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Financial risk sharing with providers in health maintenance organizations, 1999.

The transfer of financial risk from health maintenance organizations (HMOs) to providers is controversial. To provide timely national data on these practices, we conducted a telephone survey in 1999 of a multi-staged probability sample of HMOs in 20 of the nation's 60 largest markets, accounting for 86% of all HMO enrollees nationally. Among those sampled, 82% responded. We found that HMOs' provider networks with physicians, hospitals, skilled nursing homes, and home health agencies are complex and multi-tiered Seventy-six percent of HMOs in our study use contracts for their HMO products that involve global, professional services, or hospital risk capitation to intermediate entities. These arrangements account for between 24.5 million and 27.4 million of the 55.9 million commercial and Medicare HMO enrollees in the 60 largest markets. While capitation arrangements are particularly common in California, they are more common elsewhere than many assume. The complex layering of risk sharing and delegation of care management responsibility raise questions about accountability and administrative costs in managed care. Do complex structures provide a way to involve providers more directly in managed care, or do they diffuse authority and add to administrative costs?

California↗

Is your organization ready to share financial risk with HMOs?

Of growing importance in healthcare delivery is the issue of how the risk of providing services to healthcare maintenance organizations (HMOs) enrollees should be shared by the provider and the HMO. Understanding and monitoring risk-sharing arrangements and how they are developing is critical. This article reviews the trends in managed care and risk sharing and examines regulation of capitation and risk sharing as it varies form state to state.

Capitation Fee↗

Financial and organizational factors affecting the employment of nurse practitioners and physician assistants in medical group practices.

This study examines the financial and organizational factors that are associated with the employment of nurse practitioners (NPs) and physician assistants (PAs) in medical group practices. The source of the data is a survey of 128 medical group practices in Minnesota. The findings suggest that the employment of NPs and PAs and their ratios to primary care physicians (PCPs) in practices that employ them are influenced by the organizational characteristics of the group practice but not by the degree of financial risk sharing for patient care. Although neither the number of years of experience in financial risk sharing nor more revenue from capitation payment contracts were related to employment of these midlevel practitioners (MLPs), large practices, those located in rural locations, not-for-profit practices, and those that scored low on cohesive cultural traits were more likely to employ MLPs. The data provide insights into the market for MLPs and the potential for these clinicians in the future health care system. As medical group practices become larger and have more organizational capacity, they can likely be expected to increase the employment of MLPs and integrate them into their organizations.

Capitation Fee↗

Beyond the clinic: redefining hospital ambulatory care.

Responding to changes in health care financing, government policy, technology, and clinical judgment, and the rise of managed care, hospitals are shifting services from inpatient to outpatient settings and moving them into the community. Institutions are evolving into integrated delivery systems, developing the capacity to provide a continuum of coordinated services in an array of settings and to share financial risk with physicians and managed care organizations. Over the past several years, hospitals in New York City have shifted considerable resources into ambulatory care. In their drive to expand and enhance services, however, they face serious challenges, including a well-established focus on hospitals as inpatient centers of tertiary care and medical education, a heavy reliance upon residents as providers of medical care, limited access to capital, and often inadequate physical plants. In 1995, the United Hospital Fund awarded $600,000 through its Ambulatory Care Services Initiative to support hospitals' efforts to meet the challenges of reorganizing services, compete in a managed care environment, and provide high-quality ambulatory care in more efficient ways. Through the initiative, 12 New York City hospitals started projects to reorganize service delivery and build an infrastructure of systems, technology, and personnel. Among the projects undertaken by the hospitals were:--broad-based reorganization efforts employing primary care models to improve and expand existing ambulatory care services, integrate services, and better coordinate care;--projects to improve information management, planning and testing new systems for scheduling appointments, registering patients, and tracking ambulatory care and its outcomes;--training programs to increase the supply of primary care providers (both nurse practitioners and primary care physicians), train clinical and support staff in the skills needed to deliver more efficient and better ambulatory care, prepare staff for practicing in a managed care environment, and help staff communicate with a culturally diverse patient population and promote the importance of primary care within the community. Significant innovations and improvements were realized through the projects. Several hospitals expanded the availability of primary care services, trained new primary care providers, and helped patients gain access to primary care clinicians for the first time. Better methods for documenting ambulatory care were introduced. To increase efficiency and improve service to patients, some of the hospitals instituted automated appointment systems and improved medical record services. To reduce fragmentation and contain personnel costs, support staff positions were redesigned, and staff were retrained to carry out new multi-tasked responsibilities. Many of the components vital to high-quality ambulatory care can take years to develop, and significant investments of capital. Increased primary care capacity, new specialty group practices, state-of-the-art equipment for diagnosis and treatment, advanced information technology to manage and coordinate care and link services at multiple locations, and highly trained clinical and support staff all require strong commitment and support from a team of senior management executives and medical staff leaders, sufficient staffing resources, and outside expertise. Once the infrastructure is in place, hospitals must continue to reach out to their communities, helping people to understand the health care system and use it effectively.

