Healthcare 101

Day - 2

By
George Alexander
Global Headquarters
120 Vantis, Aliso Viejo CA
92656
Phone: 949.716.8757
www.ust-global.com

SETTING THE NEW STANDARD IN

GLOBAL SOURCING AND DELIVERY

Topics covered on Day 1

Topic 1
Evolution of Healthcare Delivery and Finance
Topic 2
Basic concepts -- Coverage, Benefits, Insurance
Topic 3
Managed Care Benefits and Networks
Topic 4
Financing Managed Care

Question
When determining physician's fee reimbursements, the
Blossom Managed Healthcare Group assigns a weighted
value to each medical procedure or service and multiplies
the weighted value by a money multiplier, as shown below:
Weighted value for service x Money Multiplier = Amount
reimbursed to physician

This information indicates that Blossom determines

Physicians reimbursement using a financial arrangement
called :
A
B
C
D

Discounted Fee for Service

Global Capitation Arrangement
With hold Arrangement
Relative value Scale

Question
One way in which Managed Care Plan differs from Traditional
Indemnity Plan is that Managed Care Plan typically :

A provides less extensive benefits than those provided

under traditional indemnity plan
B Place a grater emphasis on preventive care than do
traditional indemnity plan
C require member to pay a % of cost of medical services
rendered after the claim is filed, rather than a fix copayment
at the time of service as required by indemnity plan.
D Contain cost sharing requirements that result in more out
of pocket spending by members than do the cost sharing
requirements in traditional indemnity plans

Question
By definition A Managed Care plans Network refers to the

A Organization and individuals involved in the

consumption of healthcare provided by the plan.
B Relative accessibility of the plans providers to the
plans participants.
C Group of physicians, Hospitals with whom the plan has
contracted to provide medical services to its members.
D Integration of Plans participants with plans Providers

Schedule for Day 2

Topic 5
Health Maintenance Organization

Topic 6
PPO, POS and Managed indemnity plans
Wellpoint Plans
Group plans
Individual plans

Topic 7
Managed Healthcare for Specialty Services
Dental benefits
Behavioral healthcare benefits
Pharmacy benefit

Topic 8
Provider Organizations and Provider Integration

Topic 5
Health Maintenance Organizations - HMO

Topic 5 : Health Maintenance

Organizations - HMO

Global Headquarters
120 Vantis, Aliso Viejo CA
92656
Phone: 949.716.8757
www.ust-global.com

SETTING THE NEW STANDARD IN

GLOBAL SOURCING AND DELIVERY

Course Content

Day 2
Topic 5 : Health Maintenance Organizations - HMO
Health Maintenance Organization
Background HMO Act 1973
Benefits
Membership
Open enrollment period
Financing
Closed and Open panel HMO
HMO Models
Key Terms

Topic 5

Health Maintenance Organization

(HMO)

Healthcare system that

assumes or shares both financial risks and delivery risks
associated with providing comprehensive medical services
to a voluntarily enrolled population
in a particular geographical area,
usually in return for a fixed, prepaid fee (premium).

Historically HMOs were called as prepaid group practices,

although they were formed as corporations.
Most state laws require HMO to be a corporation
HMO must fulfill all statutory requirements and obtain
license to operate in a state.
HMO may be sponsored by variety of organizations and
can be for-profit or not-for-profit.

Background of HMOs
HMOs have been in existence for more than 70 years
Were very popular in mid 70s as a result of a federal
legislation HMO Act 1973
Federal qualification pre-empted certain state laws
To be federally qualified, an HMO could not exclude preexisting condition and had to offer:
Healthcare delivery in a geographic service region.
Both basic and supplemental healthcare service
Voluntary membership to an enrolled population
Act required employers to offer Dual Choice provision.
Provided access to employer market.
Federal grants and loans were made available from 1973 until
1981 for setting up of HMO.
HMO are required to get license Certificate of Authority
- COA

Benefits provided by HMO

Most HMOs provide comprehensive care to their
members
Basic menu of comprehensive services
Federally qualified HMOs established set of services
State mandated list of services
Special medical services Dental care , Vision care, Pharmacy
benefits, behavioral healthcare
Extensive preventive care programs and wellness programs
Prenatal, well baby, Immunizations, 24 hr. telephone line etc.
Smoking cessation, weight watchers program etc.
By coordinating care across all these benefits, HMO ensures that
members receive quality, cost-effective, appropriate medical
care
Unlike financing national or regional basis
Delivery of healthcare primarily local
Providing convenient local access to providers is critical for HMO

Membership
Members include both subscribers who are eligible to
enroll in to HMO directly and their dependents.
Individuals may contract directly with HMO and
receive benefits on an individual basis.
Usually a person becomes member of an HMO through
a group plan made available by their employer.
Under a group plan, HMO member has no contractual
relationship with HMO.
Contractual relationship is between HMO and employer.
HMO offers employer an annual open enrollment period,
usually 30 days, during which employees select their healthcare
coverage
During open enrollment period, HMO automatically accepts
those employees who wish to obtain coverage or switch from
other plan to HMO.
Federally qualified HMO must accept risk for pre-existing
condition for all eligible employees and dependents.

