WIN/WIN NEGOTIATIONS

1
WIN/WIN NEGOTIATIONS

• BOTH SIDES FEEL AS IF THEY HAVE BEEN TREATED
  FAIRLY WHILE GIVING AND RECEIVING CONCESSION OF
  EQUAL VALUE

2
NEGOTIATION STRATEGIES AND TACITCS
3
SURPRISE

• NEW, UNEXPECTED INFORMATION
• PURPOSE - TO DESTABILIZE AND CREATE PRESSURE
• COUNTER - KEEP A COOL HEAD AND EVALUATE THE
  SITUATION

4
AGENT OF LIMITED AUTHORITY

• UNABLE TO MAKE DECISION OR CONCESSION
• PURPOSE - TO BUY TIME AND GET MORE INPUT
• SEE THIRD PARTY - BECOME AGENT YOURSELF

5
ULTIMATUM

• ACCEPT ONLY ONE OUTCOME
• PURPOSE - TO FORCE A QUICK DECISION
• PROVIDE REAL OPTIONS TO STATED POSITION

6
REDUCTION TO THE RIDICULOUS

• USE OF MANIPULATIONS OR GIMMICKS TO MAKE
  SITUATION LOOK DIFFERENT
• PURPOSE - TO MAKE POSITION APPEAR TO BE MORE
  REASONABLE
• ANALYZE ALL ITEMS USING THE SAME CRITERIA

7
POLICY OR PROCEDURE

• INDICATE POSITION IS ACCEPTED PRACTICE
• PURPOSE - TO MAKE A POINT NON-NEGOTIABLE
• CHALLENGE STANDARD/GIVE EXAMPLE

8
WALKOUT

• LEAVING NEGOTIATIONS
• PURPOSE - TO FORCE THE OTHER PARTY TO ACT
• WAIT/MAKE A CONCESSION

9
GOOD GUY/BAD GUY

• NEGOTIATORS ASSUME OPPOSITE ROLES
• PURPOSE - TO GET ADDITIONAL INFORMATION REVEALED
• INDICATE AWARENESS OF TACTIC

10
ITEMIZATION

• REQUESTING BREAKDOWN OF COSTS
• PURPOSE - TO LOWER THE PRICE ITEM BY ITEM
• PROVIDE REASONG FOR NO BREAKDOWN

11
REFERENCE

• USE FEEL/FELT/FOUND STATEMENTS
• PURPOSE - TO PROVIDE THIRD-ARTY SUPPORT
• REALISTICALLY APPRAISE THE REFERENCE

12
TRY IT, YOULL LIKE IT

• PERMIT TRIAL WITHOUT COMMITMENT
• PURPOSE - TO DEMONSTRATE VALUE OF THE PRODUCT
• ATTEMPT TO ALSO TRY THE ALTERNATIVES

13
FLINCHING

• DRAMATIC, NEGATIVE REACTION TO OFFER
• PURPOSE - TO LOWER THE EXPECTATIONS OF THE OTHER
  PARTY
• REFUSE TO BE INFLUENCED

14
BUDGET CONSTRAINTS

• USING EXTERNAL, NON-NEGOTIABLE LIMIT
• PURPOSE- TO ESTABLISH RANGE/FORCE CONCESSIONS
• CHALLENGE THE LIMITS/CHANGE THE LOOK OF THE
  PAYMENTS

15
DISBELIEF

• YOUVE GOT TO DO BETTER THAN THAT
• TO FORCE A BETTER OFFER
• HOW MUCH BETTER

16
PLAYING DUMB

• PRETEND TO HAVE LIMITED KNOWLEDGE
• PURPOSE - TO DISARMOTHER PARTY/GAIN FACTS
• OFFER ONLY THE INFORMATION CALLED FOR

17
MEASURED APPROACH

• REACHING DECISIONS ITEM BY ITEM
• PURPOSE - TO REVEAL AGENDA ITEMS ONE AT A TIME
• ASK FOR THE ENTIRE AGENDA

18
QUICK CLOSE

• ADDING ITEMS WHEN A DECISION IS CLOSE
• PURPOSE - TO MAKE AN OFFER MORE APPEALING/CLOSE
• ASSESS THE REAL VALUE OF THE EXTRA ITEM

19
CHANGING LEVELS

• APPROACHING A HIGHER OR A LOWER LEVEL
• PURPOSE - TO CONTINUE THE NEGOTIATIONS
• ENSURE THAT NO ADVANTAGE IS GAINED BY THE ACTION

20
REASONS FOR ASKING QUESTIONS

• TO GET INFORMATION
• TO LEAD OR MOLD THINKING WHAT IF..?
• TO STALL
• WHY DO YOU SAY THAT?
• TO DETERMINE POSTIONS
• IF YOU COULD, WOULD YOU..?

