11 Oct Concepts of Managed Care? During the registration process at a provider’s office, a financial/payment policy should be given to each patient, the demographics collected, and the insurance

MANAGED CARE

CHAPTER 4 LECTURE NOTES

PART 1

PROVIDER PAYMENT

I. PAYMENT VS. REIMBURSEMENT

· “Payers” pay clinical care providers, clinical support services, and drug and device manufacturers for medical goods and services

· “Payers” do not pay providers in the same way

Payment

· Influences behavior

· Payment models have been blurring/blending for decades

· Payment can be a tool in which the financial incentives of the payer and provider become aligned-which in turn supports medical management of utilization

· Total Cost = provider payment x medical utilization

· Common forms of provider payments

· Payment of physicians and other professionals

· Payment of hospitals and ambulatory facilities

· Bundled payment of physicians and hospitals

· Medicare Shared Savings Program

· Pay for Performance (P4P)

· Payment of ancillary services

· Payment of pharmaceuticals

· Payment Reforms under the ACA

· Risk-Based vs. Non-Risk-Based Payments

Reimbursement

· Being made whole for actual out-of-pocket expenses on a dollar by dollar basis

· Does NOT influence behavior

II. STANDARDIZE CODE SETS AND TRANSACTIONS UNDER HIPAA

· Administrative Simplification

· The ACA amended HIPAA to address inconsistencies with the implementation of the use of the electronic transaction standards

III. PHYSICIAN PAYMENT

There are many different ways used to pay physicians and depends on a number of factors including:

· Type of health plan

· Benefits design

· Physician location

· Physician specialty

· Physician organizational structure

· Negotiating strength of either party

· State and federal laws and regulations

a. Non-Risk Based Physician Payment-providers are not at financial risk or do not share overall costs of care

b. Capitation (risk-based payment) – is a system of prepayment for services on a per-member, per-month basis. Capitation rates can vary depending on such factors as age, gender, current health status, geography, and practice type. Capitation payment does not vary based on the use of services by members. PMPM

c. Fee-for-service – payment is distributed on the basis of expenditure of resources. Though many physicians prefer fee-for-service plans, these plans are sometimes criticized because of the belief that physicians will do more if they are paid more. Fee-for-service plans can be either straight or performance-based (using Relative Value Scale for each procedure).

d. Discount on charges-used primarily by HMOs and PPOs to pay providers. This form of payment is easy to implement, acceptable by most providers; but does nothing to reduce the rate of cost inflation.

e. Relative Value Scale and the Resource-Based Relative Value Scale-widely used in FFS with the use of CPT codes that have a relative value (RVUs). Most well-known RBRVs is the one used by CMS

f. Fee-for-service-financial incentives aligned with the practice of evidence-based clinical care and is based on incentives rather than being risk-based. Typically applies to PCPs, but may involve specialists

IV. PAYMENT OF FACILITIES

MCOs typically use more than one method to reimburse a single institution or provider/physician.

The Charge Master-the list of all codes and associated charges that a facility uses to create/generate bills. Charge Masters differ from facility to facility.

The amount actually paid for any particular case may be modified in 2 ways: Carve outs and Outliers

The dominant forms of facility payment methods are:

· (Straight) Charges – is the simplest and most expensive method for payment, because the charges are not discounted in any way.

· Straight Discount on charges:

a. the hospital submits its claim, and the plan discounts it by an agreed-upon percentage

b. hospital accepts this payment in full

c. common payment method in low levels of managed care penetration

d. sliding scale discount on charges – is a percentage discount that is reflective of the total volume of admissions and outpatient procedures. Not popular in the NY market

e. ER services (that do not result in an admission) are considered outpatient. Payment methodology is typically a percentage or discount on charges

· Per Diem charges:

a. a negotiated per diem (per day) rate is a single charge for the day in the hospital regardless of any actual charges or costs incurred.

b. Most common type of reimbursement

c. An estimate of the charges/costs for an average day’s stay in a hospital minus a discount

d. Typically ICU or obstetric units are excluded from per diems because costs are too unpredictable. In this situation, Case Rates would be used.

e. sliding scale per diem charges – is based on the total volume

f. differential by day in hospital – sometimes the per diem reimbursement is combined with a differential by day in hospital, in which the first day is paid at a higher rate

· Diagnosis-Related Groups (DRGs) – a common reimbursement method is by DRGs, in which the plan negotiates a payment mechanism for DRGs on the basis of Medicare or state-regulated rates (NY uses Federal and NYS rates to negotiate).

· Case rates and package pricing – are set rates for certain categories of procedures.

A. Used to reimburse obstetric, cancer treatment, organ transplant, and cardiac (hospital or inpatient) cases

· Capitation or percentage of revenue – Capitation is the reimbursement of the hospital on a per-member per-month basis. Percentage of revenue, unlike capitation, may vary with the premium rate charged and the actual revenue yield.

· Contact capitation – involves reimbursement in which the capitation is tied to the percentage of admissions to a hospital, with some adjustments for type of service provided.

V. COMBINED PAYMENT OF HOSPITALS AND PHYSICIANS

Payments for both physicians and hospitals/facilities may be combined. The most common payment models are: Bundled payments, Shared Savings, and Global capitation

Outpatient Procedures – Over the past 15-20 years, there has been a huge shift from inpatient to outpatient care and procedures (more cost effective).

Reimbursement for outpatient procedures does not necessarily mirror that for inpatient services, but the two do have some methods in common.

The most common methods of reimbursing outpatient procedures are:

a. Package pricing or bundled charges-MCOs bundle all of the various charges (e.g. supplies, room fees, medications, nursing services, recovery room costs, etc.) into one single charge. If 2 procedures are needed to be done, then the payment for the 2nd procedure would be discounted.

b. Shared Savings –the ACA includes a requirement that Medicare implement a shared savings payment method and is called the Medicare Shared Savings Program (MSSP). The MSSP is a hybrid payment model that combines FFS with some elements of risk-sharing and Pay for Performance.

c. Global Capitation HMO payment of a single entity for all medical services-excluding pharmacy charges (typically carved out). Near complete transfer of risk to providers

VI. PAY FOR PERFORMANCE

P4P programs for hospitals measure results for individual hospitals or health systems