Networks
HMOs enter into negotiated contracts with providers to form a
network.
HMO can own its own facilities or employ physicians in its network.
Provider network which consist of participating physicians,
hospitals and ancillary service providers, delivers medical care to
HMO members in exchange of negotiated compensation.
Important parameters while building network
Access number and type of providers needed in a geo. area
Credentialing what credentials to verify, conduct
re-credentialing and peer reviews
Contractual relationship
whether to own facility or contract for their use
employ providers or contract their services
how providers are compensated
Salary
Capitation
discounted-fee-for-service.

Closed / Open panel HMO

Panel of providers for rendering healthcare services

Closed panel or closed access
HMO employees
Group of physicians that contract with HMO
Panel is closed to other physicians

Open panel or open access

Any physician who meets HMOs standard of care may be eligible
to contract with HMO as a provider.
Physicians operate out of their own facility
See other patients as well as HMO patients.
Panel is open to any qualified provider selected by HMO.

Closed / open panel HMOs

differentiated
Provider must be HMO
employee or contracted by
HMO to join HMO network

Operate out of HMO

facility
Generally see only HMO
patients
Member selects a PCP
from HMO network
Members obtain referral
from PCP because services
are covered only if
specialist are also in HMO
network

Providers contract
independently and may be
selected to join HMO
network as long as they
meet HMOs standard
Operate out of their own
facility
Providers see both HMO
members and Non-members
Members select PCP from
HMO network
Member in few cases may
self refer to specialist
inside or outside network
without going through the
PCP first. OON services at
reduced benefits

HMO Models

IPA Model
Separate physician office
Open or closed panel
PCPs
Independent
Discounted FFS

Specialist
Independent
Discounted FFS

Advantages: Provider choice, independence, low set up cost.

Disadvantages: Limited UM/QM, Limited economies of scale

HMO Models

Staff Model
Ambulatory care facilities (Medical Clinic or Medical Center)
Closed panel
PCPs
Employees
Salaries

Specialist
Employees or Independent
Discounted FFS

Advantages: Utilization, quality control, economies of scale

Disadvantages: Provider restrictions, Capital investment

HMO Models

Group Model
Separate group practices
Open or closed panel
Group practice
Capitation

PCPs
Independent
Salaries, incentives

Specialist
Independent
Discounted FFS, varied

Advantages: Utilization & quality control, low set up cost.

Disadvantages: Provider restriction, limited geographical
access

HMO Models

Network Model
Separate group practices
Open or closed panel
Group practice
Capitation

PCPs
Independent
Salaries, incentives

Specialist
Independent
Discounted FFS, varied

Advantages: Broad range of services, Multiple locations

Disadvantages: Varied utilization, Quality Control.

Key Terms
HMO - Health Maintenance Organization
Certificate of authority
Ancillary Services
Prepaid care
Closed-Panel HMO; Closed access
Open-panel HMO; Open access
Ambulatory care facility
HMO models
IPA
Staff
Group
Network

Question
An HMO that combines characteristics of two or more
HMOs
A Network Model HMO
B Staff model HMO
C Group Model HMO
D Mixed Model HMO

Question
One distinguishing characteristics of HMO is that
typically, an HMO
A arranges for deliver of medical care and provides, or
shares in providing, the financing of that care
B must be organized as not-for-profit organization
C may be organized as a corporation, partnership or
any other legal entity
D must be federally qualified in order to conduct
business in any state

Question
HMOs use many techniques to control Member
Utilization and Provider Utilization of Healthcare
Services. One technique that HMO uses to control
Member Utilization is
A the use of Physician Practice Guidelines
B the requirements of co-payments for office visit
C capitation
D risk pools

Topic 6

PPO, POS, Managed Care Indemnity

Topic 6

Global Headquarters
120 Vantis, Aliso Viejo CA
92656
Phone: 949.716.8757
www.ust-global.com

SETTING THE NEW STANDARD IN

GLOBAL SOURCING AND DELIVERY

Course Content

Day 2
Topic 6 : PPO, POS, Managed Care Indemnity
PPO

Benefits
Networks
Financing
Utilization management
Quality management

EPO
POS
Managed Indemnity Plans
Empire BCBS Plans
Key Terms

Topic 6

PPO, POS, EPO defined

Preferred Provider Organization (PPO)

Healthcare benefit arrangement designed to supply services
at a discounted cost by providing incentives for members to
use designated healthcare providers; also provides coverage
for services rendered outside network.
Financial incentives for members
Lower Copay, Coinsurance
Maximum limits on OOP costs for in-network use.

