Managed Care Chap 2: Types of Health Insurers, MCOs, and IDs Flashcards
Introduction
- Originally, health maintenance organizations (HMOs), preferred provider organization (PPOs), and traditional forms of idemnity health insurance were easily distinguishable
- POS plans appeared - combining HMO-like features with idemnity coverage
- Managed Care (MC) elements migrated to all product types - Newer types of plans - high deductible health plans (HDHPs) and conumer-directed health plans (CDHPs) with pretax savings accounts emerged
- Additionally, there are different types of provider organizations - integrated health care delivery systems (IDSs)
- Another example of continuing change is the degree to which physicians are no longer practicing independently, but are being hired by hospitals
Taxonomy
- “MCO” - now meaning any kind of HMO, POS, or PPO, is not interchangeable with “payer”, referring to any organization that administers health benefits and pays providers
- “Health Plan” is often used interchangeably with MCO, payer, and health insurer, but is technically incorrect
- Health plan is the health benefits plan - entity responsible for setting the benefits and bearing the risk for medical costs
- A considerable amount of coverage in this country is through employer-sponsored self-funded benefits plans in which the ER sets the benefits and bears the risk for medical costs, not the insurer
i. Legally, the health plan is the employer while the payer organization is only an administrator and processes claims payments - Using the term “health insurer” to mean any kind of payer is incorrect
i. HMOs are licensed differently than are insurers
ii. An insurer may only administer the benefits for a self-funded plan, but not hold the insurance risk for medical costs
Insured vs. Self-Funded Benefits Plans
- Less than half of all ER group plans actually are covered under health insurance
a. The larger the employer group, the more likely it is to self-fund - Insured: ER or individual subscribers pay premiums and the health plan is at risk for the cost of covered medical services
a Under ERISA, employers are allowed to self-fund their benefits plans
- ER is at risk for the cost of covered medical services, and the money used to pay claims is provided by the ER, not from premiums paid to an insurer or HMO
- ER avoids paying state premium taxes or complying with msot state laws and mandated benefits
- Keeys any profit an insurer would make on the premiums - Self-funded employer groups typically purchase reinsurance to protect themselves against very high costs
a. Some insurers sell reinsurance to self-funded customers, but a substantial portion is purchased from commercial reinsurance firms
b. Some companies use “captive” insurance or reinsurance company, meaning: They own the company themselves and use primarily for their own purpose
c. Reinsurance is not health insurance, is not required to provide the same breath of coverage, and is not subject to the ACA or ERISA
- Reinsurer may decline to cover certain benefits (e.g. transplants) or even certain individuals in the plan
i. Known as “applying a laser” to the reinsurance policy, meaning a highly focused exclusion or exclusions
ii. Typically used upon renewal after the conditions (s) have been identified, not when the initial policy was sold - Differences between period during which a cost is covered, and under what conditions
a. Insurance - coverage begins when a member is both eligible and enrolled, may be retroactive, and ends when the member is either no longer eligible or leaves the plan
b. Reinsurance - one of several forms:
- Claims made: reinsurer has liability only when even occurred and was informed of potential for liability while the insurance is in force; If informed after the policy has lapsed, the insurer has no liability
c. Claims paid: Coverage is only for medical claims paid by the health benefits plan in a contract period, regardless of when costs were actually incurred
d. Occurrence: Coverage applies if the policy was in force when the even occurred, regardless of whether or not the reinsurer was notified or a claim was paid
- Due to guaranteed issue requirement in the ACA, ER that cannot obtain reinsurance will still be able to purchase actual health insurance beginning in the year 2014
a. Only premiums for small employer groups are pooled together under community rating
b. Large groups may be experience rated
c. Self-funded groups contract with an administrator to manage their pans under an administrative services only (ASO) contract
