Trends in health care financing: opportunities for family planning agencies

In response to spiraling health care costs in the US, several alternative health care delivery systems have evolved. The delivery of subsidized family planning services in particular is being affected by declining levels of government support. The most rapidly growing of alternative delivery systems is the health maintenance organization (HMO). HMOs provide a voluntarily enrolled population a guaranteed, specific range of physician and hospital services in return for a fixed periodic payment. There are 3 types of HMO: the group model, in which doctors are members of a partnership or service corporation that contracts with employers or individuals to provide medical services; the taff model, in which physicians are direct employees of the HMO; and the independent practice association (IPA) model, a physicians' group that enters into a contract with an HMO and receives reimbursement for every patient seen. In 1986, over 21 million Americans were enrolled in approximately 262 HMOs around the country. HMOs are unequaled in their success at reducing hospital utilization; they have achieved savings of hospital costs of 20-40%. Another system for delivering and financing health care is the preferred provider organization (PPO) under which patients are assigned to a designated panel of health care providers who offer services according to a discounted fee schedule. New hybrid systems that combine many of the features of both systems are emerging. Most of the newly organized health care delivery systems described focus on utilization control and keeping costs down. A common way of ensuring coordinated health care delivery is through primary care case management. To initiate or establish relationships with HMOs or other health care delivery systems, family planning agencies should consider such activities as: undertaking surveys to study the market; training new employees on developments in health care financing; and recruiting board members with HMO experience.     

PMD6 Chronic Care Costs of New Medicare HMO Enrollees: Implications for Disease Management

Cost-effective care for chronic conditions is a growing concern of health plans enrolling increasing numbers of the elderly and disabled under Medicare risk contracts. This study provides evidence of the prevalence, patterns of care, and costs of chronic illnesses among new Medicare HMO enrollees. The results provide a foundation for estimates of the cost-effectiveness of drug therapy and care management programs that serve this group.
METHODS: We used national Medicare claims data to examine chronic care services and associated costs for a sample of 19,084 beneficiaries who enrolled in an HMO in 1995. We constructed three measures of cost: the total Medicare-covered cost, the cost of medical claims with the chronic condition coded as a diagnosis, and the regression-estimated effect of the chronic condition on cost.
RESULTS: 58% of the new Medicare HMO enrollees in our sample were treated for at least one of the selected chronic conditions in the six months before enrollment. One-third of the new enrollees had multiple conditions represented by diagnoses in more than one of eighteen chronic-condition groups. Persons with chronic conditions accounted for 93% of pre-enrollment Medicare costs among new HMO enrollees. Per 1,000 enrollees, pre-enrollment Medicare costs were greatest for those with hypertensive disease, coronary heart disease, heart failure, and diabetes.
CONCLUSIONS: The concentration of utilization and costs in those with chronic conditions suggests that appropriate drug therapy and care management for those with chronic conditions should be a top priority for HMOs with Medicare risk contracts. These estimates of prevalence suggest a need for HMOs to screen new Medicare HMO enrollees for chronic conditions immediately upon enrollment to ensure continuity of care.     

Health maintenance organizations: improvements in the regulatory environment

Health maintenance organizations (HMOs) can help slow rising health care costs. State regulatory statutes are needed that will protect critical interests of HMO members while freeing HMOs from needless statutory requirements. A model HMO regulatory law is designed to strike a balance between protection of members and freedom for HMOs to deliver programs that can reduce health care costs.     

Health maintenance organizations: critical issues raised by restructuring delivery for health systems reform

In sum, the potential that managed care will grow under health systems reform creates an opportunity for the HMO industry but also serves as a challenge and a threat. Faced with greater scrutiny and growing demands, HMOs increasingly are being forced to demonstrate their potential and live up to their expectation. At the same time, the changing nature of the health care system creates a challenge for HMOs. Cost pressures create needs to review the entire delivery system, including the ambulatory component, with a focus on enhancing cost-effectiveness. Greater visibility also creates demands; growing market penetration argues for the creation of a new paradigm to define an appropriate structure for public accountability and management. Finally, the transformation of an HMO industry into a managed care industry is not without its risks as HMO performance becomes evaluated not only against itself but as part of the performance of the broader managed care industry in which HMOs have become embedded.     

