4.1 Principles of Managed Care
3 min read•july 25, 2024
Managed care revolutionized healthcare by focusing on cost control and . It introduced new organizational structures like HMOs and PPOs, changing how patients access care and providers deliver services. These models aim to balance affordability with quality healthcare.
Key principles of managed care include , quality improvement, and . Strategies like and have significantly impacted healthcare delivery, expanding access to preventive services while potentially limiting provider choices for patients.
Managed Care Fundamentals
Key principles of managed care
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- Cost containment reduces unnecessary medical services and negotiates lower prices with providers (price negotiation, utilization review)
- Quality improvement implements evidence-based practice guidelines and monitors healthcare outcomes (clinical pathways, quality metrics)
- Access enhancement develops provider networks and offers preventive care services (annual check-ups, immunizations)
- Coordination of care implements case management programs and utilizes electronic health records for information sharing (care transitions, interoperability)
- Risk management employs payment models and uses risk adjustment techniques (, )
Types of managed care organizations
- Health Maintenance Organizations (HMOs) operate with closed provider networks where primary care physicians act as gatekeepers emphasizing preventive care (, )
- Preferred Provider Organizations (PPOs) offer larger provider networks without gatekeeper requirements but higher out-of-pocket costs for out-of-network care (, )
- plans combine HMO and PPO features requiring primary care physician referrals for in-network specialist care while allowing out-of-network care at higher cost (, )
- Accountable Care Organizations (ACOs) form networks of providers collaborating to improve quality and reduce costs using shared savings models with payers focusing on population health management (, )
Managed Care Impact and Strategies
Impact of managed care on healthcare
- Access expanded coverage through employer-sponsored plans but potentially limited due to narrow networks while improving access to preventive services (annual wellness visits, screenings)
- Quality implemented quality metrics and performance measures emphasizing evidence-based medicine but potential conflicts between cost-saving measures and optimal care (, )
- Costs reduced overall healthcare expenditures and lowered premiums for consumers shifting towards value-based care models (, )
Role of utilization management
- requirements review and approve procedures before they are performed ensuring medical necessity and appropriateness of care (MRI scans, elective surgeries)
- monitors ongoing treatments and hospital stays assessing the need for continued care (, )
- analyzes past claims and medical records identifying patterns of overutilization or inappropriate care (, )
- Case management coordinates care for complex or high-cost patients developing personalized care plans to optimize outcomes and reduce costs (chronic disease management, care coordination)
- implements and tiered medication systems promoting generic drug utilization (, )
- develop and disseminate evidence-based treatment protocols reducing variation in care delivery (diabetes management guidelines, asthma care protocols)
Key Terms to Review (36)
Accountable Care Organization (ACO): An Accountable Care Organization (ACO) is a group of healthcare providers and organizations that voluntarily come together to deliver coordinated high-quality care to their patients. The primary aim of an ACO is to ensure that patients receive the right care at the right time, while avoiding unnecessary duplication of services and preventing medical errors. By emphasizing teamwork and shared responsibility among providers, ACOs seek to improve patient outcomes while managing costs effectively.
Advocate Aurora Health ACO: Advocate Aurora Health ACO is an accountable care organization that focuses on coordinating care to improve patient outcomes while controlling costs. By bringing together healthcare providers to work collaboratively, this model emphasizes value-based care, where providers are rewarded for the quality of care they deliver rather than the quantity.
Aetna PPO: Aetna PPO is a type of managed care health insurance plan offered by Aetna, providing members with a flexible network of healthcare providers. With this plan, members can choose to receive care from in-network or out-of-network providers, although choosing in-network typically results in lower out-of-pocket costs. This flexibility connects to key principles of managed care by emphasizing cost control while still allowing for a broad choice of services.
Blue Cross Blue Shield PPO: Blue Cross Blue Shield PPO (Preferred Provider Organization) is a type of health insurance plan that offers a network of healthcare providers who have agreed to provide services at reduced rates. This plan allows members to receive care from both in-network and out-of-network providers, giving them flexibility in choosing their healthcare options while often requiring higher out-of-pocket costs for out-of-network services.
Bundled payments: Bundled payments are a healthcare reimbursement model that pays a single, predetermined amount for a set of related services delivered over a specific period, often related to a particular episode of care. This payment approach encourages providers to deliver efficient and coordinated care while controlling costs, making it an essential aspect of modern healthcare financing and reimbursement systems.
Capitation: Capitation is a healthcare payment model in which a provider is paid a set amount per patient for a specified period, regardless of the number of services rendered. This payment approach encourages efficiency and preventive care since providers receive a fixed fee to manage the overall health of their patients, fostering cost control and improved health outcomes.
Care Coordination: Care coordination is the process of organizing patient care activities and sharing information among all participants concerned with a patient's care to enhance the quality and efficiency of healthcare delivery. This process involves multiple healthcare providers working together to ensure that patients receive appropriate services in a timely manner, improving outcomes and reducing unnecessary costs.
