Keep capitated Medicare as a separate business
February 1, 1997 5 minutes read
Keep capitated Medicare as a separate business
Hard-earned tips for Medicare management
Nothing can beat in-the-trenches experience when it comes to setting up a successful Medicare managed care program. What follows are some hard-won hints and tips from a variety of experts that, combined, have decades of experience in capitating the elderly.
• Keep it as a separate business.
View Medicare managed care as a line of business unto itself rather than simply an extension of commercial capitation. "That cannot be stressed too highly," says Rae Loen, MPA, managed care specialist with the Health Care Financing Administration (HCFA) in Baltimore. "If the health system wants to run it under the rubric of a current [commercial] business, it’s been our experience that either they don’t do a very good job at it, or they end up failing. You need a staff dedicated to Medicare."
Reasons for this are Medicare enrollees are more prone to sickness and use more resources. They also often require more guidance and "hand holding" when they deal with health system bureaucracies.
Medical services that seniors typically use more than a commercial population include:
• eye care;
• orthopedics;
• urology;
• cardiology;
• oncology;
• gastroenterology.
Seniors are more familiar with fee for service
Also, many seniors grew up with fee-for-service medicine. Entering a managed care network is completely new to many, says Jennifer Marx, MBA, consulting analyst with DeMarco and Associates in Rockford, IL. Marx recommends having a customer service staff dedicated solely to capitated Medicare patients. "You really do have to educate [capitated] Medicare patients on how managed care works," Marx says. "They are used to fee for service, and that mentality can be a big drain on the resources of a managed care system. An investment like this up front can really save you a lot of money in the long run."
• Expect significant start-up costs.
If your health system has its own HMO, expect to spend significant sums of money to market your product to the senior population, says Bruce Kobritz, MS, president of Strategic Healthcare Planning Associates in Santa Monica, CA. This is particularly true in highly competitive markets. In Southern California, Kobritz says health plans spend about $500 on marketing for every enrollee. Pat Dunks, MS, consulting actuary with the Milliman & Robertson company in Brookfield, WI, has seen marketing and enrollee education costs range from $200 per member to a whopping $1,200 per member.
• Get good demographic data, if possible.
One of the most valuable and hardest to get pieces of data is demographic information that accurately predicts medical resource use rates for the population you’ll serve.
"You can ask the HMOs for this information," Dunks says. "If they have it and give it to you, great. But what you’ll find is that a lot of times they just don’t have it."
As an alternative, some health systems extrapolate fee-for-service use rates. This, however, isn’t always accurate, Dunks says. "Patients commonly see more than one doctor or go to more than one facility," he says. "There is no way of knowing what the patients’ costs are when they go outside your system."
Another option is to contract with an actuarial consulting firm to run a cost model. This involves taking the projected enrolled population and estimating utilization rates in a managed care environment, Dunks says.
With these numbers, it is possible to get a good feel for demands a given capitated population is going to place on your health system.
• Retool utilization management functions.
Fee-for-service utilization review departments tend to focus on quality assurance. In a capitated arrangement, this is not enough, Dunks says. "When you are at risk, you have to make sure your medical management and [utilization review] are re-engineered to address the issues Medicare risk presents," Dunks explains. Primary issues here are instituting care protocols and benchmarking your outcomes against best practices.
"Nobody gets best practice results in everything they do," he adds. "But doing this comparison helps you set goals. It may say you need to improve efficiency by 30% or 50%. What this does is help you understand what capitation means and how your life is going to have to change."
• Be realistic about enrollments.
Every health system entering Medicare managed care for the first time sets out projections on the number of patients it will have in a given period of time. Then reality sets in. "Most health systems are overly optimistic when they first enter Medicare risk contracting," says Dunks. To temper the pie-in-the-sky approach, Dunks suggests either hiring someone with Medicare managed care experience or seeking the help of a consulting form to formulate realistic projections.
• Minimum enrollments.
Urban health systems should get a commitment for at least 1,000 covered patients before they enter a Medicare risk contract with an outside payer. "You need that at least to start feeling comfortable," says Kobritz. "I’ve seen one situation where a group of providers entered a Medicare capitated contract with 40 covered [patients]. That was just dumb. If one of those people got really sick, they would clearly take a big financial hit. They should hire a nurse to walk around with each of those patients 24 hours a day just to make sure they don’t trip or anything."
Don’t push capitation too fast
If a plan can’t deliver that many patients right away, Dunks recommends starting the contract on a fee-for-service basis that kicks over to capitation when the plan does deliver that magic 1,000th customer.
The only exception Dunks cites would be for a rural health system. "In rural markets, you may want to go down to 500 [patients]," he says. "The risk obviously is greater. But if you don’t get into [capitation] early enough in those markets, those 500 [patients] could go down the road to the competition. You want to be seen as a willing provider with HMOs."
• Start with a complete service network.
One of the most common reasons HCFA rejects capitation applications is that the applying entity does not have signed contracts with all of the different types of providers needed to administer a Medicare managed care contract.
"People tend to jump the gun and send in an application before their network is in place," Loen says. "All agreements should be signed and in place for providing all of the services that are provided under Medicare. This means contracts with primary care and specialist physicians, ancillary providers, and home health providers."
What commonly happens is that a managed care organization will send in an application without these contracts and then scramble to secure them as the application works its way through the approval process. "This is often very difficult and very time-consuming because it entails negotiating prices and contract details and then getting the right signatures," Loen says.
A related common problem is that the applying entity doesn’t have a proper quality assurance program in place. "There is nothing new about quality assurance," Loen says. "But sometimes people have a hard time putting together their quality assurance plans and documenting that they are up and running and that it applies to all members that are a part of the contract."
Federal law also requires an established review process for the care provided, an outcomes review process, and a way to provide this type of feedback to the providers, Loen says.
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