MANAGED CARE CHAPTER 3 LECTURE NOTES

Part 1

NETWORK MANAGEMENT AND REIMBURSEMENT

I. INTRODUCTION A. MCOs such as HMOs or PPOs have networks of providers under

contract. This provides the financing and delivery of health care services.

B. POS plans and other types of MCOs or indemnity insurance may provide financial coverage for health care provided by providers who are not under contract.

C. IDSs provide health care services under managed care, but may not provide for the financing of the services.

D. Contracted provider networks are referred to as “the network”. A Network (also known as the health care delivery system) is defined as “a group of providers contracted with the HMO to provide care to the members/enrollees.

E. The network is generally composed of physicians, non physician professionals, hospitals, providers of ancillary services, providers of therapeutic services, and pharmacists, among others.

II. GENERAL CONTRACTING ISSUES

A. A Contract must specify what is covered, what is not covered, and must include:  Plan components such as member, subscriber, medical

director, provider, payer, physician, and hospital.  Routine services, experimental and/or investigational

services (if any) that are covered.  Medically necessary, emergent, and urgent care services.  Services providers are expected (and not expected) to

provide.  Services the HMO is expected to provide.

B. Standard MCO Contract Provisions

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1. Required qualifications and credentials – states that provider must hold and maintain qualifications and credentials.

2. Required compliance with the MCO’s utilization and quality management programs.

3. “Hold Harmless” clause – outlines the providers agreement to accept as payment in full the amount the MCO determines to be appropriate, and cannot bill the member (patient) for anything else. “No Balance Billing” clause – prohibits the provider from billing the member even if no payment is sent to the provider from the MCO at all. Payment or reimbursement terms – usually appear in the appendix to the contract, because it is easier to amend that than the entire contract.

4. Other-Party Liability: Subrogation and coordination of benefits (COB) – there may be more than one payer responsible for coverage of medical services, and the contract sets out the basic rules for dealing with such situations.

5. Term and termination – 3 main reasons for termination include: inadequate quality of care, failure to meet recredentialing requirements, or for business reasons (some states have passed laws against this one to protect providers).

6. PCP vs SCP Roles Primary Care Providers

 Role of the primary care provider – is often the first point of contact for the patient. Acting as a gatekeeper, many primary care providers refer patients to specialists when necessary.

 Most healthcare systems consider three specialties primary care: family practice, internal medicine, and pediatrics.

 Non-physician or midlevel practitioners in primary care – includes physician’s assistants and nurse practitioners.

Specialty Care Physician examples:  Cardiologists  Orthopedists  Gastroenterologists  Hematologists  Oncologists  Radiologists

*Some MCOs allow SCPs to function as PCPs (e.g. cardiologists, OB/GYNs) under certain circumstances where

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members have chronic conditions best suited to be cared for by the SCP instead of the PCP. * NPs and PAs (mid-level practitioners) are considered PCPs.

7. “Carve-out” and specialty care services – carve-outs refer to medical services which are “carved-out” of the basic set of services, and can be contracted for separately. Examples:

a. mental health or substance abuse (Behavioral health) services may be separated from basic med-surg services

b. a set of services may also be carved out of the basic capitation fee, such as the basic capitation fee covering cardiac care, but case rates might apply to cardiac surgery

8. Credentialing – obtaining, reviewing, and verifying the documents of professional providers.

a. Credentialing is typically conducted every 2 years (re-credentialing)

b. documentation includes licenses, DEA, certifications, insurance, evidence of malpractice insurance, and malpractice history

c. credentialing generally includes both reviewing information provided by a provider as well as verifying that the information is correct and complete

d. credentialing also refers to obtaining hospital privileges and other privileges to practice medicine

Basic Elements of Initial Credentialing  Demographic information  Office information  Training (copy of certificates)  Specialty care board eligibility or certification (copy of

certificate)  Current state medical license (copy of certificate)  Medical license numbers in all states where provider is

licensed  National Provider Identifier (NPI) as required under HIPAA  Drug Enforcement Agency (DEA) and state-controlled

substance (if required by state) numbers and copies of certificates

 Federal tax identification number  Social security number  Hospital privileges

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 Work history for past 5–10 years  Malpractice insurance  Malpractice history  Professional references  Yes/No questions  Additional elements

The National Provider Identifier  Electronic Connectivity  Electronic Medical Records

9. Reimbursement of Physicians – MCOs reimburse providers through several methods, and often mix reimbursement methods rather than use one form over another. But there are 3 basic forms of compensating physicians:  Capitation – 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.

 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).

 Salary – is the predominant method of physician reimbursement in closed panel plans, some group practices, and situations where the physician is hired as an employee.

10.Stop-loss protection – When a physician reaches the limit on his/her financial risk, stop-loss protection is activated. There are two forms: costs for individual members and aggregate cost protection.

 May require special insurance policies called re-insurance policies

 Stop-loss shields the physician from high medical costs resulting from an individual patient’s case.

11.Legislation and regulation applicable to physician incentive programs – federal regulations that affect reimbursement are applicable only in federally funded health plans, mainly Medicare and Medicaid.

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 State laws vary, but are concerned about disclosure of financial incentives.

 Federal regulations include determination of whether a physician is at significant financial risk, the requirement of some form of stop-loss protection for the protection of physicians and physician groups, disclosure requirements for network providers who are at financial risk, and the conduct of customer satisfaction surveys by MCOs.

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