21

• TO MAKE A STATEMENT
• ISNT THAT WHAT WE BOTH WANT TO ACHIEVE?

22
GOOD NEGOTATING QUESTIONS

• WHAT DO YOU HAVE IN MIND?
• DO I KNOW EVERYTHING I SHOULD ABOUT THIS?
• WHAT WOULD IT TAK TO..?
• WHAT ELSE?
• WHAT IF I COULD..?

23

• YOUVE TOLD ME WHAT YOU WANT. WHAT DO YOU NEED?
• WHATS IN IT FOR ME?
• WHERE WILL YOU COMPROMICE?
• COULD YOU REPEAT THAT OFFER?

24
ALTERNATIVE WHEN ASKED A QUESTION

• WHY DO YOU ASK THAT?
• BEFORE I ANSWER THAT, TELL ME
• WHAT I HEAR YOU SAYING IS
• WHAT EXACTLY DO YOU MEAN?
• REMAIN SILENT - WHEN THE OTER PARTY BECOMES
  UNCOMFORTABLE, HE OR SHE WILL BEGIN TALKING AGAIN.

25
Managed Care

26
Health Maintenance Organizations - HMOs

• Staff Model
• Group Practice Model
• Network Model
• IPA Model
• Direct Contracting Model
• Provider Sponsored Organization

27
STAFF MODEL

• Closed Panel
• MDs As Employees
• Greater Degree of Control Over Practice Patterns
• Convenience of One-Stop Shopping
• More Costly to Develop and Implement
• Limited Choice of Participating Physicians

28
STAFF MODEL (cont)

• Productivity Problems
• Examples
• FHP
• KAISER

29
GROUP MODEL

• Multispecialty Physician Group
• Captive Group
• Independent Group
• Greater Degree of Control of Physicians
• Lower Capital Needs Than Staff Model

30
Group Model (cont)

• Limited Choice of Physicians
• Marketing Difficulties
• Lack of Accessibility
• Examples
• MacGregor
• University Medical Group
• Kelsey

31
Network Model

• Contracts With More Than One Group Practice
• Either Closed or Open Panel Plans
• Overcomes Marketing Disadvantage
• More Limited Physician Panel Than IPA or Direct
  Contracting Model

32
IPA MODEL

• Hospital Based IPA Model
• All Inclusive Capitation
• Requires Less Capital
• Broad Choice of Participating Physicians
• Creates an Organization Forum for Physicians to
  Negotiate with HMOs

33
IPA MODEL (cont)

• More Difficult Utilization Management
• Examples
• North American Medical Management
• FPA
• Heritage

34
DIRECT CONTRACTING

• Requires Less Capital
• Broad Choice of Participating Physicians
• Does Not Create an Organization Forum for
  Physicians to Negotiate
• HMO Assumes Additional Financial Risk Relative to
  IPA

35
DIRECT CONTRACTING

• More Difficult to Recruit Physicians
• Utilization Management More Difficulty

36
Preferred Provider Organization

• Select Provider Panel
• Negotiated Payment Rates
• Rapid Payment Terms
• Utilization Management
• Consumer Choice

37
OPEN ACCESS HMO

• 30 States Currently Have
• Specialty Capitation
• Impact On Utilization
• Consumer Choice
• Texas - OB/GYN

38
EXCLUSIVE PROVIDER ORGANIZATION

• Limited Choice
• Gatekeeper
• ERISA Regulated

39
POINT OF SERVICE PLAN

• PCP Capitation
• Withholds
• Gatekeeper
• Limited Out of Network Coverage

40
INDEMNITY COVERAGE

• High Deductibles
• High CoInsurance
• 65 -84 Steerage of Patients
• MSAs

41
SELF INSURED PLANS

• ERISA Exemption
• Administrative Service Organization ASO
• Third Party Administrator TPA

42
SPECIALTY HMOs

• Mental Health/Chemical Dependence
• Dental
• TCH HMO

43
MANAGED CARE OVERLAYS TO INDEMNITY

• Utilization Management
• Specialty Utilization Management
• Catastrophic Case Management
• Workers Compensation Utilization Management

