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Clinical Risk. Clinical Risk Refers to People Who Provide Patient Care. Nursing services Physicians Support Staff Social Workers Dietary Pharmacy Lab Services Licensed and/or certified people. Liability Suit. Insurance company will cover unless it is criminal activity - PowerPoint PPT Presentation
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Clinical RiskClinical Risk
Clinical Risk Refers to People Clinical Risk Refers to People Who Provide Patient CareWho Provide Patient Care
Clinical Risk Refers to People Clinical Risk Refers to People Who Provide Patient CareWho Provide Patient Care
• Nursing services• Physicians• Support Staff• Social Workers• Dietary• Pharmacy• Lab Services• Licensed and/or certified people
Liability SuitLiability SuitLiability SuitLiability Suit
• Insurance company will cover unless it is criminal activity
• Insurance cannot cover license status
Major Issues in Clinical Risk Major Issues in Clinical Risk ManagementManagement
Major Issues in Clinical Risk Major Issues in Clinical Risk ManagementManagement
• Must have qualified staff
• Check licenses and certifications routinely
• Non-proficient staff must work in tandem with qualified person
• Universal precautions– i.e. gloves
Major Issues in Clinical Risk Major Issues in Clinical Risk ManagementManagement
Major Issues in Clinical Risk Major Issues in Clinical Risk ManagementManagement
• Have policies & procedures that are attainable
• Have attainable standards of care
NegligenceNegligenceNegligenceNegligence
• Elements necessary for liability–Duty to perform
–Breach of duty
–Personal injury or monetary damage
–Proximate cause• Causal relationship breach of duty &
damage
Incident Reporting ProcessIncident Reporting ProcessIncident Reporting ProcessIncident Reporting Process
• Peer reviewed
• Report within 72 hours to Risk Manager
• Process for review
• Aggregate data to Risk Management Committee
• Data to Governing Board
How to Gain Physician SupportHow to Gain Physician SupportHow to Gain Physician SupportHow to Gain Physician Support
• Demonstrate benefits–Personalize the benefits
–Decreases insurance costs
• Develop personal relationships with leading physicians who have power in the organization
• Stress educational benefits
• Develop training around topics of interest to physicians
How to Gain Physician SupportHow to Gain Physician SupportHow to Gain Physician SupportHow to Gain Physician Support
• Develop physician handbook–System for identifying & reporting
potential losses or injuries
–What physicians should do with summons or complaints
– Informed consent
–What to do if called by a lawyer
–Legal requirements for reporting certain types of incidents
What Physicians Dislike MostWhat Physicians Dislike MostWhat Physicians Dislike MostWhat Physicians Dislike Most
• Completing an incident report– Involve physicians in developing
policy for handling complaints
Types of Exposure When an Types of Exposure When an Incident OccursIncident Occurs
Types of Exposure When an Types of Exposure When an Incident OccursIncident Occurs
• Property
• Income
• Personnel
• Liability
Standard of CareStandard of CareStandard of CareStandard of Care
• Prescribed mode of treatment according to an expectation
TortTortTortTort
• An injury
• Intentional Tort–Touching a person without consent
• Unintentional Tort–Negligence created without intent, duty
of care, breach, foreseeability, proximate cause, damage
Golden RuleGolden RuleGolden RuleGolden Rule
• How do you feel about what you have done
Battery vs. AssaultBattery vs. AssaultBattery vs. AssaultBattery vs. Assault
• Battery– Injuring person
• Assault–Put someone in fear of injury
Reasonably Prudent PersonReasonably Prudent PersonReasonably Prudent PersonReasonably Prudent Person
• What one would expect from a competent person
Res Ipsa LoquiturRes Ipsa LoquiturRes Ipsa LoquiturRes Ipsa Loquitur
• Defendant’s burden to prove he/she is not negligent
Joint & Several LiabilityJoint & Several LiabilityJoint & Several LiabilityJoint & Several Liability
• Defendants can be sued together
• They sort out who was responsible between them
Impact RulesImpact RulesImpact RulesImpact Rules
• Just scaring someone not enough to sue
• Must actually impact the person & injure him/her
General Issues of Clinical RiskGeneral Issues of Clinical RiskGeneral Issues of Clinical RiskGeneral Issues of Clinical Risk• Assessment Exposures–Failure to include all elements of an
assessment• Bottom line = documentation• Personal & family history• Medications• Allergies• Chief complaints• Physical assessment• Mental & emotional status• Lifestyle habits
General Issues of Clinical RiskGeneral Issues of Clinical RiskGeneral Issues of Clinical RiskGeneral Issues of Clinical Risk
