Objective 1 - Provider Reimbursement

Question 1

Reasons why a health plan wants to contract with providers

Answer 1

(also referred to as contracting goals)

1. Obtain favorable pricing (less than full billed amounts)
2. Obtain payment terms that result in an underwriting gain
3. Get the provider to agree to provide services to the plan’s members
4. Meet service area access standards required by the states and Medicare
5. Obtain contractual agreement for several clauses, may of which are required by the states and Medicare. The provider agrees to:
   a) Submit claims directly to the plan, not the member
   b) Not balance bill the member for any amount above the agreed-upon payment terms
   c) Hold harmless the member (not bill for any amounts owed by the plan)
   d) Cooperate with the plan’s utilization management program
   e) Cooperate with the plan’s quality management program
   f) Give the plan the right to audit clinical and billing data for care provided to plan members
   g) Not discriminate (and other similar requirements)

Question 2

Reasons why a provider wants to contract with a health plan

Answer 2

(also referred to as contracting goals)

1. Obtain favorable pricing when in a strong negotiating position
2. Ensure that it will not be excluded from the network of a large payer
3. Receive direct payment from the plan, thereby avoiding the need to collect from the patient
4. Receive timely payment (usually 30 days or less)
5. Have plan members directed or steered to it
6. Not lose business (or medical staff) as a payer steers members to others who are contracted providers
7. Receive defined rights around disputing claims and payments

Question 3

Capabilities of a well-functioning contract management system

Answer 3

1. Identify network gaps or where provider recruiting is most needed
2. Track recruiting efforts, provide reminders, and generate recruiting reports
3. Generate new contract blanks and new contracts with information filled in
4. Store copies of different versions of any provider’s contract
5. Track and report contract changes for each provider
6. Track and manage permissions and sign-offs on contracts
7. Store images of signed documents and convert imaged documents into machine-readable formats
8. Support an entirely paperless contracting process
9. Provider early notification or reminders for upcoming actions such as re-credentialing or re-negotiations
10. Direct electronic feed of required demographic information to other internal functions
11. Direct electronic feed of market-facing systems such as internet physician searches
12. Be searchable on multiple attributes
13. Analyze the potential impact of changes in contract terms

Question 4

Types of physicians and other professional providers

Answer 4

1. Primary care physicians (PCPs) and specialty care physicians (SCPs) - for traditional HMOs, the distinction between PCP and SCP is very important because the PCP acts as a gatekeeper and must authorize any visits to a specialist
2. Hospital-based physicians - specialties include radiology, anesthesiology, pathology, emergency medicine, and hospitalist. These physicians often have exclusive rights at a hospital, so they are reluctant to contract for anything less than full charges.
3. Nonphysicians or mid-level practitioners that provider primary care - the most common are physician assistants and nurse practitioners. These are a great asset in managed care because they deliver excellent primary care, tend to spend more time with patients, and are well accepted by most members
   4, Mental health providers
4. Other types of professionals - podiatrists, dentists, orthodontists, optometrists, chiropractors, physical therapists, occupational therapists, nutritionists, acupuncturists, audiologists, respiratory therapists, and home health care providers

Question 5

Types of mental health providers

Answer 5

1. Psychiatrist - a physician who specializes in mental health and is able to prescribe drugs
2. Psychologist - has a doctoral degree in psychology and two years of supervised professional experience
3. Clinical social worker - a counselor with a master’s degree in social work
4. Licensed professional counselor - has a master’s degree in psychology, counseling, or a related field
5. Certified alcohol and drug abuse counselor - has specific clinical training in alcohol and drug abuse and provides individual and group counseling
6. Psychiatric nurse practitioner or nurse psychotherapist - a registered nurse practitioner with special training in psychiatric and mental health nursing
7. Marital and family therapist - a counselor with a master’s degree and special training in marital and family therapy

Question 6

Contracting considerations for different types of physician groups

Answer 6

1. Individual physicians - advantage is the direct relationship with the physician. Disadvantage is the effort to maintain the relationship is large for just one physician.
2. Medical groups - advantage is the same contracting effort yields a higher number of physicians. Disadvantage is that if the relationship is terminated then there is greater disruption in patient care.
3. Independent practice associations (IPAs)
   a) Advantages: a large number of providers come along with the contract, the IPA may accept more financial risk, and some IPAs perform network management credentialing, and medical management
   b) Disadvantages: the IPA can hold a considerable portion of the delivery system hostage to negotiations, and the plan’s ability to selection and deselect individual physicians is limited
4. Faculty practice plans (medical groups that are organized around teaching programs)
   a) Advantages: these programs provide highly-specialized care and they add prestige to the plan by virtue of their reputation for quality care
   b) Challenges include: tend to be less cost effective in their practice styles, and they are not set up for case management, so care is not well coordinated
5. Physicians in integrated deliver systems (IDSs) - there are two types:
   a) Hospital systems that affiliate with private physicians
   b) Hospital systems that employ physicians - these often have substantial negotiating leverage
6. Patient-centered medical ho,es - these coordinate all care for a group of patients
7. Specialty management companies - these focus on managing very specialized services using physicians (e.g., single-specialty case management of neonatal care)