Ambulatory Care↗

Risk-sharing integration efforts in the hospital sector.

The extent of hospital involvement in integrated delivery systems (IDSs) during 1996 was assessed by a national sample of 235 short-term private general hospitals. Two out of five hospitals were participating in networks with some financial risk sharing, and another third reported membership in IDS networks without financial obligations. Managed care's presence was the only significant factor moving hospitals from a stand-alone status to network membership. The decision to share financial risk was influenced not only by managed care pressures, but also by the level of local hospital competition and the severity of the inpatient case mix.

Analysis of Variance↗

Specialist capitation improves specialty and primary care physician relationships.

Physicians involved in managed care contracting serve as gatekeepers to manage their patients' care and receive payments through capitation arrangements. In serving as gatekeepers, primary care physicians assume financial risk for patients' care. A growing number of specialists, however, are entering into specialist capitation contracts, thereby sharing financial risk and patient care responsibilities. Primary care and specialist physicians should understand the terms of capitation contracts and develop positive working relationships to coordinate efficient, cost-effective patient care. Capitation contracts should define roles and responsibilities of primary care physicians and specialists and should delineate capitated payment rates. When primary care physicians and specialists share financial risk and divide responsibilities, patient care can be managed to the satisfaction of providers, payers, and patients.

Capitation Fee↗

Network structure and hospital financial performance in New York State: 1991-1995.

As networks have proliferated, questions have arisen regarding which structure is optimal. To obtain an answer from the hospital perspective, the authors conducted a survey of New York State hospitals to determine how network integration, complexity, and financial risk sharing relate to measures of financial performance during the period of 1991-1995. Of the 64 hospitals indicating a network affiliation by 1995, 67.2 percent listed some network risk-sharing activity. The least integrated networks were associated with the smallest improvements in throughput, and the most complex were associated with the largest negative changes in operating margins. During the first 2 years of network membership, hospitals joining risk-sharing networks experienced operating margin gains averaging 12 percentage points higher than hospitals joining networks without risk sharing; however, this difference dissipated in later years. Networks with higher levels of integration, lower levels of complexity, and which involve some risk-sharing between affiliates are most likely to experience improved hospital financial performance during the network's initial years.

Delivery of Health Care, Integrated↗

Preparing for full-risk capitation.

Full-risk capitation arrangements involve shared financial risk among all participants and place providers at risk not only for their own financial performance, but also for the performance of other providers in the network. Providers that wish to assume full risk must understand the types of risks they need to manage to ensure financial success for all network participants. They also must choose a method of paying network participants. The five principal physician payment models currently used in conjunction with full-risk capitation contracts are fee-for-service, salary, entrepreneurial, subcapitation, and hospital reimbursement. No matter which model is used, measurement and feedback systems should be established to increase the effectiveness of the payment systems. Such measurement and feedback systems should facilitate risk management, cost management, process management, revenue distribution, and contract renegotiation and follow-up monitoring.

Capitation Fee↗

Analysis of a pharmaceutical risk sharing agreement based on the purchaser's total budget.

Many public and private healthcare payers use formularies as a tool for controlling drug costs and quality. Although the price per dose is often negotiated as part of the formulary listing, payers may still face unlimited financial risk if demand is much greater than expected at the time of listing. The requirement for drug manufacturers to submit a budget impact analysis as part of the drug approval process suggests that payers are concerned not only with the cost effectiveness of a proposed drug but also with the potential increase in total expenditures that may result from new formulary listings. In this paper we define and analyze a model for financial risk sharing based on the total budget. Our analysis focuses on optimal decision making by manufacturers in the presence of a specific risk sharing agreement. We derive a manufacturer's optimal statement of budget impact and discuss several properties of the optimal solution.

Cost-Benefit Analysis↗

Influencing physician practice patterns.

Today, customers are holding hospitals accountable for improving clinical outcomes and cost containment in ways that require the cooperation and collaboration of physicians. This chapter examines four strategies for influencing physician practice patterns: financial risk sharing, utilization management, performance feedback, and continuous quality improvement/total quality management (CQI/TQM). The strengths and weaknesses of each strategy are explored, along with real-life examples of how each has been successfully applied.