• Assessment Exposures–Failure to secure above information
will increase exposure to liability• Do assessment ASAP• Answer all questions on form• Focus questions on chief complaint• Always return to patients to validate
incomplete information• Observe patients with adequate frequency
General Issues of Clinical RiskGeneral Issues of Clinical RiskGeneral Issues of Clinical RiskGeneral Issues of Clinical Risk
• Assessment Exposures –Failure to communicate• Must recognize certain information must
go to the physician• Certain information should trigger an
immediate intervention• If physician is unavailable, contact
immediate supervisor
General Issues of Clinical RiskGeneral Issues of Clinical RiskGeneral Issues of Clinical RiskGeneral Issues of Clinical Risk
• Planning Exposures–No or low data• Perform thorough assessment
–Failure to note patient problems• Demonstrate your knowledge about
patient
–Non-specificity of data• Do not use vague terms
General Issues of Clinical RiskGeneral Issues of Clinical RiskGeneral Issues of Clinical RiskGeneral Issues of Clinical Risk
• Planning Exposures–Failure to encourage shift continuity• Document carefully & directly in the
patient chart
–Poor discharge instructions• Good written discharge instructions
regarding after-care• Allow time to ask questions• Note in chart that patient verbalized an
understanding
General Issues of Clinical RiskGeneral Issues of Clinical RiskGeneral Issues of Clinical RiskGeneral Issues of Clinical Risk
• Intervention/Treatment Exposures–Misreading orders
–Patient identity mistakes
–Errors in patient positioning
–Medication errors• Hospitals = 1/7 prescriptions• Surgery = 1/12 prescriptions
– Inappropriate use of restraints
– Improper patient instructions
Development of Proactive Risk Development of Proactive Risk Management ProgramManagement Program
Development of Proactive Risk Development of Proactive Risk Management ProgramManagement Program
• Identifies areas of potential risk
• Develop means of addressing risk exposures
Elements of Proactive Risk Elements of Proactive Risk Management ProgramManagement Program
Elements of Proactive Risk Elements of Proactive Risk Management ProgramManagement Program
• Identification of high risk exposure in clinical departments
• Identification of key staff who can assist in recognition of behaviors leading to injuries or their potential
• Identification of types of clinical incidences which always result in departmental or interdisciplinary reviews
Elements of Proactive Risk Elements of Proactive Risk Management ProgramManagement Program
Elements of Proactive Risk Elements of Proactive Risk Management ProgramManagement Program
• Coordinate with hospital departments in order to create change
• Focus on the process of delivering quality care rather than patient injury
Motives of Malpractice Motives of Malpractice PlaintiffsPlaintiffs
Motives of Malpractice Motives of Malpractice PlaintiffsPlaintiffs
• 40% Felt humiliated by their experience with their physician
• 50+% Felt betrayed by their physician
• 80+% Felt embittered by physician’s responses to their complaints & questions
Motives of Malpractice Motives of Malpractice PlaintiffsPlaintiffs
Motives of Malpractice Motives of Malpractice PlaintiffsPlaintiffs
• 90+% Were very angry at their physicians
• 24% Felt physicians were dishonest and misled them
• 20% Felt “court was the only way to find out what happened”
• 19% Wanted to punish the doctors
What Could Have Been Done What Could Have Been Done to Prevent Litigationto Prevent Litigation
What Could Have Been Done What Could Have Been Done to Prevent Litigationto Prevent Litigation
• 35% Apologize or offer further explanations
• 25% “Correct the error”
• 16% Wanted compensation
Types of DamagesTypes of DamagesTypes of DamagesTypes of Damages
• Compensatory–Non-Economic• Pain and suffering
–Economic • Loss of income & inability to work
• Punitive –Egregious offenses
Credentialling Credentialling
Three Part ProcessThree Part ProcessThree Part ProcessThree Part Process
• Credentialling
• Privileging
• Reappointment
Content of Credentialling Packet
Content of Credentialling Packet
• Establishes initial applicant qualifications
• Signed application
• Drug Enforcement Agency certificate
• Certificate from medical specialty board
• Certificate of insurance
Content of Credentialling Packet
Content of Credentialling Packet
• Current license
• Other state license(s)
• Pre-medical college degree
• Medical school diploma
• Certified copy of exchange certificate for foreign medical graduates
Content of Credentialling Packet
Content of Credentialling Packet
• Detailed explanations for “yes” answers to specific questions
• Names of three references with completed reference forms
• Evidence of F/U calls to references
• National Health Practitioner Data Bank (NHPDB) inquiry