Question 7

Elements of a typical physician credentialing application

Answer 7

1. Demographics, licenses, and other identifiers (such as national provider identifier)
2. Education, training, and specialties
3. Practice details - such as services provided and office hours
4. Billing and remittance information
5. Hospital admitting privileges
6. Professional liability insurance
7. Work history and references
8. Disclosure questions - such as suspension from government programs or felony convictions
9. Images of supporting documents - such as a state license certificate

Question 8

Types of health care facilities

Answer 8

1. Community-based single acute care hospitals
2. Multihospital systems (MHSs) - consolidation has led to most hospitals being part of an MHS, which gives them negotiating leverage
3. For-profit national hospital companies - because these hospitals are owned by national companies, they have much less local autonomy
4. Specialized hospitals - these provide care to only a certain type of patient (e.g., children’s hospitals and psychiatric hospitals)
5. Physician-owned single-specialty hospitals - these restrict themselves to elective procedures within a single specialty so they are not equipped to handle emergencies and severe conditions
6. Accountable care organizations - these coordinate care for designated Medicare FFS beneficiaries and participate in a shared savings program
7. Government hospitals - may be county-run, state-run, or federal
8. Subacute care (skilled or intermediate nursing facilities) - these are well suited for prolonged convalescence or recovery cases. The cost for a bed day is much less than in an acute-care hospital
9. Ambulatory surgical centers (ASCs) and procedure centers - are typically equipped to handle only routine cases
10. Hospice - a broad term referring to health care services provided at the end of life, which may be at an inpatient facility, ambulatory facility, or no facility
11. Retail health clinics - small clinics usually associated with a retail store (such as Target or Walgreens). Provide basic primary care services, such as immunizations and preventive screenings.
12. Urgent care centers - a hybrid of a low-level emergency department and a PCP practice
13. Other types of ambulatory facilities - including centers for birthing, community health, diagnostic imaging, occupational health, pain management, and women’s health

Question 9

Types of ancillary services

Answer 9

1. Diagnostic
   a) Laboratory
   b) Imaging (such as x-rays and MRIs)
   c) Electrocardiography
   d) Cardiac testing
2. Therapeutic
   a) Cardiac rehabilitation
   b) Noncardiac rehabilitation
   c) Physical therapy
   d) Occupational therapy
   e) Speech therapy
   f) Other long-term therapeutic services
3. Pharmacy
4. Ambulance and medical transportation services

Question 10

Principles to follow for changing physician practice behaviors

Answer 10

1. Relationships matter - physicians acting as medical managers should get to know their practicing peers, and should approach conversations as a respectful colleague (not a punishing authority)
2. Let the data speak for itself - performance data should be analyzed to see if variations from expected are the result of a sicker population or different demographics. If variations cannot be explained, then a conversation can be set up with the physician.
3. Peers are a powerful influencer of physician practice patterns - physicians are more likely to change their behavior if they can discuss potential changes with a peer
4. Peer leaders must understand and communicate the big picture - the medical manager must be able to speak to the organization’s intent, answering questions as to why phyisicians are being managed

Question 11

Tools for changing physician behavior

Answer 11

1. Ongoing communications
   a) Electronic or paper communications - these have the worst penetration rates
   b) Group meetings - these give everyone a chance to understand one another better, to voice concerns, and to get questions answered
   c) Social networking - helps physicians get to know the organization and its personality by increasing the number of brief contacts
2. Data - the challenge is not getting information, but knowing which information can be translated into useful knowledge. Data provided to physicians must be checked and rechecked for accuracy
3. Mission clarity - a widespread understanding of what the organization is trying to accomplish is extremely valuable in changing behavior

Question 12

Programmatic approaches to changing physician behavior

Answer 12

1. Financial incentives
2. Formal continuing medical education through seminars, conferences, and home-study. But studies have found little evidence the traditional continuing education changed physician behavior.
3. Data and feedback - the following factors are likely to plan a role in whether feedback will be effective:
   a) Goal alignment - physicians must have a reason to change
   b) Clean data- feedback must be credible
   c) Knowledge - feedback must be consistent and usable
   d) Timeliness - feedback needs to be closely related to what a physician is doing at the time
   e) Reinforced - feedback must be regular in order to sustain changed behavior
   f) Extrinsic motivation - feedback linked to economic performance is more likely to produce changes
4. Practice guidelines and clinical protocols - using evidence-based guidelines is most effective when:
   a) Efforts are focused on one or two new guidelines at a time
   b) Guidelines are focused on conditions that occur frequently and for which there is a lot of practice variation
   c) Implementation of guidelines is accompanied by regular feedback
   d) Financial rewards are used
5. Small group programs - there is strong evidence of positive changes resulting from educating physicians in interactive small groups

