Medical Management Oversight

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This is the fourth article in the Medical Management "Signature Series" by Managed Care Resources, Inc. -- articles on topics in managed care written by experts in the field. The author of this article is Roberta L. Carefoote.

From the beginning, managed care organizations (MCOs) have been held accountable to multiple masters: purchasers, regulators, consumers, and the community at large. Each master has a vested and unique interest in making the MCO answerable for the care and service it provides. This accountability, which was at one time simple to address, has become increasingly diffuse as MCOs themselves become more complex and their structure spreads across a web of relationships.

This article focuses on the accountability mechanisms currently in place to oversee the quality and utilization activities of an MCO, and suggests future oversight trends in the managed care arena. Its objective is to highlight key organizations and activities without describing any one mechanism in detail. The reader is encouraged to use the article as a basis for beginning to understand the complexities of governing the quality and utilization activities of an MCO, and as a resource for pursuing more information about medical management oversight in managed care.

In a recent article by Alice Gosfield¹, she purports that managed care accountability mechanisms can be conceptualized as falling within four prominent categories. Each of these categories is briefly highlighted below and serves as the framework for outlining medical management oversight activities:

• The Industry Itself -- Within the industry, self regulation has been very evident from the beginning of the managed care era. Included in this category are the regulation of the health practitioners themselves, the use of contracts to regulate the providers that ultimately provide the care, and the accreditation programs that started as voluntary but have become increasingly mandatory over time. These self-policing activities were considered adequate in the early years of managed care, but have been supplemented by other more stringent demands in recent years.

• External Regulation -- Two primary entities regulate the quality and service utilization of MCOs: Federal and State Government. The number of Medicare and Medicaid beneficiaries enrolled in managed care plans has experienced unprecedented growth since 1993 and with over 18 million Americans enrolled, the Health Care Financing Administration (HCFA)^A is now the single largest purchaser of managed care in the country². It is not surprising then that HCFA is taking unparalleled steps to protect its beneficiaries through regulations and enforcement activities.

• The Legal System -- Accountability for quality can often come from tort verdicts where liability for damages resulting from poor patient outcome lawsuits can have a dramatic effect on the behavior of the industry as a whole. While case law holding MCOs liable for bad patient outcomes has been relatively limited, a current trend exists that confirms MCO's legal responsibilities for the care they provide to patients.¹ These precedents are forcing MCOs to reconsider the extent to which they can and will be held liable for their actions.

• Marketplace Demands -- When consumers demand more information, when they demand certain services, or when they select one health plan over another, they directly influence the behavior of MCOs. The marketplace has begun to collectively examine more closely the inner workings of managed care. Much of the interest has been stimulated by the horror stories printed in the popular press and much of the marketplace efforts have focused on measuring the performance of health plans across a variety of dimensions.

1. Provider Contracts

MCOs rely heavily on their networks of providers to be accountable for the care and service they provide. To this end, they have developed elaborate provider contracts that stipulate a) the criteria to be used for appointing and credentialing practitioners, b) cause for terminating practitioners who do not meet "quality" standards, c) adherence to the plan's quality improvement efforts, and d) use of clinical practice guidelines and standard medical record keeping systems. These are but a few of the clauses that can be found in provider contracts. In recent years, the MCOs have put more emphasis on these contracts and are more conscientious in using them for accountability purposes.

2. Accreditation

The process of accreditation has been traditionally employed to differentiate qualified performers from those that cannot meet the accreditation standards. In managed care, there are three accreditation bodies worthy of note. Although they appear to have been initially targeted at different segments of the industry, the lines of demarcation are less defined now and the scope of activities quite broad.