d. Self-funded ERs usually contract with payers such as HMOs, commercial insurers, or BCBS plans to administer their benefits
The Managed Care Continnum
1. How payers differ along the continnum
a. On one end - managed indemnity with precertification of elective admissions and large case management, superimposed on a traditional indemnity insurance plan
b. Service Plan: Similar to indemnity, has contractual relationships with providers with maximum fee allowances, prohibits balance billing, and uses same UM techniques as managed indemnity
- Indemnity or service plans typically remain the licensed entity upon which other types of MC plans other than HMOs are built
c. Further along the continuum are PPOs, POSs, open-panel HMOs, and closed-panel HMOs
d. Progressing from one end of the continuum to the other, the complexity and overhead increases, and the control of cost and quality increases as well
- CDHPs combine a high-deductible insurance policy with a PPO network and a unique pretax medical savings plan. They do not fit neatly on this continuum
- TPAs provide barebones services to self-funded plans. They do not fit neatly on continuum
- Continumm: Managed Indemnity - Serivce Plans - PPOs - Point of Service HMOs - Open Panel HMOs - Clsoed Panel HMOs
- Moving right means increased admin cost and increased control of medical cost and quality
Types of Health Insurers and Managed Care Organizations
1. Indemnity Coverage
a. Indemnifies the beneficiary from financial cost associated with health care
- Prior to managed care, few controls to manage cost. Coverage was only for illness, not for wellness, preventive services, or prescription drugs
- Insurer usually paid based on billed charges, but might also determine what a maximum appropriate charge should be for a professional visist
- Providers billed the beneficiary for anything not paid by the insurance company (“balance billing”)
b. Rising health cost hit traditional indemnity health insurance hard
- Most carriers exited the business by selling the book of business to another insurer or by being acquired
- Remaining carriers built PPOs on their insured products, using their existing licenses, along with building or acquiring various other types of MC plans
2. Service Plans
a. Similar to indemnity insurance from a benefits standpoint, but the contract brings MC elements:
- Plan contracts directly with providers
- Provider contracts specify that the plan will pay them directly and they may only bill the patient for coinsurance, co-pays, or deductibles
- Member is protected from balance billing (if services are from a contracted provider)
b. Unmanaged service plans were ssubject to the pressures as indemnity insurance, and suffered the same fate
- Service plans easily evolved into PPOs, but continue to exist as distinct contracted networks alonside the PPO
- A service plan provider that chooses not to participate in the service plan’s PPO will still be bound by the terms of the service plan contract when seeing PPO members
3. Managed Indemnity
a. Traditional carriers developed MC overlays that could be combined with traditional indemnity insurance, service plans, or indemnity like self-funded benefits plans
- MC overlays intended to provide some measure of cost control for indemnity plans, while retaining individuals freedom of choice of provider, and coverage for out-of-plan services
- MC overlays have evolved to be applicable to other types of products
b. Most common MC overlays:
- General utilization management
- Large Case management
- Specialty utilization management
- Disease management
- Rental network
- Workers’ compensation utilizaton management
4. Preferred Provider Organizations
a. PPOs (dominant type of MC plan) - entities that contract with a network of participating providers (those are considered “preferred”)
- Participating providers contractually agree to accept the PPO’s payment levels, and PPO agrees to pay the provider directly rather than send the check to the member
- PPO providers also agree to abide by UM requirements
- Payment terms also usually represented a greater discount than those foundin service plans
- Members who see PPO providers for care have higher levels of coverage
b. PPOs vary in how they perform UM
- In many PPOs, the PPO itself is responsible for UM
- Other PPOs agree to work with third-party companies that perform UM, or PPO may own a UM company
- PPOs not owned and operated by health insurers or BCBS plans typically agree to comply with an employer’s or a payer’s UM program
c. PPOs may be owned by many different types of organization (e.g. ER, HMO, Hospital, insurer, etc.)
