Test 2

Question 1

Market Structure

Answer 1

• Most healthcare markets are regional in nature
• There are travel limits beyond which most consumers will not venture
• Greater share of the market leads to greater leverage when negotiating health plans.

Question 2

Charge Description Master (CDM)

Answer 2

A list of all items for which a firm has established specific prices.

Question 3

Cost Shifting

Answer 3

The increasing payment from payers to cover losses from governmental and charity patients.

Question 4

Discounts from Billed Charges

Answer 4

A negotiated reduction from list price granted to a health plan or uninsured patient.

Question 5

Uncompensated Care Percentage

Answer 5

The cost of care provided to indigent patients after subtracting any payment.

Question 6

Outlier Provision (Stop-Loss)

Answer 6

A provision that specifies that the hospital may pay on a basis other than per diem or case if charges exceed a specific limit.

Question 7

Payment Basis

Answer 7

Defines how the actual payment will be made.

Three Primary methods:

1) Cost
2) Fee Schedules
3) Price-related

Question 8

Unit of Payment

Answer 8

Defines how the services provided are consolidated into an actual claim.

Two Primary Methods:

1) Specific Services- Individual items listed in a claim
2) Bundled Services- Specific services listed in a claim are paid on some aggregated basis (i.e. DRG, per diem)

Question 9

Factors Influencing Pricing

Answer 9

The establishment of CDM prices and the negotiation of managed care contracts.

Three Factors Driving Policies:

1) Required Net Income
2) Competitive Position
3) Market Structure

Question 10

CDM Price Setting (4 Elements)

Answer 10

4 Factors must be mathematically reflected in prices.

1) Average Costs
2) Losses on 3rd-party fee-schedule payments
3) Write-offs on billed-charge patients
4) Reasonable return on investment

-Failure to incorporate these will lead to financial failure.

Question 11

Factors that Increase Prices

Answer 11

• Increase in costs
• Government programs that pay less than cost
• Managed-care plan fee schedules that do not pay above cost
• Increases in required profit
• Reduction in charge-paying patients
• Increases in uninsured patients

Question 12

Reasonableness of Charges

Answer 12

2 Ways of determination:

1) Return-on-investment adequacy
2) Comparison with other health care firms

Question 13

Reasonableness of Charges: ROI Adequacy

Answer 13

ROI = (Revenue - Cost)/Investment

Issues:

• Is ROI reasonable?
• Are costs reasonable?
• Is investment reasonable?

Question 14

Reasonableness of Charges: Comparison with Competitors

Answer 14

Compare prices with similar hospitals and hospitals within the same region

Question 15

Managed Care Contract Negotiations

Answer 15

-Critical to continues financial solvency

2 Key Areas:

1) Contract language
2) Payment rates

Question 16

Four Health Plan Activities: Underwriting

Answer 16

HP’s receive premium from buyers and make payments to providers.

Question 17

Four Health Plan Activities: Utilization Review

Answer 17

• Medical Necessity

- Case Management

Question 18

Four Health Plan Activities: Claims Administration

Answer 18

• Validate coverage and payment terms

- Coordination of benefits

Question 19

Coordination of Benefits

Answer 19

The process of assigning payment responsibility when multiple insurers exist.

Question 20

Point of Service (POS)

Answer 20

A hybrid between an HMO and a PPO in which patients are given the incentive see to providers participating in a defined network but may see non-network providers, usually at an additional cost.

Question 21

Primary Care Gatekeeper

Answer 21

Primary care physician serves as a central triage point for the referral and approval of services.

Question 22

Four Health Plan Activities: Marketing

Answer 22

Selling insurance polices through the use of various media and salespeople

Question 23

Major Types of Health Plans: Staff Model HMO

Answer 23

Physicians are employees of the HMO or they provide most of their services to HMO members through a contractual relationship.

-Most importantly, Primary Care Physicians

Question 24

Major Types of Health Plans: Group Model HMO

Answer 24

HMO contracts with one or more medical groups to provide all necessary services to its members.

-Physicians must come together and transfer all or most of their practice assets and liabilities to the group entity.

Question 25

Major Types of Health Plans: Individual Practice Associations (IPA) Model

Answer 25

Loose affiliation of independent physicians who have not come together and integrated their practices in any substantive way.

Question 26

Major Types of Health Plans: Network Model HMO

Answer 26

• Hybrid of Staff, Group and IPA.

- Must be able to access a pool of cost-effective physicians who can manage care.

Question 27

Major Types of Health Plans: Conventional/Indemnity Plans

Answer 27

-Highest freedom of choice

Question 28

Major Types of Health Plans: Point of Service (POS) Plans

Answer 28

• Hybrid HMO

- Allows visits outside of recommended physicians.

Question 29

Major Types of Health Plans: Preferred Provider Organizations (PPO) Plans

Answer 29

Allow for out-of-network visits but require members to pay for these benefits in the form of higher co-payments and deductibles.

-Similar to HMO with a POS option

Question 30

Major Types of Health Plans: High Deductible Health Plans with Savings Option Plans (HSA)

Answer 30

Individuals can fund medical bills using pretax dollars.
-Initial payment from HSA, until deductible is met.

-aka: Consumer-directed health plans

Question 31

Per-Member-Per-Month (PMPM)

Answer 31

The most common way in which providers receive capitated payments.

Question 32

Integrated Delivery Systems (IDS)

Answer 32

“A strategic alliance among doctors, hospitals, and other ancillary providers to deliver care to a defined population.”

• May vary in the nature of services they provide.
• Some have developed their own health plans.

Question 33

Factors Leading to IDS Growth

Answer 33

• Payer Negotiation
  
  • Fewer payers drives providers to integrate
• Outpatient Service Growth
• Integrated Data Systems
  
  • Emergence of EHR
• Productivity

Question 34

Control Alternatives to IDS

Answer 34

• Physician Hospital Organization (PHO)
• Medical Service Organization (MSO)
• Physician Organizations (PO)

Question 35

Provider Payment in IDS

Answer 35

• Capitation:
  
  • Usually PMPM
  • Must define covered benefits
• Salary/Budget
  
  • Only when providers are owned by IDS
• Fee For Service
  
  • Payment related to utilization
  • No risk for utilization variance

Question 36

Factors in Setting PMPM Rates

Answer 36

• What services are included?
• Should stop-loss coverage be purchased?
• What provisions for adverse selection should be included?
• How to capture “incurred but not reported” (IBNR) liabilities

Question 37

Legal and Regulatory Issues

Answer 37

• Antitrust: Price fixing
• Increment: “Commercially reasonable”

-Licensure as an Insurer:
Is an IDS required to be licensed as an HMO?

• Incentives to reduce services by physicians
• Intentional Torts