• National Committee for Quality Assurance (NCQA).^B The NCQA is a private, not-for-profit organization dedicated to assessing and reporting on the quality of managed care plans³. NCQA began accrediting MCOs in 1991 in response to the need for standardized, objective information about the quality of these organizations, and as of this year has expanded the range of organizations it accredits to include managed behavioral health care organizations, credential verification organizations, and physician organizations. To date, it has been the single largest accrediting body for MCOs, with over one-half of the nation's HMOs currently involved in the accreditation process. The accreditation program is voluntary, and has been well received within the industry- -its value is underscored by the number of employers who require or request NCQA accreditation for the plans they do business with. For an MCO to become accredited, it must undergo a survey and meet certain standards designed to evaluate the plan's efforts to continuously improve the quality of care and service it delivers. During the survey, the plan is reviewed against more than 50 different standards, each of which focuses on an important aspect of the health plan.

• The Utilization Review Accreditation Commission (URAC). URAC was founded in 1990 as an educational corporation with the goal of establishing minimum utilization review (UR) standards that serve to encourage efficient medical review processes and to provide a method for evaluating and accrediting UR programs. The first standards were published in 1991, with significant revisions in 1994. URAC has two accreditation programs, one for companies performing utilization review and one for PPO networks.

• The Joint Commission on Accreditation of Healthcare Organizations (JCAHO).^C The JCAHO is the primary accrediting body for health care organizations and it is now playing a greater role in accrediting managed care organizations. Since 1994, JCAHO has accredited HMOs according to the standards outlined in the Accreditation Manual for Healthcare Networks. The conceptual model underlying the standards focuses on the improvement of organizational performance.

Other less frequently cited accreditation organizations include the Medical Quality Commission (TMQC)^D and The Accreditation Association for Ambulatory Health Care (AAAHC).

TMQC surveys medical groups and individual practice associations that provide care in a capitated or prepaid setting. While primarily based in the heavily managed care state of California, it is expected that the TQMC will move eastward as these markets become more managed care savvy. The AAAHC focuses primarily on ambulatory care delivery sites including clinics and ambulatory surgery centers.

All the accreditation bodies encourage their participants to capitalize on their accredited status and it is relatively common to see marketing materials highlighting this information. While accreditation does assure purchasers and consumers that MCOs meet basic expectations, there are some individuals who question the validity of a process where standards are set primarily by the very people that will be measured against them. Some advocates suggest that accountability mechanisms external to the industry are more credible.

3. Federal Accountability

The U.S. Department of Health and Human Services has the responsibility for overseeing specific MCOs including federally qualified HMOs and those plans enrolling Medicaid or Medicare enrollees. Outlined in the federal statute is a comprehensive set of benefits that HMOs must provide, as well as specific requirements for the HMO, including reporting on utilization patterns, availability, and accessibility. For those plans that participate in Medicaid managed care arrangements, Health Care Financing Administration (HCFA) sets out additional requirements, such as formal written QM programs that must be part of any contract with MCOs. The primary oversight mechanism outside of regulations, is that of the Peer Review Organizations (PROs)⁴.

The PROs are groups of practicing physicians and other health care professionals paid by the federal government to monitor the care given to Medicare patients. Each state has a PRO that decides whether care given to Medicare patients is reasonable, necessary, and provided in the most appropriate setting. PROs also decide whether care meets the standards of quality generally accepted by the medical profession. Providers serving the Medicare population are required to cooperate with PROs as a condition of participation in Medicare.

As of January 1, 1997, more than 4.9 million Medicare beneficiaries were enrolled in a total of 336 managed care plans accounting for 13 percent of the total Medicare population. As of June 30, 1996 13 million Medicaid beneficiaries were enrolled in managed care plans, representing 35 percent of all beneficiaries. With this managed care growth, the Clinton Administration has adopted several initiatives to address the issue of accountability for medical management in Medicare/Medicaid programs²:

• Medicaid and Medicare Health Plan Employer Data Information Set (HEDIS) which is comprised of performance measures intended to provide states, MCOs, practitioners, and consumers with information needed to assure high quality care in plans serving these beneficiaries.

