2. HMO ACT OF 1973
Federal qualification requirements
Dual choice provision
Federal development grants and
loans
Exemption from state laws
3. INCREASE IN HEALTHCARE COSTS
Inflation
Rapidly expanding technology
Increase in medical malpractice lawsuits
Consumer expectations
Unnecessary treatment or defensive medicine
Lack of incentives to control medical costs
Technological factors
4. COST SHIFTING
Practice of charging more for services
provided to paying patients or third-party
payers to compensate for lost revenue
resulting from services provided free or at a
significantly reduced cost to other patients is
known as cost shifting
5. BASIC CONCEPTS OF THE HEALTH
PLAN INDUSTRY
Loss rate- number and timing of losses that will occur in a given group of
insured's while the coverage is in force
Antiselection
The tendency of people who have a greater-than-average likelihood of loss to
apply for or continue insurance protection to a greater extent than people who
have an average or less-than-average likelihood of the same loss.
Deductible
Annual minimum out-of-pocket expenses that member has to incur before he
can claim
Coinsurance
Fixed percentage of costs that member has to incur
6. Co-payment - Small fixed fee for every visit
Pre-existing condition
A condition for which the individual received medical care
during the three months immediately prior to the effective
date of coverage
Group policies usually also specify that a condition will no
longer be considered pre-existing—and thus, will be eligible
for coverage—if (1) the insured group member has not
received treatment for that condition for three consecutive
months or (2) the group member has been covered under
the group plan for 12 consecutive months.
7. MANAGED CARE
Traditional Indemnity
Complete coverage, freedom-of-choice
Cost varies by level of out-of-pocket
payments (deductibles, coinsurance)
No negotiated discounts with providers
Insurer or purchaser at risk
8. HMO (Health Maintenance Organization)
Care coordinated through Primary Care
Physician
Limited access to providers
Low member out-of-pocket costs
Shift of risk to providers through alternative
payment mechanisms (target budgets,
9. PPO (Preferred Provider Organization)
Similar to indemnity programs
Two levels of benefits:
Network (preferred) providers agree to provide
services to covered individuals at a discounted fee
in return for increased volume
Members pay more out-of-pocket to use non-
preferred providers
Increasing risk to network providers due to
10. POS (Point-of-Service)
Hybrid of HMO and PPO products
Like a PPO, two benefit levels:
Enrollees select PCP who manages all in-network
utilization, as in HMO
Members pay more for access to non-network
providers, no PCP referral required
11. Constraint Indemnity HMO PPO POS
PCP Not required Required Not required Required
Deductible Required Not required (In-network) not
required
(Out-of-network)
required
Same as PPO
Out Of Network
Coverage
Available Not available Available Available
Referral for
specialist visit
Not required Required Not required Required
Cost (1-5) 5 is
max
5 1 4 3
Freedom (1-5)
5 is max.
5 1 4 3
12. Key Players in Managed Care
Providers
Payers
Purchasers
Members
13. Utilization Management
Utilization management (UM) is a
mechanism that involves managing the
use of medical services so that a patient
receives necessary, appropriate, high-
quality care in a cost-effective manner.
