COMPARATIVE HEALTH INFORMATION

MANAGEMENT 4TH EDITION PEDEN

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CHAPTER 4

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Managed Care

ANSWERS TO KNOWLEDGE-BASED QUESTIONS

1. What coding systems would be used to code a hospital claim submitted to an MCO

for payment? What systems would be used for a physician claim?

Answer:

Hospital inpatient claims are submitted using the current version of ICD diagnosis

and procedure codes along with UB-04 revenue codes. HCPCS/CPT procedure codes

are used for hospital outpatients. Physician claims are submitted using the current

version of ICD diagnosis codes and HCPCS/CPT procedure codes.

2. What three characteristics are required for an organization to qualify as an HMO?

Answer:

The HMO must be an organized system for providing health care or otherwise

assuring health care delivery in a geographic area, have an agreed upon set of basic

and supplemental health maintenance and treatment services, and serve a voluntarily

enrolled group of people.

3. How does an MCO perform coordination of benefits?

Answer:

The MCO performs coordination of benefits by recording all of the insurance carriers

for a patient, determining who the primary payer is, and paying only the portion the

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 MCO is responsible for paying.

4. What does the abbreviation PMPM mean, and why is it important in managed care?

Answer:

PMPM means per member per month, used to describe the amount of money paid for

the monthly capitation rate per patient, a frequently used reimbursement method in

managed care.

5. What two benefits will the MCO realize from using online referral processing?

Answer:

1. It allows the MCO to direct patients to appropriate providers in the network.

2. It allows the MCO to estimate future expenses associated with the referred care.

6. Explain the difference between coinsurance and copayment.

Answer:

Coinsurance is the responsibility of the insured after the indemnity insurance policy

has paid its portion. A copayment is a flat rate payment due from the patient at the

time of service.

7. What contributed to the introduction of consumer-directed health plans?

Answer:

Consumer-directed health plans arose out of employer need to curtail the double-digit

premium increases they were experiencing every year. Another contributing factor to

the increased interest in these types of plans is the frustration felt by physicians and

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 consumers over the restrictions and complexity of managed care. These plans are

appealing because consumers have flexibility in the management of their own care.

8. Identify the types of consumer-directed health plans and their characteristics.

Answer:

• A flexible spending account (FSA) is an account that is set up by the employee

through his or her employer to cover health care costs. The employee cannot

withdraw money from this account for anything other than health care. The

amount deposited into the account is predetermined by the employee on a pay

period basis and is pretax. Any amount left in the account at the end of the benefit

year is retained by the employer, creating a “use it or lose it” incentive. This plan

type is used to supplement generous benefit plans by paying low copayments and

deductibles.

• A health reimbursement arrangement (HRA) is a mechanism by which an

employer funds an account for its employees to pay for otherwise unreimbursed

health care expenses. Contributions are made by the employer into the account

and are tax deductible for the employer. Funds withdrawn by the employee to pay

for health care are also tax exempt for the employee. Employees cannot cash out

the balance of the account when they leave employment, but some employers may

allow them to continue to use remaining funds for health care expenses after

retirement.

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 • The health savings account (HSA) was created as part of the Medicare

Modernization Act and permits individuals and families who purchase high-

deductible health insurance coverage to contribute to the account. These

contributions can then be used to pay for costs associated with health care,

including those that are applied to their deductible. Consumers who have

coverage through an HSA cannot purchase supplemental insurance to cover costs

incurred until the deductible is reached. Just as with HRAs, the contributions to

this account are not taxed and any withdrawals to pay for health care are also tax

exempt. Withdrawals for nonmedical expenses can be made; however, the

withdrawal will be subject to income taxation and an early withdrawal penalty of

10% for individuals under the age of 65. Balances roll over from year to year, and

any balance in the account is retained by the employee when he or she changes

jobs (CBO, 2006).

9. Describe the key pieces of recent legislation that impact an MCO.

Answer:

• 2010 Patient Protection and Affordable Care Act—Managed care is based on a

preventive model focused on reduced utilization of costly tertiary health care

services. MCO must provide higher level of care while reducing costs.

• Clinical Laboratory Improvement Amendments of 1988—This act requires every

laboratory, including those contracted for use by the MCO, to have a certificate to

operate. Awarding of the certificate indicates the laboratory meets the operational

standards or proficiency testing guidelines of CLIA.

