Managed Care


Managed Care Essay, Research Paper

Chapter 3: Types of Managed Care Organization

? The distinction between health care providers and health care insurers have blurred substantially

? 10 Years ago managed care organizations were often referred to as alternative delivery systems

? Managed care is now the dominant form of health insurance coverage in the United States

? Managed care can mean managing the provider delivery system can be equivalent in its outcomes to managing the medical care delivered to the patient

? Managed care may not perfectly describe this current generation of financing vehicles, it provides a convenient shorthand description for the range of alternatives to traditional indemnity health insurance

? On one end of the continuum is managed indemnity with simple pre-certification of elective admission and large case management of catastrophic cases, superimposed on a traditional indemnity insurance plan

? Further along the continuum are PPOs, POSs, open-panel [individual practice association (IPA) type] HMOs, and closed-panel (group and staff model) HMOs



? HMOs are organized health care systems that are responsible for both the financing are the delivery of a broad range of comprehensive health services to an enrolled population

? HMO health insurer and a health care delivery system

? HMOs are responsible for providing health care services to their covered members through affiliated providers, who are reimbursed under various methods

? HMOs must ensure that their members have access to covered health care services

? HMOs generally are responsible for ensuring the quality and appropriateness of the health services they provide to their members

? The five common models of HMOs are (1) staff, (2) group practice, (3) network, (4) IPA, and (5) direct contact


? PPOs are entities through which employer health benefit plans and health insurance carriers contract to purchase health care services for covered beneficiaries from a selected group of participating providers

? PPOs often limit the size of their participating provider panels and provide incentives for their covered individuals to use participating providers instead of other providers

? In contrast to individuals with traditional HMO coverage individuals with PPO coverage are permitted to use non-PPO providers

? PPOs sometimes are described as preferred provider arrangements (PPAs)

? PPA is used to describe a less formal relationship than PPO

? The term PPO implies that an organization exists, whereas a PPA may achieve the same goals as a PPO through an informal arrangement among providers and payers

? Key common characteristics of a PPO include:

? Select provider panel

? Negotiated payment rates

? Rapid payment terms

? Utilization management

? Consumer choice

Exclusive Provider Organizations

? Exclusive provider organizations (EPOs) limit their beneficiaries to participating providers for any health care services

? The EPO generally does not cover services received from other providers, although their may be exceptions

? EPOs, like HMOs, require exclusive use of the EPO provider network and also use a gatekeeper approach to authorizing non-primary care services

? The difference between an HMO and an EPO is that the former is regulated by HMO laws and regulations, and the latter is regulated under insurance laws and regulations

? Employee Retirement Income Security Act of 1974

? EPOs usually are implemented by employers (b/c it?s cost efficient)

POS Plans

? Hybrids of HMO and PPO models

? Characteristics include:

? Primary care physician are reimbursed through capitation payments (i.e. Fixed payment per member per month)

? An amount is with held from physician compensation that is paid contingent upon achievement of utilization or cost targets

? The primary care physician acts as a gatekeeper for referral and institutional medical services

? The member retains some coverage for services rendered that either are not authorized by the primary care physician or are delivered by non-participating providers

Open Access or POS HMOs

? Provides some level of indemnity-type coverage along with the HMO coverage

? HMO members covered under these types of benefit plans may decide whether to use HMO benefits or indemnity-style benefits for each instance of care

? The member is allowed to make coverage choice at the point of service when medical care is needed

? Most POS plans experience between 65 percent and 85 percent in-network usage, thus retaining considerable cost control compared to indemnity-type plans

? There are two primary ways form an HMO to offer POS option

1) Via a single HMO license

a. HMO provides the out-of-network benefit using its HMO license

2) Via a duel-license approach

a. The health plan uses an HMP license to provide the in-network care and an indemnity license to provide the out-of-network coverage

b. More flexible

? Coverage under HMO POS plans recently has been the fastest growing segment of health insurance

