Managed Care Spectrum

Question 1

How did the passage of the health maintenance organization act of 1973 affect the growth of HMOs?

Answer 1

Major HMO growth began after the passage and enactment of the HMO act of 1973. The federal government continue to nurture the growth of the HMO industry through the 1970s and early 1980s with the department of Health and Human Services providing significant funding to start up HMOs. The government began to withdraw its funding during the Reagan administration. Many smaller plans, especially those in early development, did not survive the 1980s, while others consolidated or were purchased by large national insurance companies that were expanding their managed-care capabilities.

Question 2

Briefly explain why the Preferred Provider Organization (PPO) concept was developed.

Answer 2

PPOs were sponsored by national insurance companies, third-party administrators, Blue Cross/Blue Shield plans, and even Hospital organizations for their customers as an alternative to compete against emerging HMOs. PPOs gained quick popularity with employers that wanted cost savings but were unwilling to reduce provider choice as much as that required in HMOs.

Question 3

Why didn’t many employers realize long-term cost savings with PPOs?

Answer 3

Many employers didn’t realize long-term cost savings with early PPOs because they were primarily discounted fee-for-service arrangements with little focus on utilization control.

Question 4

What steps did PPO companies take to correct this problem?

Answer 4

PPO companies responded to the problem of not realizing long-term cost savings by increasing the monitoring of utilization, implementing quality control and surveying member satisfaction.

Question 5

What do opponents of the PPO approach argue is the reason they are more expensive than HMOs?

Answer 5

Opponents of PPOs are you that PPOs are a week form of managed-care with rich benefits, making them more expensive than HMOs.

Question 6

Is there a universally accepted and used definition of managed care?

Answer 6

There is no specific and uniformly accepted definition of the term “managed-care”. Some use the term exclusively in the context of HMOs, while others view it as any plan that deviates in any manner from the traditional fee-for-service arrangements. The provider community often uses the term managed-care to refer to an integrated treatment method that a patient is receiving rather than to a specific benefit design or provider reimbursement method.

The ultimate definition of managed-care may need to be one that embraces some financial risk and responsibility, a particular set of benefits, quality-of-care mechanisms and payment initiatives. A specific definition of managed care is not as important as having an understanding of the context in which it is applied. Managed-care is best understood as a change in the process of health care delivery, rather than as distinct products. The definition of managed care as a process helps the reader understand how a specific product operates and how they can best address a plan sponsors objectives.

Question 7

What is the definition of managed care provided in the text to include the broad range of managed indemnity plans, HMOs, PPOs and POS plans?

Answer 7

Managed care includes those programs intended to influence and direct the delivery of healthcare through one or more of the following techniques:

• plan design features, including incentives and disincentives in the level of coverage, intended to read direct the delivery of medical care.
• access restricted to a specified group of preselected providers
• utilization management (UM) programs also called utilization review (UR) intended to pre-authorize certain forms of medical care use and/or concurrently monitor the use of more expensive forms of care such as inpatient treatment.

Question 8

Need to Know - Review Answer

Answer 8

Healthcare delivery is a complex business, shaped in the local community and influenced by social environment, clinical culture and economic realities. Most managed-care companies recognize the importance of developing an infrastructure in the local markets in which they operate even if they are headquartered outside the market. This local perspective means understanding the local healthcare delivery systems, developing an appropriate panel of providers and incorporating the necessary managed-care mechanisms in the network.

Question 9

Defined the concept of steerage and its function in a managed care program.

Answer 9

Most managed-care plans pay reduced levels of benefits when members use non-contracted (out of network) providers instead of contracted (in-network) ones. steerage is the managed-care companies way of directing members to in network providers. Steerage is commonly accomplished through setting benefit differentials between in- and out-of-network care between 10% and 30%. Use of steerage is critical to maximize financial results of managed-care. The managed-care companies ability to negotiate favorable provider reimbursement rates is directly related to its ability to steer large numbers of members to contracted providers.

Question 10

What are some standalone UM programs found in traditional indemnity plans?