Clinical Competence↗

A typology of organizational and contractual arrangements for purchasing and delivery of behavioral health care.

The evolution of behavioral health care financing and delivery has led to a wide variety of arrangements connecting consumers to behavioral health services. In this paper, we present a typology based on three distinguishing features of behavioral health arrangements along which there is a high degree of variability and this variability has been shown to affect the cost and quality of behavioral health care: (1) the extent to which sponsor oversight over care is outsourced by way of contracts rather than performed directly; (2) whether financing for behavioral health is partitioned from health care financing overall; and (3) the amount of financial risk shared by the sponsor with third parties.

Behavioral Medicine↗

[The World Health Organization Report 2000: a politically incorrect computer game].

The World Health Organization Report 2000 is aimed at supporting an evidence-based development of health care systems in the world. The report has brought about a significant political and academic debate. This article reviews the contribution of the WHO Report to current health care policy, as well as analyzes and comments the main published critiques. Through a commented compilation of the health care reforms implemented over the last fifteen years in the world, WHO shifts radically its traditional position supporting now universal access to health care and a strong government's conduction role, but within a financial risk sharing environment, public and private co-operation and deregulation of the public management of health care institutions. WHO ranks in this report the 191 countries according to their health care systems' goal attainment and performance using a very weak, obscure and artificial methodology which has been opposed internationally. WHO is, however, committed to continue this initiative without apparently any major changes in the general and methodological approach.

Annual Reports as Topic↗

Primary care for persons with disabilities. The Boston, Massachusetts model program.

Boston's Community Medical Group (BCMG) was among the first primary care group practices to provide community-based continuous primary care to people with major disabling conditions, the first to rely on nurse-practitioners as primary care-givers, and one of the first to provide care on a prepaid capitated basis. With more than one thousand person-years' experience, BCMG has demonstrated that it is ethically and operationally feasible (1) to provide prepaid managed care to people with major disabling conditions; (2) to share financial risk for that care with providers; (3) to reinforce principles of independent living and consumer autonomy; (4) to assure high-quality clinical outcomes at reasonable costs.

Boston↗

Is provider capitation working? Effects on physician-hospital integration and costs of care.

BACKGROUND: Capitation holds health providers fiscally responsible for the services they deliver or arrange and thus provides strong motivation for physicians and hospitals to integrate activities and reduce costs of care. OBJECTIVES: The objective of this study was to assess 2 potential effects of capitation: (1) its effects on the integration of functional, financial, and clinical processes between hospitals and physicians and (2) its effects, in conjunction with process integration, on hospital costs. STUDY DESIGN: We studied a 1995 American Hospital Association (AHA) special survey that has information on 44 different physician-hospital integrative activities and on global capitation contracts held by management service organizations, physician-hospital organizations, and other similar entities. These data were combined with the AHA's Annual Survey of Hospitals, InterStudy HMO data, the area resource file, and state regulation data. Multivariate analysis was used to assess the relationship between capitation and integration and then to examine the influence of these factors and others on hospital costs. We studied 319 urban hospitals with complete data. FINDINGS: Provider capitation was found to promote integration between hospitals and physicians in relation to administrative/practice management, physician financial risk sharing, joint ventures to create new services, computer linkages, and an overall measure of physician-hospital integration. However, anticipated effects of integration and capitation on hospital costs were not evident. CONCLUSIONS: Global capitation is motivating tighter integration between physicians and hospitals in a number of respects. Although capitation is currently having the intermediate effect of encouraging process integration, it is not yet having the ultimate anticipated effect of lowering hospital costs.

American Hospital Association↗

Coordinating the care of the chronically ill in a world of managed care.

The systems required to provide coordinated health care to the chronically ill within a managed care contract are complex. As an integrated health care delivery system assuming shared financial risk of enrollees in a Medicare + Choice contract, many care processes need to be created to meet the needs of the clients and administrators. Nursing case management and physician partnering are integral to the creation of the care model. The fiscal data demonstrated, for clients in this model, that there was an overall decrease in the inpatient length of stay, hospital days per thousand, and 30-day readmission rates.

Case Management↗

Preparing for what's ahead.

With healthcare reform on the horizon, healthcare companies and providers are positioning themselves for a new environment in which cost-effective medical treatment is the Holy Grail. Not only will providers be required to measure the efficiency of their treatments, but all parties in the medical-care delivery system will need to share financial risk. In the following pages Modern Healthcare staff members look at how specific industry segments are preparing to face the changes expected during the rest of the 1990s. Industry experts also express their views.

Ambulatory Care↗