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Managed Care
Spreads risk like traditional insurance AND in exchange for lower costs, also “manages” care
Managed Care – A Definition
A model of health care that combines the financing of health services with the delivery of clinical care for a specified population of enrollees
Growth of Managed Care
–Flaws in fee-for-service –Cost appeal of managed care –Weakened economic position of providers
Flaws in Fee-for-service
Uncontrolled utilization Uncontrolled prices and payment Focus on illness rather than wellness
Efficiencies and Inefficiencies
in Manage Care
EFFICIENCIES Risk sharing with providers minimizes provider-induced demand Prudent delivery of health care Monitoring the delivery of services for appropriateness and
cost-efficiency INEFFICIENCIES Complexity for providers of having to deal with numerous plans Lengthy appeals for denied services
Managed Care Cost Control Tools
Managed care organizations attempt to control costs through both quantity and price
Quantity –Demand management –Supply side controls –Demand and supply controls can be financial or organizational Discounted pricing
Managed Care Uses Additional Tools
Disease Management
Population-oriented strategy for chronic problems • Evidence-based treatment guidelines • Focus on education, self-management training, monitoring of the disease process, and follow-up to ensure compliance • Goal: prevent or delay complications • At present cost savings appear to be elusive
Utilization Review (UR)
Review each case Determine appropriateness of services To ensure cost-efficiency Plan subsequent care Can be prospective, concurrent, retrospective
Practice Profiling
Evaluate provider-specific practice patterns Compare to a norm Feedback to change behavior Goal: improve quality and efficiency Somewhat controversial
Plan requires that patients choose a primary care physician (PCP)  (“clinical gatekeeping”) PCP = entry point into health system à first contact care PCP must authorize use of services (“administrative gatekeeping”) Juxtaposes PCP advocacy role with a cost controller role
Managed Care Typology
Cost Control Tools Used By Health Plans are Useful for Developing a “Managed Care Typology”
Managed Care Plans
Fee-for-service Traditional Managed Preferred Provider Organization (PPO) Exclusive Provider Organization (EPO) Point of Service Plan (POS) Health Maintenance Organization (HMO)
Why Different Types
HMOs did not become widely popular. The main drawbacks of HMOs were: Choice restriction (for enrollees) Capitation (for providers) Utilization management (for both) PPOs emerged on the basis of offering better choice and less risk sharing with providers Different ways of arranging service delivery led to different HMO models
Managed Care Typology by Cost Control Tools
Cost Sharing Utilization Review Provider Network PCP Gatekeeping Traditional FFS   X       Managed  FFS   X   X       PPO   X   X   X     HMO   X   X   X   X
Managed Care Typology by Cost Control Tools
Preferred Provider Organizations (PPOs)
Insurer channels patients to “preferred” providers using financial incentives (i.e., the network) Providers in the network paid discounted fees in exchange for patients Patients have open (unrestricted) access within network of providers; don’t have to go through primary care gate-keeper Patients pay higher prices if they see providers outside network
Exclusive Provider Organizations (EPOs)
Similar to PPOs, except that enrollees are not reimbursed at all if they use providers that are not part of the provider network
Health Maintenance Organizations
Insurer channels patients to provider groups that (usually) have agreed to accept some financial risk for patients health care costs Primary care providers function as “gatekeepers” Most restrictive of Managed Care Organizations
Types of HMOs
Staff /Group Hires physicians to provide care at facilities owned and operated by the HMO Group Model Contracts with single multispecialty group to provide care; physicians are usually paid either capitation or discounted ffs and retain their own practice Network Model Contracts with more than one multispecialty group to provide care Individual Practice Association (IPA) Contracts with IPA, which, in turns, contracts with physicians to provide care to managed care patients Point-of-Service Plan (POS) Permits out-of-network use in return for higher cost sharing
Point-of-Service Plans
An HMO that allows enrollees to self-refer out-of-network at an increased cost Example: –“Triple-option”: Use within HMO (no cost), self-referral to larger PPO (small cost), self-referral to non-participating provider (highest cost) Attempts to balance provider choice with cost controls
Example of Cost Sharing
in a POS Plan
  Deductible Co-pay Co-insurance Coins. Limit Tier 1 “HMO”   0   10   0   0 Tier 2 “PPO”   0   30   20%   $ 750 Tier 3 “FFS”   $ 200   0   20%   $1,500
Managed Care Backlash
Consumer/purchaser “revolt” against restrictions of choice Less restrictive products: more direct-access, “tiered” products HMOs being offered without gatekeeping Less capitation Less utilization review and pre-authorization Safeguarding profitability à large premium increases
Managed Care Aftermath
Better relations with providers Relaxed utilization controls Consumers will accept less choice at lower out-of-pocket costs High-deductible health plans Greater individual responsibility Different models that attempt to integrate care? … Accountable Care Organizations
Continued Efforts to Promote
Integrated Care Systems
Health care remains fragmented and not well coordinated in the U.S. Goal – create a system in which primary care physicians, specialists, and hospitals work together to manage overall care of their patients
Accountable Care Organizations