PrivilegesPrivilegesPrivilegesPrivileges
• Individually tailored scope of care granted
• Provider qualifications
• Provider competence
• Support of medical staff
Contents of Reappointment Contents of Reappointment Packet Packet
Contents of Reappointment Contents of Reappointment Packet Packet
• Recredentialling & reprivileging
• Signed & dated attestation
• DBPR & NHPDB inquiry results
• Insurance company information regarding litigation
• Updated copies of license(s)
• Continuing Education course credits
Contents of Reappointment Contents of Reappointment PacketPacket
Contents of Reappointment Contents of Reappointment PacketPacket
• Specialized training certification(s)
• Checking delinquency status of signed medical records
• Disciplinary proceedings or sanctions by medical staff
Governing Board Governing Board ResponsibilitiesResponsibilitiesGoverning Board Governing Board ResponsibilitiesResponsibilities
• Policy maker
• Delegates implementation & management
• Retains responsibility for overall control
• Fiduciary duty to patients to maintain, guard, & preserve quality of care
Governing Board Governing Board ResponsibilitiesResponsibilitiesGoverning Board Governing Board ResponsibilitiesResponsibilities
• Appoint qualified physicians
• Have systems in place to verify credentials of physicians
• Have systems in place to monitor work of practitioners
Peer Review Duties of Medical Peer Review Duties of Medical StaffStaff
Peer Review Duties of Medical Peer Review Duties of Medical StaffStaff
• Authority delegated & granted by governing board
• Bylaws, rules, & regulations are an instrument of delegation
• Peer review then becomes an instrument for action against a colleague
• Legitimate peer review is protected by privilege, statute, & public policy
HealthCare Quality HealthCare Quality Improvement Act of 1986Improvement Act of 1986
PurposesPurposesPurposesPurposes
• To address medical staff incompetence
• To prevent incompetent physicians from relocating
• To reduce malpractice claims
ExpectationsExpectationsExpectationsExpectations
• Increase in anti-trust litigations
PrescriptionPrescriptionPrescriptionPrescription
• Provide a safe harbor for physicians & others when participating in:–Credentialling
– Issuing of clinical privileges
–Peer review
Three Results of HCQIAThree Results of HCQIAThree Results of HCQIAThree Results of HCQIA
• Limited immunity
• Reporting to NHPDB
• Permissive access to information maintained by NHPDB
Who Has ImmunityWho Has ImmunityWho Has ImmunityWho Has Immunity
• Those serving on professional review bodies
• Those assisting review body
• Those serving as witnesses on behalf of review body
• Those under contract to review body
• Those serving on staff review bodies
Activities ProtectedActivities ProtectedActivities ProtectedActivities Protected
• Professional activity involving:–Credentialling
–Clinical privileges
–Membership
• Review of :–Competence
–Professional conduct
Standards of HCQIAStandards of HCQIAStandards of HCQIAStandards of HCQIA
• No private agendas
• Must obtain all available facts regarding the matter
• Must provide for due process of clinician under review
• Must believe actions taken were warranted by facts
• Must not lie
What Must Be Reported to What Must Be Reported to NHPDBNHPDB
What Must Be Reported to What Must Be Reported to NHPDBNHPDB
• Malpractice payments
• Licensure sanctions
• Professional review actions
Who Reports to NHPDBWho Reports to NHPDBWho Reports to NHPDBWho Reports to NHPDB
• Insurers
• Hospitals
• Multiple payers
• Practitioners
Licensure Sanctions Reported Licensure Sanctions Reported to NHPDBto NHPDB
Licensure Sanctions Reported Licensure Sanctions Reported to NHPDBto NHPDB
• License revocation
• Reprimand or censure
• Surrender of license
Hospital Actions Reportable to Hospital Actions Reportable to State Board & NHPDBState Board & NHPDB
Hospital Actions Reportable to Hospital Actions Reportable to State Board & NHPDBState Board & NHPDB
• Professional review actions
• Surrender of privileges while under investigation
Quality Management in Quality Management in Managed CareManaged Care
Traditional Quality AssuranceTraditional Quality AssuranceTraditional Quality AssuranceTraditional Quality Assurance
• Structure Criteria–Refers to such contextual issues as
licensure of a facility & capacity to provide services it proposes to offer
–Disadvantage:• No clear linkage between structure &
either quality or capacity
Traditional Quality AssuranceTraditional Quality AssuranceTraditional Quality AssuranceTraditional Quality Assurance
• Process Criteria–Evaluates the way in which services
are provided• i.e. number of referrals out of network,
number of preventive services offered
–Disadvantage:• Linkage between process & outcome not
