Transcript The HMO Story - Pro Pharma Pharmaceutical Consultants, Inc

The HMO Story
Emmanuelle Mirsakov
Pharm.D. Candidate 2007
USC School of Pharmacy
12-1-06
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What is an HMO?
 Health Maintenance Organization (a type of
managed care organization)
 An organization that provides comprehensive
health care to a voluntarily enrolled
population at a predetermined price.
 Contract directly with physicians, hospitals,
and other health care providers
 Providers offer their services at a discounted
rate, in exchange, HMOs offer referrals
 HMOs emphasize preventative care
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General Overview of How It Functions
 Members pay fixed, periodic (usually monthly) fees
directly to the HMO and in return receive health care
service from the HMO’s network of providers.
 Out-of-pocket expenses are typically limited, as long
as the member uses providers in the HMO’s network.
 Most HMOs use Primary Care Physicians (PCP’s) as
gatekeepers
 Most HMOs cover basic health services such as
physician services, inpatient/outpatient hospital
services, emergency visits, referral services,
laboratory services, and more.
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Why and When Were HMOs
Developed?
 Informal HMO structures existed as far back as 100
years ago
 HMO Act of 1973 passed by Congress.
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The governments attempt to move toward more
disciplined control of health care spending and
utilization of service
It set requirements for federal qualification and
provided for grants and loan guarantees for planning,
development, and initial operating costs for those
HMOs that met the qualifying standards.
Encouraged enrollment among the public by
establishing criteria for HMOs seeking federal
qualification
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HMO Act of 1973
 4 primary attributes:
 Feasibility grants and low-interest loan
programs made available to encourage
interested parties to develop and build HMOs
 The establishment of procedures through
which health plans would become “federally
qualified HMOs”
 Inclusion of preventative as well as curative
health care benefits
 Requirements that employers offer federally
qualified HMOs to their employees under
certain circumstances
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Who Develops HMOs
 Employers
 Labor unions
 Medical schools
 Hospitals
 Medical clinics
 Insurance companies
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What Are The Different Types of
HMOs?
 HMOs are organized on a physician
basis
 5 types:
Group model
 Staff model
 Network model
 Independent practice association (IPA)
model
 Mixed model

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What Are The Different Types of
HMOs?
 Group model:
Contracts with one independent group practice of
multispecialty physicians to provide health services, with
care usually billed to the HMO on a fee-for-service basis
(e.g. Kaiser Permanente)
 Physicians are employees of the group practice and are
generally limited to providing care for the HMO enrollees
 Staff model:
 Delivers health services through a physician group that is
controlled by the HMO. The physicians are basically
employed and paid by the HMO (e.g. Group Health
Cooperative of Puget Sound)
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The physicians practice in HMO owned facilities and primarily
only see the HMO enrollees
Pharmacy services are through in house facilities or through
network pharmacy mail order
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What Are The Different Types of
HMOs?
 Network model:
Contracts with two or more independent group practices (no
solo practices) to provide health services (e.g. Health
Insurance Plan of Greater New York)
 Pharmacy services are provided through in-house
pharmacies, a contracted community network of pharmacies,
and mail order.
 IPA model:
 Contracts with physicians from various settings (individual
physicians or a mixture of solo and group practices) to
provide health services; contracts with community hospitals,
laboratories, diagnostic centers.
 It is a loosely affiliated group of physicians organized to
contract with HMOs and other managed care organizations
 The HMO has no medical facilities of their own
 Mixed model:
 Combines elements of the other models
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What is the Payment Structure?
Providers
 Fee-for-service
 For each unit of service provided, an associated fee is
billed
 Capitation
 Health care providers are paid a fixed amount per
member per month regardless of which services (if
any) are provided [ adjusted for age and gender]
 Pre-paid health plans
 Employers pre-pay for expenses their employees will
incur by paying a fixed monthly premium to an insurer.
Physicians are then paid on a fee-for-service bases
 * Take home message: with HMOs it is the health
care provider that assumes the risk
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What is the Payment Structure?
Patients
 Premiums
 Deductibles
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A cost management tool
Requires patients pay up to a certain amount
out of pocket before the insurance pays
 Co-payments

A small fee charged for services or
medications
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Legal Aspects of an HMO
 To be federally qualified, an HMO must be organized
and operated and provide health services as
prescribed by the law

