Transcript Fairleigh Dickinson Executive MBA Health Systems Management

Fairleigh Dickinson
Executive MBA
Health Systems
Management
Managed Care and Provider
Reimbursement
Robert Eidus MD, MBA
This Week
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Medical Management
Physician Integration
 Groups, GPWW, compensation issues,
PPMCs
Case Study: Phycor, PPMCsMental Health Management
Pharmaceutical Benefits Management
Utilization Management
Web-site review: Quality Management
Final Exam
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Essay Questions (may have a choice)
The questions will be broad
You will be expected to think critically, analyze, and
defend your position
No memorization required
Reflect understanding of the managed care concepts
we discussed that are relevant to the question
To Prepare: Review slides and handouts. Review
synopsis of reading materials. Only study those
concepts which you don’t understand
Final Project
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Think Critically
Reflect an understanding of the concepts discussed
Do not regurgitate the slides or reading materials
Personal experiences can be incorporated if relevant
Some external reading or research would be expected.
Cite external reading material or provide quotes.
Don’t be afraid to take a risk
It’s quality, not quantity
Discussion
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Questions about last week
Questions, comments about reading or other
issues
Recap of Last Two Weeks
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Managed care does not exist in a vacuum
It responds (and retracts) to societal issues
Initially the issue was access, then it was cost
Cost is King
Managed care exists in a framework that is a mixture of capitalism and social
service entitlements
There is no perfect system of compensating providers
There is evidence that incentives do influence behavior
Incentives which are excessively strong may adversely affect patient care and
raised ethical questions
Incentives which are weak are ineffective, so why do them?
Accepting risk requires a significant infrastructure (financial and medical
management to be successful)
Appropriate Quotes
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Democracy is the worst form of government, except all
the rest: Winston Churchill
“I got upset because he was getting awfully close to my
price”: Abraham Lincoln
“I am not a member of any organized political party.
I’m a democrat.” Will Rogers
“A billion here, a billion there, pretty soon you are
talking real money” Everett Dirkson
“100% of providers have patient populations that are
sicker than average” Bob Eidus
How Is This Week’s Agenda
Different From Last Week’s?
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Both Deal With How To Affect Utilization of Health
Care Services
Last Week We Dealt Mainly With the structure of how
Providers are compensated by Health Plans
This Week We Will Discuss How Providers are
compensated Within Health Systems
We Will Also Discuss Ways to Affect the Clinical
Outcomes of Health Care Beyond Financial Incentives
Finishing Up Old Business
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Medicaid and Medicare
Medicaid
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Split Funding Between State and Federal
Government
Primarily for Indigent People
Total Funding Based on State Budget
Health Plans may enroll individuals either on a
voluntary basis competing with FFS or via a
state mandated plan
Very often there is an enrolling agency
Managed Medicaid
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Created to Address
Access
 Cost Containment
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Medicaid Health Plans
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Stand Alone- For Profit
Stand Alone- Non Profit (Usually affiliated with
Hospital Systems)
Multiproduct Health Plans
Managed Medicaid
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Same benefits as FFS
Often add OTC benefits
Budgets and Global Cap rates negotiated with the state
on an annual basis
Payments to physicians are highly discounted
Try to use limited hospital networks
Emphasize DM programs consistent with their
population- Asthma, AIDS, HTN, Diabetes, High Risk
Pregnancy
Managed Medicaid
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Issues
Provider networks
 Community Health Centers
 Shifting enrollment
 Member outreach
 Eligibility verification
 Ability to change health plans
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Managed Medicare
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Introduced in the late 1980s
Recognition by Medicare that it had to do
something else to control costs
Provider networks and health plans embraced it
Enrollment grew quickly, but recently there has
been dramatic retrenchment
Managed Medicare
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HCFA may a decision to either get out or
minimize its exposure for costs
Made it easy for providers and health plans to
accept significant risk for Medicare- the most
risky population to manage
Managed Medicare
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The basic model
Medicare allowed health plans to offer beneficiaries
an HMO product in lieu of their traditional benefits
 The benefit package had to be at least as good as
traditional indemnity insurance, but could be better
 The health plans were given a capitated rate for the
equivalent projected costs under the FFS Medicare
Program
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Managed Medicare
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The Capitated Rate is known as the AAPCC
(Average Annual Per Capita Cost)
Plans received 95% of the AAPCC, which
varied by region
Plans were allowed to charge a premium to be in
the HMO
Most common added benefit was Rx
Early Experience
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Many plans, including those that were loosely
managed, took on Medicare patients at a very
rapid rate
Early rapid rise in revenue and profits were
often replaced by severe losses
Why was the Initial Experience So
Bad?