Answer 10

A. Precertification of inpatient admissions
B. Concurrent review of ongoing confinements for medical necessity
C. Discharge planning
D. Precertification for selected outpatient services
E. Second surgical opinion
F. Case management for high dollar cases.

Note: The cost effectiveness of second surgical opinion’s has been questioned and as a result some plans are no longer requiring second surgical opinion’s.

Question 11

Need to Know - Review Answer

Answer 11

Deductibles and coinsurance amounts in managed indemnity plans should be increased to keep pace with inflation or their cost-effectiveness deteriorates. Low deductibles do not encourage prudent use of the healthcare system. Coinsurance percentages typically cover expenses at 80% after the deductible but at lower rates (for example, 50%) for certain services subject to federal and state statutory requirements. Once coinsurance limits are met, all expenses are paid able at 100% for the remainder of the plan year (usually the calendar year.)

Question 12

What is the incentive approach in the design of PPO plans?

Answer 12

The incentive approach was used when the plan sponsors primary objective was to introduce a managed-care plan with the least amount of employee disruption. It offered members richer preferred benefits while maintaining existing benefit levels for nonpreferred benefits. Compared to a standard comprehensive medical plan, which paid 80% for covered services, and incentive approach would pay, for example, 100% for preferred expenses, while nonpreferred expenses would be kept at the prior 80% level.

Note that premiums likely increased, because of higher benefit payments, and last negotiated provider arrangements and the impact of utilization controls or sufficient to offset the benefit increase and additional administrative expenses.

Question 13

What is the disincentive approach in the design of PPO plans?

Answer 13

The disincentive approach was used when the primary objective was cost savings with preferred benefits equal to the prior plan and nonpreferred benefits being significantly reduced. Compared to the standard indemnity plan, preferred benefits remains at 80% after deductible; the disincentive took the form of the nonpreferred benefits being paid at a lower percent,for example 60%, with a higher calendar year deductible.

Savings for maximized, since plan design differentials, negotiated prices and utilization management controls more than offset the administrative expense of operating the managed-care plan.

Question 14

What is the combination approach in the design of a PPO plan?

Answer 14

The combination approach worked best for the plan sponsor that wanted to introduce a managed-care plan with some improvement in benefits while at the same time saving money. Using the presumed current 80% standard indemnity plan, the preferred benefits were set at a slightly higher level, for example, 90%, and the nonpreferred benefits at a lower level, for example, 70%. Deductibles also were adjusted accordingly to match the higher and lower coinsurance benefit levels. Adequate steerage was built into the plan design while balancing employee acceptance against the plan sponsors need for savings.

Question 15

What is the key component of the point-of-service plan concept?

Answer 15

The primary care physician (PCP) is the key component of the POS concept, and preferred benefits are available only for care rendered by or coordinated through the member’s PCP. Care rendered by nonnetwork providers as well as any other self-referred care, even if rendered by a network provider, is payable at the nonpreferred benefit level. Thus, the PCP acts as a “gatekeeper” to specialist care. The primary care physician generally is a family practitioner, general practitioner, internist or pediatrician, with some networks including obstetricians and gynecologist as primary care physicians in response to demand from female members.

Question 16

What plan features are often included in POS plans to encourage care within the network through the PCP?

Answer 16

A. No deductible and 100% coverage after a small co-pay, for care rendered through the PCP.
B. Preventive services one obtained through the members PCP.
C. One routine gynecological exam per year
D. No member claim submission when the PCP renders care or coordinates care within the network; member claims submission when member self-refers or when a specialist outside the network is used
E. The PCP direct medical care and obtains necessary precertification for hospital confinements and referral care. For self-referred, nonpreferred services, the member is responsible for obtaining any required pre-certification and handling any other utilization management requirements.

Question 17

Need to Know - Review Answer

Answer 17

Like PPOs, POS plans can use incentive, disincentive or combination approaches to plan design, but there must be a greater benefit differential in a POS plan then in a PPO plan to create incentives for members to use the PCP and receive preferred benefits even though benefits (at the nonpreferred rate) are provided for out-of-network care.

Question 18

What is the key distinction in level of coverage between HMOs and the PPO and POS plans?