d. PPO may be operated solely for the benfit of its owner
- E.g. PPO created by a BCBS plan that provides services only to BCBS members
- It may be a so-called rental PPO that offers services to any health plan under an administrative fee agreement
e. When PPO coverage is insured, it is through a health insurer licensed in the states in which it operates
f. ER self-funded PPO plans are not subject to state licensure
5. Exclusive Provider Organization (EPOs)
a. Similar to PPOs in their organization and purpose
- Unlike PPOs, EPOs limit coverage only to services provided by participating providers except emergencies
b. EPOs typically are not licensed as HMOs, but use an existing PPO network for in-network services
c. Often used by self-funded ER groups or governmental plans not subject to typical state regulation
d. Unlike HMOs, EPOs typically do not require a member to go through a PCP gatekeeper
e. Typically implemented by self-funded employers whose primary motivation is cost-saving
f. A few large employers combined EPO-type health plans for their employees and coupled them with onsite primary care centers
- EEs are not only limited to the EPO’s network, they also are required to receive their primary care and sometimes their prescriptions, through the onsite centers
6. Point-of-Service Plans
a. Esentially combine an HMO with indemnity type coverage for care received outside of the HMO
- HMO members covered under POS benefit plans may decide whether to use HMO benefits or indemnity style benefit for each instance of care
b. Lets self-funded ERs provide a MC plan combining HMO cost savings without losing coverage for care out of network
c. POS plans also provided a way for HMOs to broaden their appeal and gain enrollment
d. Indemnity coverage available under POS incorporates high deductibles and coinsurance to encourage members to use HMO network
e. Members who use the no-HMO benefits may be subject to utilization review such as preadmission certification and continued stay review
7. Health Maintenance Organizations
a. The HMO Act of 1973
- Required HMOs to have a system that members would use for most health care services
- Described comprehensive benefits, fixed payments to the HMO, and requirement that at least 90% of basic physician services shall be provided through:
(1) Members of the staff of the HMO
(2) A medical group (or groups)
(3) An individual practice association (IPA)
(4) Physicians or other health professionals who have contracted with the HMO for such services
(5) Any combination of above
(6) In other words, HMOs are responsible for financial aspect coverage AND a delivery stystem to provide covered services
b. With a few exceptions, states allow only HMOs to share risk with providers
c. Considerations that differentiate HMO’s from health insurers
- Licensed by states under different laws than insurers and subject to more stringent rules and regulations
- Must provide adequate access to providers within its service areas
- Must include “no balance billing” clauses in all provider contracts
- Must allow direct access to PCPs and ob/gyn physicians
- Must have written policies and procedures for:
(1) Physician credentialing
(2) UM
(3) QM
- Must maintain defined minimum levels of reserves to be able to continue to pay claims
d. Elements common to most HMOs
- Share some fianncial risk with some physicians
(1) Usually only with primary care
(2) Can be with a medical group
(3) Can be with the entire physician network or an IPA
(4) Level of financial risk usually modest, limited by law for Medicare HMOs
- Require members to see a PCP for routine services and to access specialty care
- Accredited by one of three accreditation organizations
(1) National Committee on Quality Assurance (NCQA)
(2) URAC
(3) Accreditation Association for Ambulatory Health Care (AAAHC)
8. Types of HMOs
a. Open-open plans or Closed-panel plans
- Open Panels: contract with private physicians who agree to provide care to HMO’s members, and are considered open to private physicians who meet HMO’s terms and credentialing criteria
(1) Open-panel HMOs do not provide care to members, but rely on private physicians to do so
(2) Examples: IPA and “network/direct contract”
- Closed-Panel: Provide most of care to members through either a medical group associated with the HMO or physicians employed by the HMO, and are considered clsoed to private physicians
(1) Contract with private physician specialists for some services
(2) Examples: Group model and staff model
b. Independent Practice Association Model (IPA)
- Make up almost half of HMOs and contracts with an association of physicians - the IPA - to provide services to members
- HMO does not contract with IPA physicians directly
- IPA physicians continue to see their non-HMO pateitns and maintain their own offices, medical records, and support staff
- The physicians are not EEs of the HMO or IPA, but are independent contractors
- IPAs seek to follow one of two approaches in relationship to HMOs;
(1) The IPA has been independently established by community physicians and contracts with more than one HMO or
(2) The HMO works with community physicians to create the IPA, which then contracts with the HMO exclusively
- The payment methodology used by an HMO may not always align with how practicing physicians are actually pad
(1) Most HMOs pay IPA capitation for all physician services
