Risk management in an IPA setting--Part II

In the first part of this two-part article, the author explored the nature and significance of differences in the levels of risk in IPA and network managed care settings. In this concluding part of the article, he describes and assesses methods that may be undertaken by the IPA-model HMO to control and minimize risk elements. In short, what follows are the elements of a risk management program in such an environment.     

Utilization management key to HMO success.

Utilization management has a long history in prepaid health programs, especially in capitated, prepaid risk programs that were the precursors of HMOs. Utilization management is commonly considered to be that set of systems and procedures used to ensure that a patient's medical needs are met at the least cost possible consistent with adequate quality. Examples of measures taken in managing utilization include avoiding unnecessary surgery, unnecessary hospitalization, excessive hospitalization, and unnecessary diagnostic and therapeutic measures, and encouraging use of less expensive means of care, such as home health care services. Also included, and of great importance, is obtaining those services at the least possible cost through favorable contracting for services.     

Quality assurance in an IPA setting

The experience at CIGNA Healthplans shows that a quality assurance program can be instituted in an IPA-model HMO at low cost and with the addition of little new staff. Existing resources can be effectively restructured to implement a functional program of a traditional type that is easily understood by employer groups, members, and providers. It can serve as a transitional process until the HMO is large enough to put a total quality management program in place.     

Court decisions hold implications for managed care plans--Part one

The managed care industry--and HMOs in particular--is now facing the realities of a maturing business. Maturity has brought a competitive tension to the HMO/managed care field, one consequence of which is increased litigation, not only among HMOs but also between HMOs and their suppliers, customers, and indemnity insurers. Entanglement in the legal system is an outgrowth of efforts to gain or preserve a competitive edge, reduce costs, and attract customers. This article highlights selected legal developments from the past two years that reflect the causes and effects of this environment. Additional cases will be discussed in the March-April 1990 issue of the journal.     

Physician perspectives on the structure and function of group practice HMOs

This article explores physicians' perspectives regarding how their HMOs function and their satisfaction with and loyalty to HMOs. Three HMOs were studied: a mature (28-year-old) staff model, a 16-year-old staff model, and a 13-year-old group model with both HMO and fee-for-service patients. While these HMOs were found to vary somewhat in terms of emphasis on patient care versus costs, methods used to control costs and degrees of centralization of decision making, they all received high overall satisfaction and loyalty scores. The staff model HMO with a more decentralized decision making structure received the highest satisfaction/loyalty score from its physicians. The degree to which physicians perceive the HMO to be effective and supportive and the use of educational programs and peer review to influence resource use were also found to be significantly related to physician satisfaction and loyalty.     

Health care costs: saving in the private sector

Robeson offers a number of options to employers to help reduce the impact of increasing health care costs. He points out that large organizations which employ hundreds of people have considerable market power which can be exerted to contain costs. It is suggested that the risk management departments assume the responsibility for managing the effort to reduce the costs of medical care and of the health insurance programs of these organizations since that staff is experienced at evaluating premiums and negotiating with third-party payors. The article examines a number of short-run strategies for firms to pursue to contain health care costs: (1) use alternative delivery systems such as health maintenance organizations (HMOs) which have cost-cutting potential but require marketing efforts to persuade employees of their desirability; (2) contracts with third-party payors which require a second opinion (peer review), a practice which saved one labor union over $2 million from 1972 to 1976; (3) implementation of insurance coverage for less expensive outpatient care; and (4) the use of claims review. These strategies are compared in terms of four criteria: supply of demand for health services; management effort; cost; and time necessary for realized savings. Robeson concludes that development of a management plan for containing health care costs requires an extensive analysis of alternatives, organizational objectives, existing policies, and resources, and offers a table summarizing the cost-containment strategies that a firm should consider.     

Provider satisfaction: an analysis based on expectation

Provider organizations will need to be in closer touch with their medical staffs in order to successfully anticipate and react to the many changes that lie ahead in the financing and delivery of health care services. This will mean understanding both physicians feelings and expectations. If you were asked today how satisfied your physicians are with your HMO, what would be your reply? How would you know? This staff-model HMO conducted a formal survey of its physicians to determine their expectations of the organization and their level of satisfaction with their work and environment. Such a tool is recommended for others interested in maintaining good relations with their physicians.     

Coordination of benefits reduces double payments.

