Additional Learning Exercises and Applications
DISPLAY 10.5 Managed Care at a Glance
As a result of the PPS and the need to contain costs, the length of stay for most hospital admissions has decreased greatly.
Many argue that quality standards have been lowered as a result of the PPS and that patients are being discharged before they are ready. It is the nurse-leader’s responsibility to recognize when cost containment is impinging on patient safety and to take appropriate action to guarantee at least a minimum standard of care.
Chapter 23 further discusses the PPS and its impact on quality control.
In addition, hospitals use the ICD to code diseases, signs and symptoms, and abnormal findings. Currently in its 10th revision, ICD-10 provides significantly more coding options for treatment, reporting, and payment processes, including more than 68,000 clinical modification codes as compared with 15,000 in ICD-9 (CMS, 2016b).
The government again deeply affected health-care administration in the United States in 1997 with the passage of the Balanced Budget Act (BBA). This act contained numerous cost-containment measures, including reductions in provider payments for traditional FFS Medicare program participants. The bulk of the savings resulted from limiting the growth rates for hospital and physician payments. A second major source of savings derived from restructuring the payment methods for rehabilitation hospitals, home health agencies, skilled nursing facilities, and outpatient services. The BBA also, for the first time, authorized payments to nurse practitioners for Medicare-provided services at 85% of the physician-fee schedule.
The ever-increasing impact of the federal government on how health care is delivered in the United States must be recognized. Accompanying this funding is an increase in regulations for facilities treating these patients and a system that rewards cost containment. Health-care providers are encountering financial crises as they attempt to meet unlimited health-care needs and services with limited fiscal reimbursement. Competition has intensified, reimbursement levels have declined, and utilization controls have increased. In addition, rapidly changing federal and state reimbursement policies make long-range budgeting and planning very difficult for health-care facilities.
Managed Care
Managed care has been a significant factor affecting health-care delivery and reimbursement since the early 1990s. Broadly defined, managed care is a system that attempts to integrate efficiency of care, access, and cost of care. Common denominators in managed care include the use of primary care providers as
“gatekeepers,” a focus on prevention, a decreased emphasis on inpatient hospital care, the use of clinical practice guidelines for providers, and selective contracting (whereby providers agree to lower reimbursement levels in exchange for patient population contracts). Managed care typically uses formularies to manage pharmacy care and focuses on continuous quality monitoring and improvement.
Utilization review is another common component of managed care. Utilization review is a process used by insurance companies to assess the need for medical care and to assure that payment will be provided for the care. Utilization review typically includes precertification or preauthorization for elective treatments, concurrent review, and, if necessary, retrospective review for emergency cases.
Another frequent hallmark of managed care is capitation, whereby providers receive a fixed monthly payment regardless of services used by that patient during the month. If the cost to provide care to someone is less than the capitated amount, the provider profits. If the cost is greater than the capitated amount, the provider suffers a loss. The goal, then, for capitated providers is to see that patients receive the essential services to stay healthy or to keep from becoming ill but to eliminate unnecessary use of health-care services.
Critics of capitation argue that this reimbursement strategy leads to undertreatment of patients. A summary of managed care characteristics is found in Display 10.5.
Represents a wide range of financing alternatives that focus on managing the cost and quality of health care by
Using panels of selectively contracted providers
Limiting benefits to subscribers who use noncontracted providers Implementing some type of authorization system
Focusing on primary care rather than specialists and inpatient services Emphasizing preventive health care
Relying on clinical practice guidelines for providers Regularly reviewing the use of health-care resources
Continuously monitoring and improving the quality of health services
Patients have less choice about the providers they can see and services they can access, in exchange for small copayments and no deductibles.
Managed care organizations (MCOs) often use primary care gatekeepers to Be sure that the provider-ordered services are needed and appropriate See that patients are cared for in outpatient settings whenever possible Ration care by queuing and wait times for authorizations
Encourage providers to follow more standardized care pathways and clinical guidelines for treatment
Managed care is based on the concept of capitation, whereby providers prospectively receive a fixed monthly payment, regardless of what services are used by that patient during the month. This encourages providers to treat less because their potential profits decline as treatment increases.
Types of Managed Care Organizations
One of the most common types of managed care organizations (MCOs) is the health maintenance organization (HMO). An HMO is a corporate body funded by insurance premiums. The HMO’s physicians and other professionals practice medicine within certain financial, geographic, and professional limits to individuals and families who have enrolled in the HMO. The Health Maintenance Organization Act of 1973 authorized spending $375 million over 5 years to set up and evaluate HMOs in communities across the country.
Although HMOs originated as an alternative to traditional health insurance plans, some of the largest private insurers, including Blue Cross and Blue Shield and Aetna, have created HMOs within their organization while maintaining their traditional indemnity plans.
In discussing HMOs, it is important to remember that there are different types of HMOs as well as different types of plans within HMOs to which members may subscribe. Several types of HMOs include (a) staff, (b) independent practice association (IPA), (c) group, and (d) network. In staff HMOs, physician providers are salaried by the HMO and under direct control of the HMO. In IPA HMOs, the HMO contracts with a group of physicians through an intermediary to provide services for members of the HMO. In a group HMO, the HMO contracts directly with one independent physician group. In network HMOs, the HMO contracts with multiple independent physician group practices.