Self-Insured and Experience-Rated HMOs

? The federal HMO Act originally mandated community rating for all HMOs that decided to pursue federal qualification

? Under a typical self-insured benefit option, an HMO receives a fixed monthly payment to cover administrative services (and profit) and variable payment that are based on the actual payments made by the HMO for health services

? Under experience-rated benefit options, an HMO receives monthly premium payments much as it would under traditional premium based plans

? The HMO regulations of some states and federal HMO qualification regulations preclude HMOs from offering self-insured or experience rated benefit plans

Specialty HMOs

? Specialty HMOs serving other health care needs (e.g. mental health) have also developed in certain stated where they are permitted under the insurance or HMO laws and regulation

Managed Care Overlays to Indemnity Insurance

? Managed care overlays have developed that can be combined with traditional indemnity insurance, service plan insurance, or self-insurance

? The term indemnity insurance is used to refer to all three forms of coverage in this context

? The following types of managed care overlays currently exist

? General utilization management ? complete menu of utilization management activities selected by individual employer or insurers

? Specialty Utilization management

? Catastrophic or large case management ? (regardless of specialty involved)

? Workers? compensation utilization management ? to address the unique needs of patients covered under workers? compensation benefits

Physician-Hospital Organizations

? Physician-hospital organization (PHOs) are organizations that generally are jointly owned and operated by hospitals and their affiliated physicians

? A vehicle for hospitals and physicians to contract together with other managed care organizations to provide both physician and hospital service

? Physicians and one or more hospitals are shareholders or members

? PHOs can offer several advantages for providers who develop them

? They may increase the negotiating clout of their individual members with managed care organizations

? They provide a vehicle for physicians and hospital to establish reimbursement and risk-sharing approaches that align incentives among all providers

? They can serve as a clearinghouse for certain administrative activities, including credentialing and utilization management, thereby reducing the administrative burden on their individual physician and hospital members

? They provide an organized approach for physicians and hospitals to work together on managed care issues, including utilization management and quality improvement

? PHOs may also offer advantages to some managed care organizations:

? PHOs can provide a means of rapidly establishing a panel of participating physicians and hospitals

? PHOs can provide a means of reducing operating costs

? The lack of success of PHOs are:

? PHOs offer little or no benefit for enrolling large panels of participating physicians and hospitals

? PHOs, as of right now, don?t assume financial risk for delivering health services by accepting capitation-based payments


? The five commonly recognized models of HMO?s are:

1) Staff

2) Group

3) Network

4) IPA

5) Direct contact

? The major differences among these models pertain to the relationship between the JHMO and its participating physicians

? Many HMOs cannot easily be classified as a single model type, although such plans are occasionally referred to as mixed models

Staff Models

? In a staff model HMO, the physicians who serve the HMO?s covered beneficiaries are employed by the HMO

? Physicians are usually paid on a salary basis and may also receive bonus or incentive payments that are based on their performance and productivity

? Staff model HMOs must employ physicians in all the common specialties to provide for the health care needs of their members

? Staff model HMOs are also known as closed panel HMOs because most participating physicians are employees of the HMO, and community physicians are unable to participate

? Physicians in staff model HMOs usually practice in one or more centralized ambulatory care facilities

? Staff model HMOs usually contract with hospitals or inpatient facilities in the community to provide non-physician services for their members

? They have a greater degree of control over their practice patterns of their physicians

? Also offer the convenience of one-stop shopping for their members because the HMO?s facilities tend to be full service

? Disadvantages of the staff model:

? More costly to develop and implement because of the small membership and the large fixed salary expenses that the HMO must incur for staff physicians and support staff

? Provide a limited choice of participating physicians for potential HMO members

? Productivity problems with their staff physicians ? raising costs for providing care

? Expensive to expand services into new areas

Group Model

? The HMO contracts with a multi-specialty physician group practice to provide all physician services to the HMO?s members.

