Managed health care in the new millennium : innovative financial modeling for the 21st century

291 Pages·2012·2.295 MB·English

by  Samuels, David I

Health Care S
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“… elegant in both the simplicity of its premise, as well as the detail in which
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David Samuels lays out a ‘prescription’ for navigating the uncharted, murky e
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waters of Health Care’s future. … Well done David!” s
—Andrè B. Van Niekerk, PhD, Dean, School of Business, Woodbury University,
Burbank and President, (LBR) Luxury Branding Research, Los Angeles M
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“… more than a very readable ‘future history’ of managed health care. It’s a call to
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action for those who must make decisions on how health care services should be
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delivered and how the financing on managed care should be carefully structured g
towards common medical and financial goals.” e
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—Lawrence R. Lievense, FHFMA, FACMPE,

Healthcare FINANCIAL Experts, Inc., Camarillo, California H
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“David’s work can help many health care executives do a better job of
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understanding and planning for the future. … offers insight into what accountable l
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care means and how the consumer will eventually benefit through a more rational h
and defined care system.”
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—William J. De Marco MA, CMC, President and Chief Executive Officer,
De Marco & Associates, Inc., Rockford, Illinois a
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David Samuels, a leading authority on financial models in health care, draws on
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his multidisciplinary background in all aspects of managed care to provide an n
expansive yet detailed perspective of this complex field. Grounded in evidence-
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based modeling, the book’s multidisciplinary focus puts the spotlight on core h
concepts from the standpoints of health plans, hospitals, physician practice, and e

their respective integrated network models. You’ll learn what happened when a N
country’s national health care plan is developed with problematic underwriting,
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why hospitals will always be victimized at their payer’s bargaining table, and even
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how to improve the current primary care shortage at both 50% less provider costs

as well as with triple their members’ compliance in wellness care. The book gives M
you the critical tools to stay ahead of the learning curve, engage patients to take
responsibility for their own and their family’s health status, and improve your i
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differentiation in a RAPIDLY changing marketplace. e
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K11866 i
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ISBN: 978-1-4398-4030-6 m
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K11866 cvr mech.indd 1 10/31/11 2:15 PM

Managed Health
Care in the New
Millennium
Innovative Financial Modeling
for the 21st Century