• Foundation for Accountability (FAcct) is a collaboration of individuals working to develop outcomes measures that will allow the comparison of quality of care delivered in managed care settings to that provided in fee-for-service settings. HCFA is currently testing Diabetes, Depression, and Breast Cancers outcome measures.

• Quality Assurance Reform Initiative (QARI) is also a collaboration of individuals and entities, charged with the mission of designing practical and credible approaches to monitoring and improving the quality of Medicaid managed care services. In 1993, QARI issued a set of federally recommended guidelines for building and operating quality assurance and improvement systems.

• Physician Incentive Rules went into effect January, 1997, and require plans to disclose financial incentives and pay for stop-loss insurance, so that no more than 25 percent of a physician's income is at risk under capitation. These regulations also ban any incentive arrangements that include payments to doctors to limit or reduce medically necessary services. The rules are designed to make sure incentives to discourage unnecessary services do not go too far. As part of these regulations, health plans are required to provide the details of incentive arrangements to plan enrollees.

In a recent statement by Bruce Merlin Fried, Director of the Office of Managed Care⁵, he notes that HCFA recognizes the value of managed care for its beneficiaries, and has put into place a wide variety of protections covering such areas as a) information about joining managed care health plans, b) dis-enrolling from the plans, c) pre-existing conditions, and d) medically necessary services. All plans must meet Federal standards, which guarantee access to these services: e) grievance procedures, f) internal and external quality review mechanisms, g) financial solvency of the health plan, and h) out-of-pocket expenses.

Future plans include enhancing the appeals and grievance processes, beneficiary information publications, and the availability of comparative information. HCFA is also committed to enforcing these beneficiary protections through the use of special investigations, protocol monitoring processes, and national guidelines for marketing materials. For the first time in the history of the programs, HCFA has begun to impose intermediate sanctions in response to certain plan activities. If they find the same compliance problem in successive monitoring reviews, they no longer treat the recurrence as an isolated event but take enforcement actions instead, an extreme example of which is to suspend payments to the plan for new enrollees.

In the planning stages, HCFA has proposed enhancing their process for evaluating applications for managed care contracts to uncover problems with a plan's ability meet contracting requirements. They are also talking about a data system that would enable them to compare complaints, disenrollments, appeals processing, etc. to identify aberrant pattens warranting investigation. Also in the works are plans to streamline and coordinate federal and state oversight functions.

4. State Accountability

It is the state government that the public holds responsible for protecting it, and in a rapidly changing marketplace, this responsibility can be challenging. Most states regulate HMOs and other forms of managed care through their department of insurance, although some states shift some or all of this responsibility to the department of health. According to Pam Silberman⁶ a majority of states ...

• Prohibit HMOs from issuing any materials which are false, misleading, or deceptive,
• Require adequate access to personnel and health care facilities
• Require plans to have specific quality assurance plans, and to take corrective action when problems are found
• Mandate that HMOs have specific grievance procedures
• Require plans to collect, analyze, and report to the state certain utilization, enrollment, and grievance data
• Mandate that certain information be provided to enrollees and the public at large, including the enrollee's financial obligations, covered and excluded services, and how to obtain services and file a complaint
• Have mechanisms to solicit enrollee participation in HMO policy decisions
• Have a system to ensure the HMOs financial solvency and to hold the enrollee harmless for a carrier's failure to pay the provider
• Have a variety of enforcement mechanisms to ensure that HMOs comply with their statutory and regulatory requirements

Recently, the National Association of Insurance Commissioners (NAIC)^E developed model statutes governing managed care organizations and other networks. The statutes cover quality assessment and improvement, provider credentialing, utilization review, provider network adequacy and contracting, and grievance procedures. It is expected that these model statues will facilitate consistency across state lines and ensure a minimum set of oversight expectations for MCOs.