Please see handout on standards
 The HMO Act also mandated that employer
contribution must be reasonable and assure
employees a fair choice among health benefit plans
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HCFA (Health Care Financing Administration) has a
final rule for employer contributions to HMOs
 Many states have laws meant to promote HMO
development while ensuring the quality of care
delivered by HMOs
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State and Federal Laws
 State laws:
 Health plans are covered under the Department of
Insurance (DOI)
 Some Federal laws:
 Employee Retirement Income Security Act of 1997
(ERISA)
 Health Insurance Portability Act of 1996 (HIPPA)
 Consolidated Omnibus Budget Reconciliation Act of
1985 (COBRA)
 Omnibus Budget Reconciliation Act of 1993 (OBRA
’93)
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HMO vs. PPO
 PPO: Preferred Provider Organization
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An organization that arranges contracts
between a select group of health care
providers and purchasers of health care, but is
itself neither a provider nor a purchaser
Payment is on a fee-for-service rather than a
capitated basis
Strict utilization controls are combined with
flexibility in benefit design and freedom of
choice with respect to providers
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HMO vs. PPO
HMO
PPO
Enrollee must stay in plan and use only the
participating physicians/providers in order to
have services covered
Enrollee may select an out of network provider
and still receive some reimbursement
An alternative to a traditional health plan
Exists within a traditional health plan
Requires services be rendered by participating
providers in order to be covered
Reimburse services by nonpreferred providers at
a lower rate; cover most medically necessary
services
Enrollee must choose a PCP; Referral to
specialists
Do not use gatekeepers; patients can visit any
specialist (out-of-network specialist fees are
reimbursed at a lower benefit percentage)
HMO assumes risk that the cost of services
required by members> revenues generated by
capitation
Assume no risk and reimburse on a fee-forservice basis; the risk continues to be
assumed by the employer, trust fund, or
insurance carrier
Strictly regulated by federal HMO and various
state laws
Largely unregulated
Delivers health care
Facilitates the delivery of cost-effective health
care, but itself is not a provider (manager or
broker)
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HMO Advantages and Disadvantages
Advantages
Disadvantages
Through capitated pre-payment, HMOs
The choice of physicians may be limited,
transfer risk from employers directly to
which means that employees joining an
suppliers, who are in the best position
HMO may have existing doctor-patient
to control spending
relationships disturbed, or may be
faced with additional costs to keep
those relationships intact
Budgeting is simplified
Centralized HMO facilities may not be as
convenient as a local physician’s office
Offer incentives to suppliers to reduce
costs
HMO financial incentives might restrict
needed care
Through emphasis on prevention and
routine care, HMOs forestall major,
more costly ailments
In the past, some HMOs have had a
reputation for bad management, poor
service, and financial problems
HMOs may not be as effective in
controlling employer costs as expected
Medicaid and Medicare HMOs
 In 1982 the Tax Equity and Fiscal
Responsibility Act (TEFRA) was passed
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Led to Medicare risk contracts, a way for
government to introduce HMOs to control the
health care costs for Medicare
Medicaid also offers HMO options
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Most state managed care Medicaid programs
have concentrated on moving only those
recipients who qualify under the TANF regulation
(young, healthy, female patients with small
children)
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Pro Pharma
 Survey of Pro Pharma employees:
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What is an HMO?
What happens to a patient who has an
inadequate primary care physician?
Will an HMO cover emergency services?
Why do some HMOs we deal with here limit
the pharmacy you can go to, while other
HMO plans do not?
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The Moral of The Story
 HMO plans have very strict guidelines, and
restrictive coverage
 A well-designed HMO model could be a large
cost saver for employers
 It is important to understand the big picture of
HMOs because Pro-Pharma acts as a
consultant for many HMO plans (e.g.
BCBSRI; Blue Cross Blue Shield Rhode
Island)
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Don’t Let HMOs Make You Cry!
'In sickness and in health? I'll need to run that by my HMO...'
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Do you have one saying ‘good luck
getting your HMO to pay your
claim?’
claim'?
'Do you have
one saying
'Good luck
getting your
HMO to pay your
"I'm referring you to a specialist who knows how to deal with HMO's."
I’m referring you to a specialist
in how to deal with HMOs
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Go USC !!!!! Teach the Bruins a
Lesson!!!!
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