Wide variety of comprehensive services

Providers do not assume any financial risk.

PPO, POS, EPO defined

Exclusive Provider Organization (EPO)

Another variation of PPO
Similar to PPO in administration and structure
OON care is generally not covered.
An aspect which makes it very much like an HMO.

May PPOs developed EPO to compete directly with HMO.

PPO, POS, EPO defined

Point of Service (POS)

Hybrid product; combines features of Traditional indemnity,
some aspects of HMO, PPO
When member need medical service, they choose, at the point
of service, whether to go to a provider within the plans
network or seek medical care outside of network.
Offers greater amount of coverage INN, have to pay
deductible and Coinsurance for OON services.

Managed Indemnity

Traditional indemnity health plans that have integrated

managed care techniques.

Organized and administered as traditional indemnity plans

but include managed care overlays
Pre certification
Utilization review

Managed care techniques as cost control devices.

Plan does not utilize network of preferred providers.

Members can use providers of their choice.

Question

What is PPO ?

What is the difference between PPO and EPO ?

What is POS ?

Topic 7
Managed Healthcare for Specialty Services

Topic 7 : Managed
healthcare for
Specialty Services

Global Headquarters
120 Vantis, Aliso Viejo CA
92656
Phone: 949.716.8757
www.ust-global.com

SETTING THE NEW STANDARD IN

GLOBAL SOURCING AND DELIVERY

Course Content

Day 2
Topic 7 : Managed healthcare for Specialty Services

Specialty services
Carve out
Dental
Behavioral healthcare
Pharmacy benefit plans

Key Terms

Topic 7

Specialty Services
In past, managed healthcare focused on delivering,
basic physician services and hospital services.
Consumer wants other services also to be part of
expanded benefit package
Dental, Pharmacy benefits.

Specialty services are generally considered outside

standard medical services because of specialized
knowledge required for service delivery and
management.
Requires different providers and delivery system.

Prescription Drugs
Mental health/Substance abuse
Dental; Vision
Longterm care; Rehabilitation services
Workers compensation
Chiropractic

Carve out

Options for providing specialty services for plans

Develop and maintain their own programs
Carve out delivery and management of these services.
Carve out refers to separation of medical services from
basic set of benefits in some way
Basis for separation
Different compensation method
Use of separate network or delivery system
e.g. HIV/AIDS disease management program can be carved
out to another company that specializes in development
and management of programs.
MCO still retains accountability
Carve outs as a means of delivering specialty services.

Dental Care

Managed dental care

Dental HMO
Prepayment

Dental PPO
Discounted fee for service

Dental POS
Prepayment
Discounted fee for service

Contractual agreement between Dentist and plan

Behavioral healthcare

Mental health and chemical dependency related services

Demand for behavioral healthcare is on the rise.

Acceptance of behavioral healthcare issues and awareness
Increased stress on individuals and families
Availability of behavioral healthcare services

How to control utilization of Behavioral services

Initial cost control strategies
Second generation strategies
Alternative treatment levels
Acute care
Post acute care
Partial hospitalization
Intensive outpatient care
Outpatient care

Behavioral healthcare

Second generation strategies

Alternative treatment setting (Hospital,

acute care, post acute care centers)
Alternative treatment methods (Drug
therapy, psycho therapy, counseling)
Crisis intervention
Directing patients to appropriate care
Centralized referral system
Employee assistance programs

Pharmacy benefit plans

a.k.a. Prescription benefit management plan.
Pharmacy Benefit Management (PBM) plans
Offers variety services
Physician profiling
Drug utilization review
Inappropriate dosage
Over/under use for early/late refills
Duplication
Side effects, drug interactions
Formulary management
Open / closed formulary
Generic substitution : generic equivalent no approval
required.
Therapeutic substitution: chemically different entity within
same drug class require physician approval.
Prior authorization
Medical necessity review

Pharmacy benefit plans

Additional services
Mail order pharmacy
Pharmaceutical cards
helps in electronic claim processing
Two / three tier co-payment structures

