Insurance Handbook for the Medical Office 13th edition Chapter 11 The Blue Plans, Private Insurance, and Managed Care Plans

Lesson 11.1 Insurance Plans State the difference between a traditional indemnity insurance plan and a managed care plan. State the provisions of the Health Maintenance Organization Act of 1973. Explain health maintenance organization benefits and eligibility requirements. List features of an exclusive provider organization. List two types and two different functions of foundations.

Insurance Plans (cont’d) Lesson 11.1 Insurance Plans (cont’d) Define independent practice associations. Name the features of preferred provider organizations. Explain the features of a point-of-service plan. Explain how the Employee Retirement Income Security Act affects managed care insurance.

Private Insurance Blue Cross/Blue Shield Pioneers in private insurance Largest insurance company in the U.S. Blue Cross/Blue Shield carriers are independently owned and operated in each state but work together in a network. Blue Cross plans originally covered hospital expenses, while Blue Shield plans covered physician visits and services. Most affiliated organizations have converted to for-profit status and operate in much the same way as private insurers. They no longer have nationally recognized rules and regulations or standardized claim form guidelines. Discuss some of the problems that can arise from these changes. (Answers will vary.)

Prepaid Group Practice Health Plans Pioneers Ross-Loos Medical Group became CIGNA Kaiser Permanente Direct contact Individual practice model What is “capitation”? (A system of payment used by managed care plan in which physicians and hospitals are paid a fixed per capita amount for each patient enrolled over a stated period of time, regardless of the type and number of services provided.) Explain the histories of the famous medical groups that are considered pioneers of the prepaid group practice model. Consider how this model works. Discuss some ways that the pioneers have adapted the model to serve patients (fee-for-service, joint venture) with the insurance company.

Health Maintenance Organization Act of 1973 Created authority for federal government to assist HMO development by: Providing grants, loans, and loan guarantees to offset initial operating deficits of new HMOs that meet federal standards Requiring most employers to offer an HMO to employees as an alternative to traditional insurance plans Describe what an organization needs to do to qualify as an HMO and maintain its status with the federal government. (An organization must present proof of its ability to provide comprehensive health care, and must render periodic performance reports to the Department of Health and Human Services.) Explain how HMOs are reimbursed by the government. (HMOs are paid a fixed per capita amount for each patient served without considering the actual number or nature of services provided to each person.) Explain what makes an employer eligible to offer the services of an HMO to its employees. (Must have 25+ employees.)

Health Maintenance Organizations Prepaid group practice model Staff model Network HMO Direct contract model Ask students to identify each system. Ask students to identify the key characteristics of each. What is a participating physician? (Service provider in an HMO system.)

Exclusive Provider Organizations Features similar with HMO Members must choose care from network providers (emergency exceptions) Generally, no reimbursement for out-of-network care Regulated under insurance statutes Explain why an EPO is called “exclusive.” (Employers agree not to contract with any other plan.) Technically, many HMOs can be considered EPOs.

Exclusive Provider Organizations Features similar to PPO Enrolled population Limited provider panel Gatekeepers Utilization management Capitated provider reimbursement Authorization system Describe the benefits available to EPO members. (Can get all medical care under one system, regulated by insurance statutes [not HMO regulations].)

Exclusive Provider Organizations Features Negotiated fees Fee-for-service payments EPOs and PPOs both have fee-for-service payments. Explain how this aspect of these plans differs from other managed care options. (Patients pay fees based on services provided, instead of the capitation system in an HMO.)

Foundations for Medical Care Foundations for Medical Care (FMC) First established in 1954, in Stockton, CA FMC operations Comprehensive type of foundation Claims-review type of foundation Describe the importance of the incentive reimbursement system to FMCs. (Reimbursement is directly proportional to the number of medical services delivered, making it important to have enough patient encounter to support the practice.) Member physicians bill the foundation directly. Many foundations submit claims using the CMS-1500 form, while others transmit data electronically. The American Managed Care and Review Association (AMCRA) is the national society of the foundation movement.

Independent Practice Organizations Physicians are not employees, and do not receive salaries Capitation or fee-for-service program A discount of up to 30% is withheld to cover IPA operating costs. IPA physicians make contractual arrangements to treat HMO patients in their offices. IPA physicians can also treat non-HMO patients.

Preferred Provider Organizations Freedom to use any physician or hospital Members receive highest level of benefits when using preferred providers Coinsurance and deductibles PPOs may pay 100% of the cost of care, but most do not. Coinsurance requires the patient to pay 20% to 25% of the allowed amount. Predetermination of benefits may be required by the PPO. Some hospital indemnity plans pay fixed fees for certain services; patients pay the difference if charges are higher.

Silent Preferred Provider Organizations Also called blind or phantom PPOs, discounted indemnity plans, nondirected PPOs, or wraparound PPOs Provider income reduced Complicates the appeal process Silent PPOs can limit reimbursement without the provider’s knowledge. The phrase “network discount applied” on an EOB statement may indicate a silent PPO. Explain how a provider can discover if patients are silent PPO participants. (The phrase “network discount applied” may appear on the EOB, so precertify procedures and check patient insurance cards for information.)