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 • Insurance state regulations for MCOs that have commercial enrollees—These

laws ensure that the MCO is financially able to operate as an insurance company.

ANSWERS TO CRITICAL THINKING QUESTIONS

1. Why wouldn’t a managed indemnity plan collect referral data?

Answer:

Managed indemnity plans cannot collect referral data because they do not issue

referrals to patients. Patients are able to self-refer in a managed indemnity plan.

2. Why could the discounted charges reimbursement mechanism seem attractive to both

the physician and the MCO?

Answer:

Physicians may like the discounted charges reimbursement mechanism because they

are able to charge their regular fees and are not subject to severe financial risk. The

MCO may like the discounted charges reimbursement mechanism because it is easy

to establish and demonstrates an immediate savings over current charges.

3. Why would an MCO want to reimburse hospitals by a DRG payment?

Answer:

The goal of the DRG payment system is to encourage facilities to manage their

operations more efficiently by finding ways to deliver more cost-effective patient care

without sacrificing the quality of the care. An MCO would want to reimburse

hospitals by a DRG payment because it allows more accurate prediction of expenses

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 and forces the hospital to share a large portion of the risk.

4. An HMO with 50,000 members had 13,024 inpatient service days for the last month.

What formula would you use to determine bed days per 1,000, and what was this

HMO’s rate for last month?

Answer:

The formula is Inpatient Service Days/(Members/1000). The rate is

13024/(50,000/1000) or 13024/50 or 260.48.

5. Why is it crucial for an MCO to conduct utilization management activities?

Answer:

Utilization management (UM) can improve the quality of care through the use of

clinical practice guidelines. UM also helps with cost savings by assuring that the care

is delivered efficiently and at the right level of care.

6. What are the benefits of an EHR to an MCO, a physician practice, and its patients?

Answer:

An EHR provides accurate, timely, and legible patient information and better

continuity of patient care. An EHR can allow patients to obtain information about

their health care in electronic form. Alerts and reminders can help guard against

errors and help to ensure that routine screenings and other services take place at the

appropriate time. For the physician, ARRA provides financial incentives in the form

of increased reimbursement to EHR adopters and, after 2015, financial penalties to

those who do not adopt.

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7. How will ACO models potentially impact MCOs in the future?

Answer:

ACO is a new pilot payment model for Medicare. ACOs can be held accountable for

the cost and quality of care delivered to a defined subset of defined population such

as commercial health plan subscribers. MCOs may adopt the ACO model and, if so,

may be required to provide and manage patients throughout the continuum of care,

prospectively plan budgets and resource needs, and be large enough to support

comprehensive, valid, and reliable performance measures.

CASE STUDY

The senior management team of Efficient Network HMO is evaluating the year-end data

related to emergency room (ER) expenses. One physician group within the network had

ER expenses that were three times the rate of any other group within the network. Senior

management has studied group operations and theorizes that three factors are influencing

the high rate of expense. The group does not utilize triage nurses, does not have after-

hours urgent care services, and has limited office hours from 8:30 to 11:30 a.m. and 1:30

to 5:00 p.m. An answering service, not staffed by nurses, relays calls during the

remainder of the hours.

The physician group is willing to work on the problem but is asking for detailed,

comparative information from the HMO’s senior management team before it implements

any changes. How would you, as the clinical data specialist for the HMO, answer the

following questions?

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SUGGESTED RESPONSES TO THE CASE STUDY

1. What information would be useful to the senior management of the HMO and the

physician practice in evaluating the ER expenses?

Answer:

Senior management would want to know the number of ER visits and the associated

expenses for this group compared to the remainder of the network to substantiate their

concern about overutilization or overexpenditure. This data would be calculated as

both raw numbers and as a per-member-per-month (PMPM) value to provide a

variety of comparisons.

Senior management would also want to know the types of diagnoses treated in

the ER for this physician group to determine if urgent care services would be of

benefit. If the majority of services are truly an emergency, then the suggestion of

urgent care would waste resources rather than save them. They may also want

comparative data from the remainder of the network to illustrate differences between

the types of patients referred/presenting to the ER from their practice.