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Poor benefits design
Poor marketing and enrollment strategies
Adverse selection
 How would you market to the medicare population
to get positive selection?
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Lack of medical management infrastructure
Managed Medicare
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Despite these early disasters, many MCOs
registered large profits for the first decade
Recently, many plans have exited Medicare in
many regions due to unprofitable business
Why do you think we have seen this downturn
after the initial shakeout?
Managed Medicare Issues
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Payment adequacy- ratcheting down
Ability to affect medical expense trend
Marketing- adverse risk selection
Benefits structure
Taking into account general factors affecting
medical inflation
Physician Integration
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Why integrate physicians? After all, managing doctors is
like herding cats
Opportunities to create economies of scale
Increase purchasing power
Increase negotiating leverage
Increase internal referrals (FFS)
Potential to improve patient satisfaction
Potential to improve outcomes and lower medical costs
Potential to take on risk
Types of Physician Integration
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PHOs, IDS- Previously discussed
Single and Multispecialty Group Practices- Previously Discussed
IPAs: Mainly used for negotiations and as a method of accepting
risk
MSOs: Mainly used to consolidate administrative functions
GPWWs: Almost a hybrid of group and solo
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Offices run as separate profit centers; corporate structure as a single
group, facilities may be owned or rented by the group, can negotiate as a
single entity, some functions centralized
PPMCs:
PPMCs
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Phycor, Medpartners
Mini- Presentation
Why they were created?
What they tried to do?
What they failed?
Physician Compensation
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“Democracy is the worst form of government,
except for all the rest” W. Churchill
Reimbursement
Strengths
Weaknesses
Fee For Service
Motivates Productivity
Equitable for those who
work harder
Can Foster Overutilization
Capitation
Promotes efficient care
Can cause underutilization of services
Hard to administer in a
group practice or one
where there are mixed
reimbursement
populations
Salary
Incentive Neutral to Patient
Can create low
productivity
Physician Reimbursement
What do you do when you get a call at 4:30 that a child has a
fever and ear ache?
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FFS: “Come right in”
Capitation: “I will call in an antibiotic”
Salary: “Tell the patient to go to the ER”
No payment system is perfect. In reality, most physician
payment schemes are hybrids
Paying physicians based on profitability of small operating
units that are under their control makes sense to me
Mental Health Management
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Why Manage Mental Health Separately?
Privacy
 Don’t Understand the Business
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Hard to figure out what is appropriate care
Different nomenclature coding
 Use of psychologists, MSWs
 Considerable variation in benefits structure
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Managed Behavioral Health
Organizations
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Largest is Magellan
Both Non-Profits and For Profits
MBHOs
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Key Functions
Access and Triage
 Referral Management
 Authorization of Treatment Plans
 Concurrent UM of Hospitalized Patients
 Some Case Management
 Claims Payment
 Quality Management and Reporting
 Practitioner integration
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MBHOs
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Key Indices
New patients
 Ambulatory visits per case
 Hospitalization rate
 Hospital LOS
 Re-admission rate
 Quality indicators
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Pharmaceutical Benefits
Management Companies
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Why Manage Rx?
