Managed Care

A General Description

Insurance companies initiated managed care systems as a way to share risk with service providers, such as doctors and hospitals and their clients. The Pennsylvania Department of Public Welfare is phasing in managed care (for both physical health and behavioral health services) for individuals who are eligible for Medical Assistance. The goal of managed care is to control both cost and quality of services. Managed Care is based on two key ideas:

• Money is a limited resource. Communities, states and the federal government have only so many dollars to spend on human services, medical or mental health care.
• Early intervention and the provision of low end services reduce cost. Managed care focuses on prevention early intervention; in the home and community services are less expensive.

How Do Managed Care Systems Operate?

Managed Care companies contract with physicians and others to provide services. Contractors receive a fee for each enrolled participant or client. The assumption is that in any month not every participant will use every service available. Employees of the managed care company, called treatment reviewers, together with providers (such as child clinicians) define conditions for and determine the scope of treatment in a process known as utilization review. The managed care company begins by establishing contracts with service providers. These contracts determine in advance who will be served, what services will be provided, how much each service will cost, and the standards for evaluating services. Once the contract is signed, providers who go over the cost limits set by the contract will lose money. Providers who save money will show profits. The premise is that offering preventative services will save money.

How Will the Utilization Review Work?

Managed care treatment reviewers determine how much money can and will be spent, evaluate treatment plans, and approve or disapprove individual treatment plans or services. Historically only doctors and clinicians determined treatment. Under managed care, cost as well as client needs becomes a factor in treatment decisions. The treatment reviewer will question cost, medical necessity and the appropriateness of the service. In utilization review the treatment reviewer will generally ask for answers to the following questions.

• Is the service medically necessary? Are the symptoms or behaviors serious enough to justify the current level of care?
• Is the service appropriate? Is the current level of care necessary to treat the child's severity of illness?
• Is there benefit? Is the child showing progress or other signs which justify treatment at the current level of care?

The answers to these questions will determine whether services are continued, stopped or changed. For services to continue at the current level, the review must answer "yes" to all three questions. A "no" answer to any of the three questions will result in the redesign of benefits. Frequent utilization reviews direct the services provided to individuals. During the review, the provider and treatment reviewer project desired outcomes for the child; identify the essential services and secure a cost effective plan to achieve the designated outcomes.

Trying to secure the proper medical care for our child can be a stressful process. Sometimes services may be denied to your child by the public health system that you believe your child needs. When there is a discrepancy between the services provided and the services desired, you have a right to have your voice heard.

For up to date information about managed care in your county contact:

The Health Law Project
Philadelphia
924 Cherry Street, Suite 300
Philadelphia, PA 19107
215-625-3663
215-625-3879 (fax)
and
Harrisburg
101 South 2nd St., Suite 4
Harrisburg, PA 17101
771-236-6310
717-236-6311 (fax)
and
Pittsburgh
650 Smithfield St, Suite 2130
Pittsburgh, PA 15222
412-434-5779
412-434-0128 (fax)

Parents Involved Network - 800-688-4226

Commonly Used Terms and Acronyms

• Acute Care - short-term care for a person with a single episode of short-term illness or with an exacerbation of a chronic condition.
• Administrative Costs - costs not linked directly to the provision of medical care. Includes marketing, claims processing, bill and medical record keeping among others.
• Behavioral Health Care Firm - specialized (for profit) managed care organizations, focusing on mental health and substance abuse benefits, which they term "behavioral health." These firms offer employers and public agencies a managed mental health and substance abuse benefit.
• Capitation - a fixed amount of money paid per person for covered services for a specific time; usually expressed in units of per member per month (pmpm).
• Carve-out- a separate contract or sub contract for a certain population such as those with mental health or substance abuse problems.
• Enrollee - person eligible for service from a managed care plan.
• Fee for Service - payment of specific amounts for specific services rendered on a service unit basis.
• Freedom of Choice - the ability of consumers to select their own doctors. In Medicaid, the federal requirement that individuals be able to choose their health care providers.
• Full Risk Plans - general health maintenance organizations, these are fully capitated plans that, for a fixed monthly fee per enrolled, assume the financial risk of providing all medically necessary services.
• Gatekeeper - primary care physician responsible for coordinating and managing health care needs of members. Generally in order for speciality services, such as mental health and hospital care to be covered, the gatekeeper must first approve the referral.
• Health Care Financing Agency - the federal agency that oversees the Medical Assistance program.
• Health Maintenance Organization (HMO) - as defined in the Health Maintenance Act of 1973. A legal entity or organized system of health care that provides directly (or arranges for) a comprehensive range of basic and supplemental health care services to a voluntarily enrolled population in a geographic area on the primarily prepaid and fixed period basic.
• Indemnity Health Insurance - plan that reimburses physicians and other providers for health services furnished to enrollees.
• Loss Ratio - ratio of managed care entity's actual incurred expenses to total premiums.
• MCO - Managed Care Organization.
• Medicaid Waiver - permits a state to develop a Medicaid program that does not comply with all requirements of federal law, although certain safeguards must be met.
• Medically Necessary - a determination made by a third party payer or a review organization regarding whether a given medical intervention was, in fact, necessary for a particular patient.
• Outcomes Measure - a tool to assess the impact of health services in terms of improved quality and/or longevity of life and functioning.
• Performance Measure - a measure that describes the health care being provided. Current performance measures indicate whether a health plan or provider has appropriately provided certain services expected to lead to desirable outcomes. Performance measures do not necessarily address client outcomes directly.
• PMPM - per member per month.
• Preferred Provider Organization (PPO) - a network of providers that agrees to accept negotiated fees in return for prompt payment and a certain volume of patients. Enrollees can use providers outside the PPO network at an added expense to the patient.
• Primary Care - professional and related services administered by an internist, family practitioner or pediatrician in an ambulatory setting.
• Report Card - a published report for consumers on the premium costs for a plan and overall quality of a health plan or provider. Report cards generally include measures of the plan's delivery of appropriate services, patient outcomes, patient satisfaction and cost structure.
• Risk - possibility that revenues of the insurer will not be sufficient to cover expenditures incurred in the delivery of contractual services. A managed care provider is at risk if actual expenses exceed the payment amount.
• Risk Adjustment - the adjustment of premiums or outcome measures to compensate health plans for the risks associated with individuals who are more likely to require costly treatment. Risk adjustment takes into account the health status and risk profile of patients (for example, severity of illness, comorbidity, consumption of cigarettes and alcohol).
• Utilization Review (UR) - evaluation of the necessity, appropriateness and efficiency of the use of health services, procedures and facilities. This includes review of appropriateness of admissions, services ordered and provided, length of stay and discharge practices on a concurrent and retrospective basis.

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