ALTERNATIVE DELIVERY SYSTEMS
A catch-all phrase used to cover all forms of health care delivery except traditional fee-for-service, private practice. The terms includes HMOs, PPOs, IPAs and other systems of providing healthcare.
AMBULATORY CARE
Health care services that do not require hospitalization of a patient, such as those delivered at a physician's office, clinic, medical center, or outpatient service.
ANCILLARY
A term used to describe additional services performed related to care, such as lab work, x-ray and anesthesia.
COPAYMENT
A cost-sharing arrangement in which a plan member pays a specified charge for a specified service, such as $10 for an office visit. The member is usually responsible for payment at the time the health care is rendered. Typical copayments are fixed or variable flat amounts for physician office visits, prescriptions or hospital services. Some copayments are referred to as co-insurance with the distinguishing characteristics that copayments are flat or variable dollar amounts and co-insurance is a defined percentage of the charges for services rendered. Also called copay.
| For the provider, if you collect copayments in your office, make you have a system in place to be able to audit that you actually did collect the copayments in full at time of service. |
CO-INSURANCE
The portion of covered healthcare cost for which the covered person has a financial responsibility, usually according to a fixed percentage. Often co-insurance applies after first meeting a deductible requirement.
COVERED SERVICES
A service that is covered under the terms of the contract between the HMO/PPO and the contract holder (employer or noncommercial subscriber).
| If you are the provider and entering into a managed care contract be very careful with what is considered a "Covered Service" that you are to provide under the contract. Make sure you are able to provide those services and still make a profit. |
PROVIDER
A person, entity or facility which provides medical care or services (ex. A physician, medical group practice, hospital, nursing home, or pharmacy).
| In the 1980s physicians did not like to be called the generic term of "Provider" and by the 2000's this seemed like less of an issue. |
RISK
The chance or possibility of loss. Risk in managed care is the current movement to put physicians at financial risk for treatment decisions that mixes "probability risk" - the likelihood of medical events based on characteristics of populations in a given pool (which is the typical responsibility of insurance) - with "efficiency risk - how competently the doctor treats the patient.
| The financial Risk of Losing more money than making money under managed care contracts is a HUGE area for physicians to be aware of. |
PAYMENT METHODS:
FEE-FOR-SERVICE (FFS)
The traditional healthcare payment system using reimbursement under which physicians and other providers receive a payment for services rendered. Payment may be made by an insurance company, the patient or a government program such as Medicare or Medicaid. Fee-For-Service is a system of payment under which a fee is charged for each service provided on a retrospective basis. Typically, under Fee-For-Service, Providers charge their cost plus a profit margin for actual services rendered. In contrast, most HMO’s pay for services on a prospective, fixed rate basis which means the charges are agreed to in advance to services being rendered. Contrast Fee-For-Service payment method with "Per Member/ Per Month" (PM/PM) payment method under Capitation.
| By
2002, some primary care physicians are entering into "Wellness
Care" type of arrangements in which patients pay a prospective flat
fee per year (meaning the fee is paid before any services are rendered)
such as $1500 just to join this kind of practice and in return get a
designated amount of uninterrupted time with the physician during the
year including one hour visits with the physician. Some disagree
with this approach saying type of system is for the wealthy.
According to a NBC News presentation on April 3, 2002: "A Boca Raton doctor now spends significantly more face-time with a patient, including 30 minutes for a routine follow-up visit and an entire hour during annual physicals. “I feel like I’m the old family doctor now, that I wasn’t before,” says Dr. Robert Colton. “I know everybody personally, by their name. I bump into them in public, I know who they are. Their husbands, their children, their family. I know everything about them.” |
DISCOUNTED FEE-FOR-SERVICE
A reimbursement methodology in which the Provider is paid a fixed percentage discount off of full charges (ex. 80% of charges). Discounts may be made in a variety of ways such as package pricing, or established prices for specific items or services (i.e. fee schedules) or maximum price limits imposed through determination of reasonableness.
| Discounted-Fee-for-Service is commonly used by PPOs - paying for example 80% of the physician's usual and customary rate of charges |
PER DIEM
A set daily amount, frequently used in conjunction with a hospital contract whereby a daily charge is established for HMO/ PPO members in the hospital regardless of the actual services provided. Per diem is a flat rate per day paid for all "Covered Services".
| Per diem is a flat rate per day |
CAPITATION (CAP)
| Internists earned 32% of their income from HMOs in 2000 compared with 23% in 1998 with median gross income form HMOs at $64,900 and earned more of their income from PPOs but the dollar amount they took in from PPOs declined 12% to $47,300 -- According to an article by Ken Terry, "Managed Care: Could You Live Without It?" Medical Economics, (Dec.3, 2001) |
A stipulated dollar amount established to cover the cost of health care services delivered to a person, usually expressed in units of per member per month (PMPM). The term usually refers to a negotiated per capita rate to be paid periodically, usually monthly, to a health care provider. The provider is responsible for delivering or arranging for the delivery of all health services as required by the covered person under the condition of the provider contract. Capitation is a fixed periodic prospective payment to a Provider, regardless of the number of services provided to each member. This payment is the same regardless of the amount of services rendered by the Provider.
| Capitation is a method of paying providers in advance before services are rendered (i.e. prospectively) such as HMOs paying a flat rate per member per month in advance to the provider before any health care services are rendered |
TYPES OF ORGANIZATIONS:
INDEMNITY INSURANCE
The traditional type of health insurance that pays for medical services after the services are performed, usually on a fee for service basis. For example, where the insurance carrier pays 80% of the bill and the patient pays 20% after satisfying the deductible.