14. UM Techniques
Demand Management
A series strategies designed to reduce the overall demand
for and use of healthcare services by providing plan members
with the information they need to make informed healthcare
decisions
Utilization Review
An evaluation of medical necessity, efficiency, and
appropriateness of healthcare services and treatment plans for
15. Case management
A system of identifying plan members with special
healthcare needs, developing a strategy that meets
those needs and coordinating and monitoring the
delivery of necessary healthcare services
Disease management
A coordinated system of preventive diagnostic and
therapeutic measures that focuses on management
of specific chronic illnesses or medical conditions
16. Financing the managed care
FFS SALARY
Capitation PER DIEM
Global, Partial, Carve out WITH HOLDS
Discounted fee for service DRG
Fees schedule or capped fee RELATIVE
VALUE SCALE
17. Health Plans and Products
The Health Maintenance
Organization (HMO)
18. A health maintenance organization
(HMO) is a healthcare system that
assumes or shares both the financial
risks and the delivery risks associated
with providing comprehensive medical
services to a voluntarily enrolled
population in a particular geographic
19. Federal Qualification
Preempted- State Laws
Cannot exclude pre-existing conditions
Had to offer certain services
In 1995, Fed Law eliminated the dual choice
requirement for employer sponsored healthcare and
exhausted federal grants
COA
21. Comprehensive Care
Basic medical Services + offer
extensive preventive care
programs. Prenatal care, well-
baby care, routine physical
examinations, 24-hour telephone
line access to a nurse, and
23. Factors to determine no of primary care and
specialist in a given area
size and location of the geographic service
area
network adequacy
medical needs of its members
employer or other purchaser requirements,
including provider education, board
24. Before an HMO contracts with a
physician, the HMO first verifies the
physician’s credentials. Upon becoming
part of the HMO’s organized system of
healthcare, the physician is subject to
recredentialing and ongoing peer review.
25. Requirements for a Hospital
Accreditation from JCAHO
State license
Ancillary Services
26. Financing in HMO
Prepaid Care
Negotiated provider compensation
Stop loss provision- capitation- FFS
beyond a certain point
Capitation -> discrete ancillary
services
27. Types of HMO Models
Closed panel HMO X Closed access
Open panel HMO X Open access
Four models of HMO
IPA
Staff
Group
Network
Distinguishing factor is nature of contact relationship
and reimbursement
28. IPA
An independent practice association, or individual practice association, is
a separate legal entity established primarily to give member physicians
a negotiating vehicle for contracting purposes
Member physicians, who agree to adhere to the IPA/HMO contractual
requirements, remain independent practitioners who manage their own
offices and medical records and usually see other patients besides HMO
members
Variation-> direct contract model HMO -> contracts directly with
physicians
Closed panel IPA
Open panel IPA- non exclusive
34. Specialty Services
Specialty services are healthcare services that are generally considered outside
standard medical-surgical services because of the specialized knowledge required for
service delivery and management.
Workers’ compensation
Chiropractic care and other forms of complementary and alternative medicine
Rehabilitation services
Home healthcare
Cardiac surgery
Oncology services
Care for patients with chronic diseases
Diagnostic services, such as radiology and magnetic resonance imaging
35. Carve Outs
Health plans often carve out specialty services that
have one or more of the following characteristics:
An easily defined benefit
A defined patient population
High or rising costs
Inappropriate utilization
37. BEHAVIORAL HEALTHCARE
Factors that fueled growth for
behavioral healthcare
Greater awareness and acceptance
of behavioral healthcare issues
Increased stress on individuals and
families
Increasing availability of services
38. MBHO is an organization that provides behavioral healthcare
services by implementing health plan techniques
MBHO’s use four different strategies to mange delivery of
services
alternative treatment levels
alternative treatment settings
alternative treatment methods-> drug therapy, psycho
therapy, counseling
crisis intervention
Directing patients to appropriate care
PCP
Centralized Referral System
39. Pharmacy Benefits plan
Type of managed care specialty service
that seeks to contain the costs of
prescription drugs or pharmaceuticals while
promoting more efficient and safer drug
use
1. Services offered by PBMS
2. Physician Profiling
40. Formulary management:-is a listing of
drugs, classified by therapeutic category
or disease class
1.Open Formulary
2.Closed Formulary
Therapeutic substitution is the
dispensing of a different chemical entity
41. Generic substitution is the dispensing of
a generic equivalent
Generic substitution can be performed
without physician approval in most
cases, but therapeutic substitution
always requires physician approval.
42. PBM Plans
Single tier plans
Fixed copy for all types of drugs mentioned in the plan.