44
PRIMARY CARE NETWORK
45
RISK CONTRACTING

• A basis for all insurance
• Aligns responsibility and accountability
• A way of sharing risks across a population rather
  than individual by individual
• The cap rate is a function of both the predicted
  frequency and predicted unit cost of services

46
Risk Contracting (cont)

• Providers risk loss if costs are higher than
  predicted and stand to make if costs are lower
  than predicted
• The higher the volume of patients the better the
  chance of predictable expenses and average spread
  of risk
• PCP requires at least 150 enrollees and global
  capitation requires at least 10,000

47
CAPITATION

• A fixed amount is paid to the provider each month
  for the care of a specified number of patients.
  If actual costs exceed the total sum, no
  additional Moines are paid. If actual costs are
  less than the total sum paid, the provider keeps
  the surplus Moines.
• Capitation requires a specific population

48
CAPITATION

• When a provider or group of providers is
  capitated for care, all patients are required to
  use that provider or group. No coverage is
  provided if patients go out of the network.

49
PREMUIM SPLIT

• HMO
• Marketing
• Employer Billing
• Eligibility
• Out of Area Coverage
• Transplant/AIDS Pool

50
PREMIUM SPLIT (cont)

• IPA or Physician Group
• All physicians services, inpatient and outpatient
• Outpatient diagnostic services and treatment

51
PREMIUM SPLIT (cont)

• Hospital
• All inpatient hospital services
• Home Health
• Ambulatory Surgery
• Skilled Nursing Facility
• Durable Medical Equipment
• ER facility fees

52
ACTUARIAL CONCEPTS

• Premium rate is set by first calculating the
  medical expense components
• 1. Assumptions are made of the expected
  utilization of specific areas of care
• 2. Average rate per each service is determined.
• 3. After multiplying the above 2 factors, the
  copayment amount is then adjusted

53
ACTURIAL CONCEPTS

• 4. This equals the net PMPM amount in the
  premium for the specific area of care
• The full premium equals the total medical expense
  plus and administrative load.
• A specified area or service, I.e., PCP services,
  can be separated out to develop a capitation
  figure.

54
PCP Capitation
55
PCP Capitation

• Base Medical Cost 13.31
• 15 Office Visit CoPay 3.77
• Primary Care Cap 9.54

56
GATEKEEPERS

• PCPs FP,GP,IM,PED, GYN
• Eye Care - Optometrist
• Workers Comp - Physiatrist
• Dental Care - General Dentists
• MH/CD - MSWs

57
CAPITATION DONT

• Dont enter into capitation contracts without
  getting advice from experienced managers
• Dont accept a cap rate unless you know you can
  live with it
• Dont enter a capiation contract unless you are
  committed and able to monitor the utilization and
  have confidence in sub-contractors.

58
CAPITATION DONTS

• Dont accept risk for costs you or the group
  cannot control such as tertiary care or new
  technologies
• Dont tolerate an adversarial relationship with
  the payor.

59
CHALLENGES TO PROVIDERS

• Competitive costs
• Capability to accept/manage risk
• Creation of a balanced delivery system
• Lower administrative costs
• Information Management
• Negotiation Skills

60
KEYS TO CAPITATION ANALYSIS

• 1. What services are covered under the
  capitation rate?
• 2. Are there limits to the risk?
• Reinsurance- specific, aggregate
• Low enrollment guarantee

61
KEYS (cont)

• 3. What utilization and cost targets were
  utilized in building the capitation rate? Are
  these comparable to your experience?
• 4. How does the capitation compare to
  fee-for-service charges?
• 5. What are the underwriting or UM guidelines?

62
KEYS (cont)

• 6. What are the incentives for effective
  performance?
• 7. Is the payment structure to providers
  appropriate to live within the capitation?

