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Managed Care James G. Anderson, Ph.D. Purdue University.

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Presentation on theme: "Managed Care James G. Anderson, Ph.D. Purdue University."— Presentation transcript:

1 Managed Care James G. Anderson, Ph.D. Purdue University

2 History of Managed Care  Early Plans: Kaiser-Permanente Group Health of Puget Sound Health Insurance Plan, NY  HMO Act 1973 $200 million awarded to non-profit groups  Employers in the 1980s began to contract with managed care plans to reduce health care costs

3 History of Managed Care  Federal and State Governments began to encourage Medicare/Medicaid enrollees to enroll in managed care plans  Managed Care Plans begin to withdraw from covering Medicare enrollees

4 Major Types of Plans: Group or Staff Model  Group of physicians contracts to provide services  Physicians are employees and are not organized in separate medical groups  Exercise control over the amount and type of care patients’ receive  Primary care doctors act as gatekeepers  Pre-approval of specialty services, expensive diagnostic tests, hospitalization  Incentives to physicians to limit services

5 Major Types of Plans: Independent Practice Association  Physicians remain in their own offices but contract to treat patients enrolled in plan  Health plan contracts with physicians to provide care at a negotiated rate per capita, for a negotiated fee, or on a fee- for-service basis  Physicians may contract with more than one managed care plan  A portion of the physicians’ fees may be held back until the end of the year and distributed if there is a profit

6 Major Types of Plans: Preferred Provider Organization  Physicians remain in their own offices but contract to treat patients enrolled in plan  Health plan contracts with physicians to provide care according to a discounted fee schedule  Physicians may contract with more than one managed care plan and can see other patients on a fee-for service basis  Plans generally do not use primary care physicians as gatekeepers

7 Major Types of Plans: Point-of-Service  Encourages the coupling of a patient with a primary care physician who acts as a gatekeeper by offering employee incentives (e.g., more benefits, lower co- payments)  Enrollees have the freedom to seek care from nonaffiliated providers but pay substantially more out-of-pocket for care

8 Percentage of all Covered Workers By Type of Plan

9 Number of Persons Enrolled in Medicare under Different Payment Options 2002

10 Number of Medicaid Beneficiaries Enrolled in Managed Care

11 How do managed care plans influence physicians’ practice behavior?  Clinical rules - treatment protocols, algorithms, practice guidelines, regulations, administrative constraints, utilization review  Incentives - Reimbursement through per capita, discounted fee schedules, bonuses, etc.

12 Care vs. Cost Examples of US Healthcare Incentives  Hospital Stay. If the patients collectively average fewer than 178 days in the hospital per year, the doctor receives a bonus of $2,063 per month. If the patients together spend more than 363 days, the doctor receives nothing extra.

13 Care vs. Cost Examples of US Healthcare Incentives  Emergency-room Use. If emergency-room costs average les than $.84 per patient in any given month, the doctor receives a $453 bonus for that month. If the patients average more than $1.64, their doctor receives nothing extra.

14 Care vs. Cost Examples of US Healthcare Incentives  Specialist Referral. If specialist costs per patient average less than $14.49 per month, the doctor gets a bonus of $1,323 for the month. But if the costs rise above $30.49, the doctor receives nothing extra.

15 Typical Hospital Stay for New Mothers  Australia: 4-6 days  Canada: 2 ½ days  France: Up to 2 weeks; 5-day minimum  Germany: 7 days  Great Britain: 3 days  Ireland: 5-6 days  Japan 5-7 days  Netherlands: Mostly home births with all-day nurse for a week  Sweden: 1-3 days w/ midwife home visit  United States: hours

16 Percentage of Mastectomies Done on an Outpatient Basis

17 Do managed care plans reduce health care costs?  Plans have a significant impact on use and costs of service, although this may not result in lower system-wide costs  A survey of 2,409 employers found that respondents spent 14.7% less per employee for HMO coverage than the average cost per employee of traditional indemnity plans  The average cost per employee for care delivered through PPOs was 6.1% below that of indemnity plans  The average cost per employee of point-of- service plans was 7.9% lower than traditional indemnity plans

18 How do managed care plans affect quality of care?  Studies have shown that elderly, poor and chronically ill patients have worse physical outcomes under Managed care  Hospitals under managed care plans more frequently deny admission or prematurely discharge mentally ill patients  HMOs frequently limit access to National Cancer Centers and enrollment in clinical trials of experimental cancer treatments

19 Potential Benefits Patients  Less over-treatment  More preventive care  Lower cost  Minimal paperwork  Low or no co-payment and deductibles

20 Potential Benefits Physicians  Lower practice start-up costs  Dependable income  Regular hours  Structured practice  Incentives for cost-effective care  Assured patients

21 Potential Benefits Payers  Lower health care costs  More predictable costs  Use of business management practices (e.g., CQI)

22 Potential Burdens Patients  Incomprehensible benefit plans  Limits on specialty services, hospitalization, etc.  Physician is no longer the patient’s advocate

23 Potential Burdens Physicians  Physician’s role is changed to that of a business-person  The physician is less responsive to the patient’s needs  Physicians lose clinical autonomy in ordering tests, treatment, hospitalization, etc.