clear
Traditional Quality AssuranceTraditional Quality AssuranceTraditional Quality AssuranceTraditional Quality Assurance
• Outcome Criteria– Infection rates, morbidity, & mortality
–Disadvantage:• Does not indicate causes of poor
performance
Traditional Quality AssuranceTraditional Quality AssuranceTraditional Quality AssuranceTraditional Quality Assurance• Peer Review–Comparison of a provider’s practice by
peers or against a standard of care or norm
–Disadvantages:• Peer review requires conformance & this
may shut out opportunities for innovation & improvement• Agreement on what quality is among peer
reviewers is not consistent• Peer review limited by scope of processes
or indicators under review
Method of Developing QI Method of Developing QI Program AgendaProgram Agenda
Method of Developing QI Method of Developing QI Program AgendaProgram Agenda
• Identify patient need to be addressed
• Evaluate evidence of the need to improve
• Assess probability of measurable impact
• Estimate likelihood of success
• Identify impact generated in meeting patient need
Process Model: Quality Process Model: Quality Management ProgramManagement Program
Process Model: Quality Process Model: Quality Management ProgramManagement Program
Using a TQM/Continuous Quality Improvement process
• Understand customer need–Complaint analysis
–Satisfaction surveys
Process Model: Quality Process Model: Quality Management ProgramManagement Program
Process Model: Quality Process Model: Quality Management ProgramManagement Program
• Identify outcomes meeting customer need–Facility access represents needs
–More flexible hours of operation represents adjustment to meet that need
Process Model: Quality Process Model: Quality Management ProgramManagement Program
Process Model: Quality Process Model: Quality Management ProgramManagement Program
• Assess performance compared with professional or best of class standards–Benchmarking
–Outcomes assessment
–Appropriateness review• Providing necessary care & not providing
unnecessary care
–Peer review
Process Model: Quality Process Model: Quality Management ProgramManagement Program
Process Model: Quality Process Model: Quality Management ProgramManagement Program
• Define indicators to measure performance–Determined according to populations
of patients served
–Case mix approach used to evaluate appropriateness of care & encounter outcomes
Process Model: Quality Process Model: Quality Management ProgramManagement Program
Process Model: Quality Process Model: Quality Management ProgramManagement Program
• Establish performance expectations–Measure against best of class
standards
–These can be internal or external standards
• Monitor performance & compare with expectations–Complete at regular intervals
Process Model: Quality Process Model: Quality Management ProgramManagement Program
Process Model: Quality Process Model: Quality Management ProgramManagement Program
• Provide feedback to providers & patients–Profiles & report cards can be used
effectively
–Examples of criteria to be profiled & reported amount of billings
–Nosocomial infection rates
Process Model: Quality Process Model: Quality Management ProgramManagement Program
Process Model: Quality Process Model: Quality Management ProgramManagement Program
• Implement improvements–Practice guidelines, case management,
quality improvement teams, & consumer education can be used
Changing Provider Behavior Changing Provider Behavior in Managed Care Plansin Managed Care Plans
Challenges in Modifying Challenges in Modifying Physician BehaviorPhysician Behavior
Challenges in Modifying Challenges in Modifying Physician BehaviorPhysician Behavior
• Very strong autonomy & control needs– In terms of where care is provided
– In terms of how care is administered
• Role conflict–Needs of the plan vs. needs of the
patient
Challenges in Modifying Challenges in Modifying Physician BehaviorPhysician Behavior
Challenges in Modifying Challenges in Modifying Physician BehaviorPhysician Behavior
• Lack of understanding of insurance function of plan–Particularly difficult are exclusions &
limitations
• Bad habits–Keeping patients in the hospital too
long
–Not making rounds on a particular day
–Lengthening stay unnecessarily
Challenges in Modifying Challenges in Modifying Physician BehaviorPhysician Behavior
Challenges in Modifying Challenges in Modifying Physician BehaviorPhysician Behavior
• Poor understanding of economics–Capitation
–Performance based reimbursement systems
Challenges in Modifying Challenges in Modifying Physician BehaviorPhysician Behavior
Challenges in Modifying Challenges in Modifying Physician BehaviorPhysician Behavior
• Poor differentiation of competing plans–Benefits same
–Payments same
–Requirements of plans vary• i.e. paperwork, forms
• Obstinance & arrogance
