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EMPLOYER
BASED HEALTH CARE:
THE BASICS OF MANAGED CARE
Prior to the adoption
of managed care principles, health insurance plans were typically indemnity
plans where a patient could go to any provider to receive medical treatment.
After the care was rendered, the provider billed the plan which paid
all or part of the bill. There was essentially no monitoring of the
medical treatment rendered by providers to patients - no checks and
balances - to assure that the treatment was appropriate and of high
quality.
When health care insurance premiums and self-insurance expenditures
began to increase rapidly in the late 70's and early 80's, employers
were forced to look for a way to control health care costs while continuing
to provide health care benefit plans for their employees. Employers
quickly realized that there was no data to show how health care benefit
dollars were being spent or whether employees were receiving quality
medical care. As a result, new "managed" health care techniques
and benefit plans were developed to encompass the quality and cost management
concepts already being used by businesses.
Plan Structures
Although managed care plans come in different forms, they all have similar
characteristics. A managed care plan typically has a network of medical
providers organized and maintained by an administrator, health insurance
company or health insuring corporation ("HIC"). By contract,
the provider agrees to abide by the utilization review, quality assurance
and other requirements of the managed care plan and accepts the plan's
fee schedule. In return, the plan has expedited payment arrangements
and steers patients to the network providers. Network providers are
"credentialled" by the plan to ensure that the providers are
qualified to provide services to patients. In addition, provider performance
is measured and monitored by the managed care plan to ensure tthat high
quality, cost efficient care is delivered by the providers in the network.
There is a wide range of types of managed care plans. An indemnity plan
with utilization management and preferred/prompt pay arrangements with
an unlimited number of providers is at one end of the spectrum. At the
other end are Health Maintenance Organizations (HMO's) (known as "HIC's"
in Ohio). These plans provide comprehensive benefit coverage at little
or no cost to plan participants but only if they use a primary care
physician in the network to coordinate their care and access to specialists.
In between are point-of-service (POS) and preferred provider organization
(PPO) plans where there is coverage outside of the network but the participants
pay more of the cost. A POS plan requires the participant to have a
primary care physician to coordinate care. A PPO does not.
Because the provider network is one of the most critical aspects of
a managed care plan, a great amount of administrative cost and effort
is invested in its building and maintenance. A sufficient number and
type of providers must be geographically accessible to plan participants.
Unless there are few providers in an area, a managed care plan will
not contract with all available and willing providers.
Contracting with more providers than are needed adds unnecessary administrative
costs and weakens the plan's effectiveness. It lessens the plan's ability
to assure patient volume to physicians and reduces physicians' incentives
to abide by the plan's utilization review and quality assurance processes.
It also weakens the plan's ability to monitor and measure physician
performance, especially if the volume of patients is not significant
enough to be statistically valid.
To determine the medical providers to contract with for the network,
managed care plans use a "credentialling" process to search
for those with the best qualifications. In this process, providers must
supply documentation of education, training, work history, licenses,
board certification, malpractice experience, admitting privileges, etc.
It may also include an analysis of the provider's actual patient treatment
methodology, outcomes studies or visits to the provider's office or
facility to evaluate the office environment and service.
Coordinating Care and Ensuring Quality
Managed care plans contain various mechanisms to monitor the quality
of medical services paid for by the plan. Use of "utilization reviews,"
"pre-authorization" procedures and "medical necessity"
determinations are essential to ensure access to cost-effective, high
quality health care services.
"Utilization reviews" are used by the plan to review proposed
or already performed treatments to determine if they are medically appropriate
and, therefore, covered under the plan.
"Pre-authorization" requires contact with the plan prior to
treatment to determine if the plan will pay for it. This serves as a
quality check on the proposed treatment to ensure it is medically necessary
and appropriate.