(2) IPAs use the capitation to pay physicians using either FFS or a combination of FFS for specialists and capitation for PCPs
(3) An IPA may also capitate certain specialsits
(4) When using FFS, IPAs typically withhold a portion of each payment for incentive and risk-sharing purposes
c. Direct Contract Model
- HMOs contract directly with independent physicians or medical groups to provide physicians services to their members
- Because there is no IPA, the HMO does the credentialing, network management, and UM
- HMOs pay physicians through capitation and FFS, in various combinations
- Payment to the physicians is also direct, although a medical group may still pay their physicians through a methodology different from what the HMO uses
d. Group Model
- HMO contracts with a multi-specialty medical group practice to provide all physician services to the HMO’s members
- Physicians are employed by the group practice and not by the HMO, and share facilities, equipment, medical records, and support staff
- Medical group may be captive to the HMO, or the HMo may be captive to the group
(1) In the captive group model, the group practice exists solely to provide services to the HMO’s beneficiaries
(2) In the captive HMO model, an established independent medical group is the sponsor or owner of the HMO
e. Staff Model
- The physicians who serve the HMO’s covered beneficiaries are employed by the HMO
- Physicians are paid on a salary basis and also receive bonus or incentive payments
- HMO must employ physicians in the most common specialties, but unlike large established medical groups, these HMOs likely contract with private physician specialist as well
- Health systems employing a large panel of PCPs and specialists are also staff models, thoough not HMOs
f. Advantages of open-panel HMOs
- More easily marketed and sold becasue they include a large panel of private physicians
- Easier for members to find participating physicians conveniently located
- Routine medical management functions may be delegated to the IPA in IPA model HMOs
- Easier and less costly to set up and maintain
g. Disadvantages of open-panel HMOs
- HMO has little ability to manage the care being provided and must rely on the use of benefits determinations and medical necessity criteria
- Premiums are often higher than closed panels
h. Advantages of closed panel HMOs
- Ability to more closely manage the medical care
- Delegation of routine medical maangement to the group, thereby reducing admin costs
- Convenience of “one-stop shopping” for members as buildings often house doctors’ offices, small procedure rooms, basic X-rays and pharmacy services
i. Disadvantages of closed-panel HMOs
- Not as easily marketed whe people already have a relatioship with a doctor and do not want to change it
- Locations of the HMO’s medical offices may not be convenient for all members
- Only feasible in medium to large cities where the market is large
- More complex and costly to set up and maintain compared to any other health plans
j. True Network Model
- “true” network model when the HMO contract with more than one large medical group or physician organization
k. Mixed Model HMOs
- Many HMOs or MCOs are actually mixes of different model types
- More common for closed-panel types of MCOs to add open-panel components to their health plan than the reserve
l. Mixed Model HMOs
- Many HMOs or MCOs are actually mixes of different model types
- More common for closed-panel types of MCOs to add open-panel components to their health plan than the reverse
m. Open-Access HMOs
- Resembles a hybrid of a POS plan and an EPO
- Like a POS plan, the member selects a PCP and gets the highest level of benefits by using the HMO system, but may access specialty care directly, with less coverage
- Like an EPO, only services provided by in-network providers are covered, regardless of whether accessed through the PCP or by going directly to a specialty
- Some open-access HMOs dispense with the PCP “gatekeeper” approach and simply require a higher copayment for specialist care, but still restrict any coverage to services from in-network providers
9. Consumer-Directed Health Plans (CDHPs)
a. Combine a high deductible health plan (HDHP) with pretax savings account and are often associated with a PPO network as well
- health care costs are paid first from the pretax account and when that is exhausted, any additional costs up to the deductible are paid out of pocket
- Preventive services are not subject to the deducitble
b. Two basic forms of CDHP benefits plans:
- Employer-based using a health payment amount (HRA)
- Individual-based using a Health Saving account (HSA)
c. HRAs are funded solely by the ER on a pretax basis, and are not considered taxable income to the EE
- ER determines how much pretax money to put into account and how much unused money may be rolled over year to year
d. HSAs were created as part of the Medicare Modernization Act
- Only individuals covered by a HDHP may make tax-deductible contributions to an HSA
- Individuals eligible for Medicare, claimed as a dependent on somebody else’s tax return, or covered under another policy are not eligible to contribute to an HSA
- Any money left in a HSA at the end of the year may be rolled into the next year
e. HDHP is also limited to maximum OOP expenses
f. Most CDHPs are associated with a PPO to provide the value of the negotiated discount to the consumer