Methods of Changing Behavior Methods of Changing Behavior Throughout the ProgramThroughout the Program
Methods of Changing Behavior Methods of Changing Behavior Throughout the ProgramThroughout the Program
• Translate goals & objectives in understandable terms
• Establish positive reinforcement for compliance
• Maintain active line of communication
• Formal continuing education
Methods of Changing Behavior Methods of Changing Behavior Throughout the ProgramThroughout the Program
Methods of Changing Behavior Methods of Changing Behavior Throughout the ProgramThroughout the Program
• Providing data & feedback face to face
• Develop practice guidelines with physician input–Extra difficult in open panel plan
Methods of Changing Methods of Changing IndividualIndividual Physician BehaviorBehavior
Methods of Changing Methods of Changing IndividualIndividual Physician BehaviorBehavior
• Collegial discussion–Physician to physician
• Positive feedback when things are done well
• Persuasion–NHPDB
• Firm direction of policies reminding physician of contract
Methods of Changing Methods of Changing IndividualIndividual Physician BehaviorBehavior
Methods of Changing Methods of Changing IndividualIndividual Physician BehaviorBehavior
• Sanctions–Ticketing = verbal reprimand
–Disciplinary letter
• Contract termination
Using Data in Medical Using Data in Medical ManagementManagement
Requirements for Using Data Requirements for Using Data to Manage a Health Delivery to Manage a Health Delivery
SystemSystem
Requirements for Using Data Requirements for Using Data to Manage a Health Delivery to Manage a Health Delivery
SystemSystem• Data must have integrity
• Data must be consistent
• Data must be valid
• Data must be meaningful
Requirements for Using Data Requirements for Using Data to Manage a Health Delivery to Manage a Health Delivery
SystemSystem
Requirements for Using Data Requirements for Using Data to Manage a Health Delivery to Manage a Health Delivery
SystemSystem• Sample size must be adequate
• Data must encompass adequate time period
Provider ProfilingProvider ProfilingProvider ProfilingProvider Profiling
• Definition–Collection, collation, & analysis of data
to develop provider specific profiles
Provider ProfilingProvider ProfilingProvider ProfilingProvider Profiling
• Sample data for collection annualized–Outpatient services• Average # visits/member/provider
–Specialty services• Average # visits/member/specialist
–Diagnostic services• Utilization/provider/visit
– Inpatient admissions• # admits/provider/year
Provider ProfilingProvider ProfilingProvider ProfilingProvider Profiling
• Matching clinical data & budget information
• Cross tabbing clinical data & revenues
• Cross tabbing clinical data & expenses
Authorization SystemsAuthorization Systems
DefinitionDefinitionDefinitionDefinition
• Management review of case for medical necessity
• Channeling care to most appropriate location
• Provision of timely information to Large Case Management
• Providing assistance in estimating medical expenditures each month
Categories of AuthorizationCategories of AuthorizationCategories of AuthorizationCategories of Authorization
• Prospective
– Issued before service is provided
–Elective services
• Concurrent
–Generated at time service is provided
–Urgent service
Categories of AuthorizationCategories of AuthorizationCategories of AuthorizationCategories of Authorization
• Retrospective
–Takes place after the fact
–Life threatening emergency
• Pending
–Medical review for necessity
• Denial
–No authorization forthcoming
Categories of AuthorizationCategories of AuthorizationCategories of AuthorizationCategories of Authorization
• Subauthorization
–Authorization for hospitalization & surgery may carry with it a subauthorization for use of anesthesia, radiology, pathology, surgery consultant fee, etc.
Rating & UnderwritingRating & Underwriting
Rating vs. UnderwritingRating vs. UnderwritingRating vs. UnderwritingRating vs. Underwriting
• Rating–Expected case specific premium for
medical service product
–Book rate formula
–Manual rate
• Underwriting –Uses rating results along with
discounts & credits to produce final rates.
Cost & Revenue TargetsCost & Revenue TargetsCost & Revenue TargetsCost & Revenue Targets
• Variables driving costs–Utilization/1,000
–Allowed average charge
–Frequency of copay
Cost & Revenue TargetsCost & Revenue TargetsCost & Revenue TargetsCost & Revenue Targets
• Rate structure variables–Measurable variables• Age• Gender• Industry• Trend during time period measured• Benefit level• Geographic service area
Cost & Revenue TargetsCost & Revenue TargetsCost & Revenue TargetsCost & Revenue Targets
• Rate structure variables (cont.)
–Non-measurable considerations• Health of overall population• Case management projected impact (i.e.