63
CONTACT CAPITATION

• Customer based fixed payment for services over a
  specified time period.
• Referral based count the number of unique
  patients in a given time period PERIOD.
• Diagnosis/Point based referral based but
  modified by acuity, severity..Points or weights
  assigned to specific diagnosis
• Other case rates, DRGs, ASC rates

64
TYPICAL CAPITATIONMONTHLY PREMIUM 120

• Inpatient Hospital 34
• Outpatient Hospital 14
• Specialty Care 28
• Primary Care 12
• Other Medical 15
• Administrative/Profit 17

65
PHYSICIAN CAPITATION

• Provide or arrange for medical services 24 hours
  a day
• Patient management Consultations
• Hospital Nursing home visits
• Pediatric and adult immunizations
• Initial child care/well care
• Outpatient diagnostic services

66
PHYSICIAN CAPITATION

• Office surgery
• In area urgent and emergent care
• Anesthesia
• Health education
• Telephone consultation
• Physical, speech occupational therapy

67
HOSPITAL CAPITATION

• Hospital facility costs
• Skilled nursing services
• Home Health
• Surgery facility costs
• Prosthetics/durable medical equipment
• Ambulance
• Chemo/radiation therapy agents

68
OTHER MEDICAL POOL

• Prescription drugs
• Vision services
• Dental services
• Mental Health substance abuse services
• Out-of area emergency urgent care
• Kidney dialysis

69
OTHER MEDICAL POOL

• Transplants
• Expenses above stop/loss levels

70
ADMINISTRATIVE POOL

• Marketing
• Membership maintenance/servicing
• Claims administration
• Provider servicing
• UR/QA management
• Finance/Reporting/Systems Management
• Retention

71
RESOURCES NEEDS CHANGE

• Drop inpatient days to 200 - 225 commercial,
  1,100- 1,200 for Medicare
• Reduce Specialist Referrals by 25
• Reduce average length of stay to 2.9 days
• Increase physician visits by 15
• Employ weekend social workers to expedite
  discharge

72
RESOURCE CHANGES

• PCPs stay in office and see patients - stop
  hospital work- employ physician extenders
• Employ full-time physicians on-site at hospital
  to manage all enrollee care - Medical Intensivist
• Employ mental health gatekeepers to reduce
  psychiatric admissions

73
RESOURCE CHANGES

• Conduct physician house calls to avoid inpatient
  stays
• Reduce ER non-emergency visits, telephone triage,
  fast track ER, telemedicine
• Chronic disease management -- Asthma, CHF,
  Diabetes
• Improve access to care

74
Models of Integration

• Physician Hospital Organization
• Management Service Organization
• Group Practice Without Walls
• Integrated Provider
• Medical Foundation

75
Physician Hospital Organization

• A legal entity owned by both a hospital and a
  group of physicians. Its primary purpose is
  obtaining payor contracts.

76
PHO

• Payor requirements of the PHO
• Strong PCP base
• Strong utilization management
• Inclusion of only select specialists with a track
  record of efficient, quality care

77
PHO

• Determinations to make before setting up a PHO
• What are we selling?
• To whom are we selling?
• What is the likelihood we will sell enough to
  survive?

78
PHO Advantages

• Serves as an excellent first stage model
• Requires less capital investment
• May create a vehicle for global capitation

79
PHO Disadvantages

• Less integration than a Medical Foundation or
  Integrated Medical Group
• Since it is not fully integrated, creates
  antitrust risk
• Potential for working inefficiency with super
  majority requirement

80
PHO Physician Strategies

• PHO Risk
• Willing to take risk
• Not willing to take risk
• PHO Capabilities
• Contract a subset
• Grant power of attorney

81
PHO Physician Strategies

• Market to self insured employers
• Market to managed care
• Market to other networks
• Physicians only take risk
• Both physicians and hospital take risk
• Develop an IPA subset of PHO

82
IPA

• Multi-specialty
• Single Specialty
• Specialty
• Workers Comp
• Ethnic
• Other

83
IPA

• Ownership
• Physicians
• Management Company
• Physicians and third party (hospitals, management
  company, venture capitalist)
• Funding
• Physicians Only
• Physicians and third party

84
MSOs

• Provided by hospitals
• Provided by third party payors
• Provided by other outside entities
• Provided by the physician group itself

85
MSO Purposes

• To fund the IPA
• To use as PR tool for physicians recruitment
• To act as precursor to group practice without
  walls
• To reduce the administrative cost for the group

86
Group Practice Without Walls

• A formal legal organization that bills under one
  provider number (75 of revenue through a common
  billing number) and provides certain core
  administrative and management services to
  physicians who maintain separate individual
  offices

87
GPWW

• Purpose Allow independent physicians access to
  benefits of group practice without full
  integration.
• Ownership Independent physicians ownership

88
GPWW

• Focus of activity
• Geographic dispersed physician network
• Provide for adequate physician compensation and
  retirement benefits
• Reduce physician cost of business
• Use as base for accomplishing medical staff
  development goals
• Ownership of some ancillary services

