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, PPMCs- Tim
Mental Health Management
Case Study- Merck-Medco: Ken
Pharmaceutical Benefits Management
Case Study: Small Area Variation in Utilization- John
Wennberg MD- Lia
Utilization Management
Web-site review: doctorquality.com, ncqa.org
Quality Management
May 31
• Population Based Health Management
– Preventive Health Services in Managed Care
– Demand Management
– Disease Management
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Case Study- Accordant Health Services
Final Exam (First Hour)
Oral Presentations of Project
Wrap Up
Final Exam
• Single Essay Question (may have a choice)
• The question 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
Brief Discussions
• Questions about last week
• Questions about reading
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?
Capitation requires a significant infrastructure (financial and medical
management to be successful)
Quote of the Week
“Physicians are required to do everything
that they believe may benefit each patient
without regard to costs or other societal
considerations”
Norman G. Levinsky, MD, The Doctor’s Master, 311 NEJM.
1573, 1984
How Is This Week’s Agenda
Different From Last Weeks
• 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
• Medicaid and Medicare
Medicaid
• 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
• Created to Address
– Access
– Cost Containment
Medicaid Health Plans
• Stand Alone- For Profit
• Stand Alone- Non Profit (Usually affiliated
with Hospital Systems)
• Multiproduct Health Plans
Managed Medicaid
• 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
• Issues
– Provider networks
– Community Health Centers
– Shifting enrollment
– Eligibility verification
– Ability to change health plans
Managed Medicare
• 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
• 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
• 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
Managed Medicare
• 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
• 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?
• Poor benefits design
• Poor marketing and enrollment strategies
• Lack of medical management
infrastructure
Managed Medicare
• 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
• 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
• 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
– 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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Case presentation: Tim
Phycor, Medpartners
Why they were created
What they tried to do
What they failed
Why did Phycor fail?
• Operational Efficiencies
– Extra Layer of Management
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Contracting Power
Assumption of Risk
Management of Risk
Management of Physicians
– Were physicians motivated?
Physician Compensation
• “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?
• 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
• Why Manage Mental Health Separately?
– Privacy
– Don’t Understand the Business
• Hard to figure out what is appropriate care
– Different nomenclature coding
– Use of psychologists, MSWs
– Considerable variation in benefits structure
Managed Behavioral Health
Organizations
• Largest is Magellan
• Both Non-Profits and For Profits
MBHOs
• 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
Pharmaceutical Benefits
Management Companies
• Why Manage Rx?
– Most Rapidly Growing Part of Health Care
Market Basket
– Difficult to Manage
– Integration Potential with Medical
Management and Medical Date
– Quality and Outcomes Potential
Presentation
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Merck-Medco: Ken
How do PBMs create value
Why was it purchase by Merck?
Why is Merck now trying to sell it?
Pharmaceutical Benefits
Management
• Benefits Design
– Covered Benefits
– Formularies
• Discounting of Medications
– Often tied to formulary
– Discounts received from Manufacturer, although
product purchased from distributor
• Manufacturer’s rebates
– Passed through to health plan or insurer
– Occasionally tied to formulary
Pharmaceutical Benefits
Management
• Retail Store Management
– Drive Hard Discounts (AWP, filling fee)
• Retail Utilization Management
– 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
• Utilization Management
– Patient profiling (unauthorized refills)
– MPA
• Vioxx, for example:
• Costly, with minimal, if any advantaged over other
NSAIDS
• Orthopedists give it out like water
– If you are a hammer, everything looks like a nail
Quality Management
• Takes advantage of a rich data base
– Adherence Programs
– Testing reminders
– Patient education
– Disease Management
Case Discussion
• Small Area Variation: John Wennberg, MD
– Lia
Utilization Management
• 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
Three basic types
• Prospective
– Referral Management
– Prior Authorization for surgery
– SSO
• Concurrent
– Is continued hospitalization still necessary? Transfer
to lower level of care
• Retrospective
– Carve out excess length of stay and un-necessary
services (not needed fro in-lier DRG payments)
Referral Management
• Members need to go to PCP first
– 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
• Women’s health maintenance with Ob/Gyn
• Special situations: eg cancer care
• Eye care
Referral Management
• 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
Referral Management
• 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 some that referral
management programs contain costs
Referral Management Systems
• Pros
– Makes sense
– May contain costs
– May avoid un-necessary
procedures
– Better coordination of care
– Supports PCP capitation
– Supports preventive
services better
• Cons
– 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
• Prior authorization (also known as MPA,
Precertification)
– 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
• Common uses
– Surgeries such as hysterectomy
– Diagnostic testing (PET scans, MRI)
– Pharmacy ( Lamisil,Cipro,Clarinex, Growth
Hormone, Ribavirin, Vioxx)
• 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
• Pros
– Effective in many
areas
– Can link to case
management and
disease management
• Cons
– 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)
– Intensity of service, severity of illness
Concurrent Utilization Management
• Pros
– Felt to be effective
– Good link with care
management
• Cons
– Requires systems and
hiring large numbers
of nurses
– Adversarial with
hospitals and
sometimes with
physicians
– Telephonic less
effective than on-site
Retrospective UM
• After the service has been rendered
– For participation providers only
– Generally for emergency admissions or
instances where prior authorization was
required but was not received
– Participation provider at risk
• No balance billing of member
• Medicare now required signed consent prior to
delivering services which may not be covered by
them
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
Discussion
• doctorquality.com
• ncqa.org
Other Quality Sites
• Various government sites (State and Fed)
• Some Health Plans
• www.consumerlab.com (herbs and
supplements)
• www.hi-ethics.com (evaluates health sites
on the web)
Quality Management
• 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
Why Did Health Plans Embrace
Quality Management
• 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
• 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
• Provider Directed
– Guidelines
– Disease Registries
– Notification of outliers
– Incentives
• Mirror HEDIS indicators
– Disease Management activities
QM Tactics Employed by Health
Plans
• Patient Directed
– Pt education
– Reminders
– Care management
– Disease management
– Incentives
Contribution of Managed Care To
Quality
• Prevention
– Childhood immunizations
– Mammography
– Colon Cancer Screening
– Adult immunization
• Chronic illness
– Asthma
– Diabetes care
– Beta blockers after heart attack
Next Week
• AM: RUGS, MDS and long term care
(Mike McDonough, St. Barnabus Health
System).
• Financial indicators of hospital
performance (John Hazel, NJDHSS)
• PM: Managed care and provider
performance measurement (Don
Zimmerman, CHMS, FDU).
• Readings: In class handouts
Final Session
• AM: Examination (60 minutes)
• In-Class presentations and submission of Final
Research Project
• PM: In-Class presentations and submission of
Final Research Project- (cont.)
• 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