Question 13

Stepwise approach for changing behavior in individual providers

Answer 13

1. Collegial discussion of cases and utilization patters in a nonthreatening way
2. Persuading the provider to act in ways her or she may not initially choose
3. Firm direction (only if the first 2 steps don’t work) - reminding the physician of his or her commitment to cooperate with organizational policies and procedures
4. Discipline and sanctions (only when all other approaches have failed) - formal sanctioning may occur for the following reasons:
   a) Poor-quality care - this is a serious charge and has a very negative impact on a physician, so the plan must comply with due process requirements
   b) Failing to cooperate with plan policies and procedures - in this case, the organization may terminate the contract “for cause”
   c) Utilization does not match the organization’s managed care philosophy - the contract can be terminated without cause when adequate notice is given

Question 14

Sources of data for provider profiling

Answer 14

1. Lab test results
2. Biometric information
3. Feeds from electronic health records
4. Patient satisfaction measures
5. Operational information on vendor programs
6. Claims system data is the major source. Before it can be used, it must be standardized and stored in a data warehouse.

Question 15

Data to include in a data warehouse for provider profiling purposes

Answer 15

Provider profiling is the identification, collection, collation, and analysis of data to develop a characterization of the provider’s performance

1. Unique patient identifier
2. Diagnostic information (e.g., ICD-10 codes)
3. Procedural information (e.g., CPT and HCPCS codes)
4. Level of service information
5. Paid and allowed dollar amounts from services ordered by the physician or health care facility
6. Unique provider identifier

Question 16

Principles for designing provider profiling reports

Answer 16

1. Identify high-volume and costly clinical areas to profile
2. Involve appropriate internal and external customers (including providers) in developing and implementing the profile
3. Compare results when published performance (external vs. internal norms)
4. Report performance using a uniform clinical data set
5. When possible, employ an external data source for independent validation of the provider’s data
6. Consider onsite verification of data from the provider’s information system
7. Present comparative performance using clinically-relevant risk stratification
8. Require statistical significance for comparisons and establish thresholds for minimum sample size
9. Adjust performance measures for severity

Question 17

Users of provider profiles

Answer 17

1. Health plans - for example, provider relations and medical directors
2. Consumers - effective dissemination of profiles to members is still under development
3. Employers - most are more interested in cost control than quality, so approaches should integrate cost control with quality
4. Providers - most are interested in change if methods to measure performance are well grounded in scientific evidence or professional consensus

Question 18

Desired characteristics of provider profiles

Answer 18

1. Accurately identify the provider - is not easy to do when members use multiple providers. Also consider whether to profile at the physician level (which has credibility issues) or at the clinic or group level
2. Accurately identify the provider’s specialty - can be difficult because many specialists provider a lot of primary care. So consider a specialist’s mix of routine and complex cases
3. Help to improve the process and outcome of care
4. Have a firm basis in scientific literature and professional consensus
5. Meet certain statistical thresholds of validity and reliability - definitions:
   a) Validity - the extent to which the data actually means what you think it means
   b) Reliability - the extent to which the data is consistent and means the same thing from provider to provider
6. Compare the provider to a norm - can compare to total health plan average results, results from peers (such as all network physicians or those of the same specialty), or budgeted amounts
7. Cost the minimum amount possible to produce
8. Respect patient confidentiality and obtain patient consent when necessary

Question 19

Future trends that will affect pharmacy program management

Answer 19

1. The patient loss of approximately $90 billion of brand name drugs, resulting in low-cost trends
2. A simultaneous increase in the number of specialty drugs approved by the FDA
3. Due to the high cost of specialty drugs, health plans will integrate some portion of their medical and pharmacy management
4. By 2019, the number of beneficiaries in Medicare and Medicaid will grow by 30%
5. Due to the ACA and CMS policy, there will be several initiatives to measure and promote practice patterns and risk-sharing contracts that improve outcomes and the quality of care
6. New technologies will support accountable care organizations and patient-centered medical homes
7. Health plans and PBMs will likely implement greater restrictions on their formularies

Question 20

Services typically offered by PBMs

Answer 20

1. Claims processing and management reports
2. Community retail pharmacy provider network
3. Home delivery (mail service) prescriptions
4. Specialty pharmacy distribution services
5. Drug formulary development and management
6. Pharmaceutical manufacturer contracting
7. Customized pharmacy benefit design development and administration
8. Clinical pharmacy programs, such as drug utilization review (DUR) and medication therapy management (MTM)
9. Other customized services requested by plan sponsors