Two tier plans
Lower copay for Generic drugs
Higher copay for Branded drugs
Three tier plans
Lowest copay for Generic drugs
Medium copay for branded drugs
Highest copay for Non formulary drugs
45. Structural Integration
Common ownership and Control (Mergers. JVs, Acquisition)
Operational Integration
Business Integration – Combine one or more separate
business function
Clinical Integration – Making a variety of services available
from one entity
Advantages of Integration
Greater operating efficiency and effectiveness
46. Provider Integration Models
Physician Only model
IPAs (Least Integrated)
Group Practices without Walls GPWW/
Management Services Org (MSO)
Physician Practice Management (PPM)
company
Consolidated Medical Group
47. Physician and Hospital model
Physician Hospital Organization
Integrated Delivery Systems (IDS)
/Medical Foundation (Most
integrated)
49. Health Plan , Structure
Basic ways of organizing a business
Sole proprietership
Partnership
Corporation
Separate legal entity
Lives beyond the owners
Parent Company
Holding company
For Profit/ Not For profit
Stock/Mutual
50. Organizational Structure
Inside Director
Outside Director
Responsibilities
Authorization of major financial transactions, including mergers,
acquisitions, and capital expenditures
Appointment and evaluation of senior management, including the
organization’s chief executive officer
Participation in corporate strategic planning
Approval and evaluation of the organization’s operational policies and
procedures
Oversight of the plan’s quality management (QM) program, including
51. Medical Director
Physician executive who is responsible for the quality and cost-
effectiveness of the medical care delivered by the plan’s providers.
Network management Director
developing and managing the health plan’s provider networks
authority over such activities as recruiting, credentialing,
contracting, service, and performance management for providers
Corporate Compliance Director
dedicated to overseeing compliance activities
Appointment of a corporate compliance director
52. Committees
Standing Committee
long-term advisory bodies on ongoing issues such as financial
management, compliance, quality management, utilization
management, strategic planning, and compensation
Ad Hoc Committees
special committees, are convened to address specific management
concerns. Ad hoc committees are typically disbanded once the issue
has been resolved. For example, a special litigation committee may
be temporarily established to oversee a legal challenge regarding
53. Network Structure and Management
Market Analysis
Market Maturity
Provider Community
Competitive Landscape
Economic Conditions
Characteristics of the Service Area
Population Characteristics
Health Plan Characteristics
Regulatory requirements
56. Network Structure and Management
Credentialing
In-house/Third Party Credentialing Agencies
Providers have to submit forms along with supporting
docs
Check for licensure, professional liability history,
medical education and training, disciplinary history
Sources - State Medical Records, Court Records,
National Provider Data Bank (NPDB)
Upon successful credentialing contract is negotiated
with the provider
57. Contract Provisions - Provider
Provider Services
Administrative policies
Credentialing and Re credentialing
Participation in UM and QM programs
Maintenance and submission of Medical
records
58. No balance billing
Requires providers to accept the amount the
plan pays for medical services as payment
in full and not bill plan members for
additional amounts
Hold Harmless provision
Forbids providers from seeking
compensation from patients if HP fails to
59. Contract Provisions – Health Plan
Payment
Risk Sharing and incentive Programs
Timely Payment
Eligibility Info
60. Termination provision
Without cause-either the health plan or the
provider may terminate the contract without
providing a reason or offering an appeals
process. The terminating party is often
required to give notice of at least 90 days.
With Cause-permitted by all standard provider
contracts, occurs when one party does not live
up to its contractual obligations, for example
the provider fails to provide required services
61. Cure Provision
which specifies a time period (usually
60–90 days) for the party that breaches
the contract to remedy the problem and
avoid termination of the contract.
due process clause which gives
providers that are terminated with
62. N/W Maintenance and Provider Services
Orientation
Health plan give the providers an orientation or
introduction to its systems and operations.
Peer Review
Evaluation of a provider’s performance, usually by
other providers who practice within that same
medical specialty and within the geographic area.
