Surveying hospital network structure in New York State: how are they structured?

We determine the most common network structures in New York state. The taxonomy employed uses three structural dimensions: integration, complexity, and risk-sharing between organizations. Based on a survey conducted in 1996, the most common type of network (26.4 percent) had medium levels of integration, medium or high levels of complexity, and some risk-sharing. Also common were networks with low levels of integration, low levels of complexity, and no risk-sharing (22.1 percent).

Assessing an IDS's readiness to operate profitably under a risk contract

An IDS that wishes to assume risk should understand first the factors that have caused IDSs to experience poor financial performance under risk contracts. Then, the IDS should clarify its goals for managed care contracting, assess its operational strengths and weaknesses, evaluate potential managed care payer partners, and understand the amount of risk associated with various contract options. Implementation issues that need to be addressed include aligning the financial incentives of physicians and the IDS, establishing systemwide policies and procedures for monitoring performance, and developing information systems capabilities.

Give physicians incentives to deliver value, boost outcomes

The secret of success under capitation for this New England physician group is to pay physicians extra for delivering value. Here's how they determine who gets the money.

MGMA data reveal higher revenues for heavily capitated groups

Is there money in capitation? You bet. This Data Insight shows that the multispecialty groups with the highest revenue and charges are those with the greatest percentage of capitation.

Including hospice in Medicare capitation payments: would it save money?

Hospice services received by Medicare risk-based health maintenance organization (HMO) enrollees are paid on a non-capitated basis, creating financial incentives for HMOs to encourage their terminally ill patients to elect hospice. Using Medicare administrative records for 1998, we found that hospice enrollment in the last month of life was significantly higher among HMO enrollees than among beneficiaries in fee-for-service (FFS). However, low mortality rates among HMO enrollees produced similar population-based rates of hospice use in the HMO and FFS sectors. Simulations showed that including hospice care under capitation payments in July 1998 would have produced very small savings for Medicare.

Harvard Pilgrim's financial distress holds lessons for other risk-bearing groups

What lessons can be learned from the financial collapse and rehabilitation of Harvard Pilgrim Health Plan? One managed care expert says many of the factors that hurt Harvard Pilgrim can be seen in other plans across the nation.

The economics of regulatory mandates on the HMO market

Recently proposed HMO regulations have involved mandates of two forms: (1) minimum quality standards, and (2) mandated increases in access to speciality care. I show that piecemeal regulation, which uses only one of either mandate (1) or (2), may decrease welfare for all HMO consumers. Under full regulation using both (1) and (2), if the minimum standard is set too low, say, due to political bargaining, a floor-to-ceiling effect occurs. This involves HMOs setting quality at the minimum standard, even when their quality would be above the standard in an unregulated market. Finally, I show how premiums may either increase or decrease under a mandate.

At the brink: how Harvard Pilgrim got in trouble

The Massachusetts insurance commissioner placed Harvard Pilgrim Health Care (HPHC) in receivership in January on the basis of large projected losses that put the nonprofit plan in a significant negative net worth position. Because Harvard Pilgrim was the largest health plan in the market, with substantial amounts payable to hospitals and physicians, its financial problems shook the Boston health care community. The story also attracted national attention because of the plan's prominence and its reputation for quality. The Center for Studying Health System Change (HSC) followed the Harvard Pilgrim story closely as part of its continuous tracking of Boston--one of the 12 Community Tracking Study sites visited every two years--and is able to put this event in broader context. Many of Harvard Pilgrim's problems are evident in plans elsewhere. This Issue Brief discusses the causes of the plan's financial problem and the state's response, which has preserved the organization.

Risk sharing and the supply of mental health services

This paper examines the effects of risk sharing with mental health providers in a managed care context. The results show that providers that received a fixed payment per case reduced the number of outpatient visits by 20-25%, compared with providers who continued to be paid for each visit. This effect was stronger for integrated group practices and providers with more intensive utilization review protocols. In addition, evidence was found that in a setting where providers serve multiple payers, the share of their total revenue derived from risk-sharing contracts is an important determinant of the magnitude of the supply response.

Pharmaceutical cost growth under capitation: a case study

Rising drug spending has generated concern among purchasers and policymakers. This paper compares drug cost growth in a capitated system with that in managed care systems that generally did not place physicians directly at risk for drug spending. We focus on cost growth because a substantial body of literature indicates that managed care interventions that reduce the level of costs may not influence the rate of cost growth. Drug cost growth under capitation initially was below that of other systems but still above targeted rates. Over time the capitation rates rose, the amount of risk transferred to physicians declined, and spending growth accelerated.

How to identify global markets that are ready for managed care

As international risk carriers observe increasing medical loss ratios, many have flocked to managed care in an attempt to control medical costs while allowing for the measurement of care leading to improved quality. These same risk carriers often find it difficult to determine which managed care programs will produce the desired effects. However, it is not always clear why American health care concepts do not always produce the desired results in some international markets.

