The Health Care Delivery System: Managed Care Part Two Craig A. Pedersen, R.Ph., Ph.D. Department of Pharmaceutical and Administrative Sciences School of Pharmacy Ohio State University

Hospitals Doctors Prescription Drugs Amb Care Supplies & Equip. Organized Delivery System Managed Care Definition The organization of a health care delivery system in such a manner that it brings providers of health care services or products and health care financing organizations together under cooperative agreements that lower price and utilization, while enhancing total quality for the health care delivered to persons enrolled and covered by that health plan.

Five Common Components of a Managed Care Plan: 1. Negotiated price and service bundling. 2. Utilization management programs (pre & post delivery of care). 3. Benefit design that channels Consumers to health care providers in the plan and discourages waste. 4. Quality measures or standards applied. 5. Health promotion programs.

Primary Types of Managed Care Plans v Contracted Care under an Indemnity Insurance Plan v Preferred Provider Organization (PPO) Plan v Health Maintenance Organization (HMO) or Exclusive Provider Organization (EPO) v Open choice of providers without benefit limitations. Providers under contract for fees and utilization review. v Open choice of providers, with benefit limitations for not using PPO providers. Providers under tougher fee and utilization review contracts. v Choice of Primary Care Physician. All other physician and major service referrals must go through Primary Care Physician. No benefits outside HMO providers. Order of introduction

Health Maintenance Organizations v Five Fundamental Components (originally) –Enrolled Population –Prepayment of premiums –Comprehensive coverage –Centralization in delivery –Staff physicians v Physicians had no incentive to provide more than necessary (therefore, utilization should decrease) v Examples: –Kaiser Permanente –Group Health Cooperative of Puget Sound

Types of HMOs v Staff Model –Salaried physicians employed by the HMO v Group Model –Structured around a group of physicians, usually at one major clinic....i.e. Physicians Clinic v Independent Practice Association –Independent physicians contract with the HMO

Preferred Provider Organizations v Price discounts traded for higher volume v Patients “Channeled” to the preferred provider v Less costly for enrollee to use the panel of providers than nonpaneled providers –Example: $10 copay to panel provider, vs. 20% coinsurance for nonpanel provider v Utilization Review

Managed Fee For Service (FFS) or Managed Indemnity v Open choice of providers without benefit limitations v Providers under contract for fees v Providers subject to some utilization review –Precertification –Second Opinion –Medical Necessity –Discharge Planning

Hybrid Managed Care Plans Example: Point-of-Service (POS) Benefits Combines HMO and PPO Benefits in One Plan MEMBERS Primary Care Physician ( PCP ) PHYSICIAN (Not Member’s PCP) SPECIALIST or HOSPITAL SPECIALIST or HOSPITAL PCP REFERRAL NO PCP REFERRAL HIGHEST BENEFITS HMO Model Delivery System LOWER BENEFITS PPO Model Delivery System EMERGENCY

Total Autonomy Maximal Utilization Review Key: Decision Making The Physicians “Managed Care Continuum”

Managed Care Product Continuum Non-Managed Care Product Traditional 3rd Party Insurance Managed Care Level 1 Non-selective Contracts Level 5, Seamless Delivery System Increasing Performance Expectation and Network Restrictions Managed Care Level 2 Selective Contracts / PPO Managed Care Level 4 Exclusive Contracts / HMO Unlimited Access to Provider of Choice Managed Care Level 3 POS / Open HMO

Managed Care Plan Total Costs and Administrative Costs The more managed care controls that are added to a health plan result in a lowering of overall health care costs, but there will be an increase in the percentage of administrative cost to the overall cost of the health plan. Total Health Plan $Cost$ 3-5% 16-25% 12-15% 7-9% % of Total Costs for Administration $ $ $ $ HMOPPOContract Open Choice Non-Mgd Care Indemnity

Managed Care Plan: Changing Roles for Health Professionals v Changing from Hierarchy / Command Model to Team Model: –Managers / Motivators –Patient Advocates –Drivers for outcomes –Drivers for efficiency –Drivers for CQI

Managed Care Plan: Changing Roles for Health Professionals v Increased Demand for the Health Professional as Information Analyst: –Global System Performance –Technology Evaluation –Practice Pattern Evaluation –Information system Development

End of Part Two