- While the provider’s fee is discounted, they must still collect any amounts due under the deductible from the member
- Many payers provide real-time info about any remaining deductible amounts so providers can collect at the time of service
- Some payers allow a member to authorize a direct provider payment from their HRA or HSA at the time the claim comes in
10. Third-Party Administrators
a. TPA administers benefits for a self-funded ER group, but does not have all the capabilities of a major payer organization
- Services include enrollement and claims processing. TPA may also provide UM or access to a rental PPO, or these may come from another company
b. TPAs are not licensed insurers and assume no risk
- Often has arrangements with reinsurers and may assist the employer group in obtaining it
- Many states have TPA license requirements including regulations governing TPA’s agreement with a reinsurer
11. Consumer Operated and Oriented Plans (CO-OPs)
- ACA calls for CO-OPs to offer coverage to small groups and individuals through the state exchanges
- Can’t be run by a state or local government
- Can’t have been a health insurance issuer on July 16, 2009
- Must be licensed by the state and comply with all state insurance laws
- Governed by a board that is subject to the majority vote of its members
Integrated Health Care Delivery System (IDS)
- Providers coming together to manage health care and contract with HMOs, PPOs, or health insurance companies
- The common denominator is the physician. Unless there is a significant physician compoennt, it would not be considered an IDS - Independent Practice Association
- Physician Practice Management Companies (PPMCs)
- Publicly trade companies, placing great pressure on the need to report positive earnings
- Most failed. PPMCs purchased physician practices. Then there was no longer sufficient incentive for physician to be highly productive
- The PPMCs that thrived were more specialty-focused than PPMCs that had acquired primary and specialty care practices
- Unlike a group practice, the physicians are EEs of the PPMc, which not only manges the practice but provides MC services - Group Practice Without Walls (GPWW)
- Also known as the clinic without walls
- Does not require the particiaption of a hospital
- Composed of private practice physicians who agree to aggregate their practices into a single legal entity, but physicians continue to practice in their independent locations
i. They appear independent to patients, but they are 1 organization from the view of contracting entities
- Difference between GPWW and gor-profit, physician-only MSOs
i. The GPWW is owned solely by the member of physicians an not by any outside investors
ii. The GPWW is a legal merging of all assets of physicians’ practices rather than the acquisition of only tangible assets
- To be considered a medical group, physicians’ personal income affected by the performance of the group as a whole
- GPWW is owned by the member physicians, and governance is by the physicians
i. May contract with outside organization to provide business support services - Physician-Hospital Organization (PHO)
- An entity that allows a hospital and its physicians to negotiate with payers
- Weakest form of PHO is the messenger model
i. PHO analyzes the terms offered by an MCO and transmit its analysis to each physician, who then decides on an individual basis whether to participate
- More commonly, the PHO participants develop contract terms and use those terms to negotiate with payers
- Physician organizations that do no accept substantial financial risk find it difficult to operate within the Federal Trade Commission’s antitrust safety zone
i. Federal antitrust agencies established an exemption to allow PHOs to negotiate terms with MCOs provided those financial terms were an essential component of the PHOs quality or utilization objectives
- Focus on same types of metrics used by more traditional MC
- Same accreditation organizations used by HMOs have created recognition standards for clinically integrated IDSs such as PHOs - Management Services Organizations (MSO)
- Represents the evolution of the PHO into an entity that provides more services to support the physicians
- Physician usually remains an independent private practitioner
- Operates as a service bureau providing basic practice support services to member physicians
i. These services incldue such activities as billing and collection, admin, electronic data interchange
- Receive compensation from the physician at fair market value, or hospital and physician could incur legal problems
- May actually purchase many of the assets of the physician’s practice
i. May purhcase the physician’s office space or office equipment at fair market value
ii. Can employ office support staff of the physician as well
iii. Can incoporate functions such as QM, UM, provider relations, member services, and claims processing - Foundation Model
- A hospital creates a not-for-profit foundation, purchases physicians’ practices and puts those practices into the foundation
i. To qualify for tis not for profit status, the foundation must prove that it provides substantial community benefit
- Second form of foundation model doesn not involve a hospital
i. Foundation is an entity that exists on its own and contracts for services with a medical group and a hospital