Most Rapidly Growing Part of Health Care Market
Basket
 Difficult to Manage
 Integration Potential with Medical Management and
Medical Data
 Quality and Outcomes Potential
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Pharmaceutical Benefits
Management
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Benefits Design
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Discounting of Medications
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Covered Benefits
Formularies
Often tied to formulary
Discounts received from Manufacturer, although product
purchased from distributor
Manufacturer’s rebates
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Passed through to health plan or insurer
Occasionally tied to formulary
Pharmaceutical Benefits
Management
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Retail Store Management
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Retail Utilization Management
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Drive Hard Discounts (AWP, filling fee)
OTC Switch
Brand/ Brand switch
Brand/ Generic Switch
Mail Order
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The origination of PBMs
90 fills
Lower copay (single copay)
PBM functions as a pharmacy
Pharmaceutical Benefits
Management
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Utilization Management
Patient profiling (unauthorized refills)
 MPA
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Vioxx, for example:
 Costly, with minimal, if any advantaged over other
NSAIDS
 Orthopedists give it out like water
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If you are a hammer, everything looks like a nail
Mini-Presentation
Seth
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Medco Managed Care
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Originally formed as Medco Containment Services:
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CEO was a prominent entrepreneur Martin Wygod
Purchased by Merck
Why did Merck buy Medco?
 What were some of the issues/concerns?
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Why did Merck spin off Medco?
PBM Quality Management
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Takes advantage of a rich data base
Adherence Programs
 Testing reminders
 Patient education
 Disease Management
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Utilization Management
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Principle is that there is significant overutilization of health care services which does
not help and may detract from quality and
outcomes
Fueled by lack of counterbalancing incentives
between patients and providers (both want to do
more)
 Different from financial/ payment structuring to
reduce utilization
 Under-utilization can be dealt with separately
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Three basic types
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Prospective
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Concurrent
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Referral Management
Prior Authorization for surgery
SSO
Is continued hospitalization still necessary? Transfer to lower
level of care
Retrospective
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Carve out excess length of stay and un-necessary services
(not needed fro in-lier DRG payments)
Referral Management
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Members need to go to PCP first
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PCP then authorizes referral to participating specialist
Some services (eg specialized x rays may still need prior
authorization from health plan
Sometimes includes number of visits and procedures or tests
Opposite is direct access
Health Plans that use referrals often have exception for
certain services
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Women’s health maintenance with Ob/Gyn
Special situations: eg cancer care
Eye care
Referral Management
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Rationale
Puts up a barrier to access
 Assumes that PCPs can manage most illnesses better
 Allows PCPs to be at risk for system wide costs
 Mimics the British system
 Emphasizes preventive health
 Allows PCP capitation
 Can be administratively linked with prior
authorization
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Referral Management
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There is some evidence that PCPs manage a
broad range of illnesses more cost effectively or
better than specialists
There is some evidence to support the
contention that specialists manage some
illnesses better than generalists
There is virtually no evidence that referral
management programs contain costs
Referral Management Systems
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Pros
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Makes sense
May contain costs
May avoid un-necessary
procedures
Better coordination of
care
Supports PCP capitation
Supports preventive
services better
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Cons
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Another layer of
management
Resented by many
specialists and patients
Mixed response at best
from PCPs
May prevent appropriate
care or timely
intervention for some
illnesses by some
providers
Prospective UM
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Prior authorization (also known as MPA,
Precertification)
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Participating Provider (usually specialist, but may be hospital,
diagnostic treatment center, or PCP) is required to notify
health plan of requested serviced and get authorization for
specific services, number of visits, length of treatment)
Providers who perform services which require prior
authorization without obtaining prior approval risk not
getting paid: member is held responsible
In indemnity plans, it may be the insured who is responsible
for prior authorization
Mandatory Prior Authorization
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Common uses
Surgeries such as hysterectomy
 Diagnostic testing (PET scans, MRI)
 Pharmacy ( Lamisil,Cipro,Clarinex, Growth
Hormone, Ribavirin, Vioxx)
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Trend is to narrow the MPA lists to those where
continuing to manage this way is felt to be
