Managed Care:

Managing the Monster

(Outline to accompany PowerPointÒ presentation)

Dennis L. Hufford, CDR, MC, USN

Faculty Development Fellowship

(Last edited for web page 13 July 1999)

Goals:

• Put managed care issues into perspective as they pertain to your role(s) as interns/ residents/ faculty/ staff.
• Forewarn you of the directions in which managed care is heading.
• Suggest tactics with which to peacefully and productively coexist with "the Monster".

Background and History:

• How did we get into this Mess?!?!

The Golden Age of Medicine: 1940-1960’s:

• Technological advances
• Improved hospital hygiene
• Rapid expansion of medical knowledge
• Enhanced esteem of the profession
• Political clout (AMA)
• Patients benefit, and doctors got RICH!
• But, care became EXPENSIVE.

1960’s: the Result...

• Need for Health Insurance to cover costs of high tech care.
• Government involvement.
• Unequal distribution of resources.
• Political concern re: care for the poor and elderly.
• Third party payment by Fee-for-Service.
• Deep Pockets + Uncontrolled Billing = SKYROCKETING COSTS to Insurance Underwriters including the Federal Government.
• Things were getting out of hand….

The 1970’s

• First attempts to control growth in health care expenditures.
• Goal:
• Avoid duplication of resources.
• Applied to major building projects.
• The First HMO’s arose in attempt to "manage" costs.

The 1980’s

• Reagan Administration.
• Supply and demand theory.
• "Let the Market Decide"
• Result: Large hospital corporations and large practices gained competitive advantage.
• Medical profession moved towards increased specialization.
• Specialists formed their own professional organizations.
• AMA membership and political clout declined.

Meanwhile, back in the Military...

• The 1980’s Legacy: Large military, large hospitals, over-specialization, and then:
• NO ENEMY!!
• The high cost of winning the cold war:
• Drawdowns, base closures.
• Increased competition between war fighters and medical for budget $$.
• Many MTFs closed.
• ACCESS for dependents and retirees at MTFs shrank, more shifted to CHAMPUS.
• Big rise in CHAMPUS expenditures.
• Congress was hearing more and more about ACCESS from beneficiaries.

The 1990’s: Dawn of the Managed Care Era

• Rate of rise in costs begins to decline.
• Proportionately fewer Americans without health insurance.
• Employers driven into managed care plans, because unmanaged FFS too expensive.

"Success Stories" of Managed Care Models

• HMO Model :
• an INSURANCE plan.
• regulated as such.
• Prepaid premiums for care over a specified term.
• Requires enrollment, acceptance of rules.
• Preferred Provider Organization (PPO) model:
• Based on provider incentives to patient or employer to seek care there.
• Discounted charges.
• The medical equivalent of "Costco".
• No enrollment, no prepayment.
• "Managed" Fee-For-Service models:
• ex. Blue Cross/Blue Shield, CIGNA.
• Preset limits on "reasonable and customary" charges.
• Based on Medicare reimbursement structures.
• Problems with specialty and geographic differences.

Congress, DOD, and Managed Care, 1990-1994

• Congress "sold" on the idea of military managed care as cost control and access enhancement "magic bullet".
• Directs DOD to make it happen.
• The answer: TRICARE!

What is Tricare?

• CHAMPUS by any other name…
• A hybrid of the 3 "successful" managed care models:
• FFS = Tricare Standard.
• PPO = Tricare Extra.
• HMO= Tricare Prime.
• It is a compromise plan intended to serve multiple masters:
• Beneficiaries calling for ACCESS.
• War Fighters, seeking "bang for the buck" for their budget $$.
• the CHAMPUS program seeking to control skyrocketing costs.
• DOD let contracts for geographic regions to Managed Care corporations for 5 year contracts.
• The primary contractor is responsible for providing all beneficiary health care services within each region.
• Contractor guaranteed a minimum profit, no maximum limit.