- Foundation owns and manages the practices, but the physicians become members of a medical group
i. Foundation is the only source of revenue to the medical group
ii. Physicians have contracts with the medical group - Provider-Sponsored Organizations (PSO)
- PSOs were a group of providers engaged in both delivery and financing of health care services
- PSOs were authorized by Congress to contract directly with Medicare on an at-risk basis for all medical services, bypassing existing Medicare HMOs
i. Cutting out the middleman in the form of bypassing experienced Medicare HMOs was a fast route to deep financial losses
ii. PSOs were adverse risk magnets to o - Hospitals with Employed Physicians
- Hospitals are employing both PCPs and specialists
i. In some cases, physicians can’t keep up with requirements such as electronic records and turn to their hospital for help
ii .Hospital wants to prevent physicians from becoming competitors
iii. Increases the hospital’s negotiating leverage - this exacerbates the problem payers now have in negotiating with health systems that dominate a local area
- Other positive aspects include professional management, better electronic transactional systems, a more rapid adoption of electronic medical records, greater ability to coordinate care, greater ability to manage practice, better communications, and a more stable physician base
Integrated Health Care Delivery System (IDS)
- Providers coming together to manage health care and contract with HMOs, PPOs, or health insurance companies
- The common denominator is the physician. Unless there is a significant physician compoennt, it would not be considered an IDS - Independent Practice Association
- Physician Practice Management Companies (PPMCs)
- Publicly trade companies, placing great pressure on the need to report positive earnings
- Most failed. PPMCs purchased physician practices. Then there was no longer sufficient incentive for physician to be highly productive
- The PPMCs that thrived were more specialty-focused than PPMCs that had acquired primary and specialty care practices
- Unlike a group practice, the physicians are EEs of the PPMc, which not only manges the practice but provides MC services - Group Practice Without Walls (GPWW)
- Also known as the clinic without walls
- Does not require the particiaption of a hospital
- Composed of private practice physicians who agree to aggregate their practices into a single legal entity, but physicians continue to practice in their independent locations
i. They appear independent to patients, but they are 1 organization from the view of contracting entities
- Difference between GPWW and gor-profit, physician-only MSOs
i. The GPWW is owned solely by the member of physicians an not by any outside investors
ii. The GPWW is a legal merging of all assets of physicians’ practices rather than the acquisition of only tangible assets
- To be considered a medical group, physicians’ personal income affected by the performance of the group as a whole
- GPWW is owned by the member physicians, and governance is by the physicians
i. May contract with outside organization to provide business support services - Physician-Hospital Organization (PHO)
- An entity that allows a hospital and its physicians to negotiate with payers
- Weakest form of PHO is the messenger model
i. PHO analyzes the terms offered by an MCO and transmit its analysis to each physician, who then decides on an individual basis whether to participate
- More commonly, the PHO participants develop contract terms and use those terms to negotiate with payers
- Physician organizations that do no accept substantial financial risk find it difficult to operate within the Federal Trade Commission’s antitrust safety zone
i. Federal antitrust agencies established an exemption to allow PHOs to negotiate terms with MCOs provided those financial terms were an essential component of the PHOs quality or utilization objectives
- Focus on same types of metrics used by more traditional MC
- Same accreditation organizations used by HMOs have created recognition standards for clinically integrated IDSs such as PHOs - Management Services Organizations (MSO)
- Represents the evolution of the PHO into an entity that provides more services to support the physicians
- Physician usually remains an independent private practitioner
- Operates as a service bureau providing basic practice support services to member physicians
i. These services incldue such activities as billing and collection, admin, electronic data interchange
- Receive compensation from the physician at fair market value, or hospital and physician could incur legal problems
- May actually purchase many of the assets of the physician’s practice
i. May purhcase the physician’s office space or office equipment at fair market value
ii. Can employ office support staff of the physician as well
iii. Can incoporate functions such as QM, UM, provider relations, member services, and claims processing - Foundation Model
- A hospital creates a not-for-profit foundation, purchases physicians’ practices and puts those practices into the foundation
i. To qualify for tis not for profit status, the foundation must prove that it provides substantial community benefit
- Second form of foundation model doesn not involve a hospital
i. Foundation is an entity that exists on its own and contracts for services with a medical group and a hospital