Answer 18

In HMOs, the member receives no coverage for medical care or treatment received outside of the HMO, except for emergency treatment or when traveling out of the network’s coverage area. In both the PPO and POS plans, the member can still obtain care out of network and receive benefits, though at a reduced rate.

Question 19

Briefly describe the basic features of an HMO.

Answer 19

HMOs provide members with comprehensive benefits through an established provider network.

Members receive Rich benefits (virtually 100% coverage) in exchange for exclusive use of the HMO network and for compliance with its requirements.

As mentioned previously, no coverage is provided for any healthcare received outside of the HMO, except for emergency treatment or when traveling out of the network’s coverage area. Plan highlights include the following:

A. No annual deductibles and relatively small office visit copayments
B. Comprehensive coverage with minimal copayments
C. No claims forms for other paperwork to file
D. Preventive care, including well-baby care, immunizations and routine exams.

Question 20

Identify and briefly explain - GROUP MODEL HMO:

Answer 20

Group model HMOs contract with groups of physicians and usually link the group with various forms of financial risk sharing. While the physicians are not employed by the HMO company, they typically have large numbers of patients who are HMO members which forms a strong financial tie with the company. Members receive primary care at the medical groups clinic or health center, with specialty referral care and hospital confinements handled through other contracted arrangements.

Question 21

Identify and briefly explain - STAFF MODEL HMO:

Answer 21

Staff model HMOs operate in much the same way as the group model. The critical difference is that physicians are employed by the HMO company which pays them a salary rather than payments per service to covered members. Typically, staff model HMOs deliver all levels of care, although the HMO may contract with certain specialists or facilities to provide services it cannot handle.

Question 22

Identify and briefly explain - IPA MODEL HMO:

Answer 22

IPAA model HMOs, or “open-panel” plans, contract with individual practice associations (IPAs) or directly with private practice physicians. This is the most common form of HMO structure today because it requires less capital to establish and operate than the other forms require. It is also often the most popular form of HMO among members, whose current physician may already be on the panel.

Question 23

Identify the fundamental components or factors of the managed-care spectrum that can be used to compare managed-care plans with traditional fee-for-service comprehensive medical plans and also with each other.

Answer 23

A. Degree of freedom and choice of providers
B. Degree of steerage
C. Responsibility for claims handling
D. Degree of external utilization management controls
E. Referral management
F. Provider reimbursement methods
G. Whether the patient is responsible for any balance billing if actual charges exceed the amount of provider reimbursement
H. Rating and financial methods

Question 24

Briefly describe an exclusive provider organization (EPO).

Answer 24

And EPO essentially is a self-funded HMO. By self-funding, and HMO allows the plan sponsor more funding flexibility. The HMO may directly sponsor the EPO or may sell its managed care network and utilization management services to a standalone third-party administrator (TPA) or smaller insurance company. These types of “rental” arrangements are increasingly common in today’s managed care marketplace, even to the point of plan sponsors directly contracting with health care providers for selective services.

Question 25

What was the purpose of the Health Maintenance Organization Act of 1973?

Answer 25

Health maintenance organization act of 1973 provided federal initiatives to encourage the establishment of HMOs. The act, named and promoted as “the health maintenance strategy” by Dr. Paul Elwood, consisted of federal grants and loans to organizations wishing to investigate the feasibility of “federally qualified HMOs”.

Question 26

Need to Know - Review Answer

Answer 26

With the burgeoning over-age-65 population and growing entitlement costs, cost control is as much a priority for those state and federal agencies responsible for health care delivery as it is for employer-sponsored plans. Both the Medicare and Medicaid programs actively pursue ways to encourage managed-care options to those populations covered by these programs.

Question 27

Why are traditional rehabilitation and return-to-work programs not the most effective devices (on their own) in controlling disability costs?

Answer 27

Most of the control efforts for long-term disability start 3 to 6 months after an employee becomes disabled. In the interim, many employers have already hired and trained replacement workers, thus incurring additional costs. Most short-term disabilities are unmanaged other than for cursory independent examinations.

Question 28

What techniques are now used by some insurers?