89
GPWW

• Functions
• Managed Care Contracting
• Joint Ventures
• Physician Support Services
• Group Practice Development
• Practice Management
• Ancillary Services

90
GPWW

• Structure
• Owned by participating physicians and can be
  organized as a professional medical corporation
  or as a medical partnership. It is operated for
  profit. Legal requirements
• Incorporation
• Stock structure and bylaws
• Legal arrangement between the GPWW and physicians
  joining the group

91
GPWW

• Legal Issues
• Common Billing
• Merging of practice not purchase of assets
• Retirement Plan Sec. 414 IRS Code

92
GPWW

• Types
• United - The new group practice owns and manages
  the hard assets of the practice along with all
  business operations. Physicians are employees
  and shareholders in the newly formed group
  practice.

93
GPWW

• Administrative
• Physicians retain their assets and ownership in
  their practices, but pay monthly dues for core
  group of services provided by and administrative
  services office. These services include group
  purchasing, collections, billings, payroll, and
  personnel.

94
GPWW

• Advantages
• Greater autonomy to physicians
• Less capital investment required of physicians
• Potential cost savings through economies of scale
• Physicians able to retain certain benefits of
  multi-specialty group practice

95
GPWW

• Advantages
• Provides vehicle of succession for various
  medical practices within the GPWW
• Physicians maintain their individual locations
  and facilities
• Good transitional form between individual
  practice and fully integrated group practice
• Provides opportunity for revenue enhancement

96
GPWW

• Disadvantages
• May raise issues under Sec 414 of IRS Code
• Practices remain compartmentalized

97
Antitrust issues
98
MANAGED CARE

• UTMB
• FALL 2002

99
RESOURCE PLANNING

• The acquisition and allocation of
• Fixed Capital
• Equipment Capital
• Human Capital
• Operating Capital

100
THE SHIFTING OF ATTENTION

• From the hospital to
• Ambulatory Care
• Skilled Nursing Facilities
• Home Health
• Physician Office

101
FINANCIAL PLANNING
102
STRATEGIC PLANNING

• The process of setting long-term objectives for
  the future
• Focus on the budget as its main planning tool,
  management-oriented cost accounting

103
KEY MANAGEMENT SKILLS

• Organizational Skills
• Delegating Skills
• Recruitment and Training of Professional Health
  Workers

104
HEALTHCARE REFORM

• Drivers of Federal Health Policy
• Federal Budget
• The Public Debt
• Medicare Trust Fund
• State Budgets
• Business Profits and Growth
• The Public Perception of Change

105
MEDICARE PAYMENT POLICIES

• Fragmented at-risk payment methods
• Medicare-managed care contracting policies

106
FEE FOR SERVICE TO CAPITATION

• 1970 - Cost Limits
• 1980 - HMO and CMP
• Risk Contracting
• Hospital DRGs
• Small Skilled Nursing Facility PPS

107
1990s

• RBRVS Fee Schedule
• CABG Package Pricing Contract
• Skilled Nursing Facility PPS
• Home Health Agency PPS
• Ambulatory Surgery Center PPS

108
2002

• Open Access
• Four Tiered Pricing of Drugs
• Medicare Select
• Managed Care Reform
• Prompt Pay
• Limited Risk

109
MEDICAID MANAGED CARE PAYMENT POLICIES
110
1970s

• Limits on Cost-Based Fee for Service

111
1980s

• Freedom of choice waivers
• Home and community-based services
• Boren Amendment
• Rate-setting Flexibility
• Arizona Medicaid Demonstration

112
1990s

• Prescription drug rebate program
• Medicaid managed care waivers expedited
• Primary Care Case Management Models - PCCM
• TennCare
• STAR PLUS

113
2002

• Oversight review of Medicaid managed care
• Purchase co-ops demonstration risk pools
• Elimination of TennCare

114
CAPITATION RATES

115
PRIMARY CARE

• GROUP 10.50 - 12.30
• IPA 10.80 - 15.03
• HOSP 8.61 - 14.02
• PHO 11.90 - 14.94

116
PRIMARY CARE

• MEDICARE 13.06 - 26.00
• MEDICAID 13.44 - 28.00

117
PROFESSIONAL

• MEDICARE 138.12 - 171.32
• COMMERCIAL 29.06 - 55.84

118
MENTAL HEALTH

• COMMERCIAL .77 - 3.80

119
SPECIALTY COMMERCIAL

• ALLERGY .19 - 1.37
• ANESTHESIOLOGY 1.75 - 3.45
• CARDIOLOGY .66 - 1.28
• CARDILOGY INVASIVE .11 - .38
• NONINVASIVE CARDIO .60 - 1.27
• DERMATOLOGY .26 - .92
• ER .43 -.70