24 Potential Burdens Payers  Complex health care plans  Inadequate data concerning outcomes, quality of care  Concerns about price-fixing, monopolization  Uncertainty concerning liability

25 Percent of Public Dissatisfied with Health Care

26 The Backlash Against Managed Care  AMA’s patient Protection Act.  Patient’s Rights bills in the U.S. Congress.  Over 27 states have passed patient protection laws that include some or all of the following:  Right to sue External appeals Referral out-of-network Coverage of Emergency services Access to prescriptions not covered by the plan

27 Conflicts Choice Cost Quality

28 Employer Backlash  Minneapolis businesses launched a program to overhaul local health delivery systems. Their objective was to bypass the region's three large health maintenance organizations (HMOs), contract directly with doctors and inject a dose of free-market economics into medicine.  No fewer than 26 of the region's largest corporations -- including 3M, Honeywell, Dayton Hudson, Pillsbury and Carlson Companies -- entered into the arrangement, which has been described as a rebellion.

29 Employer Backlash  In the new scheme, doctors are free to charge, organize and operate as they choose.  But employees get booklets which rank doctor groups on what they charge and how they fare in terms of customer satisfaction -- and employees who choose expensive doctors must pay the extra out-of-pocket.  Payments to doctor groups are raised if they wind up attracting sicker-than-average patients -- who cost more to treat.  Physician groups which find ways to treat patients more efficiently get to keep the savings - - while inefficient or wasteful doctors who go over budget are penalized.

30 Physician-Patient Conflicts  A number of studies and press reports indicate that the financial arrangements Health Maintenance Organizations (HMOs) make with doctors reward physicians and hospitals for deferring or withholding care that is deemed too expensive, pitting the financial interest of the doctor against the medical needs of the patient. For example:

31 Physician-Patient Conflicts  The brain tumor of a 5-year old Florida girl was repeatedly misdiagnosed as the flu until her mother took her to a facility outside the HMO - which refused to pay for the surgery resulting from the correct diagnosis.  Long Island Jewish Hospital in Queens replaced private doctors in its anesthesia department with lower-paid and less-experienced salaried physicians, and in one 10-week period four patients died from anesthesia-related complications after successful surgery.  A California HMO was fined $500,000 by the state for refusing to refer a young girl to a specialist for her Wilm's tumor and instead assigning a physician who had never operated on children or on a Wilm's tumor.

32 Public Misunderstanding of HMOs  Some 55 percent said they have either never heard the term "managed care" or didn't have a good understanding of what it means.  Nearly one-third said they have never heard the term "health maintenance organization" -- or had heard it but didn't know its meaning.  Only 52 percent knew that HMOs put emphasis on preventive care.  One in three who knew what HMOs were didn't know that they provide coverage for set monthly fees.  Moreover, one in four in an HMO didn't know that their choice of physicians was limited.

33 Patients’ Bill of Rights Enrollment  Prohibit managed care plans from refusing to enroll patients with preconditions.

34 Patients’ Bill of Rights Patient Information  Publish managed care plans’ performance ratings.  Establish and inform members of grievance procedures.  Ban physician gag clauses in contracts.

35 Patients’ Bill of Rights Mandated Services  Require coverage for a 48 hour hospital stay after delivery and mastectomies.  A Hospital patient who is too sick to be discharged may request their case be reviewed by an impartial arbiter.  Require coverage for emergency room visits when there is a reasonable expectation that an emergency exists.  Guarantee patient’s right to be referred to a specialist when they require specialty care..

36 Patients’ Bill of Rights Mandated Services  Permit members to seek care from providers outside the plan when more experienced providers exist for the illness.  Cover prescription drugs not on the plan’s approval list if the patient can show a need for the drug.  Permit members to enroll in clinical trials for new drugs and therapies.

37 Patients’ Bill of Rights Incentives  Prohibit managed care plans from paying bonuses to doctors who delay or withhold treatment for patients.  Prohibit capitation payments to family physicians and internists.  If a health plan cancels or refuse to sign a contract with a doctor, require the plan to explain its reasons. Permit the doctor to appeal and request a hearing. a

38 Patients’ Bill of Rights Grievances  Establish independent boards to review decisions to deny coverage for specific procedures.  Require plans to respond within three hours to a doctor’s request to extend a patient’s hospital stay.  Plans must rule on patient request for services within 14 days or 72 hours in urgent cases. They must respond to an appeal within 30 days or 72 hours in urgent cases.  Allow patients to sue their managed care plan when medical benefits are improperly denied.

39 The Changing Face of Managed Care  Broader and more inclusive provider networks  Elimination or modification of Gatekeepers  Reintroduction of prior authorization requirements for selected services  Expanded investment in disease and case management  Increased consumer cost-sharing and introduction of consumer-directed plans  Capitated payment arrangement with providers scaled back or eliminated

40 Questions  How much control over access to specialized care and clinical decisions should the managers of managed care be able to exercise?  How much autonomy should physicians have in:Setting fees? Ordering diagnostic procedures? Referral of patients to specialists? Ordering hospitalization? Enrolling patients in experimental therapies?

41 Questions  What is the quality of care delivered by NPs and PAs compared to care delivered by MDs?  Does the substitution of lesser trained personnel for RNs adversely affect the quality of care?

42 Heart Attack Death Rate Higher In HMOs  Health Maintenance Organization (HMO) enrollees with cardiac disease are twice as likely to die after a heart attack as those with traditional fee- for-service coverage, says cardiologist Paul Casale in a report to the American Heart Association.

43 Heart Attack Death Rate Higher In HMOs  Casale studied 4,000 heart attack patients admitted to Pennsylvania hospitals in  He found HMO patients are less likely to receive two surgical procedures common after heart attacks -- heart catheterization and angioplasty.  However, Casale's study did not have data on how long patients waited to get care -- considered the best predictor of heart attack survival rates.  But Casale notes that HMO policies discouraging emergency room use could have delayed patients seeking treatment.


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