Question 21

Components of prescription drug program management

Answer 21

1. Certificate or evidence of coverage - to legally enforce the benefit design
2. Pharmacy benefit design - plan sponsor-specific benefit management strategies
3. Drug formulary - list of covered drugs and access rules
4. Pharmacy provider network - drug distribution channels to provide member access to covered drugs
5. Information technology - claims processing and decision support systems to optimize program performance
6. DUR, MTM, and clinical programs - resources to support patients and maximize outcomes

Question 22

Categories of drugs that are typically excluded on prescription drug plans

Answer 22

1. Experimental or investigational drugs (not approved by the FDA)
2. FDA-approved drugs when prescribed for unapproved indications (“off-label” use)
3. Drugs used for cosmetic purposes or specific purposes such as smoking cessation or infertility
4. Over-the-counter drugs other than insulin

Question 23

Definition and types of drug formularies

Answer 23

Definition of drug formulary - a continuously-updated list of covered drugs and access rules (such as a tier structure and dispensing limitations). It should be supported by current evidence-based medicine and the judgment of physicians, pharmacists, and other experts.

1. Open formulary - generally covers most drugs (exceptions may include cosmetic and over-the-counter drugs)
2. Closed formulary - does not cover as many drugs. Drugs not included in the formulary are not eligible for payment except by an approved medical exception

Question 24

Types of drug utilization review programs

Answer 24

1. Prospective - can identify and resolve problems before the medication is dispensed. It serves as an excellent member-teaching opportunity for pharmacists.
2. Concurrent - performed at the point-of-prescribing. Pharmacists are provided clinical and benefit design edits that provide an alert for potential clinical conflicts to evaluate before the product is dispensed.
3. Retrospective - performed after the prescription is dispensed. It could include a review of high-cost outliers.

Question 25

Formulary guidelines for Part D plans

Answer 25

1. There are 146 therapeutic categores that must be included
2. If a generic is available, it must be included
3. If the pharmacy dispenses a brand name drug, it must inform the patient of any differential between the price of the brand and the lowest-priced generic of that drug
4. Preferred drug rebates must go to the payer to decrease the cost of the program
5. At least 2 drugs must be included in each “key drug type” category
6. The formulary must include prior authorizations, step therapy, generic drug requirements, and preferred brand name drugs
7. Substantially all drugs in the following classes must be included: antidepressants, antipsychotics, anticonvulsants, anticancer, immunosuppressants, and HIV/AIDS medications

Question 26

Services provided by medication therapy management (MTM) programs

Answer 26

(aka components of MTM program management)

1. Performing or obtaining necessary assessments of the patient’s health status
2. Formulating a medication treatment plan
3. Selecting, initiating, modifying, or administering medication therapy
4. Monitoring and evaluating the patient’s response to therapy
5. Performing a comprehensive medication review to identify, resolve, and prevent medication-related problems
6. Documenting the care delivered and communicating essential information to the patient’s other primary care providers
7. Providing verbal education and training designed to enhance patient understanding and appropriate use of medications
8. Providing information, support services, and resources to enhance patient adherence to drug regimens
9. Coordinating and integrating MTM services with other health care management services

Question 27

Metrics for measuring financial performance of pharmacy programs

Answer 27

1. Various cost parameters (e.g., program expenses, billed and paid claims, and copayments)
2. Prescription utilization and trends
3. Administrative and claims processing fees
4. Prescription discount or rebate
5. Generic dispensing and conversion rates and missed generic substitution opportunities
6. Drug formulary conformance rate
7. Patient satisfaction and member complaints related to the pharmacy program
8. Number of drug formulary prior authorization exception requests and approvals
9. HEDIS measures related to pharmacy
10. Drug utilization review exception reports

Question 28

Key success factors of an accountable care organization

Answer 28

1. Ability to identify the population to manage
2. Ability to understand and manage cost
3. Ability to manage quality
4. Ability to integrate care

Question 29

Key success factors of a patient-centered medical home

Answer 29

1. Improved quality of care
2. Improved status of comorbid conditions
3. Increased satisfaction of patients
4. Reduction of avoidable comorbid hospitalizations
5. Reduction of acute occurrences
6. Reduction of inpatient admissions
7. Reduction of LTC admissions