120
SPECIALTY COMMERCIAL

• ENDOCRINOLOGY .05 - .26
• GI .28 - .99
• GENERAL SURGERY 1.10 - 2.03
• HOME HEALTH .53 - 2.12
• INFECTIOUS DISEASE .02 - .09
• LAB .36 - 1.13
• NEPHROLOGY .04 - .23

121
SPECIALTY COMMERCIAL

• NEUROLOGY .20 - .45
• NEUROSURGERY .31 - .71
• OB/GYN 2.77 - 5.28
• ONCOLOGY .17 - 2.69
• OPHTHLMOLOGY .32 - 1.42
• ORTHOPEDICS .68 - 2.09
• OTOLARYNGOLOGY .63 - 1.65

122
SPECIALTY COMMERCIAL

• PATHOLOGY .24 - 2.24
• PEDIATRICS 4.38 - 16.50
• PHARMACY 8.87 - 18.50
• PODIATRY .21 - .33
• PULMONOLOGY .16 - .41
• RHEUMATOLOGY .08 - .15
• UROLOGY .32 - .72

123
SPECIALTY MEDICARE

• ALLERGY .05 - .38
• ANESTHESIOLOGY 4.01 - 5.50
• CARDIOLOGY 5.00 - 8.18
• CARDIOLOGY INVASIVE 2.09 - 3.06
• NONINVASIVE CARDIO 6.04 - 9.10
• DERMATOLOGY 1.50 - 4.22
• ENDOCRINOLOGY .19 - .28

124
SPECIALTY MEDICARE

• GI .74 - 2.80
• GENERAL SURGERY 3.94 - 8.66
• HOME HEALTH 12.61 - 28.06
• LAB .48 - 2.15
• NEPHROLOGY .62 - .99
• NEUROLOGY .81 - 1.51
• NEUROSURGERY .80 - 1.46

125
SPECIALTY MEDICARE

• OB/GYN .85 -2.16
• ONCOLOGY 3.19 -5.92
• OPHTHALMOLOGY 5.00 - 9.70
• ORTHOPEDICS 3.10 - 7.60
• OTHOLARYNGOLOGY .72 - 1.64
• PHARMACY 18.88 - 60
• PHYSICAL MEDICINE .53 - .85

126
SPECIALTY MEDICARE

• PODIATRY .40 - 1.41
• PULMONOLOGY 1.10 - 1.40
• RHEUMATOLOGY .36 - .56
• UROLOGY 1.85 - 3.69

127
ANECDOTES COMMERCIAL

• CHIROPRACTIC .07
• AMBULANCE .25
• NEONATOLOGY .18
• ORAL SURGERY .22
• GLOBAL MEDICAID 130.78

128
DAYS PER 1,000

• COMMERCIAL 142 - 349
• MEDICARE 800 - 1811

129
ADMITS PER 1,000

• COMMERCIAL 50 - 160
• MEDICARE 202 - 355

130
LOS

• COMMERCIAL 2.30 - 4.50
• MEDICARE 4.10 - 7.00

131
STOP LOSS

• MD 10,000 - 75,000
• HOSPITAL
• PER CASE 22,000 - 100,000
• AGGREGATE 30,000 - 200,000
• PREMIUMS
• MD .52 - 2.41
• HOSPITAL 1.00 - 2.37

132
Finance
133
Financial Statement

• Revenue
• Premium Revenue
• Other Revenue
• Operating Expenses
• Medical Expenses
• Administrative Expenses
• Retention

134
Premium Revenue

• Primary Source of Revenue
• Generally 95 of Revenue
• Effective for a 12 month period

135
Other Revenue

• PPO Access Fees
• COB Recoverable
• Reinsurance Recoverable
• Interest Income

136
Medical Expenses

• Paid Claims
• IBNR Incurred But Not Reported

137
IBNR Factors

• Significant changes in enrollment
• Unusual or large claims
• Changes in pricing or product design
• Seasonal utilization or reporting patterns
• Claim processing backlog
• Major changes to the provider network or
  reimbursement methods