Trying  to integrate care while avoiding past problems (e.g., concerns that capitated provider groups would deny care) Groups consisting of one or more hospitals and doctors who use the hospitals but may/may not be employed there Public and private payers would hold these systems accountable for providing high-quality care to the ACOs usual patient population while reducing unnecessary use of resources ACOs that improved their performance would be financially rewarded
Current Delivery Systems
That Could Become ACOs
Existing Integrated Delivery Systems Multispecialty Group Practice Physician-Hospital Organization Independent Practice Associations
Challenges to ACOs
Benefits of ffs payment and higher utilization may be greater than any shared savings from reduced utilization Smaller physician groups and solo practitioners lack data systems & organizational structures needed to form ACOs Potential legal hurdles
Why Costs Increase
  Economy wide inflation – prices go up over time (measured by CPI) Medical inflation – medical prices increase faster than general prices Population growth / changing demographics (aging of the population) Increase in volume and intensity of services
Reasons Why Increasing Healthcare Expenditures May be a Problem
Opportunity Costs multiple uses of scarce resources value of the next “best” alternative or what is given up Other uses of health care dollars: Societal perspective: Reducing taxes; lowering deficits; expanding government programs to cover uninsured Consumer perspective: other goods and services Higher costs may not bring better health; may increase the number of uninsured
Who is concerned about
Rising Health Care Costs ?
Federal and state government Corporations/Employers Unions Consumers
Goals of Cost Containment
E = P * Q Expenditures are a function of Price and Quantity Options for Cost Containment Fix the overall budget Price Controls Quantity Controls
Regulatory Approaches –
Price Controls
Sets payment rates for providers Examples include: Medicaid physician and hospital rates Medicare hospital (PPS/DRG) and physician rates (RBRVS)
Regulatory Controls on Quantity
Control the supply of health care services Technology Controls Utilization review Reduce inappropriate hospital admissions, hospital days, and use of unnecessary procedures Physician profiling
Competitive Approaches for Controlling Prices
Antitrust enforcement to encourage providers to compete against each other Cost sharing to make the consumer more sensitive to the cost of health care Physician and patient education to make the provider and consumer more aware of their alternatives Payer-driven and Consumer-driven competition
Other control methods
Improving quality and efficiency Electronic medical records, other hit Disease management Bulk purchasing of drugs for State Pharmaceutical Assistance Plans
What is Access?
We define access as actual use of personal health services and everything that facilitates or impedes their use”

“The timely use of personal health services to achieve the best possible outcomes”
Types of Access
Financial: capacity to pay for healthcare Organizational: arrangement of healthcare resources to facilitate patient-provider encounters Geographic: distance to and distribution of providers
Financial Accessibility
Insurance: presence, type, amount Out-of-pocket payments as a function of income Barriers: –no insurance,under-insurance,high OOP payments as function of income
Characteristics of the 46 million* Uninsured – A Summary
Most are in working families that do not have access to employer-sponsored health insurance More than eight in ten are in low or moderate income families Most low- and moderate-income uninsured adults are not eligible for Medicaid The uninsured suffer from negative health consequences due to their lack of access to necessary medical care Medical bills are a burden for the uninsured and frequently leave them with debt
The Consequences of Being Uninsured
use fewer preventive and screening services; are sicker when diagnosed; receive fewer therapeutic services; have poorer health outcomes (higher mortality and disability rates); and have lower annual earnings because of poorer health.
Organizational Accessibility
Appointment waits, Office waits Office hour availability, phone availability Site amenities Provision of interpreters Barriers: long appointment waits, limited office hours, poor telephone access Facilitators: outreach, recall systems
Geographic Accessibility
Travel time or travel distance Density/distribution of providers and hospitals Mode of transportation Barrier: long travel times; low population to provider / hospital ratio Facilitator: short travel time; high population/provider ratio
What are Some Approaches to Address Financial Barriers?
What are Some Approaches to Address Organizational Barriers?
What are some Approaches to Address Geographic  Barriers?
Some Ways of
Describing Access
Equitable: use determined by health related need rather than enabling factors Effective: use of services improves health status or satisfaction Efficient: costs minimized and health status or satisfaction maximized
Definition of Quality
“Quality of care is the degree to which health services for individuals and populations increase the likelihood of desired health outcomes and are consistent with current professional knowledge”
Quality Assessment
Purpose: identification of quality problems Target: service or condition Attributes of measures –Reliability, validity, practicality Criteria for Selecting Quality Assessment Area –Common, high cost, or high impact condition –Evidence for efficacious or effective interventions –link between process and outcome –Recommended service is cost-effective
Donabedian” Framework for Assessing
Quality of Medical Care
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