Question 30

Types of services delivered by commercial behavioral health care networks

Answer 30

1. Inpatient services - the highest level of skilled services. Involves 24-hour medical and nursing care in a psychiatric facility, a general hospital, or a detoxification unit in a hospital
2. Residential treatment - services rendered in a 24-hour facility offering therapeutic services for patients with sever mental and substance-related disorders
3. Partial hospitalization - provides structured mental health or substance abuse therapeutic services for at least 4 hours per day and 3 days per week
4. Intensive outpatient program - provides structured therapeutic services for at least 2 hours per day and at least 3 days per week
5. Outpatient treatment - includes individual, family, or group treatment rendered by a licensed professional
6. Employment assistance programs (EAPs) - EAP professionals deliver short-term, problem-focused outpatient services for employees and their families

Question 31

Types of behavioral health care services delivered by public sector networks

Answer 31

1. Supervised living - includes community-based residential detoxification programs and rehabilitation in halfway or quarter-way houses
2. Programs for assertive community treatment - multidisciplinary teams deliver services directly in the community to people who demonstrate chronic symptoms and a pattern of relapsing
3. Peer support - consumers who have recovered work under the supervision of a behavioral health provider that assists patients in building confidence and in improving life skills
4. Continuous treatment teams - multidisciplinary teams provide a range of services in an effort to prevent a child from needing to be removed from the home and placed in a more restrictive level of care
5. Community case management - workers coordinate care and social services delivered within the community

Question 32

Utilization management strategies to reduce inpatient behavioral health care costs

Answer 32

1. Addressing psychosocial causes of admissions in order to get early treatment and avert the need for admission
2. Increasing ambulatory follow up to help prevent unnecessary readmissions
3. Reducing readmissions through intensive interventions for at-risk patients
4. Measuring and tracking clinical performance with a focus on outcomes and efficiency
5. Reducing relapse through effective aftercare planning and use of community and social supports
6. Coordinating services among multiple agencies and providers
7. Emphasizing the quality of service provided through supervision, analysis of complaints, satisfaction surveys, and staff training

Question 33

Delivery mechanisms for telemental health services

Answer 33

1. Hub-and-spoke networks - these link large tertiary centers with outlying clinics
2. Health provider-home connections - these link providers with single-line phone-video systems for interactive consults
3. Web-based e-health patient service sites - these provide direct consumer outreach and services over the internet

Question 34

Challenges related to delivering telehealth care

Answer 34

1. Technology infrastructure - the technologies available are constantly expanding
2. Cost - the capital investment required for telehealth infrastructure can be prohibitive for some organizations and communities
3. State licensing and regulation - professionals who use telemedicine technology across state lines must apply for a separate license in each state
4. Payment - a number of payers have recently started covering telehealth and “web visits” for their members

Question 35

Institute of Medicine definition of quality care

Answer 35

Definition - the degree to which health services increase the likelihood of desired health outcomes and are consistent with current professional knowledge

Aims for or properties of high-quality care:

1. Safe - avoiding injuries to patients
2. Effective - providing services based on scientific knowledge to all who could benefit, and refraining from providing services to those not likely to benefit
3. Patient-centered - providing care that is respectful of and responsive to individual patient preferences, needs, and values
4. Timely - reducing waits and sometimes harmful delays
5. Efficient - reducing waste, including waste of equipment, supplies, ideas, and energy
6. Equitable - providing care that does not vary in quality because of personal characteristics

Question 36

Data sources for behavioral health care performance metrics

Answer 36

1. Administrative data - includes claims, eligibility information, and various coding sets
2. Treatment records - contain detailed clinical information
3. Survey data - from providers and consumers
4. Access data - from reviews of provider appointment availability
5. Clinical assessments - involve consumer self-report and provider and caretaker observations
6. Utilization management data - include requests for care, nonauthorizations, and appeals
7. Risk management data - include adverse events and medication errors
8. Predictive modeling data - derived from utilization data and population risk adjustment formulas

Question 37

Considerations in contracting for bundled payments

Answer 37

1. Defining the episode - what is the trigger date and when does the case end? Which services are included?
2. Evaluating catastrophic risk - need to do an outlier risk analysis that includes a classical stop loss analysis
3. Financial stability for low case loads - random fluctuation may be greater for provider groups with low case loads
4. Determining provider allocation of funds - the allocation should consider financial incentives for physicians to encourage them to promote more cost-effective care
5. Distinguishing case severity - could limit risk by removing higher-severity patients from the bundled payment approach
6. Quality outcome requirements - minimum quality thresholds may be needed to ensure quality is not compromised as providers reduce services
7. Administrative complexity of supporting the contract
8. Risk-sharing alternatives - contracts that share financial risk between the provider and payer may be more viable than pure bundled payments
9. Potential for increased utilization - contracts for individual providers should not give them incentives to increase utilization to get a larger share of the bundled rate

Question 38

Definition of accountable care organizations (ACOs)

