Aug 7, 2011

Managed Care Backlash On Pricing And Utilization Management

While the large shifts in membership towards managed care plans achieved the intended consequences of lessening the high rate of healthcare costs increases during the mid- to late-1990s, there was tremendous resistance from both members and the provider community. With most people having to choose their physician from a directory for the first time in their lives and with both members and providers now forced to run a gamet of utilization controls and rules, it did not take long for public dislike of managed care to grow to noticeable proportions. Managed care in general, and HMOs in particular, became openly villified and commonly ridiculed within the main stream media, in political discussions and even in major motion pictures.
An August 2004 Kaiser Family Foundation survey found significant member dissatisfaction with the results of managed care, in terms of their interraction with providers. Sixty percent felt physicians had been forced to decrease the amount of time spent with patients, as a result of managed care, and 56 percent felt it was more difficult for patients to see a specialist physicians when needed. While an overwhelming 79 percent of those surveyed felt that their employer was doing the best it could to provide affordable health insurance coverage, there were strong feelings that managed care had made no difference in keeping health care costs down (63 percent) and that managed care had contibuted to decreasing the quality of care provided (49 percent).
By the late 1990s, many provider organizations and "vertically integrated" health systems (e.g., where a large hospital system also owns a number of physician practices) had formed to bargain for better reimbursement rates and to counter what they perceived as oppressive utilization controls by insurers and HMOs. Even the federal government intervened to protect patients' rights, most notably with the Newborns' and Mothers' Health Protection Act of 1996 (NMHPA), which prohibited most managed care plans from restricting a hospital stay in connection with childbirth to less than 48 hours following a vaginal delivery or 96 hours following a delivery by caesarean section. Prior to that legislation, many HMOs and managed care plans were routinely approving only one day for normal vaginal deliveries.
With mounting public and political pressure, by 2000 many managed care plans, including most of the national insurers, had either discontinued or dramatically scaled back their cost containment efforts. Many opponents of managed care felt these developments signalled the end of managed care as a defining feature of the healthcare industry.
In particular, many managed care plans abandoned capitation as a form of physician reimbursement, although some global cap systems were retained or modified for larger provider groups. Recent studies indicate that most capitation models switched back to discounted fee schedules, although some new physician incentive models have been introduced in various markets, many of which now tie physician incentives to quality measures such as HEDIS (Health Plan Employer Data Information Set) which is issued by the National Committee on Quality Assurance (NCQA). Most managed care plans also eliminated, or greatly reduced their reliance on, the more restrictive forms of utilization management, such as pre-authorization for hospitals stays. Many HMOs also loosened rules regarding specialist from a primary care physician referrals, either for selective specialists (e.g., annual OB/GYN exams) or for all referrals in what has been commonly called "open access" HMO plans. Some HMOs continue to offer full referral plans at a lower cost for those plan sponsors that still want the tighter cost controls.
However, the evidence shows that the relief from price increases in the mid-1990s was not permanent. Trend rates have again risen at double-digit rates since 2001, after many of the pricing and utilization management changes were instituted. 
Whether rising healthcare trend rates are directly attributable to the reduction of managed care controls is difficult to measure, however recent reports indicate that many managed care companies have started to selectively reintroduce utilization controls. Techniques making a revival include tighter concurrent hospital stay reviews and implementing thresholds on the number of treatments for certain procedures (e.g., MRIs, CAT scans). The key difference is that plans are using detailed data analysis to target those services which offer little or no clinical benefit while being careful not to reduce access to potentially beneficial services.
In addition, some managed care companies have begun to introduce new selective provider networks, which focus upon only those providers which have been shown to achieve demonstrable quality outcomes and costeffective results. These "tiered" networks offer the future possibility of refined managed care products, where members can receive highest benefits for using providers from the selective list, a middle level of benefits for the broader network and lowest benefits for non-network providers. Alternatively, the selective network may focus on certain specialties (e.g., cardiology, gastroenterology, orthopedics) and be offered along side existing PPO or HMO network options.
The point of acknowledging these recent developments in the managed care field is to make the reader appreciate the importance of analyzing, in detail, exactly what types of pricing and utilization management techniques are being employed by the managed care plan being examined. Every PPO is not just like every other PPO. Every HMO is not just like every other HMO. Those are just product labels. Remembering that managed care is about process, not products, can help the reader understand what truly differentiates various health plan options.


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