? Physicians in the group practice are employees by the group practice (not by the HMO)

? Physicians in a group practice share facilities, equipment, medical record, and support staff

Captive Group

? The physician group practice exists solely to provide services to the HMO?s beneficiaries

? I.e. Kaiser Foundation Health Plan

Independent Group

? The HMO contracts with an existing, independent, multi-specialty physician services to its members

? I.e. Geisinger Health Plan

? Continues to provide services to non-HMO patients while is participates in the HMO

Common Features of Group Models

? Advantages

? Both types of group model HMOs are also referred to as closed-panel HMOs because physicians must be members of the group practice to participate in the HMO

? Group practice HMOs may have lower capital needs than staff model HMOs

? Disadvantages

? Limited choice of participating physicians from which potential HMO members can select

? Limited number of office locations for the participating medical groups

? Restricts the geographic accessibility of physician for the HMO?s members

? Certain group practices may be perceived by some potential HMO members as offering an undesirable clinic setting

Network Model

? In network model HMOs, the HMO contracts with more than one group practice to provide physician services to the HMO?s members

? The HMO compensates groups on an all-inclusive physician capitation basis

? The group is responsible for providing all physician services to the HMO?s members assigned to the group and may refer to other physicians as necessary

? Network modeled may be either closed- or open-panel

? Closed-panel plan:

? Only contracts with a limiter number of existing group practices

? Open-panel:

? Participation in the group practices will be open to any physician who meets the HMO?s and group?s credentials criteria

? Broader physician participation that?s usually identified with network model HMOs helps overcome the marketing disadvantage associated with the closed panel staff and group model plans

? This model usually have more limited physician participation than either IPA model or direct contract model plans

IPA Model (Individual Practice Association)

? IPA model HMOs contract with an association of physicians ? the IPA ? to provide physician services to their members

? IPA physicians continue to see their non-member HMO patients and maintain their own offices, medical records, and support staff

? IPA model HMOs are open-panel plans because participation is open to all community physicians who meet the HMO?s and IPA?s selection criteria

? Broad physician participation can help make the IPA model HMO more attractive to potential HMO members

? Methods IPA model HMO establishes relationships with their IPAs:

? HMO contracts with IPA that has been independently established by community physicians

? These types of IPAs often have contracts with more than one HMO on a nonexclusive basis

? The HMO works with community physicians to create an IPA and to recruit physicians to participate in it

? The HMO contract is usually on an exclusive basis because of the HMO?s leading role in forming IPA

? Most HMOs compensate their IPAs on an all-inclusive physician capitation basis to provide services to the HMO?s members

? The IPA then compensates its participation physicians on either a fee-for-service basis or a combination of fee-for-service and primary care capitation

? IPA model HMOs overcome all the disadvantages associated with staff, group, and network model HMOs

? They require less capital to establish and operate

? Provide a broad choice of participating physicians who practice in their private offices

? Two major disadvantages from an HMOs perspective:

1) The development of an IPA creates an organized forum for physicians to negotiate and contract directly with managed care plans

a. Individual members of an IPA retain their ability to negotiate and contract directly with managed care plans

b. IPA are immune from antitrust restrictions on group activities

2) The process of utilization management is more difficult in an IPA model HMO than it is in staff and group model plans

a. Because physicians remain individual practitioners with little sense of being a part of the HMO

Direct Contact Model

? Direct contact model HMOs contract daily with individual physicians to provide physician services to their members

? I.e. U.S. Healthcare and its subsidiary HMOs

? Attempt to recruit broad panels of community physicians to provide physician services as participating providers

? A.K.A. ? gatekeeper systems

? Compensate their physicians on either a fee-for-service basis or a primary care capitation basis

? Direct model HMOs eliminate the potential of a physician bargaining unit by contracting directly with individual physicians

? Disadvantages

? HMO may assume additional financial risk for physician services relative to an IPA model HMO

? This is expensive

? Difficult and time consuming for a direct contract model HMO to recruit physicians because it lack the physician leadership inherent in an IP

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