managed care definition

Answer 7

• the process whereby an insurer intervenes in provision of medical care
• with the dual objective of optimising quality of treatment for the policyholder
• and maintaining affordability of healthcare provision
• by means such as preferred providers, claims pre-authorisation, and treatment protocols.