As a means of reducing the cost of duplicate health care coverage, the health insurance industry utilizes a mechanism called coordination of benefits (COB). The main purposes of COB are to limit recovery to 100 percent of actual charges and to assign insurers primary and secondary responsibilities to pay these charges. Nearly all health plans, including HMOs, Blue Cross/Blue Shield plans, and commercial insurers, coordinate benefits, mostly for group coverage, often on the basis of procedures found in state insurance codes. While COB provides an effective cost reduction mechanism to health insurers, several issues remain in its administration, including difficulties that arise when carriers refuse to pay, when HMO members self-refer, and when coordination is attempted with an uninsured plan.     

Provider-sponsored networks. Physicians organize for direct contracting

The Provider Service Network (PSN) concept is part of a wider movement by physicians to restructure for managed care to improve bargaining leverage for America's more than 600,000 active medical practitioners. Direct contracting has a simple appeal--no intermediaries. Imagine managed care contracts without the costs or hassles of an HMO or third-party intermediary. The PSN is a new form of managed care organization, but without the middleman. Savvy, self-insured employers, business coalitions, and government health programs are the potential "buyers." Doctors and hospitals are the "sellers," organizing provider networks on a regional and statewide basis. Up for grabs are over 225 million consumers whose health benefits are currently managed by insurance plans, HMOs, and third parties. This new marketplace of direct contracting may sound to doctors like the Garden of Eden, but there is plenty of opposition. PSNs will not become a national trend without a fight.     

Computer-based patient records: a building block for health care reform

The fundamental need for better information management capabilities in health care is at risk of being overlooked in the proposals for major national changes aimed at providing health security, controlling costs, enhancing quality, and expanding access for citizens. In addition to these proposed macro changes (e.g., universal access, guaranteed benefit package, national health board, regional health alliances), successful reform will require transformation of health care delivery at the micro level. We must overcome provider-dependent variations in clinical practice patterns, in quality of performance, and in costs of services. We must ensure movement toward appropriate care rather than simple rationing. Individual health care professionals and institutions must acquire and use tools that will enable them to provide their services cost-effectively with consistent results. We must be able to assess and ensure value--i.e., appropriateness, effectiveness, and cost--of health services, apply that knowledge in each and every patient encounter, and track the impact of clinical decisions through an analysis of aggregated databases.     

Practicing managed care in the academic medical center

The purpose of this article is to outline the contrasts between the traditional AMC and an organization oriented toward the delivery of population-based managed care. Academic medical centers differ from one another considerably in the extent to which they serve as quaternary care community resources, the degree to which they emphasize primary care in training and care delivery, and the amount of research undertaken. Nor is there a single organizational structure for managed care; successful managed care is practices in IPAs, multispecialty groups, PHOs, and staff-model HMOs. Nonetheless, the contrasts outlined here between AMCs and managed care organizations (MCOs) are valid in most cases.     

The five stages of managed care. Strategies for physicians in health care's market revolution

What are the five stages of managed care? From "Can't Spell HMO" to Managed Cooperation, each stage has predictable market events and strategic responses. At every stage, a new set of relationships evolves among the major players, including physicians and hospitals, HMOs and insurers, and employers and government. At each higher level of managed care penetration, the players restructure their relationships as they seek to control their market and their destiny.     

Risk alignment in health care quality and financing: optimizing value

How should health care best consolidate rational cost control while preserving and enhancing quality? That is, how can a system best optimize value? A limitation of many current health management modalities may be that the power to control health spending has been expropriated from physician providers, while they are still fully responsible for quality. Assigning responsibility without authority is a significant predicament. There are growing indications that well-organized, well-managed groups of high quality physicians may be able to directly manage both types of risk-quality and financial. The best way to optimize responsibility and authority, and to control financial and quality risks, is to place such responsibility and authority within the same entity.     

Attracting qualified physicians to underserved areas. Part 2. Pay physicians more to practice in underserved areas.

With health networks searching for additional market share and with a projected 30.2 million to be enrolled in Medicaid HMOs by 2000, more health executives will be weighing various strategies of how to attract qualified physicians to practice in poor inner-city and rural areas. Most frequently cited as solutions are supplying more physicians, encouraging more medical school graduates to pursue primary care residencies, and modifying the number of international medical graduates entering U.S. residency programs. Part I of this article, which appeared in the November/December issue of The Physician Executive, reviewed the efficacy of these approaches. The second part explores a more pragmatic option: to simply improve the working conditions and pay substantially more to physicians who practice in "less desirable" locations. Although this idea is consistent with economic principles, drawbacks must be considered, such as: (1) the American taxpayers' reluctance to finance a more costly health care delivery system for the poor; (2) the inherent conceptual difficulties of a capitated Medicaid HMO serving as the linchpin for organizing, financing, and delivering care for the underserved; and, (3) many providers being expected to react in a fairly litigious manner to such an approach.     