Despite current oversight activities, states continue to hear about the difficulties associated with MCOs, and in response have introduced a record number of bills to regulate managed care⁷. By May of 1996, 15 states had enacted maternity length-of-stay statutes, and 10 others had bills awaiting governor's signatures. Thirteen states had enacted emergency service laws and four states had enacted patient protection provisions. A sampling of other state regulatory activities include:

• A new consumer protection law effective January 1, 1997 will require HMOs in Idaho to offer point-of-service options to employees covered by group health plans and individual policy holders⁸
• A new Community Health Management Information System (CHMIS) will replace the Iowa Health Data Commission with the intent of expanding the quantity and quality of information available to the public⁹
• North Carolina was one of many states to bar health plans from having rules - so called gag clauses - that limit what doctors can tell their patients. The rules, effective October 1996, require HMOs to set standards for doctor/enrollee ratios and keep data on how long patients wait before getting a doctor's appointment¹⁰
• In Maine and Oklahoma, officials developed rules requiring state workers' compensation UR companies to comply with URAC standards for worker's comp accreditation¹¹
• In Ohio, a Physician/Health Plan Partnership Act, if passed, will result in a joint process aimed at "best practice" industry wide standards. Others areas addressed by the bill include prudent layperson emergency coverage standards, and physician inclusion in utilization review¹²
• Minnesota's departments of health and commerce are calling for regulations for risk bearing provider service organizations that contract directly with employers¹³

This focus on laws to ensure adequate accountability for service utilization and patient protection is likely to continue as long as health plans are perceived as focusing more on cost than on quality of care issues.

5. The Legal System

MCOs respond to legal verdicts in an ad hoc fashion, but respond they do. According to Alice Gosfield¹, the legal community has seen the courts' trend toward confirming MCO's legal responsibility for the care they provide to patients. More and more cases have held that because of the direct relationship between the MCO and the individual's health care provider who caused harm to the patient, the MCO can be held liable. Other less successful cases have been those that have focused on the utilization controls (e.g. early discharge) and financial incentives of MCOs. While the success of direct judicial challenges to financial incentives and utilization controls remains unknown, the industry has seen an increase in these types of complaints and new ones that focus on the actions of primary gatekeepers who determine the access to specialty services and other ancillary services. In response to legal suits, MCOs have not dramatically changed their behavior but tend to respond more actively to those cases where jury verdicts have been rewarded.

6. Marketplace Demands: Performance Measures

A significant development in the area of marketplace demands and its impact on accountability is in the area of performance measurement. Purchasers have begun to ask plans to report their performance in terms that facilitate comparisons across health plans. Leading the field in this area is NCQA's Health Plan Employer Data and Information Set known as HEDIS.

Based on its marketing materials,¹⁴ HEDIS 3.0 is touted as the gold standard in performance measurement, and is unprecedented in its scope and reach. It is a set of standardized performance measures designed to ensure that purchasers and consumers have the information they need to reliably compare the performance of managed health care plans. It has the ability to evaluate both the quality of different health plans along a variety of important dimensions, and to facilitate decision making based on demonstrated value rather than simply on cost. HEDIS differs from other performance measurement systems in two respects: It has a track record with measures that have been widely reported, and its measures are specifically designed to help purchasers and consumers make comparisons. HEDIS measures performance in eight areas: effectiveness of care, access/availability of care, satisfaction with the experience of care, health plan stability, use of services, cost of care, informed health care choices, and health plan descriptive information.

Walter A. Zelman, an instructor in health policy in the Harvard School of Public Health, suggests that public disclosure of key information is a highly effective and less expensive means of consumer protection in managed care (when compared with statutes and regulations mandating specific rules and activities). It both informs consumers and pressures plans and providers to provide safe and effective care¹⁵. It stands to reason that purchasers and consumers will continue to demand performance measurement systems that enable them to make informed health plan decisions.

Accountability for the quality of care and service utilization in managed care falls to the responsibility of many. What started as an industry that predominantly policed itself through voluntary accreditation with minimal standards set by state and federal legislators, MCOs now find themselves barraged by a variety of stakeholders yearning to enhance the visibility of oversight mechanisms and tighten the rules under which MCOs operate.