Answer 38

1. ACOs are a new category of health care provider created by the ACA as part of the Medicare Shared Savings Program
2. Definition - a legal entity composed of certified Medicare providers and suppliers. These providers and suppliers work together to coordinate care for a defined population of Medicare FFS beneficiaries, and they have control over the ACO’s decision-making process.
3. ACOs that meet specified quality performance standards are eligible to receive payments for shared savings if they can reduce spending growth below target amounts
4. Medicare beneficiaries will be assigned to ACOs based on where they received certain primary care and preventative services in the most recent 12 months

Question 39

Eligibility requirements for ACOs to participate in the Medicare Shared Savings Program

Answer 39

1. Must be an eligible type of provider (see separate list)
2. Must be capable of receiving and distributing shared savings, repaying shared losses, ensuring all providers comply with program requirements, and performing other required functions.
3. The governing body must be composed primarily (at least 75%) of participating providers and must also include Medicare beneficiaries served by the ACO
4. Leadership and management criteria include:
   a) Clinical oversight must be done by a senior-level medical director who is a board-certified physician
   b) Providers must make a meaningful financial or human investment to the clinical integration program
5. Must exhibit a strong patient-centeredness element (see separate list)
6. Must have a sufficient number of beneficiaries (at least 5,000) and primary care providers
7. Must have a compliance plan, a lead compliance official, and mechanisms for identifying compliance problems

Question 40

Providers eligible to participate in an ACO

Answer 40

1. Professionals in group practice arrangements
2. Networks of individual practices
3. Joint venture arrangements between hospitals and professionals
4. Hospitals employing professionals
5. Critical access hospitals that are paid by Medicare in a way that supports the collection of data needed to assign patients to providers
6. Rural health clinics
7. Federally qualified health clinics

Question 41

Ways ACOs must demonstrate patient-centeredness

Answer 41

1. A beneficiary care experience survey
2. Patient involvement in ACO governance by representation in the governing body
3. A process for evaluating the health needs of the population
4. Systems in place to identify high-risk individuals and develop individualized care plans for targeted populations
5. A mechanism in place for coordination of care
6. A process in place for communicating clinical knowledge to beneficiaries in an understandable way
7. A process to allow beneficiaries to access their medical records
8. Processes for measuring clinical or service performance and using these results to improve care and service

Question 42

Definitions related to payment reform

Answer 42

1. Value-based arrangement - an arrangement where a payer and a patient seek quality and efficiency. The opposite of a volume-based arrangement
2. Payment reform - the environment where more contracts move to value-based arrangements
3. Payment model - the manner in which a payer reimburses providers
4. Service deliver model - the manner in which providers organize and deliver care to patients. Can refer to an approach (such as telemedicine) or organization (such as an accountable care organization (ACO))

Question 43

The actuary’s role in payment reform

Answer 43

1. Leading the pricing exercise
2. Help quantify the risk
3. Calculate the correct price for the selected payment model
4. Help project and model cash flows

Question 44

Types of risk associated with payment arrangements, from the provider’s perspective

Answer 44

1. Utilization risk - the risk that changes in utilization will impact provider profitability
2. Technical risk - the risk of appropriately structuring technical elements of a contract
3. Insurance risk - the risk of variation in demand for medical services over time and the risk of differences in utilization within segments of the insured population. Examples include:
   a) Age, gender, and acuity differences
   b) Number of high-cost cases vs. average
   c) Year-to-year variation in patient demand for services
   d) Proportion of the population that has zero claims in a year
4. Performance risk - the risk of inefficiency, suboptimal quality, and high cost of care

Question 45

Types of provider payment models

Answer 45

1. FFS - providers are paid for each service they perform, either through a fee schedule or as a percent of charges
2. Global capitation - providers are paid a fixed rate for each member they agree to service. The payment is based on the average costs of the population, rather than the services provided.
3. Shared savings - providers typically get reimbursed using FFS, but they also receive a percentage of the savings they create by reducing utilization below a benchmark. Usually, providers only receive the bonus if they meet certain quality targets.
4. Diagnosis-related groups (DRGs) and case rates - the hospital is paid a single price, or case rate, for an admission rather than a price per day or for each service provided during the stay. There is often an outlier adjustment where the provider gets paid an outlier per diem rate if the admission exceeds a certain number of days
5. Bundled payments - a single payment is made for an episode of care, which usually starts with a specific DRG or a surgery and extends for a specific future period (typically 30, 60, or 90 days)
6. Reference pricing - a benefit limit (i.e., the reference price) is established for a specific medical procedure or device. The patient must pay the difference between the allowed charge and the reference prices.
7. Provider excess loss reinsurance - protects the provider from high-cost outliers. It is generally paired with one of the previous payment models.
8. Pay-for-performance (P4P) - any payment arrangement can include a P4P aspect by including incentives for higher quality of care or disincentives for lower quality. This adds performance risk.