beneficial and there are no other alternatives
Mandatory Prior Authorization
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Pros
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Effective in many areas
Can link to case
management and disease
management
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Cons
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The quintessential hoops
and hurdles management
initiative
Docs learn to game the
system
Another layer of
management
Concurrent Utilization Management
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Generally done my nurses
Can be telephonic or on-site
Targets the last days of a hospital admission
Not needed for DRG in-liers
In the early days, was the single most effective way of
managing costs
May use Max LOS as an alternative or as a trigger
Use national criteria (Interqual, M&R)
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Intensity of service, severity of illness
Concurrent Utilization Management
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Pros
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Felt to be effective
Good link with care
management
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Cons
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Requires systems and
hiring large numbers of
nurses
Adversarial with hospitals
and sometimes with
physicians
Telephonic less effective
than on-site
Retrospective UM
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After the service has been rendered
For participating providers only
 Generally for emergency admissions or instances
where prior authorization was required but was not
received
 Participating provider at risk
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No balance billing of member
 Medicare now required signed consent prior to delivering
services which may not be covered by them
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The Managed Care Dashboard
Hospitalization
Rate
ER visit per
1000
Same day
surgery rate
Specialist
Costs
Medical
Expenses
Days Per
1000
Out of
network costs
Mental Health
Referrals
PCP
Referral Rate
Rx PMPY
Range of U/M Data
Loosely
Managed
Moderated
Managed
Well Managed
# Admits /
1000
83.70
70.80
57.42
ALOS
5.38
4.19
3.11
# Days /
1000
450
296
178
Quality Management
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What is the case for quality?
The best quality is also the lowest cost
 Price does not track with quality
 Good quality reduces re-work
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A short history of Quality
Management in Health Care
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Codman- early pioneer- a pariah
PROs: focus on sentinel events and outliers
Dodabedian
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Structure, Process, Outcome
Deming Principles of CQI
Error Prevention
Why Did Health Plans Embrace
Quality Management
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As a defense against allegations of underutilization causing worse quality
To allay fears
Marketing/ In response to some employers
To meet Federal Qualifications and
Accreditation Standards
It meshed with their systems
Some pioneering spirit
Traditional QM Activities
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CME- Doesn’t work
Guidelines Promulgation- Make good door
stops
Case review- only deals with complaints
Randomized audits- not systematic; doesn’t
point to a fix
Peer review- bad apple management
QM Tactics Employed by Health
Plans
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Provider Directed
Guidelines
 Disease Registries
 Notification of outliers
 Incentives
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Mirror HEDIS indicators
Disease Management activities
QM Tactics Employed by Health
Plans
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Patient Directed
Pt education
 Reminders
 Care management
 Disease management
 Incentives
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Contribution of Managed Care To
Quality
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Prevention
Childhood immunizations
 Mammography
 Colon Cancer Screening
 Adult immunization
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Chronic illness
Asthma
 Diabetes care
 Beta blockers after heart attack
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Sentinel Events vs Quality Indicators
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Sentinel events: Popular in the 1970s and1980s
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Quality Indices: not tied as much to specific providers
and not tied to individual cases
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Usually bad things
Used as a trigger for further investigation
Commonly used by hospitals and MBHOs
Population based
QI-systems approach
Error prevention
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Application of systems management operations management
and root cause analysis to prevent errors from occurring in
the first place
National Committee on Quality
Assurance
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Originally created by the industry
Broke of to establish credibility
Tried to reassure the public re allegations of
poor care in HMOs
Created system of Accreditation
Has moved into performance measurement
Institute for Health Care
Improvement
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Independent non profit
Looks mainly at the provider sector
In patient and ambulatory
Bridges to Excellence
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Started by industry
Cooperation with NCQA
Re-kindled concept of pay for performance
Leapforg Group
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Business initiative
Focuses on in- patient care
Looks at processes and error prevention
Web-site Analyses
Final Session
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AM: Examination (60 minutes)
In-Class presentations and submission of Final Research Project
Case DiscussionCase Discussion: Codman:
PM: In-Class presentations and submission of Final Research
Project- (cont.)
Case Discussion- Accordant Health Services:
Emerging issues in managed care and reimbursement.
Population based health management. The role of prevention in
managed care. Prospective care management
Readings: Konsveldt Chapter 19, pp. 822-832, Chapter 13, Chapter 11
pp. 198-202