Health care utilization by old-old long-term care facility residents: how do Medicare fee-for-service and capitation rates compare?

OBJECTIVE

To describe the healthcare utilization of a long-term care population receiving primary and specialty care in a closed system and to compare Medicare fee-for-service (FFS) reimbursement with the amount that would have been paid under capitation for these services.

SETTING

A life care community in California composed of two facilities, both having residential care and nursing facility (NF) beds.

PARTICIPANTS

Residents (n = 700) living in the community between September 1995 and February 1996.

METHODS

Data on Medicare Part A and Part B reimbursements were gathered from billing records for hospitalizations, based on diagnostic related group payments, primary and specialty care visits, various procedures, diagnostic tests, and therapeutic services. These data were compared with what the facility, in collaboration with the providers and an affiliated hospital, would have received under Medicare capitated rates at that time.

RESULTS

Annually, residents averaged 16.3 primary care visits, 7.7 specialist visits, and 3453 hospital days per thousand. Nursing facility residents received significantly more primary care than did those in residential care. Total Medicare Part A and B payments per resident per month averaged $558. The monthly capitation rate in effect at the time for this population was substantially higher at $1085, generating an annual "risk pool" of $9.1 million. Care provided in the two facilities varied greatly. Hospitalization rates, clinic-based primary care and specialist visits, and therapy sessions were greater in facility one. Overall expenditures were lower for residents at facility two, where the majority of care was provided by trained geriatricians in collaboration with physician extenders and without sophisticated clinical pathways and utilization controls.

CONCLUSIONS

Our data support other studies that suggest that teams of geriatricians and physician extenders can reduce hospitalization rates and overall expenditures. Capitated rates for the frail, geriatric population warrant careful study. These rates must balance fiscal responsibility with the need for adequate, risk-adjusted payments that create incentives for providers to produce high quality as well as cost-effective care.

Integrated risk assessment and feedback reporting for clinical decision making in a Medicare Risk plan

The challenge of tapping into the rich resource of population-based, aggregated data to inform and guide clinical processes remains one of the largely unrealized potentials of managed care. This article describes a multifaceted approach of using health-related data to support providers in clinical decision making as an adjunct to case management and primary care delivery. The goal is to provide data that can be used for clinical decision making that is population based, yet individualized for specific patient care situations. Information reporting holds great potential in the clinical care of patients because it can be used to identify persons who could benefit from early detection, intervention, or treatment. It has been suggested that one of the keys to success in managed Medicare is the timely use of information that is detailed, comprehensive, and real-time describing key parameters of clinical encounters.

How does risk sharing between employers and a managed behavioral health organization affect mental health care?

OBJECTIVE

To study the ways in which allocating the risk for behavioral health care expenses between employers and a managed behavioral health organization affects costs and the use of services.

DATA SOURCES

Claims from 87 plans that cover mental health and substance abuse services covering over one million member years in 1996/1997.

STUDY DESIGN

Multi-part regression models for health care cost are used. Dependent variables are health care costs decomposed into access to any care, costs per user, any inpatient use, costs per outpatient user, and costs per inpatient user. The study compares full-risk plans, in which the managed care organization provides managed care services and acts as the insurer by assuming the risk for claims costs, with contracts in which the managed care organization only manages care (for a fixed administrative fee) and the employer retains the risk for claims.

PRINCIPAL FINDINGS

Full-risk plans are not statistically significantly different from non-risk plans in terms of any mental health specialty use or hospitalization rates, but costs per user are significantly lower, in particular for inpatients.

CONCLUSIONS

Risk contracts do not affect initial access to mental health specialty care or hospitalization rates, but patients in risk contracts have lower costs, either because of lower intensity of care or because they are treated by less expensive providers.

Medicaid managed care reimbursement for HIV and its implications for access to care

The rapid growth of managed care in state Medicaid programs has raised concerns about access to care for people living with HIV and AIDS (PLWH). Even the highest capitation rates that most programs pay to managed care organizations (MCOs) for disabled enrollees are substantially lower than the costs of care, especially when costly protease inhibitor therapy is taken into account. A national study has shown that Medicaid beneficiaries did not have the same level of access to protease inhibitors as did privately insured HIV patients in 1996 and 1997. Low capitation rates can limit access to care for PLWH by discouraging MCOs from having experienced HIV physicians on their provider panels and from enrolling PLWH. Since 1997, however, Medicaid programs in several states have adopted strategies to reduce the financial risks facing MCOs caring for PLWH and enrollees with other high-cost conditions. These strategies include global health-based (risk-adjusted) payment systems, AIDS-specific reimbursement rates, carve outs from capitation rates for medications and other services, risk pools for high-cost enrollees, risk corridors, and stop-loss insurance policies through which Medicaid programs share financial liability with MCOs for catastrophic losses. In addition, several programs have developed HIV centers of excellence. Most state Medicaid programs have yet to adopt any of these strategies. However, the growing numbers and types of experimental approaches to capitating services for PLWH may provide models for other states whose low reimbursement rates currently limit access to care.