Question 46

Risks to the provider under FFS

Answer 46

1. Utilization risk - for most services, the provider’s profit increases as utilization increases
2. Technical risk - this risk is low because FFS is easy to implement, design, and monitor
3. Insurance risk - providers have very little insurance risk. They are not at risk for the year-to-year variation in claims cost of a specified population
4. Performance risk - this risk may exist if the claims administrators do not carefully monitor nonspecifc codes

Question 47

Risks to the provider under global capitation

Answer 47

1. Utilization risk - changes in utilization have the opposite impact as in a FFS model. Profit increases for providers as utilization decreases
2. Technical risk - this risk is quite high. A provider organization will need complex structures in place to allocate money among various providers
3. Insurance risk - all of the insurance risk is transferred to the provider. The provider takes on the risk that members will need more services than was expected when negotiating the capitated rate.
4. Performance risk - the provider is a high risk since it takes on the financial responsibility for all of the care the patient receives

Question 48

Risks to the provider under shared savings

Answer 48

1. Utilization risk - because of the complexity of contracts, this risk is hard to quantify
2. Technical risk - this risk is high due to the complexity of calculating benchmarks, reconciling savings, measuring quality, and distributing savings and losses
3. Insurance risk - there is a risk that year-to-year variation in claims costs will result in claims costs that are different than the benchmark
4. Performance risk - there is significant risk regarding whether care management efficiencies can be achieved and whether the benchmark can be met

Question 49

Risks to the provider under DRG/case rates

Answer 49

1. Utilization risk - increased admissions lead to increased profits. But the provider has an incentive to reduce the length of stay because for longer stays the provider has additional costs but no additional reimbursement
2. Technical risk - this risk is low to medium because DRGs have existed for some time and there are established models for creating DRG groupings
3. Insurance risk - the provider is at risk for longer lengths of stay, but not for incidence risk
4. Performance risk - the hospital may be cautious of discharging patients too early. That could increase the risk or readmissions, which carries financial penalties from Medicare

Question 50

Risks to the provider under bundled payments

Answer 50

1. Utilization risk - when the number of episodes increases, provider profits can increase. But within an episode, the provider will need to decrease medically unnecessary services in order to make a profit
2. Technical risk - this risk is quite high due to challenges such as defining conditions, coordinating care, and partnering among different providers
3. Insurance risk - the provider is at risk for members who have higher allowed costs than the average episode
4. Performance risk - there is risk related to proper discharge planning and communication

Question 51

Risks to the provider under reference pricing

Answer 51

1. Utilization risk - members will be less likely to use provider services as their out-of-picket share increases
2. Technical risk - there is risk related to educating the policyholder on reference pricing
3. Insurance risk - some patients may need high-cost care, in which case the insurance risk is shifted to the patient and away from both the insurer and the provider
4. Performance risk - patients who are charged high amounts for procedures may be unhappy with both their providers and their insurers

Question 52

Risks to the provider under provider excess loss reinsurance

Answer 52

1. Utilization risk - this risk is shifted to a reinsurer
2. Technical risk - this risk will vary with the structure of the stop-loss contract. The most common approach is a coinsurance arrangement, which has low technical risk.
3. Insurance risk - the provider’s risk of high outlier costs is somewhat mitigated
4. Performance risk - this risk is highly dependent on the structure of the reinsurance policy

Question 53

Domains of quality from the Agency of Healthcare Research and Quality

Answer 53

1. Access to care - whether a patient can readily obtain needed services. Performance measures include the number and geographic distribution of providers.
2. Structure of care - whether care is provided by appropriate providers who use up-to-date technology. Measures include assessment of referral policies and use of electronic health records.
3. Process of care - whether services have been provided to appropriate member subpopulations. One measure is hospital readmission rates.
4. Outcomes of care - whether treatment has been effective. Measures include what percentage of patients with diabetes meet blood sugar targets.
5. Experience of care - whether patients are satisfied with the care they have received. Is generally measured by surveys

Question 54

Factors to consider when modeling payments and case flows for a provider payment model

Answer 54

1. What types of unintended behaviors may occur due to incentives created by the payment model?
2. What other factors would jeopardize achievement of forecasted results?
3. How will results be achieved during the model test be replicated?
4. Will the structure and the dimensions of the payment model change over time?
5. Will there be a phased-in approach?
6. How will the payment model promote continuous improvement of the service delivery model?
7. What key factors, including other delivery and payment reforms, may affect this progression?