HMOs and Managed Care: Implications for Rural Physician Manpower Planning*

ABSTRACT: American health care is changing dramatically. Health maintenance organizations (HMOs) and other managed care plans are central to this change. Today, the majority of Americans living in metropolitan areas receive their care from these types of plans. The goal of this article is two-fold. First, it will discuss the potential implications of HMOs and managed care for physician needs and supply in rural regions. Second, it will derive insight into alternative approaches for meeting rural health manpower needs by analyzing HMO staffing patterns. As HMOs and other managed care plans expand, rural physicians, their practices, and their patients will almost certainly be affected. As described in this paper, most of these effects are likely to be positive. The staffing patterns used by HMOs provide an interesting point of comparison for those responsible for rural health manpower planning and resource development. HMOs appear to meet the needs of their enrollees with significantly fewer providers than are available nationally or suggested by the federal standards. Moreover, HMOs make greater use of nonphysician providers such as nurse practitioners and physician assistants.     

HMOs and Managed Care: Implications for Rural Physician Manpower Planning*

American health care is changing dramatically. Health maintenance organizations (HMOs) and other managed care plans are central to this change. Today, the majority of Americans living in metropolitan areas receive their care from these types of plans. The goal of this article is two-fold. First, it will discuss the potential implications of HMOs and managed care for physician needs and supply in rural regions. Second, it will derive insight into alternative approaches for meeting rural health manpower needs by analyzing HMO staffing patterns. As HMOs and other managed care plans expand, rural physicians, their practices, and their patients will almost certainly be affected. As described in this paper, most of these effects are likely to be positive. The staffing patterns used by HMOs provide an interesting point of comparison for those responsible for rural health manpower planning and resource development. HMOs appear to meet the needs of their enrollees with significantly fewer providers than are available nationally or suggested by the federal standards. Moreover, HMOs make greater use of nonphysician providers such as nurse practitioners and physician assistants.     

A methodology for choosing a physician profiling system: the case of First Option Health Plan

The public continues to demand improved health care at affordable costs. It appears that this public pressure will force health maintenance organizations (HMOs) and other health care providers to face their toughest days in the years to come. They will need to find solutions to resolve this "quality and cost" problem. One method that is likely to have the ability to improve quality of care and control costs is physician profiling. That is, data related to a physician's care or outcomes can be collected and compared with profiles of various populations, for example, other similar providers in a relatively close geographical proximity. This article examines the issues involved in physician profiling, including the characteristics of profiling systems and the direct and indirect benefits of having such a system. Further, the article uses an actual HMO example to discuss considerations that administrators should make when choosing a physician profiling system.     

HMO partnering: the provider dilemma

While the growth of HMOs has slowed patient visits to doctors, it also has created a deluge of press clippings. On July 16, 1996, three articles on the subject appeared in the Wall Street Journal, front section. The headlines painted a vivid picture of the forces acting on HMOs and providers alike (Figure 1). The articles portended more change for healthcare. The "shake-out," a term applied to industries in serious transformation, brings shedding of excess capacity and loss of jobs and income. Providers, in particular, find themselves in a difficult dilemma. They must not only cut costs as reimbursement drops, but also retain patients with good outcomes and high quality service. Patient retention means keeping the individual patient from switching to another provider and keeping the insurer's group of patients as an authorized provider for that insurer. The relationship between provider and HMO lies at the heart of the provider dilemma. The HMO structure, which shifts financial risk for care, is quickly setting the standard, for healthcare pricing, medical standards, and management practices. Understanding and responding to HMO needs are vital to competitive advantage and survival. The article discusses the inherent dilemma of HMO and provider partnering and suggests provider responses.     

Consumer acceptance of prepaid and fee-for-service medical care: results from a randomized controlled trial.