They would find ER utilization data by time of arrival helpful in evaluating

the time of day patients are presenting to the ER compared to the lack of availability

of medical advice or appointments at the physician group. Data would be provided

separately for weekdays versus weekends to help determine whether weekday versus

weekend procedures produce higher ER utilization rates.

Senior management might suggest that the physicians perform a sample

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 review of office records to determine whether advice was sought from their office or

answering service before the patient went to the ER. The physician group would want

a listing of patients and their demographics to assist them in selecting sample office

records for this review.

2. What data sources would you use to obtain data?

Answer:

Encounter data from ER visits would provide most of the data necessary to complete

this project. If time of arrival is not available from the encounter data at the HMO,

arrival time data should be sought from the contracted hospitals.

3. How could the reports be structured to provide meaningful information?

Answer:

To display the number of ER visits and expenses, bar graphs with associated values

could be used to display the group’s data compared to the remainder of the network

and to the values associated with other groups in the network. There could be four

graphs showing:

• ER visits

• ER expenses

• ER visits PMPM

• ER expenses PMPM

Diagnosis data could be structured as a frequency table comparing the

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 physician group to the remainder of the network and to other groups in the network.

To be most valuable, two tables should be provided. The first table would be a

summary table collapsing diagnoses into broad categories based on the chapter

divisions of the current version of ICD, providing a high-level view of the reason for

visit. The second table would include the frequency of each specific ICD diagnostic

code, providing a detailed look at specific reasons for visit.

Two bar graphs, each with an associated line graph, could be used to display

data for the time of visit over a 24-hour period, first for weekday visits and then for

weekend visits. One-hour increments should be used. Students may need to review

data presentation techniques studied in other courses to set up appropriate graphs and

tables.

Data for patients having ER visits should be given to the physician group in a

spreadsheet format containing columns for patient name, date of birth, member

number (or other identifier), date of ER visit, time of ER visit (if known), PCP name

or number, primary diagnosis code and description, primary procedure code and

description, and total charges.

Highlights from AHIMA Curricular Competencies

I. Domain: Data Content, Structure & Standards (Information Governance)

Chapter 4 provides information on the evolution of managed care plus external

factors that require the managed care industry to continue adapting to an ever-

changing environment. HMO, PPO, POS plans, and managed indemnity plans are

included in this chapter. The Healthcare Effectiveness Data and Information Set

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 (HEDIS) is discussed in Chapter 4. Health care professionals who work in

managed care are identified. Classification systems used in managed care

organizations are presented.

II. Domain: Information Protection: Access, Disclosure, Archival, Privacy &

Security

Key accreditation organizations are identified, including NCQA with its

specific focus on managed care. Federal regulatory issues such as those related to

the Clinical Laboratory Improvement Amendments of 1988 (CLIA) are

introduced.

III. Domain: Informatics, Analytics, and Data Use

The chapter discusses the specialized requirements of electronic information

systems for managed care and provides examples of both basic components and

advanced features. This chapter explains the type of data needed to provide useful

statistics to management.

IV. Domain: Revenue Management

Chapter 4 discusses data needed to monitor the financial performance of the

managed care organization and explains special considerations for revenue

generation in an MCO. The use of hierarchical condition categories (HCCs) in

adjusting premium payments to Medicare Advantage plans is explained. The

concept of revenue for managed care organizations (as opposed to

reimbursement) is covered along with data that might be monitored as part of the

unique revenue cycle of an MCO. Reimbursement concepts such as deductible,

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 copayment, coinsurance, and coordination of benefits are defined and explained.

MCO revenue and reimbursement to the provider of care including salary,

capitation (PMPM), per diem, fee schedule, RBRVS, DRGs, and discounted

charges are covered in this chapter.

V. Domain: Compliance

Chapter 4 discusses the organization of a quality improvement plan in managed

care along with indicators and tools that can be used in quality management.

Concepts related to utilization management in this setting (e.g., preadmission

certification, preauthorization, concurrent review, discharge planning) are defined

and explained. ACOs are explained.

VI. Leadership

Consumer-directed health plans such as FSA, HRA, and HAS are explained in

Chapter 4. Credentialing, recredentialing, and provider’s office evaluations are

explained.

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