utilization level, average charges for services)
Types of Premium RatesTypes of Premium RatesTypes of Premium RatesTypes of Premium Rates
• One Tier–Employee (Ee) only or composite rate
• Two Tiers–Ee only or Ee + family
• Three Tiers–Ee only, Ee + 1, Ee + 2 or >
• Four Tiers–Ee only, Ee + spouse, Ee + child(ren),
Ee + spouse + child(ren)
Credibility of Premium RatesCredibility of Premium RatesCredibility of Premium RatesCredibility of Premium Rates
• Refers to likelihood of accuracy of projections for future claims experience as a function of past experience
• Based upon number of years of claims experience available
• Credibility factor ranges from 20% for one year to a maximum of 70% after three years
Credibility of Premium RatesCredibility of Premium RatesCredibility of Premium RatesCredibility of Premium Rates
• Consequence:–Aggregate stop loss (frequency of
claims) is pegged at 125% of expected claims
–Specific stop loss (severity of claims) is negotiated with client
–Refer to specific stop loss
Credibility of Premium RatesCredibility of Premium RatesCredibility of Premium RatesCredibility of Premium Rates
• Trends–Measured by utilization levels &
charges
–Relate to aggregate stop loss
• Corridors–Refer to costly claims requiring LCM
intervention
Credibility of Premium RatesCredibility of Premium RatesCredibility of Premium RatesCredibility of Premium Rates
• Bottom line:–Experience ratings are based on past
utilization data
–Expected utilization for the next year has an inherently large margin of error built in
–Hence underwriters strive to protect company from excessive losses
Common Problems in Common Problems in Managed Care PlansManaged Care Plans
UndercapitalizationUndercapitalizationUndercapitalizationUndercapitalization
• Unable to make needed repairs
Predatory Pricing & Lo-BallingPredatory Pricing & Lo-Balling
• Buying market share
• The HealthSouth experience
OverpricingOverpricing
• Reasons:–Panic response to previous lo-balling
–Carrying excessive overhead
–Failure to control utilization
–Adverse selection
–Greed (avarice)
–Genuine belief that quality of product will cause prospective clients to shop the product instead of the price
Unrealistic ProjectionsUnrealistic ProjectionsUnrealistic ProjectionsUnrealistic Projections
• Underestimating medical expenses
• Overestimating enrollment
Uncontrolled GrowthUncontrolled GrowthUncontrolled GrowthUncontrolled Growth
• Leads to saturation of delivery system
• Inability of management to administer growth
Improper IBNR Calculations or Improper IBNR Calculations or Accrual MethodsAccrual Methods
Improper IBNR Calculations or Improper IBNR Calculations or Accrual MethodsAccrual Methods
• Need lag studies to verify accuracy of accruals
Failure to Reconcile Accounts Failure to Reconcile Accounts Receivable & MembershipReceivable & Membership
Failure to Reconcile Accounts Failure to Reconcile Accounts Receivable & MembershipReceivable & Membership
• Paying medical expenses of members no longer eligible
• Failure to collect premiums of new members
• The Oxford Health Plan experience
Overextended ManagementOverextended ManagementOverextended ManagementOverextended Management
• Limiting control to few managers
• Overreliance on central decision making
• Heavy hands-on involvement by senior management
• Result is paralysis
• The Maxicare Health Plan experience
Failure to Use UnderwritingFailure to Use Underwriting
• Risk of adverse selection
• Inadequate premiums to pay claims
• Rate setting must be geared to the particular market
• However, following the market to artificially lower rates leads to financial disaster
• The 1985 insurance crisis
Failure to Understand Sales & Failure to Understand Sales & MarketingMarketing
Failure to Understand Sales & Failure to Understand Sales & MarketingMarketing
• A major error committed by provider-sponsored health plans
• Multi-choice environment increases the chance of adverse selection
• Cannot gauge characteristics of enrollees of your plan
Management Failure to Management Failure to Understand ReportsUnderstand Reports
Management Failure to Management Failure to Understand ReportsUnderstand Reports
• Occurs most frequently when management not involved in developing format of reports
Failure to Track Medical Costs Failure to Track Medical Costs & Utilization& Utilization
Failure to Track Medical Costs Failure to Track Medical Costs & Utilization& Utilization
• Develops false sense of security
• Unnoticed increases in utilization can portend disaster
System’s Inability to Manage System’s Inability to Manage the Businessthe Business
System’s Inability to Manage System’s Inability to Manage the Businessthe Business
• Occurs during merger activities• Hospital-based MCOs most vulnerable
due to:– Lack of understanding of the insurance
function– Law of large numbers
• Danville Regional Medical Center experience
• Aetna/U.S. Healthcare A/R experience
Failure to Educate & Failure to Educate & Reeducate ProvidersReeducate ProvidersFailure to Educate & Failure to Educate & Reeducate ProvidersReeducate Providers
• Problem most evident in open panels
• Must communicate regularly with providers
• Must curtail open ended authorizations to specialists
Failure to Deal with Failure to Deal with Non-Compliant PhysiciansNon-Compliant PhysiciansFailure to Deal with Failure to Deal with Non-Compliant PhysiciansNon-Compliant Physicians
• Direct result is expense associated with uncontrolled utilization of resources
• Indirect result is effect of negative attitude on members
Failure toFailure to Control Inappropriate Business &
Marketing Practices
Failure toFailure to Control Inappropriate Business &
Marketing Practices• State enacted managed care laws
Medicare & Managed CareMedicare & Managed Care
Adjusted Average Per Capita Adjusted Average Per Capita Cost (AAPCC)Cost (AAPCC)
Adjusted Average Per Capita Adjusted Average Per Capita Cost (AAPCC)Cost (AAPCC)
• Payment basis to HMOs & Competitive Medical Plans (CMPs) under a contract to HCFA–1 of 142 possible monthly cap amounts
applied to each county in the U.S.
