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Newsletters: Managed Care Issues Discussed at Oley Conference
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Managed Care Issues Discussed at Oley Conference

A wealth of information was shared during the conference plenary sessions. Below are some of the highlights from the talks on managed care - including an introduction by the panel facilitator, Carol Schaffer, president and CEO of Cleveland Clinic Health Care Ventures. Many thanks to the presenters for their valuable contributions.

The good news about managed care is that the “primary care gatekeeper philosophy” can lower health care costs. In addition, managed care’s capitation reimbursement mechanism encourages the dedication of resources to preventive care.

The bad news is that in order to compete in this new market, there has been a great deal of consolidation. This has resulted in fewer health care providers and ultimately less choice of providers for consumers.

The ugly news, is that if consolidations go too far, and there is not enough competition between insurers (managed care organizations), then we will probably see a decline in the quality of health care provided.

Part I: Managed Care: The Good, the Bad and the Ugly

Bruce Grill, MD, Inland Pediatric Specialties Medical Group, San Bernardino, CA

By definition, managed care is the insurer’s control over one or more of three basic parameters of health care: price, quality and access. The goal is to achieve the best patient outcome at the least cost. The basic components are cost containment, preventive care strategies, capitation, audits with quality and outcomes criteria, and the gatekeeper role for primary physicians.

The trends we see with managed care are the ability of employers to drive health care choices, increased use of case managers to coordinate patient care and increased integration of fee for service. These actions lead to more efficient use of available resources and lower costs for care, but also to fewer choices of providers.

Different types of managed care health plans include:
Managed fee for service: services are still paid for in the traditional way, but utilization is controlled. For example, authorization must be obtained before certain procedures or hospitalizations are performed.
Preferred provider organization: a group of physicians agree to be part of an organization and to accept reduced fees and increased management in exchange for a guaranteed flow of patients.
Health maintenance organization
1. Staff model: an HMO employs its own doctors that patients must see in order to receive insurance coverage.
2. Group Model: an HMO uses the services of an independent medical group which it contracts with or may own or manage.
3. Network Model: physicians have their own private practice but will charge an HMO a reduced fee for caring for its patients in order to have access to the HMO’s patient pool.
Point-Of-Service: patients can choose from MCO’s list of doctors and have full or best coverage, or patients can choose a doctor not on the list but will receive only partial coverage. (In other words you pay more to see a doctor not on the MCO’s list.)


How It All Breaks Down

After practicing for many years in California where managed care is already the norm, I have come to the conclusion that there are good, bad and ugly aspects to this system of health care.

The Good:

•  Lower prices in health care (although the savings are not necessarily passed on to health care user).

•  Incentive for cost-effective scientific advances.

•  Incentive for care at home because it’s cheaper than institutional care.

•  More physician involvement because physicians are called upon to be gatekeepers and to be aware of patient outcomes.

•  Consolidation of companies can lead to more efficient delivery of services.

•  Integrated networks can provide to varying degrees all required services.

•  Patient satisfaction is important because the patient may switch insurance plans and because MCOs must report on patient satisfaction if they wish to be accredited by JCAHO.

The Bad:

•  Less availability of health care in rural areas.

•  Less choice of health care providers.

•  Lower reimbursement for providers could mean providers are less willing to give care.

•  Insurance ceilings.

•  Lower standards for clinicians. (MCOs will accept lesser trained physicians in order to reduce costs.)

•  Denial of newer therapies.

•  Disincentive (costly) for physicians to refer patients to specialists.

The Ugly:

•  The insurance maze created by MCOs and government bureaucracy. This includes all of the contracting, credentialing, authorization, billing and collecting problems faced by the consumer and provider in dealing with multiplicity of overlapping plans and rules.

•  Stark Law referral restrictions. This law severely limits a physician’s ability to refer patients to entities in which they have an ownership interest or from which they receive compensation.

•  Difficulty in tracking outcomes. Outcomes are more important for MCOs because they are often “at risk” or capitated and can lose money if they don’t have an approximation of what various therapies will cost.

As managed care becomes increasingly more common and insurance issues more complex, consumers need to become more active in their care. Ask questions about what is and isn’t covered, and how to get approval for the procedures and supplies you need. You should also be asking why services or supplies were denied and what alternatives are available. Start with your case manager or consumer relations contact at the MCO. If that doesn’t work try your state insurance commission or the department of corporations. It’s also important to stay informed of legislation and health care updates by attending conferences like these.

Part II: Trends in Managed Care Today

Sue Bickel, RN, BSN, CCM, QualChoice Health Plan, Inc., Cleveland, OH

Managed care organizations (MCOs) offer services which can benefit homePEN consumers and other chronic health care users. For example, MCOs demand better case management or coordination of patient services by social service organizations, in-patient and out-patient care, nurses, home care reps, primary physicians and specialists. This involves making sure there is no overlapping of efforts and that the problem is dealt with by the appropriate care provider (i.e. a homePEN formula may be prescribed by a specialist, but a cold should be treated by a primary physician). These steps ensure that patient care is more cost-effective, and thus help consumers avoid reaching their policy limit.

MCOs also work to identify alternative financing for care so consumers won’t cap out their insurance as early and to locate providers of services not offered by MCOs.

Some industry trends that may interest consumers include the following:

•  industry initiatives and self reform have led to more MCOs holding themselves accountable for better outcomes and to creating a process for grievances. One organization involved in this effort is the National Committee of Quality Assurance (NCQA). NCQA is an independent, non-profit organization that provides voluntary accreditations based on an MCO’s member services, provider credentials, quality improvement efforts and utilization management. A second organization involved in MCO reform is the Joint Commission on the Accreditation of Healthcare Organizations (JCAHO). JCAHO is an independent organization that historically has accredited hospitals and skilled nursing facilities and is now moving into voluntary accreditation of MCOs as well.