- Foundation owns and manages the practices, but the physicians become members of a medical group
i. Foundation is the only source of revenue to the medical group
ii. Physicians have contracts with the medical group - Provider-Sponsored Organizations (PSO)
- PSOs were a group of providers engaged in both delivery and financing of health care services
- PSOs were authorized by Congress to contract directly with Medicare on an at-risk basis for all medical services, bypassing existing Medicare HMOs
i. Cutting out the middleman in the form of bypassing experienced Medicare HMOs was a fast route to deep financial losses
ii. PSOs were adverse risk magnets to o - Hospitals with Employed Physicians
- Hospitals are employing both PCPs and specialists
i. In some cases, physicians can’t keep up with requirements such as electronic records and turn to their hospital for help
ii .Hospital wants to prevent physicians from becoming competitors
iii. Increases the hospital’s negotiating leverage - this exacerbates the problem payers now have in negotiating with health systems that dominate a local area
- Other positive aspects include professional management, better electronic transactional systems, a more rapid adoption of electronic medical records, greater ability to coordinate care, greater ability to manage practice, better communications, and a more stable physician base
Organizations Emerging Under Health Reforms
- Accountable Care Organizations (ACOs)
a. Specifically written into the ACA to address bending the cost curve in the traditional Medicare program
b. Eligible groups to form an ACO and apply to participate in a shared savings program:
- ACO professionals in group practice arrangements
- Networks of individual practices of ACO professionals
- Partnerships or joint ventures between hospitals and ACO professionals
- Hospitals employing ACO professionals
- Rural health clinics (RHCs)
- Federally qualified health centers (FQHCs)
- Critical access hospitals (CAHs)
c. ACO has to be a legal entity authorized to conduct business in each state in which it operates
d. ACO must be formed for the purposes of:
- Receiving and distributing shared savings
- Repaying shared losses or other monies owed to CMS
- Establishing, reporting, and ensuring provider compliance with health care quality criteria
e. Governing body of the ACO must include a Medicare beneficiary without a conflict of interest with the ACO
- At least 75% of the ACO’s board seats must be held by ACO participants
f. ACO management must be under the governance of the board
g. ACO participants must demostrate a meaningful commitment, defined as a sufficient financial or human investment such that ACO losses would be a significant motivator
h. Shared savings programs, including the potential for financial risk
- ACO must show that it can repay losses at least 1% of the total per capita Medicare Parts A and B FFS expenditures for its assigned benficiaries
- An ACO may demostrate its ability to repay losses by obtaining reinsurance, placing funds in escrow, obtaining surety bonds, establishing a line of credit, or establishing another repayment mechanism
- Patient-Centered Medical Home (PCHM)
a. “Joint Principles of the Patient Centered Medical Home”
- Patients have ongoing relationships with a personal physician who provices first contract, continuous and comprehensive care
- Patients receive care from a team, led by the personal physician, who take collective responsibility for providing care
- Personal physicians take responsibility for providing or arranging all of the health care across the patient’s community
- Quality and safety are key parts of PCMH, enhanced by evidence-based medicine, continuous quality improvement, patient engagement in decision making and others
- Enhanced access to care through open scheduling, expanded hours, and better communication between practices and patients
- Payment to PCMHs recognize “added value” provided including services outside of face-to-face visits, coordinate of care, recognition of case-mix differences, and incentive payments associated with reduced hospitalization and quality improvement
b. Similarities and differences between these PCMH principles and PCPs in the gatekeeper PCP model HMOs
- Like closed-panel HMOs but unlike open-panel HMOs, it explicitly recognizes a care team aligned around the primary care PCP
- Like HMOs, there is focus on the quality monitoring and improvement aspects of the PCPs role in a PCMH - This is reinforced with the suggestion thaat PCMHs should be subject to some type of accreditation
- The value of patient engagement in the decision-making process is explictly a part of the PCMH concept
c. The ACA allows a plan participaring in a state exchange to provide coverage through a qualified PCMH
Vertical Integration
- Vertically Integrated means physicians, hospitals and insurance or benefits administrations all came together under a single corporate entity
- Two new developments may see forms of vertical integration reappear
- The rapid increase in employment of physicians by large hospital systems
- The ACA calls for payment changes in Medicare and new organizational approaches such as ACos and PCMHs
(1) These new organizations would be paid through shared savings, but the overall trend will be downward pressure
(2) An alternative to ACOs for health systems is found in MA in which both upward and downward risk exists