Do consumers find the care provided by health maintenance organizations (HMOs) and that provided in the fee-for-service (FFS) system equally acceptable? To address this question, we randomly assigned 1,537 people ages 17 to 61 either to FFS insurance plans that allowed choice of physicians or to a well-established HMO. We also studied 486 people who had already selected the HMO (control group). Those who had chosen the HMO were as satisfied overall with medical care providers and services as their FFS counterparts. The typical person assigned to the HMO, however, was significantly less satisfied overall relative to FFS participants. Attitudes toward specific features of care favored both FFS and HMO, depending on the feature rated. Four differences (length of appointment waits, parking arrangements, availability of hospitals, and continuity of care) favored FFS; two (length of office waits, costs of care) favored the HMO. HMO versus FFS differences in ratings of access to care and availability of resources mirror differences in the organizational features of these two systems that are generally considered responsible for the significantly lower medical expenditures at HMOs. Regardless of their origin, less favorable attitudes toward interpersonal and technical quality of care in the HMO have marked consequences: dissatisfaction and disenrollment.     

State HMO Accreditation and External Quality Review Requirements: Implications for HMOs Serving Rural Areas

The purpose of this article is to analyze state regulations regarding health maintenance organization (HMO) accreditation and external quality review; to briefly describe states' experiences implementing these regulations; and to discuss the implications of these regulations for HMOs serving rural areas. The incorporation of HMO accreditation and external quality review requirements into state HMO licensure processes and state employee contracting raises many policy issues, including several that are especially relevant to HMOs serving rural populations. A key issue is whether the linkage of accreditation and external quality review requirements to HMO licensure will be an additional deterrent to the development of new HMOs or the expansion of existing HMOs into rural areas. Other issues relate to the costs and benefits of accreditation for HMOs serving rural populations, and the potential impact of HMO accreditation requirements on efforts to expand managed care enrollment of rural Medicaid and Medicare beneficiaries and rural state employees. Nine states were identified that have regulations requiring HMOs to seek accreditation or to undergo an external quality review as a condition of licensure. Four states were identified as implementing requirements that an HMO be accredited in order to serve state employees. Many of these requirements are still in the early stages of implementation. Several states with the requirements have significant rural populations and will provide opportunities to evaluate their impact on HMOs serving rural areas, rural providers and rural consumers.     

Service-level selection by HMOs in Medicare

In the federal Medicare program, contracting health maintenance organizations (HMOs) are paid on a capitated basis. There has long been concern that an "adverse selection" of risks remain in the traditional fee-for-service (FFS) sector, since beneficiaries with low costs may leave the FFS sector and join the HMOs. The distortion associated with this form of selection is that health plans may design their mix of health care services in order to effectuate favorable selection. This paper scrutinizes patterns of HMO membership and costs by service in the FFS sector for evidence consistent with the hypothesis that HMOs engage in service-level product distortion. We develop a multi-service model of choice between FFS and HMOs and show that if the HMO sector is underproviding (overproviding) a service relative to the FFS sector, we should observe a positive (negative) correlation between the HMO market share and average costs of those remaining in the FFS sector. We estimate the correlation between the HMO market share and the average FFS costs for different health care services using Medicare data for 1996. We find evidence indicating that there exists significant service-level selection by HMOs.     

A Comparison of Practice Characteristics Among Physician Assistants in HMO and Non-HMO Settings

Abstract: Health maintenance organizations (HMOs) have continued to grow in both number and enrollment. A major goal of HMOs and other managed care structures is the containment of health care costs. The utilization of physician assistants (PAS) would seem to nicely mesh with these organizations. This study examines the roles, productivity, and clinical autonomy of PAS in HMO settings. In this examination, PAS working with HMOs are compared with PAS working in non-HMO settings, both urban and rural. The results of the study document that PAS working in HMO environments primarily focus on ambulatory care, with few inpatient or administrative responsibilities. Further, PAS working in HMO settings have a highly autonomous practice with approximately 70 percent of patient visits never being discussed with a supervising physician. Lastly, the results suggest that many of the attributes of an HMO practice are found in rural practice as well. Consequently, as HMOs reach out farther into rural America, PAS in rural settings will have fewer practice modifications to make than urban PAS in their transition to practice in an HMO modality.     

Workers' compensation cost shifting: an empirical study.