IDSs reconsider the viability of risk contracting

As financial success with risk contracting continues to elude many IDSs, some of these organizations have started questioning their overall mission as risk-bearing entities. To determine whether to continue to assume risk, an IDS should consider its market environment, the commitment of its provider constituents to the organization, its core competencies, the likelihood of success with risk contracting, and alternatives. To determine its future course, the IDS should engage in a strategic-planning process that includes all IDS stakeholders. Such a process can help build consensus regarding the IDS's market characteristics and benefits of IDS membership; determine the IDS's appropriate roles, services, and functions; and evaluate resources required to pursue the desired strategy. The process should include planning for various possible future scenarios, and results should be communicated to all IDS provider constituents.

Tool helps ID high-risk seniors, cut costs under Medicare risk

Health risk evaluation surveys can help physician groups with Medicare risk contracts identify problem patients, curtail costs, and boost profits. Here's how you can adapt this tool in your organization.

Underfunded contracts wreak havoc with the promise of contact capitation

Once a favored technique for specialists, contact capitation has fallen out of favor, primarily because there isn't enough money going to physicians. Here's how to make contact capitation work.

Options analysis of managed care contracting and regulation: theory and evidence

Managed care contracts can be represented as bundles of options. In particular, the managed care provider is short a call option. To hedge the risk involved in such contracts, managed care contractors can construct several types of virtual put options, among them the ownership of facilities. Agency theory and options theory suggest that for-profit managed care plans, in the presence of debt, will engage in less hedging activity than will other managed care plans. Here, the authors test that hypothesis, using data for Florida HMOs in 1995, and they reject the null hypothesis. That managed care organizations act as if they are short a call option raises interesting regulatory issues, including the possibility of using a hedge-based regulatory scheme in place of a net-worth-based scheme.

Medical group bankruptcies: an emerging problem

This article explores the reasons why medical group practices and independent practice associations are filing for bankruptcy with increasing frequency. The problem stems from capitation payments by managed care organizations that are not sufficient to cover the costs of providing necessary care. The result is the dislocation of patients who have to find a new provider and providers who have to find a new practice setting. This article suggests that if the managed care industry could adopt clinical risk adjustment as a mainstay of physician compensation, medical groups and IPAs would have a far better chance of managing patient risk more successfully under capitation.

Fixing responsibility for risk management

The responsibility for carrying financial risk for medical coverage has migrated from individuals to insurers to employers to providers, without finding a satisfactory home. Each shift further complicates the health care infrastructure, as other responsibilities in the management of benefits and provision of care gravitate to the stakeholder who accepts risk. The social imperative to broaden coverage is forcing a change in the mechanisms of risk management--from avoiding high-risk patients, to managing those patients to better outcomes. In this paper we seek to identify objectively the most appropriate party to carry the financial risk of medical coverage, consider what characteristics are necessary to make that a practical and enduring solution, and examine the secondary effects of the structure required to support that solution.

Disease management: old wine in new bottles?

Disease management is a holistic, patient-focused approach to the treatment of disease across the spectrum of healthcare delivery. In its current form, disease management was created in response to the societal and economic burden that chronic illness contributes. There has recently been rapid growth in the development of disease management programs and sponsors are widespread within the industry, with the largest increase in independent vendors. Although growth has been substantial, the hurdles these programs have encountered have kept them from reaching their full potential. The challenges that exist include clinical, financial, and regulatory issues, and these challenges have significant meaning to healthcare managers. In deciding whether to develop or enhance programs, executives must consider their capability of outcomes measurement, their provider relationships, and the arrangements for program implementation. Ultimately, if programs provide improved health and quality of life for participants, cost savings will follow.

Achieving a balance between risk and return

Because risk management is costly, many health plans and providers practice risk avoidance by transferring risk to other entities. Risk-bearing healthcare organizations can improve their return on assets, but to do so they need complete information about patients' health status and the availability of effective medical treatment. To improve their return on assets, providers can use risk-management strategies such as growth, designing incentives to encourage providers and health plans to reduce or eliminate unnecessary variations in resource use, and improving information about the reasons for variations in resource use and controlling those variations when possible. Providers need data to analyze why variations in resource use occur and to evaluate the efficiency of their resource use.

Capitated contracting roles and relationships in healthcare

Capitated contracting of health providers has created substantial change in healthcare markets. This article assesses how capitation affects the roles and relationships of healthcare organizations. In-depth case studies were conducted of eight major hospital-led integrated health networks/systems and two large integrated medical groups. Types of capitated contracts employed, contract support capabilities developed, relationships among providers in the support services, and lessons learned about capitation were explored. The experiences of these organizations provide valuable guidance for health executives as they develop or refine capitated contracting strategies.

Systemic impact of risk-sharing arrangements

The overall complexity and systemic impact of what is ostensibly a simple change in payment methods were the most important lessons to learn.