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Managed CareSelect:
Financing Community Hospitals
Discounted Fee for Service The hospital receives a percentage of its usual fees. The percentage for an individual contract is confidential, but ranges from 30-80% of the hospital's usual charges. Discount fee-for-service rewards the hospital for accumulating as many fees as possible for an individual patient. The managed care company counters this by reserving the right to determine whether the services are medically necessary and/or which services are covered. Negotiated Perdiem The hospital receives a negotiated rate per patient per day. The amount is confidential, but ranges from $600 to $1500 per day for general inpatient care. Haggling over individual charges is eliminated. The hospital is rewarded for using only appropriate services. The managed care company counters by determining whether the patient meets their criteria for medically necessary hospital days. Under this arrangement, managed care wants to decrease length-of-stay. The financial incentive is to increase length-of-stay. Capitation
The hospital receives a negotiated amount per patient enrolled in the health care plan per month.
The hospital agrees to assume the risk of potential costs of the care of the patient in exchange
for a predictable revenue stream whether or not those services are used. Under this system, the
hospital is rewarded for using only the most appropriate services.
Financing Academic Hospitals Overall costs are higher at academic hospitals than at community hospitals. When managed care companies are negotiating contracts with hospitals, they are comparing academic hospitals with community hospitals on two criteria: cost per case and "quality". In addition, they are not paying for graduate medical education of resident physicians. Cost per case is calculated by dividing the total costs of the hospital by the total number of hospitalized patients. This number is generally available. For example, in Chicago in 1998, the average cost per case for an academic hospital was in the range of $10,000-$12,000. The average for community hospitals was in the range of $6,000 to $8,000. Quality is determined in a number of ways. It is a matter of intense argument as to which measure, if any, is valid. On most measures, academic hospitals would argue that their scores are inaccurate because their case mix is different from community hospitals. They would say they care for more complex cases. Therefore, measures of mortality or morbidity are likely to be inaccurate. In order to avoid this quagmire, quality is also measured by patient satisfaction. There are
national surveys that hospitals use to measure patient satisfaction. These scores are generally
available and permit managed care companies to compare hospitals.
Financing Subacute and Skilled Care Financing Custodial Care Financing Ambulatory Outpatient Care
Full capitation In full capitation, the managed care company gives the health care provider a set amount of money (capitation) per member per month. The health care provider must then pay for all of the health care our of the total amount. In other words, the health care provider takes the risk if the cost of health care exceeds the amount paid. Alternatively, the health care provider gets to keep the balance if the costs are less than the amount paid. Capitation can be full-risk, or only partial. For example, in a full-risk capitation plan, all of the health care costs, including hospitalization, operations, diagnostic tests are included in the contract. Alternatively, partial risk capitation may relate only to the ambulatory outpatient portion of health care. Fee-for-service Much of managed care is still conducted on a fee-for-service basis. However, the fee paid is usually deeply discounted over usual and customary fees. The rationale is that in exchange for a reliable panel of patients, a physician will be willing to accept much less money per visit. The threat is that if the physician doesn't like the proposed fee structure, the plan will contract with another physician and take the business elsewhere. Most managed care fee-for-service plans include a utilization review process. Colloquially called "mother-may-I" by physicians, this means that the physician must ask permission from a central review person for things like chest x-rays and referrals to specialists. Carve-outs For some specialty services, eg. Bone marrow transplant, a managed care company may establish a special contract with a provider for that service. It may include not only the physician's fees, but all the costs associated with providing that service to a patient. Global budgets
Some managed care companies own and manage all of the components of health care. Kaiser would be an example where they own the hospitals, the clinics, the diagnostic facilities, etc. In these cases, there is a global budget to cover all services. However, they use fee-for-service and capitation mechanisms as budget management tools to manage productivity and costs within the global budget.
Financing Home Care Financing Hospice Care Under current regulations, a Medicare managed care plan (such as Medicare+Choice) will continue to receive 25% of its Medicare capitation for a patient who elects the Medicare Hospice Benefit because it remains responsible for the care of problems not related to the terminal illness. Some managed care plans try to "unbundle" or otherwise negotiate the services provided to its members by an individual hospice. For example, if the managed care plan already covers prescriptions and home care services, they will try to have the hospice provide only the nurse or social work or chaplain visits on a fee-for-service basis rather than under a single per diem rate. Next, consider Government (Veterans Administration, Active Duty Military).
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