• Actuarial projection of what Medicare expenses would have been had beneficiary remained in traditional Medicare program
Comparison of Adjusted Comparison of Adjusted Community Rate & AAPCCCommunity Rate & AAPCC
Comparison of Adjusted Comparison of Adjusted Community Rate & AAPCCCommunity Rate & AAPCC
• If projected premium (ACR) exceeds projected payment (APR), then:–Revenue is less than the cost of
providing care
–Practice receives difference up to 95% of AAPCC
Comparison of Adjusted Comparison of Adjusted Community Rate & AAPCCCommunity Rate & AAPCC
Comparison of Adjusted Comparison of Adjusted Community Rate & AAPCCCommunity Rate & AAPCC
• If ACR is less than APR, must either:–Return surplus to HCFA
–Return difference to beneficiaries by reducing premium
–Offer enriching benefit package
• HCFA will not pay greater than 95% of the AAPCC
Requirements to Obtain a Requirements to Obtain a Medicare ContractMedicare Contract
Requirements to Obtain a Requirements to Obtain a Medicare ContractMedicare Contract
• Must be a federally qualified HMO or CMP
• Membership
–At least 5,000 prepaid capitated members
–1,500 members in rural area
–50/50 rule: Medicare/Medicaid membership balance must not exceed 50%
Requirements to Obtain a Requirements to Obtain a Medicare ContractMedicare Contract
Requirements to Obtain a Requirements to Obtain a Medicare ContractMedicare Contract
• Medical Services
–Provide or arrange for all medical services in service area
–24 hour emergency services
• Range of Services
–Provide or arrange for all Medicare A & B
Requirements to Obtain a Requirements to Obtain a Medicare ContractMedicare Contract
Requirements to Obtain a Requirements to Obtain a Medicare ContractMedicare Contract
• Open Enrollment
–30 day open enrollment every year
• Can be waived if 50/50 rule will be violated or if organization cannot accommodate new enrollees
• Marketing Rules
–No redlining
Requirements to Obtain a Requirements to Obtain a Medicare ContractMedicare Contract
Requirements to Obtain a Requirements to Obtain a Medicare ContractMedicare Contract
• Ability to Bear Risk
–Adequate capital & surplus
• Administrative Ability
–Can carry out terms of contract
• Quality Assurance
–Must qualify QA program as part of HMO qualification process
Requirements to Obtain a Requirements to Obtain a Medicare ContractMedicare Contract
Requirements to Obtain a Requirements to Obtain a Medicare ContractMedicare Contract
• Right to Inspect Records
–Government has right to inspect & evaluate records
• Medical Records Confidentiality
–Adhere to provisions of Privacy Act
Options Now Available for Options Now Available for Medicare EligibleMedicare Eligible
Options Now Available for Options Now Available for Medicare EligibleMedicare Eligible
• Medicare Select–Program offered by Medicare
Supplemental Insurance Companies
–An incremental program because going out of network is not heavily penalized
Options Now Available for Options Now Available for Medicare EligibleMedicare Eligible
Options Now Available for Options Now Available for Medicare EligibleMedicare Eligible
• PPO–20%coinsurance outside of network
–Case management employed
• Cost Contracting–This is on way out due to:• Lack of cost controls• Lack of incentives for providers to control
costs
Options Now Available for Options Now Available for Medicare EligibleMedicare Eligible
Options Now Available for Options Now Available for Medicare EligibleMedicare Eligible
• POS–Can be offered as supplemental benefit
or optional benefit
• Medicare Choices–Broad range of options including
shared risk contracts
Medicaid Managed Care Medicaid Managed Care (MMC)(MMC)
Most Significant Contribution Most Significant Contribution of MMCof MMC
Most Significant Contribution Most Significant Contribution of MMCof MMC
• Use of primary care case management– Integral part of the managed care
process
Medicaid Demonstration Medicaid Demonstration ProjectsProjects
Medicaid Demonstration Medicaid Demonstration ProjectsProjects
• Arizona HealthCare Cost Containment System –Four key objectives• Competitive bidding for prepaid contracts• Development of primary care doctor
gatekeeper network• Copays to control inappropriate utilization• Restricted freedom of choice after selecting
a plan
Medicaid Demonstration Medicaid Demonstration ProjectsProjects
Medicaid Demonstration Medicaid Demonstration ProjectsProjects
• Arizona HealthCare Cost Containment System (cont.) –Result • Cost savings averaged 7% during first 11
years
Medicaid Demonstration Medicaid Demonstration ProjectsProjects
Medicaid Demonstration Medicaid Demonstration ProjectsProjects
• Virginia Approach– Incrementalism• Phase 1: restricted freedom of choice &
mandatory fee for services PCCM (Medallion Program)• Phase 2: voluntary HMO Choice for those
opting out of Medallion• Phase 3: establish multiple competing
HMO options & mandatory HMO enrollment
Impact of Medicaid Managed Impact of Medicaid Managed CareCare
Impact of Medicaid Managed Impact of Medicaid Managed CareCare
• Cost Savings–Ranged from 5-15% per enrollee
• Utilization, Satisfaction, & Quality–Use of emergency room care reduced
• Administrative Costs–Serious limits in securing budget
predictability of future expenditures
–Due to challenges of working with individual physicians
Future TrendsFuture TrendsFuture TrendsFuture Trends
• Greater variability between states–Less uniformity
• Growth of prepaid managed care–FFS cannot guarantee cost containment
• Mainstreaming–Enrollment in traditional established
HMOs having broad base of membership
–Tends to spread the risk more equitably
Future TrendsFuture TrendsFuture TrendsFuture Trends
• Vulnerable populations –Can poor people with complex chronic
problems fit into a mainstream environment?