MANAGED CARE
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The term "Managed Care" is a broad term typically referring to HMOs, PPOs and many of the tools used by such entities including: |
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A system of health care delivery that influences utilization of services and measures performance. The goal is a system that delivers value by giving people access to quality, cost-effective health care. Umbrella label referring to any organization which directs and manages the delivery of health care to ensure high quality and cost effectiveness. Generally, managed care is any system that integrates the financing and delivery of appropriate medical care by means of (one or more of) the following four features:
(1) contracts with selected physicians and hospitals that furnish a comprehensive set of health care services to enrolled members, usually for a predetermined monthly premium;
(2) utilization and quality controls that contracting providers agree to accept;
(3) financial incentives for patients to use providers and facilities associated with the Managed Care Organization’s ("MCO") plan; and
(4) assumption of some financial risk by doctors.
TYPES OF MANAGED CARE ORGANIZATIONS ("MCO"):
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Types of MCOs include: |
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HEALTH MAINTENANCE ORGANIZATION (HMO)
Health Maintenance Organization ("HMO") is an organized system of care that provides health care services to a defined population for a fixed, prospective per-person fee. Typically, members are not reimbursed for care not provided or authorized by the HMO. HMOs primarily use Capitation, but may use other methods of payment such as Discounted Fee-For-Service. Typically, HMOs have at least four characteristics to call itself an HMO: (1) an organized system for providing health care in a geographic area, for which the HMO is responsible for providing or otherwise assuring its delivery; (2) an agreed upon set of basic and supplemental health maintenance and treatment services; (3) a voluntary enrolled group of people; (4) community rating. There are four basic models of HMOs: group model, individual practice association model, network model and staff model.
PREFERRED PROVIDER ORGANIZATION (PPO)
An organized system of care in which the PPO contracts with independent physicians, who become the "preferred" Providers, typically accepting reimbursement on a negotiated fee schedule rather than capitation. Patients may seek treatment from nonmember physicians for a higher co-payment or fee, and PPO physicians may also see non-PPO patients. In essence, PPO’s contract to provide hospital, physician, and other health care services at discounted rates to employer groups.
HMOs bottom lines are improving as premium increases outpace medical costs and PPOs will continue to gain ground in membership as HMOs struggle with an image problem -- According to Laura Benko, "Outlook '02; The Healthcare Industry Faces Many of the Usual Financial, Political and Operational Challenges, But Some Sectors Begin the New Year with Strong Vital Signs," Modern Healthcare (Jan. 7, 2002).
MANAGEMENT SERVICES ORGANIZATION (MSO)
Provides practice management services to doctor groups and other healthcare providers. MSOs may be sponsored by hospitals, doctors or a joint venture between the two. Also, MSOs may be organized by those with expertise in management and experience in the health-care industry. Some MSOs are large publicly held organizations, others are start-ups with plans to become public companies. The range of services offered by MSOs vary. Some MSOs may acquire the tangible assets of a medical group and contracts with the group to provide all facilities, equipment and administrative services for a management fee. Other MSOs may offer only administrative services and give the Providers a menu to choose from. Some MSOs may offer the Provider the choice between these two approaches.
INDEPENDENT PRACTICE ASSOCIATION or INDEPENDENT PROVIDER ASSOCIATION (IPA)
A legal entity comprised of physicians in separate private practices which allows them to contract with health plans as a unified network. Generally, IPAs contract with HMOs, PPOs and possibly employer groups on behalf of the network of affiliated Providers. Also, the affiliated Providers of the IPA may contract with a variety of IPAs, HMOs, PPOs and employer groups, unless an exclusive arrangement is made.
THIRD PARTY ADMINISTRATOR (TPA)
An independent person or corporate entity (third party) who administers group benefits, claims and administration for a self-insured company or group. A TPA does not underwrite the risk. A TPA collects premiums, pays claims, and/or provides administrative services.
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Traditionally, typically, uses capitation and extensive utilization management tools. There are different kinds of HMOs such as the staff model where physicians are employees of the HMO as compared to other types of HMOs where physicians or groups or networks contract with the HMOs
Contracts with providers (hospitals, doctors, pharmacies, etc.) to create a preferred network of contracted participating providers. Traditionally uses discounted fee for service to pay providers and through the years started using utilization management tools.
Collects premium money and pays claims. PPOs may contract with or create their own TPAs.
Network of physicians joined together for contracting purposes. Sole practitioners can join an IPA. |