The types of plans available within HMOs typically vary according to the degree of provider choice available to enrollees. Two such plans include point-of-service (POS) and exclusive provider organization (EPO) options. In POS plans, the patient has the option, at the time of service, to select a provider outside the network but pays a higher premium as well as a copayment (amount of money enrollees pay out of their pocket at the time a service is provided) for the flexibility to do so. In the EPO option, enrollees must seek care from the designated HMO provider or pay all of the cost out of pocket.
Another common type of MCO is the preferred provider organization (PPO). PPOs render services on an FFS basis but provide financial incentives to consumers (they pay less) when the preferred provider is used.
Providers are motivated to become part of a PPO because it ensures them an adequate population of patients.
More than 70 million Americans have enrolled in HMOs, and almost 90 million have become a part of PPOs since their inception (National Conference of State Legislatures [NCSL], 2013). As of 2010, the breakdown of enrollment by plan type in the United States was 19% in HMOs, 58% in PPOs, and 8% in POS plans (NCSL, 2013). It should be noted that “enrollment numbers in HMOs peaked in 2001 and are declining
substantially in almost every area, although managed care generally remains a dominant type of health care and coverage” (NCSL, 2013, para. 2).
Medicare and Medicaid Managed Care
Although Medicare and Medicaid patients historically were excluded from managed care under the free choice of physician rule, these restrictions were lifted in the 1970s and 1980s. As a result, these patients could participate in private HMOs and other types of managed care programs through Medicare Part C (formerly the Medicare + Choice program, and now known as Medicare Advantage). To join a Medicare Advantage plan, patients must have both Medicare Part A and Part B. The payment system for these programs (effective 1982) was to be prospective, and the HMO was at risk for providing all benefits in return for the capitated payment.
MCOs receive reimbursement for Medicare-eligible patients based on a formula established by the CMS, which looks at age, gender, geographic region, and the average cost per patient at a given age. Then, the government gives itself a 5% discount and gives the rest to the MCO. The BBA of 1997 expanded the role of private plans under Medicare + Choice to include PPOs, provider-sponsored organizations, private FFS plans, and medical savings accounts (MSAs), coupled with high-deductible insurance plans.
The CMS is now the largest managed care buyer in the United States. Of the total Medicaid enrollment in the United States in 2009, approximately 72% of participants are receiving Medicaid benefits through managed care (NCSL, 2013). In addition, all states except Alaska and Wyoming have all or a portion of their Medicaid population enrolled in an MCO (NCSL, 2013).
The CMS is now the largest purchaser of managed care in the country.
Proponents and Critics of Managed Care Speak Up
Proponents of managed care argue that prepaid health-care plans, such as those offered by HMOs, decrease health-care costs, provide broader benefits for patients than under the traditional FFS model, appropriately shift care from inpatient to outpatient settings, result in higher physician productivity, and have high enrollee satisfaction levels.
Critics, however, suggest that participation in MCOs may result in a loss of existing physician–patient relationships, a limited choice of physicians for consumers, a lower level of continuity of care, reduced physician autonomy, longer wait times for care, and consumer confusion about the many rules to be followed.
A common complaint heard from managed care subscribers is that services must be preapproved or
preauthorized by a gatekeeper or that second opinions must be obtained before surgery. Although this loss of autonomy is difficult for consumers accustomed to an FFS system with few limits on choice and access, such utilization constraints are necessary due to moral hazard, which is the risk that the insured will overuse services just because the insurance will pay the costs. Because the copayment is typically small for patients in managed care programs, the risk of moral hazard rises.
Moral hazard refers to the propensity of insured patients to use more medical services than necessary because their insurance covers so much of the cost.
Another aspect complicating health-care reimbursement through the PPS, an HMO, or a PPO is that clear and comprehensive documentation of the need for services and actual services provided is mandatory. Provision of service no longer guarantees reimbursement. Thus, the fiscal accountability of nurses goes beyond planning and implementing; it includes responsible recording and communication of activities.
Provision of service no longer guarantees reimbursement.
Perhaps the most serious concern about the advancement of managed care in this country is the change in relationships among insurers, physicians, nurses, and patients. The full impact on clinical judgment of tying
physician and nursing salaries to bonuses, incentives, and penalties designed to reduce utilization of services and resources and increase profit is unknown. As a result, a need for self-awareness regarding the values that guide individual professional nursing practice has never been greater.
LEARNING EXERCISE
10.5
Providing Care With Limited Reimbursement
Y
ou are the manager at a home health agency. One of your elderly patients has insulin-dependent diabetes. He has no family support. He speaks limited English and has little understanding of his disease.He lives alone. Your reimbursement from a government agency pays $90 per visit. Because this gentleman needs so much care, you find that the actual cost to your agency is $130 for each visit to him. What will be the impact to your agency if this patient is seen twice a week for 3 months? How can you recover the lost revenue? How can you make each visit less costly and still meet the needs of the patient?
The Future of Managed Care
Managed care continues to change the face of health care in the United States. The contractual complexity and the use of prospective payment in managed care make it much more difficult for providers to anticipate potential revenues and then to bill for and collect reimbursement for services provided. Indeed, some critics of managed care suggest that health-care practitioners and institutions now bear much more of the financial risk for the cost of care than insurers.