Managed Health
Care in the New
Millennium
Innovative Financial Modeling
for the 21st Century
David I. Samuels
CRC Press
Taylor & Francis Group
6000 Broken Sound Parkway NW, Suite 300
Boca Raton, FL 33487-2742
© 2012 by Taylor & Francis Group, LLC
CRC Press is an imprint of Taylor & Francis Group, an Informa business
No claim to original U.S. Government works
Version Date: 20111111
International Standard Book Number-13: 978-1-4398-4031-3 (eBook - PDF)
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Contents
Preface.................................................................................................................xv
Acknowledgments...............................................................................................xix
About.the.Author................................................................................................xxi
Chapter 1 An.Updated.Introduction.to.Managed.Care.and.Capitation............1
Introduction......................................................................................1
A.Simple.Definition—But.Not.So.Simple.History—Of.
Managed.Care.and.Capitation..........................................................5
Understanding.Managed.Care.in.the.Private.and.Public.
Sectors:.A.Reality.Check.................................................................6
Understanding.Capitation—And.Not.Just.Financially..................10
Effects.of.Public.Policies.on.Capitation.and.Capitated.
Relationships..................................................................................14
A.Simplified.Understanding.of.Managed.Care.Models.................16
Two.Basic.Demand.Models.of.Managed.Care:.Illness-Based.
versus.Wellness-Based...................................................................16
Understanding.Health.Plans...........................................................17
Chapter 2 Understanding.Managed.Care.Industry.Operations......................25
Introduction.to.the.Insurance.Industry...........................................25
Understanding.ERISA.Implications.for.HMOs.and.Employers....27
Responsibility.for.Negligence.under.ERISA.............................27
Administration.of.Practice.Management..............................27
Credentialing.of.Network.Providers.....................................28
Actions.of.Employed.Staff/Practitioners..............................28
Contractual.Liability.Issues.......................................................28
Unreasonable.Benefit.Determination........................................29
Balance-Billing.Violations.of.FQHMOs...................................29
Introduction.to.Managed.Care.Underwriting.................................29
Purchaser.Selection...................................................................30
Benefit.Plan.Design...................................................................30
Claims.History..........................................................................30
Role.of.MCO.Reinsurance........................................................31
Aggregate.Reinsurance.........................................................31
Individual.Reinsurance.........................................................31
Introduction.to.Commercially.Insured.Populations.......................32
The.“50–50.Rule”......................................................................32
Control.of.Commercial.Risk.Populations.................................33
v
vi Contents
Understanding.Rating.Methodologies:.Community.versus.
Experience......................................................................................34
Community.Ratings...................................................................34
Basic.Community.Ratings....................................................34
Community.Ratings.by.Class...............................................36
Experience.Rating.Methodologies............................................38
Experience-Based.Community.Ratings...............................40
Understanding.and.Predicting.Medical.Losses..............................40
Introduction.to.Actuarial.Mathematics..........................................42
Premium.and.Product.Issues..........................................................43
Payer.Premium.Revenues..........................................................43
Payer.Nonoperating.Revenue.Sources.......................................43
Employer.Benefit.Plan.Design........................................................44
Cost-Sharing.Impacts.on.Product.Design.................................45
Deductible.Mechanisms.......................................................45
Share-of-Cost.Payments.......................................................45
Out-of-Pocket.Maximums....................................................46
Incentives.and.Disincentives................................................46
Health.Plan.Enrollment.............................................................47
Cost.Data.to.Predict.Losses...........................................................47
Community.Utilization.and.Service.Intensities........................48
Impact.of.Utilization.Management............................................48
Effectiveness.of.Health.Care.Management...............................48
Probability.Matrix.of.Predicted.Use.........................................48
Operational.Loss.Sources..........................................................48
MCO.Operational.Elements.to.Minimize.Losses.....................49
Payer–Provider.Risk.Relationships................................................50
Stop-Loss.and.PMPM.Relationships..............................................51
Underwriting.and.Reinsurance.Relationships...........................52
Other.Interrelationships..................................................................54
Risk.Banding.and.Provider.Risk-Sharing.Arrangements..............55
Payer–Provider.Financial.Relationships........................................57
Cost.Sharing..............................................................................57
Reinsurance.Recoveries.............................................................58
COB.Relationships....................................................................58
“Pursue-and-Pay”.COB.Method...........................................59
“Pay-and-Pursue”.COB.Method...........................................59
Capitation.Adjustments.Based.on.Percentage.of.Premium.
Revenue.....................................................................................59
Claims.Management.and.Processing.............................................60
Claims.Adjudication..................................................................63
Referral.Management.....................................................................64
Provider.Authorizations............................................................64
Prospective.Authorizations........................................................67
Concurrent.Authorizations........................................................68
Contents vii
Retrospective.Authorizations....................................................69
Pended.Authorizations..............................................................69
Denied.Authorizations...............................................................69
Subordinate.(“Sub-”).Authorizations........................................70
Payer.Development.of.Provider.Panels..........................................70
Outcomes.Reporting......................................................................71
Advanced.Studies.in.Capitated.Managed.Care..............................72
Per.Member,.per.Month.............................................................73
Full-Risk.Capitation..................................................................76
Global.Capitation.......................................................................77
Gatekeeping.and.Primary.Care.Capitation...............................78
Contact.and.Specialty.Care.Capitation.....................................78
Subcapitation.Modeling.............................................................79
Tertiary.Capitation.....................................................................80
Nonindexed.Capitation..............................................................81
Understanding.of.“Operational”.Capitation.for.the.Health.
Care.Industry..................................................................................81
Conclusion......................................................................................85
Chapter 3 Managed.Care.Provider.and.Practitioner.Operations....................87
Introduction....................................................................................87
The.Board.of.Directors..................................................................87
Board.Committees.....................................................................89
MCO.Managers..............................................................................89
Chief.Executive.Officer.............................................................89
Medical.Director.......................................................................91
Network.Director.......................................................................91
Chief.Financial.Officer..............................................................91
Operations.Director...................................................................91
Marketing.Director....................................................................91
General.Counsel/Compliance....................................................92
Payer.Benefit.Determination..........................................................92
MCO.Services...........................................................................92
MCO.Economics............................................................................93
Specialty.HMOs.............................................................................93
Federal.Qualification.Eligibility.by.Office.for.Managed.Care......93
Application.Process.for.FQHMO.Qualification........................95
Site.Visit.Prior.to.FQHMO.Qualification..................................96
FQHMO.Postqualification.Process...........................................96
MCO.Marketing.and.Product.Development..................................97
Market.Segmentation.Strategies................................................97
Defining.Desirable.Market.Segments.......................................98
Strategic.Product-Positioning.Drivers.......................................99
Distribution.Channel.Drivers.of.Effective.Product.Placement....99
viii Contents
Revenue.Drivers.Based.on.Requests.for.Proposal.and.
Requests.for.Information..............................................................100
Request.for.Proposal................................................................100
Request.for.Information..........................................................100
Payer.and.Practitioner/Provider.Services......................................101
Contracting...............................................................................101
Carve-Outs.versus.Carve-Ins..................................................103
Outsourcing.............................................................................103
Strategies.to.Manage.Provider/Practitioner.Costs.......................104
Practitioner.Profiling...............................................................104
Episodes-of-Care.Profiling......................................................105
Incentive.Compensation.Data..................................................105
Payer/Provider.Budgeting.and.Financial/Resource.
Estimation...............................................................................106
MCO.Budgeting......................................................................106
Analyses.of.Administrative.Costs...........................................106
Analyses.of.Capitated.Medical.Service.Costs.........................106
Analyses.of.Fee-for-Service.Practitioner.Costs.......................107
Office.Visit.Frequency.............................................................108
Nonnetwork.and.Referral.Services.Data.................................108
Hospital.Inpatient.Utilization/Payment.Data..........................108
Comparative.Market.Data........................................................110
Conclusion.....................................................................................111
Chapter 4 Managed.Care.Organization.Quality.Benchmarking...................113
Introduction...................................................................................113
Accreditation.of.HMOs.under.NCQA...........................................114
NCQA.Accreditation.Process...................................................115
Areas.of.NCQA.Review...........................................................116
Clinical.Indicators.Measured.through.MCO.Accreditation.....118
Joint.Commission.Quality.Indicators..................................118
Health-Plan.Employer.Data.and.Information.Set................118
URAC.Accreditation.Procedures.................................................121
URAC.Accreditation.Process..................................................121
Areas.of.URAC.Review..........................................................121
Responsibility.....................................................................123
Information.........................................................................123
Procedures..........................................................................123
Appeals.of.Denied.Authorizations.....................................123
Confidentiality....................................................................123
Staff.and.Program.Requirements.......................................124
Accessibility.......................................................................124
Accreditation.of.Preferred.Provider.Organizations.....................124
AAPI.Review.Process.............................................................124