Physician Provider Groups Physician owned (unlike IPA) Joint ventures with hospitals, labs, etc. Can combine services for member physicians, cutting business costs Explain the benefit of combined services for physicians and patients. (Flexibility to have contracted plans and still offer separate plans to other organizations outside of the contracts.) PPG physicians turn over a portion of their income to the PPG to cover joint expenses, such as billing. Describe similarities and differences between PPGs and IPAs. (PPG functions like an IPA, but is physician-owned.)

Point-of-Service Plans HMO cost management PPO freedom of choice Members choose services from participating and nonparticipating providers, with different benefit levels Explain the role of the primary care physician in the POS plan. (Members choose a primary care physician who manages specialty care and referrals.) Describe how participants in POS plans can benefit by using network providers. (POS program pays members a higher level of benefits when they use program [network] providers.)

Triple Option Health Plans Members choose from HMOs, PPOs, or “traditional” indemnity insurance Members can change plans Cost-containment measures Describe the cost-containment measures used in triple-option health plans. (Precertification for hospital admission, hospital stays, and second surgical opinions.) See Table 11-1 in your text for an overview of managed care plans.

Employee Retirement Income Security Act Regulates all managed care insurance paid by the employer or supplemented by the employee 85% of claims that are non-Medicare/Medicaid/workers’ compensation Regulated by Department of Labor Any case relating to employee benefit plans (EBP) falls under federal jurisdiction Explain why it is important to understand and distinguish plans purchased by an individual versus plans paid by an employer. (Employer-paid plans are regulated by the ERISA.) Describe ERISA, and explain which agency regulates it. (ERISA regulates employer-paid plans, and is regulated by the Department of Labor.) Discuss liability issues and immunities. (Congress has given certain immunities to employers that establish EBPs.) Discuss circumstances in which state regulations are preempted by federal jurisdiction. (Employees cannot be protected by state laws that limit the excesses of other HMOs now subject to ERISA.)

Medical Review and Management of Plans Lesson 11.2 Medical Review and Management of Plans State reasons for a Quality Improvement Organization program. Define a carve out. Identify four types of referrals for medical services, tests, and procedures. State the purpose of creating a managed care plan reference guide. Describe types of payment mechanisms used for managed care plans.

Quality Improvement Organization Peer review Utilization review Churning Turfing Buffing Ask students to: Suggest examples of cases that would be discussed in peer review. Discuss the red flags that might cause concern during utilization review. Define churning, turfing, and buffing. How might the management of the medical office be set up to prevent or spot these abuses? (Answers will vary.)

Management of Plans Contracts Carve outs Medical services not included in the contract benefits Paid on a fee-for-service basis Nationwide data from Medirisk, Inc. can be used to make a knowledgeable financial decision on how a managed care plan will affect an existing medical practice. Generally, physicians prefer carve outs for expensive procedures when contracting with MCOs.

Plan Administration Patient information letter Medical records Scheduling appointments Encounter form Explain the function of the patient information letter. (Outlining noncovered procedures and listing copayment requirements.) Explain how many medical offices differentiate charts to reflect which organization the patient belongs to. (Using color-coded adhesive dots or color-coded folders.)

Preauthorization or Prior Approval Formal referral Direct referral Verbal referral Self-referral Ask students to: Define and give an example of a formal referral. Define and give an example of a direct referral. Define and give an example of a verbal referral. Define and give an example of a self-referral. What are the precautions to take with a patient regarding prior approval for treatment? (Ask about requirements when appointment is made, carefully review patient’s managed care plan and inform patient of requirements, remind patient to bring required forms to appointment, create tracking system for referrals, etc.)

Managed Care Guide Fig. 11-6 A managed care plan quick reference guide like this one can help keep track of important information for each managed care plan that the physician participates in. Describe additional information it might be useful to include in a more detailed medical office reference guide for MCOs. (Answers will vary.)

Financial Management Payment Deductibles Copayments Payment mechanisms Contract payment time limits Monitoring payment Define “deductible.” (A specific dollar amount that must be paid by the insured before a medical insurance plan or government program begins covering healthcare costs.) Explain where copayments might be applicable. (In managed care plan.) List and describe three types of payment mechanisms in managed care plans. (Contact capitation, case rate pricing, and stop-loss limit.) Discuss what might happen after exceeding a contract payment time limit. (Interest may accrue on late claims.) Define “COBRA.” (The Consolidated Omnibus Budget Reconciliation Act of 1985.) Ask students what they might do if claims are not paid in a timely fashion. (Answers will vary.)

Financial Management Statement of remittance Accounting Fee-for-service Some medical offices handle managed care patients just like fee-for-service. Define the term “withhold.” (A portion of the monthly capitation payment to physicians retained by the HMO until after the end of the year to create an incentive for effective care.) Explain why the year-end evaluation is important. (It will determine whether the provider receives the withheld amount from the HMO.)

Financial Management Year-end evaluation Withhold Capitation versus fee-for-service Explain how copayments, adjustments, and overpayments would be accounted for. (Post the charge, then the copayment/coinsurance in the patient’s account. Post an adjustment after receiving the EOB to show the disallowed amount, and show an overpayment as a refund or account credit.) Describe how a capitation accounting sheet would be designed and used. (See Fig. 11-10.) It is important for the medical biller to understand financial management reports, because he/she will be dealing with accounting in the medical office. Indicate what useful information could be reported to the practice by monitoring plan payments from managed care patients. (Answers will vary.)

Questions?