138
Administrative Expenses

• Finance
• Sales
• Underwriting
• Member Services
• Provider Services

139
Underwriting
140
Underwriting Considers

• Health Status
• Ability to pay premium
• Other coverage
• Historical Persistency

141
Health Status

• Physical Examinations
• Individual Medical Questionnaires
• Employer disclosure listing major health
  conditions
• Medical cost experience
• No Health Status Information Medicare and
  Medicaid

142
Ability to Pay

• Credit History

143
Other Coverage

• Coordination of Benefits

144
Historical Persistency

• Frequent changes of carriers

145
Base Rate Development

• Population
• Covered Services
• Cost-Sharing Provisions
• Provider Reimbursement arrangements
• Demographics
• Geographical Area
• Occupation/Industry

146
Base Rate Development cont

• Health Status
• Degree of Health care management
• Coverage effective date
• Out-of-Network Usage
• Use of pre-existing condition clauses
• Underwriting Practices
• Claims administration practices

147
Common Operational Problems
148
Undercapitalization

• New Plans require 10,000,000 in working capital
• Existing plans
• Sustained operating losses
• Acquisitions

149
Unrealistic Projections

• Overestimates of enrollment
• Underprojecting medical expenses

150
Pricing

• Predatory Pricing or Low Balling
• Overpricing
• Panic response to previous low-balling
• Excessive overhead
• Failure to control utilization properly
• Adverse selection

151
Uncontrolled Growth

• Rapid growth
• Acquisition
• No competitor
• Results
• Rapid expansions in delivery system
• Service erosion
• Insufficient claims reserves

152
Uncontrolled Growth

• Results
• Saturation of delivery system
• Inadequate reserves

153
Failure to Manage a Reduction in Growth

• Failure to grow
• Failure to manage the consequences of a flattened
  or negative growth

154
Other Issues

• Failure to use underwriting
• Adverse Selection
• Improper Incurred Bur Not Reported Calculations
  and Accrual Methods
• Failure to Reconcile Accounts Receivable
• Overextended Management

155
Other Issues

• Failure of Management to Produce or Understand
  Reports
• Failure to Track Correctly Medical Costs and
  Utilization
• Systems Inability to Manage the Business
• Failure to Educate and Reeducate Providers
• Failure to Deal with Difficult or Noncompliant
  Providers

156
Base Rate Development dont

• Distribution Method
• Other variables impacting medical costs

157
Using Data in Medical Management

• Data Characteristics
• Integrity
• Consistency
• Same meaning from provider to provider
• Validity
• Meaningfulness
• Adequate Sample Size

158
LEVELS

• Health Center, IPA, Provider Organization, or
  Geographically Related Center
• Individual Physician
• Service or Vendor Type
• Employer Group

159
HOSPITAL UTILIZATION REPORTS

• Daily Log
• Monthly Summary

160
OUTPATIENT UTILIZATION

• PCP Encounter rates
• Preventive Care
• Lab Utilization
• Radiology Utilization per visit
• Prescriptions
• Referral Utilization
• Out-of-Network

161
OUTPATIENT CONT

• Ambulatory procedures
• Ancillary care
• PT
• Podiatry
• Eye Care
• Oral Surgery
• Other

162
PROVIDER PROFILING

• Collection, collation, and analysis of data to
  develop provider-specific profiles.
• Initial focus - inpatient care
• Recent shift to outpatient care

163
Episodes of Care

• Difficulty in determining who has responsibility.

164
Adjusting for Severity and Case Mix

• Severity of Illness Indicators
• Statistical Manipulation
• Trimming

165
Comparing the Results of Profiling

• Plan Average Results
• IPA, POD, or IDS
• Specialty or peer group
• Peer group adjusted for age, sex and case
  mix/severity of illness
• Budget
• Feedback

166
Disease Management

• Success factors
• Implementation Speed to market
• Management Tools Reports, Provider Profiles
• Staff Adequate staffing ratios for nonphysician
  practitioners
• Organizational integration Roles and processes
  defined

167
Disease Management cont

• Marketing and Sales Regional and National
  distribution
• Targeting Tools Optimal use of data
• Stratification Tools Customized interventions
  for optimal outcomes
• Guideline Validity High quality of evidence

168
Disease Management cont

• Member Behavior Change Method based on behavior
  change models including learning
  style,interventions targeted and tailored
  maintenance strategy
• Physician Behavior changed based on research