Cigna POS: Cigna POS (Point of Service) is a type of health insurance plan that combines features of both HMO (Health Maintenance Organization) and PPO (Preferred Provider Organization) plans. This hybrid model allows members to choose between receiving care from a network of preferred providers or seeking care outside the network at a higher cost, offering flexibility while also emphasizing cost control and coordinated care.
Claims audits: Claims audits are systematic evaluations of healthcare claims submitted for payment to ensure their accuracy, compliance with regulations, and appropriateness of services rendered. They play a crucial role in managed care by verifying that claims are valid and that providers are reimbursed correctly, helping to reduce fraud, waste, and abuse in the healthcare system.
Clinical Practice Guidelines: Clinical practice guidelines are systematically developed statements that assist healthcare practitioners and patients in making decisions about appropriate healthcare for specific clinical circumstances. These guidelines integrate the best available evidence with clinical expertise and patient values, ensuring that care is both effective and tailored to individual needs.
Concurrent review: Concurrent review is a process in healthcare management that involves the evaluation of a patient's ongoing care while they are still receiving treatment. This type of review is crucial for ensuring that the care being provided is necessary, effective, and aligned with the patient's health goals. It not only helps in managing costs but also ensures that the quality of care remains high by regularly assessing the appropriateness of treatments as they occur.
Cost containment: Cost containment refers to strategies and measures implemented to control and reduce healthcare expenses while maintaining quality services. It aims to balance the financial aspects of healthcare delivery by minimizing waste, promoting efficiency, and ensuring that necessary services are delivered without incurring excessive costs. Effective cost containment is essential for sustainable healthcare systems and can significantly impact decision-making processes within organizations.
Formularies: Formularies are lists of medications and treatments that are approved for use within a specific healthcare system or insurance plan. These lists are designed to promote the use of safe, effective, and cost-efficient medications while managing overall healthcare costs. Formularies help healthcare providers make informed prescribing decisions and can vary significantly between different managed care organizations.
Geisinger Health Plan: Geisinger Health Plan is a managed care organization that operates primarily in Pennsylvania, providing a range of health insurance products to individuals and families. It is known for its innovative approach to healthcare delivery, integrating health insurance with comprehensive care services to improve patient outcomes while controlling costs.
Health Maintenance Organization (HMO): A Health Maintenance Organization (HMO) is a type of managed care health insurance plan that requires members to select a primary care physician (PCP) and obtain referrals to see specialists. This model emphasizes preventive care and efficient management of healthcare resources, aiming to reduce costs while maintaining the quality of care for its members.
HEDIS Measures: HEDIS measures are standardized performance metrics developed by the National Committee for Quality Assurance (NCQA) to evaluate the quality of care provided by health plans. These measures cover various aspects of healthcare services, such as preventive care, chronic disease management, and patient satisfaction, helping to ensure that patients receive high-quality care. By collecting and reporting HEDIS data, health plans can identify areas for improvement and enhance their overall performance in delivering healthcare services.
Hierarchical Condition Categories: Hierarchical Condition Categories (HCC) are a risk adjustment model used primarily in Medicare to account for the health status and expected healthcare costs of enrollees. By grouping patients based on their medical conditions, HCC helps payers adjust reimbursements to providers, ensuring they receive appropriate compensation relative to the complexity of patient care. This system encourages managed care organizations to improve care quality and reduce costs by incentivizing better management of patients with chronic conditions.
Kaiser Permanente: Kaiser Permanente is an integrated managed care consortium that provides healthcare services to its members through a network of hospitals, medical offices, and health plans. It operates on the principles of managed care, focusing on coordinated care and preventive services to enhance patient outcomes and control costs effectively.
Length of stay reviews: Length of stay reviews are evaluations conducted to assess the duration of patient hospital stays, aiming to identify whether the length is appropriate based on medical necessity and treatment standards. These reviews are crucial for ensuring efficient resource use, controlling healthcare costs, and improving patient outcomes by minimizing unnecessary extended hospitalizations.
Level of care determinations: Level of care determinations refer to the process of assessing a patient's specific healthcare needs and identifying the most appropriate type of medical services or facilities required for their treatment. This assessment helps ensure that patients receive the right care at the right time, while also managing resources efficiently within the healthcare system. Understanding these determinations is crucial in managed care settings, where cost containment and quality of care are prioritized.
Medicare Shared Savings Program: The Medicare Shared Savings Program (MSSP) is a program designed to encourage healthcare providers to work together to improve the quality of care for Medicare beneficiaries while reducing costs. It promotes the formation of Accountable Care Organizations (ACOs), which are groups of doctors, hospitals, and other healthcare providers that collaborate to deliver coordinated care and share in the savings generated from more efficient services.
Patient satisfaction scores: Patient satisfaction scores are metrics used to gauge the level of satisfaction that patients have with their healthcare experiences. These scores provide insights into the quality of care received, the effectiveness of communication between healthcare providers and patients, and overall patient engagement. Understanding patient satisfaction is essential in evaluating and improving healthcare systems, influencing care delivery models, and ensuring that patients' needs are met across different healthcare settings.