Features of Tricare Alternatives

• Standard:
• Maximum patient flexibility in selecting their care outside MTF.
• Maximum patient cost.
• Maximum program cost (FFS and administrative costs highest).
• Minimum Access to MTFs. (space-A)
• Extra:
• "Middle ground" access and costs.
• Access to "network" of PPOs, offering discounted services COMPARED TO STANDARD.
• Same space-A access to MTFs.
• Costs (both to patient and government) less than Standard, but more than Prime.
• Prime:
• Priority patient access to MTFs.
• Lowest cost to patients.
• Lowest cost to contractor.
• Limits patient flexibility by
• requiring enrollment.
• assignment of PCM.

Why are HMO’s cheaper?

• HMOs that manage costs best:
• Manage ACCESS:
• those WHO NEED TO GET IN get in promptly.
• those who don’t NEED to see a doctor DON’T see a doctor.
• Practice EVIDENCE-Based medicine:
• Therapies and tests that don’t improve outcome are costly.
• Keep their providers informed and monitor their performance:
• incentives to alter practice towards most cost effective methods.
• Manage PREVENTIVE services effectively:
• including self care, risk factor modification, patient education.
• Maximize use of least expensive personnel capable of performing specific services:
• requires stability of workforce and effective training.
• critical links: triage, appointing, physician extenders, billing clerks.

The Rush to Managed Care - Trouble in New Territory

• Problems w/ Organizations in Integrated Systems.
• Many services under one roof.
• Operating Margins Down.
• "Cost" giving way to "access".
• Emergence of Carve-Ins.

Where Are We Going?

• Enrollment Based Capitation.
• Medicare Subvention

Enrollment Based Capitation

• Budget plan based upon enrollment of TRICARE PRIME.
• Rewards MTF for increasing efficiency and keeping care in-house.
• Encourages regional and local savings.
• Phased in implementation starting 1999.

The EFFECTS of Capitation:

• Drive towards maximal enrollment
• equals maximum budget
• equals maximum dependence of Tricare contractor upon the MTF
• job security
• Maximal PRIME enrollment at MTF = Maximal utilization of PC clinics.
• Major paradigm shift in usual ways of doing business:
• No more built-in reserve capacities.
• BIG potential impact on residencies.
• Who will have time to Teach? Research? Train?

Capitation RISK:

• A facility in which PRIME member enrolls will have to REIMBURSE other facilities (including MTFs) who provide services for that member.
• The Enrollee’s MTF commander will have power to choose referral facilities, under no obligation to pick another MTF!
• Tertiary care MTFs must contain specialty service costs to compete with "carve-ins" and cost efficient civilian facilities.
• OR ELSE they risk becoming redundant, too expensive and therefore EXPENDABLE.

Medicare Subvention Trial

• Called Tricare SENIOR PRIME.
• Capitated HMO like Tricare Prime.
• Huge political forces at work on both sides of this issue.
• Trial began at five sites including MAMC on 01 SEP 98.
• Impacts documentation, training and funding for department and GME.
• 3300 retirees participating in trial
• Competition is Federal Employees Health Benefits Plan (FEHBP), also in trial stage at other MTFs.
• For information: Tricare website, and service center at MAMC

Peaceful Coexistence with the Monster

• Feed the Monster DATA
• Document well
• Listen to what it has to say
• Utilize feedback to improve practice
• Do Your Part
• Manage your time and patients well
• Pay attention to ACCESS

What Can the Monster Teach Us?

• How to count
• Value of our work
• Cost of what we do
• How to play well with our peers
• Utilization of specialist and resources

What Can The Monster DO FOR US?

• Protect us from meaner Monsters!
• Justify our continued existence
• Buy us help to do our jobs better
• Promote research

Summary

• Managed care financing has changed the direction of medical care in the U.S., and is here to stay!
• Business of medicine has put pressure on productivity at expense of education and care for underserved Americans.
• Institutions and doctors must adapt to the new ground rules.

References:

• Region 11 home page (lessons learned)
• www.tricarenw.mamc.amedd.army.mil
• DoD Heath Affairs (HA) home page:
• has capitation (EBC) information & formulas
• many helpful policy information letters
• www.ha.osd.mil/

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