PBM contractual arrangements

Fee-for-service
PBM creates a retail pharmacy network offers discounts on
prescription drugs and online claim adjudication.
PBM receives claim administration fees for each Rx it fills.
Capitation
Fixed $ amt per employee per month
Risk sharing
Target cost per employee per month, cost overrun and
savings are shared by PBM

Key Terms
Specialty services
Carve-out
Specialty health maintenance organization
Managed dental care
Managed behavioral care
Pharmacy benefit management (PBM) plan
Drug utilization review (DUR)
Open / closed formulary
Generic / Therapeutic substitution
Mail order pharmacy program

Topic 8
Provider Organizations and Provider Integration

Topic 8 :
Provider
Organizations and
Provider
Integration
Topic 5

Global Headquarters
120 Vantis, Aliso Viejo CA
92656
Phone: 949.716.8757
www.ust-global.com

SETTING THE NEW STANDARD IN

GLOBAL SOURCING AND DELIVERY

Course Content
Day 2
Topic 8 : Provider Organizations and Provider Integration
Provider Integration
Operational
Structural
Provider integration models
Physician only integration model.
IPAs
GPWW
Physician practice
management companies
Open / closed PHO
Integrated Delivery system - IDS
Medical foundation
Key Terms

Topic 8

Provider Integration
Plan/Payor organization contracts with providers for
delivery of healthcare.
Individual providers
Organizations representing number of providers
To combine certain operating functions in order to achieve
economies of scale and thus reduce overall operating cost
To strengthen their negotiating power with MCOs and Payors /
Plans.

Provider organizations are characterized by different types

and level of integration.
Integration : when two or more previously separate providers
combine under common ownership or control.
Structural Integration
Operational integration

Provider Integration

Structural Integration
Previously separate providers under common ownership and
control.
Mergers and acquisitions are examples of complete structural
integration
Merger: Two or more separate providers are legally joined.
Acquisition : one Org. buys another Org.
Consolidation: (type of merger) one provider may absorb another
or providers form a new organization with original companies
being dissolved.
Joint venture (Partial Structural integration)
Two or more Org. combines resources to achieve a stated objective.

Merger

Provider A

Provider B

New Provider
created from A, B, C

Provider C

Acquisition

Parent Company
Owns A, B, C

Provider A

Provider B

Provider C

Operational Integration

Consolidation of operations that were previously carried

out separately by each provider into a single operation.
Business Integration
One or more separate non-clinical business functions into one.
e.g. To carry out billing, collections and contracting

Clinical Integration
Involves making variety of health services available to patients
from same organization or entity.
Advantages
Common patient record, single medical record.
Coordination of care
More streamlines administrative processes

Provider integration
The amount of provider integration displayed by each
provider organization falls somewhere on a continuum
stretching from minimal integration to fully integrated.
Independent Practice Association (IPA) minimal
integration.
Integrated Delivery System (IDS) fully integrated.
Full range of healthcare services from birth to death

Other organizations
Group practice without wall (GPWW)
Multiple physician practices under same umbrella org. and
performs certain business operations for member practices.
Management services organization (MSO)
Organization that providers management and administrative
support
Relieve physicians from non-medical business functions.
Physician practice management (PPM)
Purchases physician practices, long term contract with
physicians or equity to physician. Manages non-medical
aspects.

Continuum of Operational
Integration

Physician only models

IPA

GPWW,
MSO

PPM
Company

Less Integrated

Consolidated
Medical Group

More Integrated

Physician and Hospital models

PHO

Less Integrated

IDS, Medical
Foundation

More Integrated

Contracting with Providers - I

IPA

Negotiate contract terms

Contracts

MCO

Physician
Physician
Physician
Physician
Physician

Contracting with Providers - II

MCO

Contract

Contracts

IPA

Physician
Physician
Physician
Physician
Physician

Provider integration

Medical Foundation
Corporate practice of medicine is not permitted in some
states.
Hospital & health plan creates medial foundation
Notforprofit benefit to community.
Purchases and manages physician services

Provider organizations that bear insurance risk.

IDSs, IPAs, PHOs integrate provider operations and take
financial risk.
Provider Organizations that bear insurance risk are referred to
as at risk

Key Terms

Integration
Structural, operational integration

Merger, consolidation, acquisition, joint venture

Business integration
Clinical integration

IPA

Messenger model

Group practice without wall. GPWW.

Physical practice management (PPM compay)

Integrated Delivery System - IDS

Medical foundations

At- risk organization

THANK YOU!
Questions?

Schedule for Day - 3

Topic 9:

Managed Healthcare Operations - Overview

Topic 10:

Medical Management

Topic 11:

Key Healthcare Operations

Topic 12:

Healthcare Industry Protocols