It has been suggested that health maintenance organizations (HMOs) overdiagnose work-related injuries and illnesses to increase their income. This study compared the Workers' Compensation experience of 2,176 Boston postal employees enrolled in a large HMO with that of 3,473 employees enrolled in a large fee-for-service health insurance plan. It controlled for the potential confounders of age, gender, job classification, type of injury, and duration of employment. It found no difference in the incidence of injuries: 5.93% for HMO enrollees and 6.25% for fee-for-service plan enrollees. Medical costs averaged $475 for HMO enrollees and $838 for fee-for-service plan enrollees (p = 0.018). Total costs averaged (09 for HMO enrollees and $1388 for fee-for-service plan enrollees (p = 0.063). In our cohort, there was no evidence of cost shifting. It appeared that the HMO provided less expensive medical care for injured postal workers.     

Rocky Mountain HMO

Rocky Mountain HMOs two-decade history of success on the western slope of Colorado is due not only to the conscious decisions of its managers but also to the geography and demography of its primary market area. The managers of Rocky Mountain HMO sought to build a managed care plan that was physician friendly and that had a local face, explicitly recognizing that their success hinged on the ability to satisfy the needs of both providers and purchasers. Isolated by the Rocky Mountains from major population centers of the state and located beyond the pull of the Salt Lake City, Utah, market to the west, Rocky Mountain HMO had no real managed care competitors on the western slope during its formative years. This lack of competition, combined with the ability to defuse physician resistance to managed care and to provide a satisfactory array of benefits at a reasonably low price, gave Rocky Mountain HMO an impressive share of the western slope health insurance market. Rocky Mountain HMOs expansion plans, in part, are a reaction to real and anticipated increases in managed care competition along the western slope. To maintain competitive premium rates, Rocky Mountain HMO executives perceive the need to spread the fixed costs of its infrastructure by increasing enrollment. As Rocky Mountain HMO expands its market to include all areas of the state, three issues relative to rural areas emerge. First, will Rocky Mountain HMO be able to import its successful rural HMO development strategies to other rural areas of the state at the same time it attempts to develop urban markets, or will rural expansion areas be treated in the same manner as urban expansion areas? Second, what are the consequences of the HMO's change in strategic focus for Rocky Mountain HMO providers and consumers on the western slope? Third, how will increased competition on the western slope affect Rocky Mountain HMO's relationship with its providers and consumers?     

Availability, accessibility, and acceptability in the evolving health care system for older adults un the United States]

OBJECTIVE: This study examined three dimensions of access to medical services that contribute to social equity in distribution--availability, accessibility, and acceptability--in order to examine the equity of two medical system arrangements in the United States of America: the traditional fee-for-services scheme and the newer, health maintenance organization (HMO) approach. Equity was compared among three racial/ethnic groups of older adults in the country: European-Americans (the majority in the United States), African-Americans, and Latin Americans (Latinos). METHODS: The data came from a representative national survey that included 858 Latinos, 970 African-Americans, and 8,622 European-Americans. All the survey participants were 65 years of age or older, living in urban areas, and using services through the United State Government's Medicare program for older persons. The three groups were compared through chi-square tests and logistic regression analysis. RESULTS: The data indicated that the older persons belonging to minority groups--who have fewer economic resources but a greater need for medical services--benefit more from HMOs, which provide them with greater availability and access to medical services than does the fee-for-services system. This difference is due to the fact that HMOs reduce the economic barriers for patients. However, the Latinos in HMOs reported lower satisfaction with their HMOs' primary-care physicians than did the European-Americans. CONCLUSIONS: The HMO approach increases access to medical care but does not necessarily improve the quality of the patient-physician interpersonal relationship for older minority persons in the United States. This study demonstrates that in health systems that are going through a reform process it is possible to monitor equity in medical care, and that an accurate assessment needs to focus on vulnerable populations as well as to distinguish between different dimensions of access.     

The impact of healthcare reform on HMO administrators

Over the years, congressional legislation toward healthcare reform has evolved, moving toward channeling indigent populations into managed care plans. Health Maintenance Organizations (HMOs) will have to respond to increased competition caused by this shift enrollment as each entity attempts to funnel these patients into its own provider network. It is likely that some HMOs may bid too low when contracting for patients, putting these organizations at risk for financial insolvency. This paper discusses the impact of Medicaid waivers on HMO administrators. HMO executives need to develop a strategy for monitoring the financial integrity and contractual performance of new and existing HMOs in light of changes taking place with respect to healthcare reform. The transition to managed care and the shift in enrollment pose many challenges for directors of HMOs as will be discussed by analyzing lessons learned from Medicaid managed care plans in Arizona and Oregon.     

