Chapter 7: Unraveling the Mysteries of Managed Care
Unraveling the Mysteries of Managed Care
I. Common Types of Managed Care Organizations
a. Preferred provider organizations (PPOs)
i. Discount to enrollees: group of healthcare providers agree to this
ii. PPO contract: with network of providers who agree to offer care at a lower rate in exchange for being a part of the network
iii. What makes them popular?
1. you do NOT have to choose a PCP (primary care physician): a specific provider who oversees the member’s total healthcare treatment
2. you do NOT need referrals (auth from PCP) to visit any physician, hospital or healthcare provider within the network
iv. out of network visits: it is allowed, but patient may have to pay higher deductibles and coinsurance/copayments
v. advantages:
1. not as tightly controlled as HMOs
2. wider choice of treatments with fewer restrictions
vi. disadvantages
1. if loosely controlled, not better at cost-containment than fee-for-service
2. if controlled too tightly, patient isn’t able to manage their own healthcare
3. patient may believe he is paying less than traditional healthcare and he may not be
b. Health Maintenance Organization (HMO)
i. Must have 3 characteristics under the federal HMO Act
1. an organized system for providing healthcare
2. an agreed-on set of basic and supplemental health maintenance and treatment services
3. a voluntary enrolled group of people
ii. provides members: w/basic healthcare services for a fixed price and for a given period of time
iii. tightly controlled by government: must use HMOs healthcare provider’s and facilities; if not, services are NOT covered
iv. staff model: multi-specialty group practice; all healthcare services are provided within buildings owned by the HMO
1. closed panel HMO: other healthcare providers in the community generally cannot participate;
2. providers: are salaried employees of the HMO and only provide services to enrollees; routine care is done by PCP and all referrals require pre-auths;
3. HMO bears risk: for the entire cost of healthcare services furnished to its members
v. group model: HMO contracts with independent, multi-specialty physician groups who provide all healthcare services to its members
1. reimbursement: capitation (receive a fixed fee for every patient enrolled in the plan
vi. individual practice association (IPA): services are provided by out patient networks composed of individual healthcare providers; providers see HMO and nonHMO patients
1. open panel plan: healthcare providers in the community may participate if they meet certain standards
vii. Network Model: multiple provider arrangements (staff, group and IPA); provider is paid on a FFS basis rather than by capitation
viii. Direct contract: HMO contracts directly with individual physicians; HMO recruits a variety of providers (PCPs and specialists)
ix. Point of service: “hybrid” type of managed care; also known as open-ended HMO; allows patient to use the HMO provider or go outside the plan and use any provider they choose if they want to pay higher deductibles and co-pays
II. Advantages and Disadvantages of Managed Care
a. Advantages
i. Preventive care: they want to keep members healthy
ii. Lower premiums: how? Because they limit which physicians their member can see and when they can see them
iii. Prescriptions: cover most prescriptions for a low co-pay
iv. Fewer unnecessary procedures: give physicians financial incentives to provide only necessary care
v. Limited paperwork: for HMO members
b. Disadvantages
i. Limited provider pool: tell their members which physicians they can see
ii. Restricted coverage: members cannot expect treatment on demand because everything must be approved
iii. Prior approval needed: must get referral to see specialist
iv. Possibility of undertreatment: HMOs typically give physicians incentives to limit care
v. Compromise privacy: HMOs use patient records to monitor physician’s performance and efficiency—this may breach their right to privacy
III. Managed Certification and Regulation
a. National Committee on Quality Assurance (NCQA)
i. Private non-profit organization: accredits healthcare plans based on careful evaluation of the quality of care members receive and member satisfaction rates
ii. 5 categories of accreditation
1. access and service: how well the plan provides its members with access to needed care and good customer service
2. qualified providers: ensures each physician is licensed and trained to practice medicine and that the members are satisfied with their physician’s performance
3. staying healthy: evaluates activities that help people maintain good health and avoid illness
4. getting better: looks at health plan activities that help people recover from illness
5. living with illness: evaluates activities that help people manage chronic illness
iii. Joint Commission on Accreditation of Healthcare Organizations (JCAHO)
1. independent non-profit organization: considered the predominant standards-setting and accrediting body in healthcare
iv. Utilization Review: designed to determine the medical necessity and appropriateness of a requested medical service, procedure, or hospital admission prior, concurrent or retrospective
v. Complaint Management
1. Patient disagrees with UR: he/she can file a grievance protesting the decision
2. state laws: some states have enacted laws that allow residents to air their complaints to the state insurance commissioners office when certain medical payments are denied by their health insurer
IV. Preauthorization, Precertification, and Referrals
a. Preauthorization: required by most managed care and indemnity plans before a provider performs specific procedures or treatments for a patient (usually inpatient hospitalization and certain diagnostic tests)
i. How does it work?: Provider contacts health plan and requests permission; the plans representative authorizes the service or procedure or not; if it is authorized, a code is assigned
b. Precertification: process used by health insurance companies to control healthcare costs and is similar to preauthorization; involves collecting information before inpatient admissions or performance of selected ambulatory procedures and services; permits advance eligibility verification, determination of coverage, and communication with the physician or plan member or both; used to inform physicians, members and other healthcare providers about cost-effective programs and alternative therapies and treatments
c. Referrals: request for a patient to be evaluated or treated by another provider usually a specialist
i. How a patient obtains a referral: PCP requests referral from insurance company for patient to see specialist
ii. Referral vs Consultations
1. consultation: when the PCP sends a patient to another healthcare provider opinion regarding the patients condition
2. referral: the PCP relinquishes care of the patient to the specialist
V. Impact of Managed Care
a. Impact on the Physician-Patient Relationship
i. May change the way in which such relationships begin and end: limited patient ability to establish a relationship with the physician of their choice
ii. Limits time physicians spend with patients: because they get paid less for services so they want to see more patients
iii. Restricts patients’ freedom to choose providers and obtain the medical services they provide: PCP controls everything
b. impact on Healthcare Providers
i. HMO physicians spent more time with their patients: patients received more preventive care, asked more questions
ii. Managed care patient spent 2 fewer days in an intensive care unit
iii. HMO patients were hospitalized less
iv. Chronically ill patient in managed care plans had better access to care
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