Plans apply "medical necessity" criteria to determine if a
proposed medical treatment is covered by the plan. This is true of all
possible care that could be covered by the plan. Even though the plan
may state that a particular service is covered (MRI's for example),
a medical necessity determination could determine that a MRI is not
medically appropriate or necessary for the particular case and payment
could be denied. The plan's refusal to pay for the treatment does not
mean the treatment cannot be rendered. It just means that the managed
care plan won't pay for it. The physician is still free to treat and
the patient can still obtain the treatment. It simply becomes a purchasing
arrangement between the physician and the patient.
To determine if a treatment is medically necessary, plans utilize guidelines
or protocols that have been developed and approved by providers. They
are usually derived from an analysis of treatment data to determine
the most prevalent, effective and successful course of treatment for
a particular diagnosis. Many plans have processes to modify guidelines
as innovations improve the outcomes of medical treatment and to take
into account local practice patterns that are seen as claims are being
processed.
The "utilization review" of a medical procedure is usually
performed by a nurse or other medically trained person. Requests that
do not meet the medical necessity guidelines for coverage are reviewed
by a physician to evaluate and decide. For the overwhelming majority
of managed care plans, coverage denials are only made by physicians
and these are usually after the case has been discussed with the treating
physician. The percentage of cases that require physician review is
low and the plans typically try to work with the treating physician
to resolve any disagreements. Studies have shown that managed care plans
deny payment for less than 1% of disputed claims.
Expanded Coverage
To help patients negotiate the often complex health care system, many
managed care plans have a case management/patient advocate mechanism
that engages through the utilization review and pre-authorization processes.
Especially in catastrophic or chronic medical condition cases, a treating
physician's office may lack the resources to coordinate the continuing
care required when a patient leaves the hospital or has a chronic condition
such as diabetes mellitus. Case managers are nurses with special training
who help patients and their families understand treatment options and
work with medical providers to obtain care that will be paid for by
the plan. The case manager can also facilitate and coordinate the patient's
receiving treatment from a "center of excellence" - a facility
like the Cleveland Clinic or Mayo Clinic - which has negotiated an arrangement
with the managed care plan to treat specific types of cases.
Medical necessity determinations under the utilization review function
have reduced payments for unnecessary and wasteful treatment and, as
a result, have brought about an expansion of coverage. Types of treatment
that may have been excluded in the past (like the centers of excellence
mentioned above) can now be covered because the utilization review oversight
will assure that the treatment is only paid for when it is medically
necessary and appropriate. This is especially true of treatments that
in the past may have been considered prone to abuse, experimental and/or
investigational.Health care plans have never covered medical treatments
that were considered experimental and/or investigational. This is still
true today. However, with the rapid advancements in medicine, managed
care plans through the utilization review process have been able to
evaluate rapidly and cover treatments that may have been routinely excluded
in the past. A classic example is bone marrow transplants. In the past
they were not covered because they were considered to be experimental
treatment. Today, they are considered appropriate treatment for certain
medical conditions. But for other diagnoses, they are still considered
experimental and potentially more dangerous to the patient than the
potentially life-threatening disease it is supposed to treat. The desperate
search for cures coupled with the exorbitant cost of these treatments
and the entitlement mentality of plan participants is creating pressure
on managed care plans to cover experimental/ investigational treatments.
Unfortunately, this conflicts with the basic premise of managed health
care plans to pay for treatment that meets safe and appropriate standards
of medical treatment and is medically necessary.
To further enhance the value of managed care plans and focus on the
quality of life, many plans are expanding to provide non-traditional
coverages and programs focused on improving plan participants' health.
These include preventive care, wellness programs and disease management
programs.
Conclusion
The adoption of managed care plans has enabled employers to provide
comprehensive and expanding health care coverage at a reasonable cost
for both employers and employees. The utilization review and other quality
monitoring processes assure that the treatment being paid for by the
plan is appropriate and medically necessary. It will be imperative for
state and federal legislators to refrain from damaging the effective
operation of managed care plans as technology and an aging population
continue to drive up the demand and cost of health care services.
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