Social Health Maintenance Organizations: assessing their initial experience.

The Social/Health Maintenance Organization (S/HMO) is a four-site national demonstration. This program combines Medicare Part A and B coverage, with various extended and chronic care benefits, into an integrated health plan. The provision of these services extends both the traditional roles of HMOs and that of long-term care community-service case management systems. During the initial 30 months of operation the four S/HMOs shared financial risk with the Health Care Financing Administration. This article reports on this developmental period. During this phase the S/HMOs had lower-than-expected enrollment levels due in part to market competition, underfunding of marketing efforts, the limited geographic area served, and an inability to differentiate the S/HMO product from that of other Medicare HMOs. The S/HMOs were allowed to conduct health screening of applicants prior to enrolling them. The number of nursing home-certifiable enrollees was controlled through this mechanism, but waiting lists were never very long. Persons joining S/HMOs and other Medicare HMOs during this period were generally aware of the alternatives available. S/HMO enrollees favored the more extensive benefits; HMO enrollees considerations of cost. The S/HMOs compare both newly formed HMOs and established HMOs. On the basis of administrator cost, it is more efficient to add chronic care benefits to an HMO than to add an HMO component to a community care provider. All plans had expenses greater than their revenues during the start-up period, but they were generally able to keep service expenditures within planned levels.     

Hospitals owning HMOs get shortchanged when it comes to controlling, reducing costs

Data Benchmarks: HMO ownership a financial hindrance to hospitals? A new survey of hospitals owning HMOs vs. hospitals that don't surprisingly shows hospitals getting into the managed care business aren't faring as well as they hoped. Hospitals owning HMOs had 11.3% higher total costs per occupied bed than organizations that don't own HMOs. Here are the details, plus comparisons of other financial indicators between the two groups.     

The determinants of HMOs' contracting with hospitals for bypass surgery

Objective. Selective contracting with health care providers is one of the mechanisms HMOs (Health Maintenance Organizations) use to lower health care costs for their enrollees. However, are HMOs compromising quality to lower costs? To address this and other questions we identify factors that influence HMOs’ selective contracting for coronary artery bypass surgery (CABG). Study Design. Using a logistic regression analysis, we estimated the effects of hospitals’ quality, costliness, and geographic convenience on HMOs’ decision to contract with a hospital for CABG services. We also estimated the impact of HMO characteristics and market characteristics on HMOs’ contracting decision. Data Sources. A 1997 survey of a nationally representative sample of 50 HMOs that could have potentially contracted with 447 hospitals. Principal Findings. About 44 percent of the HMO‐hospital pairs had a contract. We found that the probability of an HMO contracting with a hospital increased as hospital quality increased and decreased as distance increased. Hospital costliness had a negative but borderline significant (0.10<p<0.05) effect on the probability of a contract across all types of HMOs. However, this effect was much larger for IPA (Independent Practice Association)‐model HMOs than for either group/staff or network HMOs. An increase in HMO competition increased the probability of a contract while an increase in hospital competition decreased the probability of a contract. HMO penetration did not affect the probability of contracting. HMO characteristics also had significant effects on contracting decisions. Conclusions. The results suggest that HMOs value quality, geographic convenience, and costliness, and that the importance of quality and costliness vary with HMO. Greater HMO competition encourages broader hospital networks whereas greater hospital competition leads to more restrictive networks.     

Happy with health care?

The American Association of Health Plans (the main HMO trade association), in making the case against patients' rights legislation, points to polling data that show Americans are basically satisfied with managed care plans. Although large majorities, including those with HMOs, do say they are "satisfied" with their health care plans, HMO members are less satisfied than members of other types of plans. And if we look beyond personal-satisfaction ratings, we find plenty of evidence for public concern about HMOs in particular and the health care system in general. Americans are supportive of HMO regulation, and despite their willingness to say they are "satisfied" with their health care plans, they harbor a lot of worries about the future--treatment that could be denied them, costs that could ruin them, and loss of coverage. The public sees the need for major change not just in HMOs but in the health care system as a whole. As HMO lobbyists scramble for new arguments against legislation, they will likely persist in misrepresenting and misusing polling data to make their case.