•  managed care contracts with employers can led to decreases in the cost of premiums and to decreases in the risk to employers by capping costs.

•  MCOs demanding a better package of patient’s services can help patients maximize benefits without reaching their insurance limits.

•  MCOs may negotiate with physicians outside of their network so new patients can still use their long-standing clinician.

Part III: Managed Care’s Role in Health Care Reform

Barbara McKinnon, PharmD, BCNSP, Nova Factor, Memphis, TN

In attempting to solve the health care crisis of cost, quality and access, the government’s tool is health care reform legislation, and the insurance industry’s tool is managed care. The federal government’s attempts at national health care reform in 1994 failed because there were too many choices with too wide a difference between plans. One important issue raised during the debate was the compromise bills supported by Senator Mitchell and Representative Gephart which included homePEN as part of basic health benefits rather than the traditional classification of homePEN as durable medical equipment or supplies.

In 1995 it is highly unlikely that comprehensive health care reform will pass. More likely we will see incremental reform in the coming years. Some issues addressed in bills currently before congress include:

•  Portability - would allow patients to keep their insurance despite changing jobs or pre-existing conditions.

•  Medical savings accounts - would allow patients to make pre-tax savings accounts to pay medical bills.

•  Small business insurance cooperatives - would make it more affordable for small businesses to provide employees insurance.

•  Continued experimentation with Medicaid waiver programs - would allow state governments to continue to experiment with the type of coverage provided to Medicaid patients.

One example of a Medicaid waiver program is TennCare. In this case, the State of Tennessee took the Medicaid money they receive from the federal government, set up 12 managed care organizations (MCOs) and paid these MCOs $139 per person per month to provide all health care services for Medicaid patients. This meant providers received a flat capitated payment per Medicaid patient no matter what their treatment needs were. In doing so, the state passed the financial risk of providing health care onto the private sector health care providers. Other components of the TennCare program, such as MCOs demanding one-stop-shop service from providers, shifted much of the patient administration costs onto the providers as well.

Some of the MCOs created by TennCare also limited the choice of drugs that providers could prescribe for patients - purely as a cost-cutting measure. (MCOs can receive rebates from drug companies when they mandate that only one particular brand of drug can be used by their providers.) Choosing drugs solely because of cost is irresponsible. Other factors such as outcomes, complications with the rest of the patient’s treatment, patient satisfaction and patient quality of life, must also be considered.

Some strategies for surviving in this health care environment are to:

•  Become politically active. Tell the story of a chronic health care user.

•  Complete satisfaction surveys. (These can make a difference since MCOs must report on patient satisfaction if they wish to be accredited by JCAHO.)

•  Fight substandard care. Know when a negative change in health care is merely inconvenient or truly bad care.

•  Join voices with others to be heard. Several organizations advocate for chronic health care users, including those with digestive disorders.

Finally, we must recognize that health care is like many other issues in life; when you need security, you must trade in some freedom of choice.

Part IV: One Consumer’s Perspective on Managed Care

Sheilla Messina, RN, NMC Homecare, San Jose, CA

As a homePEN consumer and clinician, I encourage you to communicate with your health care providers. Educate them as to what it’s like to live with homePEN. It can make a difference to them and to you. No one has their act together overnight. Just take one step at a time, and you will learn how to relay your needs and concerns.

When you have an idea, tell your managed care organization how you think particular parts of your care could be improved - especially if it cuts down on costly waste. This can help you avoid an unwanted cost-cutting measure.

Finally, stay reality-based when standing up for your needs. You may not get everything you ask for, but you’ll be surprised what a difference being an active consumer of health care can make.

Part V: Questions Answers

Q: Why are patient premiums not going down if MCO’s costs are dropping?

A: A much greater percentage of health care costs are used for administration in an MCO. In other words, the money is going toward higher CEO salaries, stock dividends, administration salaries and litigation. For example, Medicare allows only 3 percent of patient costs to go towards administration of care; whereas many MCOs dedicate as much as 25 percent of patient costs for administration of care. This is a big difference. We need to have better accountability in for-profit health care. California is currently considering legislation that would limit administrative costs to 15 percent.

Q: What can consumers do when they have a problem with their MCO?

A: Fill out satisfaction surveys (MCOs must report their findings and follow-up if they want to be accredited by JCAHO). In addition, voice your concern to the staff all the way up the chain of command within the MCO. If that doesn’t work, go to your state department of health, the media, your government representatives and your employer (if your insurance is contracted through your employer).

Copyright © 1995 The Oley Foundation

This website is an educational resource. It is not intended to provide medical advice or recommend a course of treatment. You should discuss all issues, ideas, suggestions, etc. with your clinician prior to use. Clinicians in a relevant field have reviewed the medical information; however, the Oley Foundation does not guarantee the accuracy of the information presented, and is not liable if information is incorrect or incomplete. If you have questions please contact Oley staff.


Updated in 2015 with a generous grant from Shire, Inc. 


This website was updated in 2015 with a generous grant from Shire, Inc. This website is an educational resource. It is not intended to provide medical advice or recommend a course of treatment. You should discuss all issues, ideas, suggestions, etc. with your clinician prior to use. Clinicians in a relevant field have reviewed the medical information; however, the Oley Foundation does not guarantee the accuracy of the information presented, and is not liable if information is incorrect or incomplete. If you have questions please contact Oley staff.
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