Managed care concepts and rules for reimbursement

The Commission for Case Manager Certification (CCMC) writes the CCM exam. They have provided us with a Glossary of Terms on their website. According to the CCMC, “the glossary of terms is a list of terms directly or indirectly related to the practice of case management compiled by members of CCMC’s Exam and Research Committee…This list is not meant to be exhaustive. It is organized based on major aspects of case management practice. CCMC suggests that candidates for the CCM exam be familiar with terms and concepts relevant to case management. This list should be helpful in that regard.”

For this reason I will start by listing the definitions from the CCMC’s glossary of terms followed by my notes.

CCMC Definitions Related to Managed Care

Managed Care: A system of healthcare delivery that aims to provide a generalized structure and focus when managing the use, access, cost, quality, and effectiveness of healthcare services. Links the patient to provider services.

Health Maintenance Organization: An organization that provides or arranges for coverage of designated health services needed by plan members for a fixed prepaid premium. There are four basic models of HMOs: group model, individual practice association (IPA), network model, and staff model. Under the Federal HMO Act an organization must possess the following to call itself an HMO: (1) and organized system for providing healthcare in a geographical area, (2) an agreed-on set of basic and supplemental health maintenance and treatment services, and (3) a voluntarily enrolled group of people.

Group Model HMO: The HMO contracts with a group of physicians for a set fee per patient to provide many different health services in a central location. The group of physicians determines the compensation of each individual physician, often sharing profits.

Individual Practice Association (IPA) Model HMO: This HMO model that contracts with a private practice physician or healthcare association to provide healthcare services in return for a negotiated fee. The IPA then contracts with physicians who continue in their existing individual or group practice.

Network Model HMO: This is the fastest growing form of managed care. The plan contracts with a variety of groups of physicians and other providers in a network of care with organized referral patterns. Networks allow providers to practice outside the HMO.

Staff Model HMO: The most rigid HMO model. Physicians are on the staff of the HMO with some sort of salaried arrangement and provide care exclusively for the health plan enrollees.

Preferred Provider Organization (PPO): A program in which contracts are established with providers of medical care. Providers under a PPO contract are referred to as preferred providers. Usually the benefit contract provides significantly better benefits for services received from preferred providers, thus encouraging members to use these providers. Covered persons are generally allowed benefits for nonparticipating provider services, usually on an indemnity basis with significant copayments.

Exclusive Provider Organization (EPO): A managed care plan that provides benefits only if care is rendered by providers within a specific network.

Point-of-Service (POS) Plan: A type of health plan allowing the covered person to choose to receive a service from a participating or a nonparticipating provider, with different benefit levels associated with the use of participating providers. Members usually pay substantially higher costs in terms of increased premiums, deductibles, and coinsurance. 

CCMC Definitions Related to Reimbursement

Reimbursement: Payment regarding healthcare and services provided by a physician, medical professional, or agency.

Capitation: A fixed amount of money per-member-per-month (PMPM) paid to a care provider for covered services rather than based on specific services provided. The typical reimbursement method used by HMOs. Whether a member uses the health service once or more than once, a provider who is capitated receives the same payment. 

Carve out: Services excluded from a provider contract that may be covered through arrangements with other providers. Providers are not financially responsible for services carved out of their contract.

Case Rates: Rate of reimbursement that packages pricing for a certain category of services. Typically combines facility and professional practitioner fees for care and services. 

Diagnosis-Related Group (DRG): A patient classification scheme that provides a means of relating the type of patient a hospital treats to the costs incurred by the hospital. DRGs demonstrate groups of patients using similar resource consumption and length of stay. It also is known as a statistical system of classifying any inpatient stay into groups for the purposes of payment. DRGs may be primary or secondary; an outlier classification also exists. This is the form of reimbursement that the CMS uses to pay hospitals for Medicare and Medicaid recipients. Also used by a few states for all payers and by many private health plans (usually non-HMO) for contracting purposes. 

Fee-for-Service (FFS): Providers are paid for each service performed, as opposed to capitation. Fee schedules are an example of fee-for-service.

Global Fee: A predetermined all-inclusive fee for a specific set of related services, treated as a single unit for billing or reimbursement purposes. 

ICD-9-CM: International Classification of Diseases, Ninth Revision, Clinical Modification, formulated to standardize diagnoses. It is used for coding medical records in preparation for reimbursement, particularly in the inpatient care setting. ICD-10 is expected to be published soon. 

Per Diem: A daily reimbursement rate for all inpatient hospital services provided in one day to one patient, regardless of the actual costs to the healthcare provider. The rate can vary by service (medical, surgical, mental health, etc.) or can be uniform regardless of intensity of services. 

Risk Sharing: The process whereby an HMO and contracted provider each accept partial responsibility for the financial risk and rewards involved in cost-effectively caring for the members enrolled in the plan and assigned to a specific provider. 

Managed Care Concepts for the Case Manager

Managed care is a system or organization that’s goal is to maintain quality, cost-efficient health care.

4 types of managed care

  • Preferred Provider Organization (PPO)
  • Exclusive Provider Organization (EPO)
  • Point-of-Service (POS) Plan
  • Health Maintenance Organization (HMO)

4 Types of HMOs

  • Group Model HMOs
  • Individual Practice Association (IPA) Model HMO
  • Network Model HMO
  • Staff Model HMO

In the Group Model HMO, the HMO contracts with a multispecialty physician group where the physicians are employed by the group, not the HMO. The HMO and the group share profits or losses.

The Network Model HMO is similar to the group model but involves more than one group of physicians. In this model the HMO contracts with multiple groups of physicians and other providers to form a network of care.

The Individual Practice Association Model HMO contracts with physicians who maintain their existing individual or group practice while also taking on patients of the HMO.  The physicians continue to own their practice, and they provide healthcare to the HMO members for a negotiated rate.

In the Staff Model HMO physicians are employed by the HMO and provide services exclusively to members of the HMO.

HMO’s often use the Primary Care Physician (PCP) as the “gatekeeper”. A patient receives all primary and preventative care from the PCP. Any care needs outside the PCP’s scope of practice would be referred out and coordinated by the PCP. Any care, other than emergency care, not coordinated through the PCP would not be covered by the HMO. 

PPO’s contract with providers to provided care at a discounted rate. The providers with whom they contract are considered “network providers”. If the patient uses a provider that is not part of the network they will have a larger financial responsibility. 

EPO’s are similar to PPO’s in that there is a network of providers who have agreed to provide care for the members at a discounted rate. The difference is that if the patient chooses to go outside the network, there is no reimbursement. 

The Point-of-Service Plan is a combination of a PPO and HMO. The patient can choose to receive care in network at little or no cost, or to go out of network and have larger out of pocket expenses. 

Carve Out

Care out services are those which are not part of the contract the provider has with the HMO. These services are usually handled by other providers without penalty to the PCP. Examples are maternity care, which would be provided by an OB/GYN and not the PCP and mental/behavioral health.

Global Fees

Predetermined, all inclusive payment for a specific group of related services. All services are billed as a single unit. Examples are transplant where all pre and post op care is rolled into one charge and pregnancy where all perinatal and delivery services are paid at one global rate.