Answer 28

Insurers have applied managed-care techniques, particularly utilization management, first used for health plans, to their disability insurance products.

Managing short-term disabilities provides improved integration with long-term disability programs and deals more effectively with the total disability period of the employee.

The most successful approaches employee a team approach, coordinated by a nurse consultant, starting from the onset of the disability. The teams commonly include the plan sponsor, physician consultants, and vocational and rehabilitation specialist, if necessary. The plan sponsor or the disabled employee contact the managed-care company upon onset of the disability (typically after the third day, to ignore common short-term illnesses), or the managed disability company may collect the information automatically if it also administers UM certification programs under the managed health care program. The nurse consultant then uses automated protocol based systems, combined with input from other team members to determine the expected length of disability. Concurrent review enables the nurse consultant to continue to check on an employee’s disability and to initiate rehabilitation services if appropriate.

Question 29

As managed-care marketplace structures have matured, what value has been provided to purchasers by PPOs according to the authors of “The Puzzling Popularity” of the PPO?

Answer 29

The PPO’s value to purchasers lies in what it delivers relative to its cost:

1) A contracted network with some level of discounts off of full charges and some provider credentialing
2) Possibly some medical management features within the network, typically for an additional fee.

Many employers have no illusions that they are buying managed-care in the PPO. They see the PPO arrangement as malleable enough to introduce more cost sharing and benefit reductions into their benefit designs, at the time when buying down benefits - not more care management is an effective antidote to sharply rising health insurance costs. It is not quite so clear whether purchasers really think that they are controlling cost growth through preferred provider networks, although they know that they would face higher payment rates if they did not buy a contracted network. Much of the appeal of the PPO option lies in its asserted superiority relative to HMOs in terms of choice, limited medical management, accommodation of providers preferences and lower administrative expenses.

Question 30

What are PPOs expected to do as new care models emerge that focus on preventive and primary care?

Answer 30

As new care models emerge that focus on preventive and primary care, such as patient-centered medical home (PCMH) and accountable care organization (ACO) models, PPOs are expected to do what they have done in the past: adapt to their offerings to take advantage of market demands. while PCMH and ACO arrangements are still taking shape, they will likely be the inspiration for PPOs to begin offering more options to compete for attention.

Question 31

What changes are likely to come to PPOs as a result of quality measurements that are part of the patient protection and affordable care act of 2010 (PPACA)?

Answer 31

The changes that are likely to come to PPOs as a result of quality measurements involve accountability and value. PPOs, as all health plans, need to adjust to marketplace needs. As embodied by quality measurements included in the health reform act, PPOs will need to focus on how to improve quality and safety, decrease costs, keep healthy people in a state of good health and overall wellness, improve chronic illness care, keep people from needing to use the emergency room (ER) unnecessarily, and provide access to community resources.

Question 32

What positive behavioral outcomes are associated with patients who possess and use tools that allow them to manage their own healthcare?

Answer 32

Among these outcomes are the following:

1) They are healthier.
2) They are less likely to choose expensive procedures over wellness initiatives.
3) They are more apt to increase competition among providers by “shopping around” for appropriate and cost-effective health care.

Question 33

After the prepaid plans of the 1920s, the first form of managed care program to be established was the:

Answer 33

Health maintenance organization (HMO)

Question 34

Managed-care plans and compass programs that are intended to influence and direct the delivery of healthcare through which of the following techniques?

I. Plan features that establish a maximum degree of freedom of choice to participants in selecting co-pay arrangements
II. Plan design that restricts the access of participants to a specific group of providers
III. Utilization management programs

Answer 34

II and III only

Question 35

The fundamental components of the managed-care spectrum that distinguish the operation of managed-care plans include all of the following EXCEPT:

A. Claims-handling responsibilities between patient-participants and providers
B. Risk sharing by providers in the network
C. Fixed, nonnegotiable and uniform basis on which provider payments are made
D. Referral management system to use when a primary care physician cannot render a specific type of care
E. Experience rating and financial alternatives coupled with expected net savings

Answer 35

C. Fixed, nonnegotiable and uniform basis on which provider payments are made.