The growth and acceptance of managed care as a viable alternative to the fee-for-service delivery model is no longer challenged. What consumers and purchasers now demand are predictable health care outcomes based on the cost effective delivery of health care services. Current accountability mechanisms have yet to satisfy the purchasers and consumers. The fact that in 1996 alone, more than 1,000 measures aimed at tightening the regulation of HMOs¹⁶ were debated in state legislatures attests to a perceived need for more managed care oversight. Future and proposed accountability mechanisms serve to enhance MCO oversight through more comprehensive far-reaching regulations with stronger enforcement strategies, mandatory accreditation that encompasses quality, access, utilization, satisfaction and outcome standards to name a few of the requisite standards, and reliable and comparable data that measures performance across plans. The future holds significant challenges for MCOs striving to meet the increased oversight demands being placed on them by purchasers and consumers alike.

For more information on Managed Care and Quality Management please contact us at (630) 325-6543 or by email at info@mcres.com .

We hope that you will join us as we explore all of the elements of medical management in the coming months. In addition, we are offering a "Signature Series" on "Managed Care Contracting". We hope that the two series combined will lessen the mystery of managed care and help level the playing field between providers and payers.

Ira H. Rosenberg

President, Managed Care Resources, Inc.

References:

1. Alice G. Gosfield, "Who is Holding Whom Accountable for Quality?" Health Affairs, May/June, 1997, p.26-40.

2. Fact Sheet, "Managed Care in Medicare and Medicaid," HCFA Press Office, January 28, 1997, p. 1.

3. NCQA, "NCQA: An Overview," NCQA World Wide Web Site, July, 1997

4. Bruce Merlin Fried, "Overview of Managed Care," HCFA World Wide Web Site, November 13, 1996, pp.1-6.

5. HEDIS Report Cards, HEDIS 3.0 Executive Summary, NCQA World Wide Web Site, July, 1997.

6. Pam Silberman, "Ensuring Quality and Access in Managed Care: How Well are We Doing?" Quality Management in Health Care, 5(2) 1997, p. 44-54.

7. Thomas R. Beauregard and Kevin R. Winston, "Emloyers Shift to Quality to Evaluate and Manage their Health Plans," Managed Care Quarterly, 5(1) 1997, p.51-56.

8. Lisa Schiff - Editorial Assistant, "State Report" Business & Health, June, 1997, p.63

9. Lisa Schiff - Editorial Assistant, "State Report" Business & Health, September, 1996, p.85

10. Lisa Schiff - Editorial Assistant, "State Report" Business & Health, October, 1996, p.89

11. Lisa Schiff - Editorial Assistant, "State Report" Business & Health, January, 1997, p.50

12. Lisa Schiff - Editorial Assistant, "State Report" Business & Health, May, 1997, p.53

13. Lisa Schiff - Editorial Assistant, "State Report" Business & Health, March, 1997, p.53

14. HCFA Components, "Medicare Peer Review Organizations," HCFA World Wide Web Site, July, 1997

15. Walter A. Zelman, "Consumer Protection in Managed Care: Finding the Balance", Health Affairs, January/February, 1997, pp. 158-166.

16. David O. Weber, "Second Thoughts: Can Managed Care be Ethical?", Healthcare Forum Journal, July/August, 1997, pp. 17-26.

Related World Wide Web Sites:

A. Health Care Financing Administration (HCFA)

B. National Committee for Quality Assurance (NCQA)

C. The Joint Commission on Accreditation of Healthcare Organizations (JCAHO)

D. The Medical Quality Commission (TMQC)

E. National Association of Insurance Commissioners (NAIC)

The Managed Care Resources, Inc. team has over 150 years of combined experience in the development and implementation of managed care services. Please visit our home page to learn more about how we can assist you with your managed care needs. We also invite you to contact us with questions or comments.

www.mcres.com email: info@mcres.com