Pay-for-performance: Pay-for-performance is a healthcare reimbursement model that financially rewards providers based on the quality of care they deliver, rather than the quantity of services provided. This approach aims to improve patient outcomes and incentivizes providers to enhance their efficiency and effectiveness. By aligning financial incentives with the goals of better health and patient satisfaction, pay-for-performance contributes to overall improvements in the healthcare system.
Peer review: Peer review is a process where experts in a specific field evaluate the quality, relevance, and validity of research or scholarly work before it is published or accepted for use. This evaluation ensures that the work meets the necessary standards and contributes meaningfully to the field. In the context of healthcare, peer review plays a critical role in maintaining the integrity of clinical practices and ensuring that medical decisions are based on high-quality evidence.
Per-member-per-month payments: Per-member-per-month payments are a payment model commonly used in managed care that calculates a fixed monthly fee for each enrolled member, regardless of the number of services provided. This approach emphasizes preventive care and efficient resource use by incentivizing healthcare providers to focus on maintaining the overall health of their patient population rather than billing for individual services. This method aligns with the principles of managed care by promoting cost-effective healthcare delivery and improving patient outcomes.
Pharmacy benefit management: Pharmacy benefit management (PBM) is a system that helps manage prescription drug benefits on behalf of health insurers, employers, and other plan sponsors. It includes processes like formulary management, negotiating with drug manufacturers, and managing pharmacy networks to control costs while ensuring patient access to medications. This approach is critical in the managed care landscape, as it influences drug pricing, utilization, and overall healthcare spending.
Point of Service (POS): A Point of Service (POS) plan is a type of managed care health insurance that combines features of both Health Maintenance Organizations (HMOs) and Preferred Provider Organizations (PPOs). In a POS plan, members choose a primary care physician (PCP) who coordinates their care and refers them to specialists when needed, but they also have the option to seek care from out-of-network providers at a higher cost. This flexibility allows members to manage their healthcare needs while still benefiting from cost-saving incentives associated with network providers.
Pre-authorization: Pre-authorization is a process used by health insurance companies to determine if they will cover a specific treatment or service before it is provided. This step is crucial in managing costs and ensuring that treatments align with the established guidelines of care. It involves healthcare providers submitting detailed information to the insurer, which evaluates the necessity and appropriateness of the proposed services based on medical criteria.
Preferred Provider Organization (PPO): A Preferred Provider Organization (PPO) is a type of managed care health insurance plan that offers a network of healthcare providers to its members. PPOs provide flexibility in choosing healthcare providers, allowing members to see any doctor or specialist without requiring a referral, although they receive higher benefits for using providers within the network. This model is designed to balance the cost of care with the accessibility and choice of services available to patients.
Prior Authorization: Prior authorization is a process used by healthcare insurers to determine if a specific service, medication, or treatment is medically necessary before the provider delivers it. This process helps manage costs and ensures that patients receive appropriate care while preventing unnecessary procedures and treatments. It serves as a gatekeeping mechanism within managed care to control healthcare spending and improve the quality of care provided to patients.
Quality Improvement: Quality improvement refers to systematic efforts aimed at enhancing healthcare services, processes, and outcomes to ensure better patient care and safety. This involves analyzing data, identifying areas for improvement, and implementing changes to increase efficiency and effectiveness in delivering healthcare. The focus on quality improvement is essential in driving accreditation, safeguarding patient rights, and aligning with managed care principles.
Retrospective review: A retrospective review is a process used to evaluate and analyze past events, decisions, or outcomes in healthcare to improve future practices and policies. This method is particularly important in managed care, as it helps identify trends, assess the effectiveness of interventions, and evaluate adherence to guidelines. By reviewing previous cases or data, healthcare organizations can derive insights that lead to better patient outcomes and more efficient care delivery.
Risk-sharing arrangements: Risk-sharing arrangements are financial agreements where parties involved in healthcare, such as insurers and providers, share the financial risks associated with patient care. These arrangements incentivize providers to deliver quality care while controlling costs, aligning their interests with payers. This collaborative approach can lead to improved health outcomes and more efficient use of resources, as both parties work together to manage risks effectively.
Step Therapy: Step therapy is a managed care protocol that requires patients to try and fail on one or more lower-cost medications before being approved for more expensive treatments. This approach aims to control healthcare costs while ensuring that patients receive effective care, as it often begins with the least expensive and most widely used treatments. It reflects a broader principle of managed care, which focuses on cost containment and evidence-based practices.
Unitedhealthcare pos: UnitedHealthcare POS (Point of Service) is a type of managed care health insurance plan that combines features of both Health Maintenance Organizations (HMOs) and Preferred Provider Organizations (PPOs). It allows members to choose between receiving care from in-network providers or going outside the network for a higher cost, offering flexibility while also encouraging cost-effective healthcare utilization.
Utilization Management: Utilization management refers to a set of techniques used by healthcare organizations to assess the necessity, appropriateness, and efficiency of healthcare services. This process is essential for ensuring that patients receive the right care at the right time while also controlling costs and optimizing resource allocation. By systematically reviewing the use of healthcare services, utilization management plays a crucial role in maintaining quality care and minimizing waste, closely aligning with principles of managed care and strategies for cost containment.