Quality. A tightrope for the '90s

How accurately can you measure quality of care in health care? Recently, HMOs and other types of managed care organizations have been in the process of defining quality in quantitative terms. Physicians who utilize fewer resources and who care for more patients per-unit-of-time are valued as providing better care than colleagues who may work at a slower (more expensive?) pace. The pressure to evaluate or treat greater numbers of patients in shorter periods of time can produce adverse consequences. And numbers do not necessarily take into account the quality of the care delivered. There is clearly a middle road. Physicians must take care of a sufficient number of patients with a given problem to gain and maintain expertise and mastery. But they must also guard against the insidious pressure for the procedure to become the end in itself.     

Complementary and alternative medicine. Integrative medicine: business risks and opportunities.

Much of the buzz over integrative medicine is well deserved. The opportunities seem to outweigh the risks, but superior management skills are needed to guide these programs through adolescence into clinical and business maturity. By carefully considering the staffing, team building, compensation methods, marketing, and program evaluation and development issues explored in this article, health care and physician executives should be able to steer between the rocks on their way to integrative medicine decisions that are right for their organizations. Many claim that integrative medicine has the potential to reshape health care delivery in a more patient-centered direction. While this may be true, such programs must prove themselves from financial and clinical operational perspectives in order to achieve this potential. Luminary clinical skills are not enough to guarantee the survival of such programs--a strong clinical base of expertise in alternative therapies is a key success factor. As with any health care venture, there are no substitutes for clinical excellence or sound management.     

Newspapers foretell health care's future.

This article is based on a two-months snapshot (November 1998 to January 1999) of newspaper articles addressing various health care issues. Newspaper contents reflect the changing market share of competing societal concerns. Health care issues, particularly cost and choice, now preoccupy the American people. Health care trends percolate bottom-up through the pages of newspapers, not top-down from Washington, D.C, policymakers, or health care executives. By reviewing these articles, the author provides a big picture view of the prevailing and emerging health care trends. From the new thrust of consumerism and the public backlash against managed care organizations to the demise of HMOs and PPMCs, these observations signify not only the concerns that are bubbling to the surface but also the direction that health care is headed. Consumers are in the driver's seat and physician executives need to provide them with evidence of the value they desire--and understand what they perceive as value.     

HMO marketing: the Cadillac and the Chevy.

The author's bias and goal is to create an effective group practice model. Managed care will play an important role in this model. This article is designed to examine the role of an HMO in this model and to provide a framework for examining the HMO-group practice relationship. The bottom line question : Are HMOs the most effective group practice vehicle for delivering managed care?     

Value-based health care. Part I: Physicians reestablishing clinical autonomy

Clinical decision-making was once the sole purview of physicians, but no longer. Medical judgment has been usurped by third parties in the name of cost control. To reestablish this rightful authority, physicians must organize to assume the financial risks for their patients' health, using objective, clinical information to deliver superior quality outcomes. To successfully manage their patients' clinical and financial risks, physicians need to: (1) establish a structure independent of the hospital medical staff for outpatient contracting; (2) secure a capital partner that supports their independent, clinical decision-making; and (3) be leaders in acquiring and effectively using clinical information that accurately risk-adjusts and integrates both inpatient and outpatient data for all episodes of care. Physicians who acquire these skills will secure premium contracts from purchasers who are demanding value-based health care delivery.     

Why will physicians in this new environment replace MHAs?

The competitive forces of managed care, capitated payment, cost constraints, and the formation of health networks are among the major precipitating factors leading to the employment of additional executives and middle managers with clinical backgrounds. These factors will require our health leaders to know how to cut costs without seriously impinging on the accessibility and quality of patient care. Physicians with leadership and management skills, and with prior hands-on patient care expertise, will continue to be sought after in the foreseeable future by various types of health organizations. With this scenario, health services management generalists are predicted to experience increasing difficulties to secure senior positions in the health industry,