Question 55

Formula for determining Medicare allowed amounts

Answer 55

1. Weights are determined based on:
   a) Relative value units (RVUs) - these are categorized by Current Procedural Terminology codes. There are three components for each RVU: work/practice cost (w), facility/cost of living (f), and malpractice (m).
   b) Geographic Practice Cost Index (GPCI) - these are based on provider zip coes
2. Medicare allowed amount = (GPCIw * RVUw + GPCIf * RVUf + GPCIm * RVUm) * conversion factor
3. Payments are also adjusted for various reasons, such as who performs the service (e.g., professional surgeon vs. assistant surgeon) and where the service is performed

Question 56

Expected sources of savings for ACOs in the MSSP

Answer 56

MSSP = Medicare Shared Savings Program

1. Reducing unnecessary care and duplication
2. Redirecting care to cost-efficient providers
3. Preventing medical errors

Question 57

Profit formula for ACOs in the MSSP

Answer 57

Net gain/loss = 
- Revenue reductions
\+ Bonus/share of revenue reductions
- Start-up costs of the ACO 
- Administrative costs of operating the ACO
\+ Reduction in direct expenses

Question 58

Considerations when negotiating terms of commercial ACO contracts

Answer 58

1. Target costs - how are the baseline costs developed? Is there re-basing from one year to the next?
2. Risk adjustment - the actuary can help the payment reform team understand the benefits and impacts of the different risk adjusters to use in creating the target cost
3. Trend - will the baseline and measurement years be trended, and at what rate?
4. Shared savings - what are the savings rate and loss rate, and are the targets achievable?
5. Attribution - the attribution method is extremely important, but the details can be quite complex
6. Random variation - is the number of members attributed to the ACO large enough that gains and losses will not just be due to statistical fluctuation?
7. Stop loss - the ACO and the payer may swish to negotiate specific and aggregate stop loss
8. Data and reports - the ACO will need member-level detail on enrollment, medical claims, and pharmacy claims. It will also need detailed reporting in order to reconcile gains and losses
9. Quality - are there a sufficient number of measures to ensure reliable results and reasonably determined benchmarks and targets?
10. Infrastructure cost support - will there be a care coordination fee to help the ACO get up and running with its infrastructure?

Question 59

Elements of a DRG contract

Answer 59

1. DRG/case rate schedule - shows the case rate for each DRG for an initial length of stay and the per diem for days beyond that level
2. Maximum days - the number of days for which the case rate applies. Cases that exceed that length of stay are then paid a per diem rate for each additional stay
3. Carve-outs for specialty drugs and implant devices - additional payments may be made for these items
4. Stop loss - a contract may also have a stop loss to be applied on a case level
5. Transplants - payment for transplants is usually negotiated separately
6. Readmissions - the contract must state whether payment will be made for readmissions

Question 60

Steps for bundled payments

Answer 60

1. Obtain claims data
2. Select DRGs or conditions - look for enough volume, a population that will have similar treatment patterns, and potential for savings that is due to variation in care. Knee and hip procedures are popular selections.
3. Define the episode - specify the full time period and mix of services for which the organization is financially responsible and at risk. Typically includes:
   a) Anchor stay - period of time between admission and discharge
   b) Post-discharge period or post-anchor event period - typically covers 30, 60, or 90 days from the discharge date
   c) Post-episode period - covers 30 days past the episode end date as the quality control to make sure providers are not waiting until the end of the episode to provide services
4. Define exclusion criteria - should be easy to implement and not overly specific
5. Estimate cost of the bundle - done by analyzing claims data
6. Identify savings opportunities - these will be different for every episode and every organization. For example, discharging more knee replacement surgery patients to their home instead of a rehabilitation center will lead to savings

Question 61

Major issues with pay-for-performance methods

Answer 61

1. Unintended incentive to avoid the most severely ill patients
2. Gaming the system by miscoding diagnoses or services
3. Selecting patients on the basis of the likelihood of a positive outcome
4. Compliance with treatment protocols rather than need
5. Unmeasured objective could be ignored

Question 62

Functions (or components) of patient-centered medical homes

Answer 62

1. Comprehensive care - provided through several different care providers
2. Patient-centered - a relationship-based process to educate patients and allow them to define the levels of care with which they are comfortable
3. Coordinated care - incorporating the entire health case system in order to facilitate communication about the patient and discuss best practices among different provider groups
4. Accessible services - providing multiple channels for the patient to be able to reach out and gather information or receive care
5. Quality and safety - implementing quality improvement measures while taking into account the patient’s progress, concerns, and overall well-being

Question 63

Qualities an organization needs to succeed under payment reform

Answer 63

1. Highly integrated system
   2, Efficient care management initiatives
2. More efficient health system than the rest of the market
3. Select and restricted networks
4. Collaborative relationship between the provider organization and payers to reduce costs
5. Reasonable methods to establish capitation rates, episode payments, and other payments
6. Equitable methodology for allocating global capitation payments or quality incentives among the individual participating providers