–Will traditional carriers accept this burden & level of risk?
Future TrendsFuture TrendsFuture TrendsFuture Trends
• Public & private purchaser convergence–Efforts to align public programs with
private efforts• Achieve economies of scale • Compatible systems development
Future TrendsFuture TrendsFuture TrendsFuture Trends
• Sustainable profitability of Medicaid product line–Unclear whether rates paid for
Medicaid beneficiaries will be sufficient to sustain a program alignment between for profit & public programs
State Regulation of State Regulation of Managed CareManaged Care
Current Regulatory Processes Current Regulatory Processes HMOHMO
Current Regulatory Processes Current Regulatory Processes HMOHMO
• Licensure–Must secure certificate of authority
(COA)
–Unusual because Insurance Department has little or no direct authority over ERISA qualified HMOs
• Certificate of Need (CON)–34 states have CON laws
–25 state CON laws apply to HMOs
Current Regulatory Processes Current Regulatory Processes HMOHMO
Current Regulatory Processes Current Regulatory Processes HMOHMO
• Enrollee Information–Availability of plan document &
summary plan document
• Access to Medical Services–Must assure access & availability
• Provider Issues–Written contracts with providers–Risk transfer vs. risk sharing with
providers
Current Regulatory Processes Current Regulatory Processes HMOHMO
Current Regulatory Processes Current Regulatory Processes HMOHMO
• Reports & Rate Filings–File annual report with Insurance
Department
• QA & UR–Must have plan in place before
obtaining license
• Grievance Procedures–HMO Act requires written protocol
Current Regulatory Processes Current Regulatory Processes HMOHMO
Current Regulatory Processes Current Regulatory Processes HMOHMO
• Solvency Protection–HMO Act requires $1.5M net worth
–Most state insurance departments require capital & surplus of up to $10M
• Financial Examination & Site Visits– Involves finances, marketing activities,
& QA programs
Current Regulatory Processes Current Regulatory Processes HMOHMO
Current Regulatory Processes Current Regulatory Processes HMOHMO
• POS Offerings–Most state laws require HMO to enter
wrap around agreement with insurance carrier to cover out of plan usage of benefits• Carrier must be licensed & admitted vs.
surplus line company
• Multi-State Operations–Compliance with regulations of each
jurisdiction
Current Regulatory Processes Current Regulatory Processes PPOPPO
Current Regulatory Processes Current Regulatory Processes PPOPPO
• Regulation–By state Insurance Department
–Not as intensely scrutinized as HMOs
Current Regulatory Processes Current Regulatory Processes PHOPHO
Current Regulatory Processes Current Regulatory Processes PHOPHO
• Regulation–No licensure requirements in most
states
Current Regulatory Processes Current Regulatory Processes Self-Funded PlansSelf-Funded Plans
Current Regulatory Processes Current Regulatory Processes Self-Funded PlansSelf-Funded Plans
• Regulation–Most are ERISA qualified
–States are preempted from regulating them
Current Regulatory Processes Current Regulatory Processes TPATPA
Current Regulatory Processes Current Regulatory Processes TPATPA
• Regulation–TPAs normally assume no insurance
risk
–Come under the Secretary of State & Department of Corporations• Not the Insurance Department
Anti-Managed Care LegislationAnti-Managed Care Legislation Anti-Managed Care LegislationAnti-Managed Care Legislation
Most serious threats to Managed CareMost serious threats to Managed Care
• Preferred Provider Arrangements–Mandatory POS offerings
–Burdensome due process for aggrieved physicians
–Prohibition & disclosure requirements & financial incentives
–Establishment of duplicate health plan standards
Anti-Managed Care LegislationAnti-Managed Care LegislationAnti-Managed Care LegislationAnti-Managed Care Legislation
Most serious threats to Managed CareMost serious threats to Managed Care
• Any Willing Provider–33 laws adopted in 27 states
• Direct Access Legislation–May threaten viability of HMOs in some
cases
• Mandated Benefit Requirements–Several cases in response to physician
pressures