SYSTEMS-BASED PRACTICE – Class 1

Definition of Systems-Based Practice

Any system that integrates the financing and delivery of appropriate medical care by means of (at least one of) the following four features:

  • Contracts with providers to furnish a comprehensive set of health care services to enrolled members, usually for a predetermined monthly premium
  • Utilization and Quality Controls that contracting providers agree to accept
  • Financial Incentives for patients to use participating providers
  • Assumption of some financial risk by providers

Systems-based practice is both the management of a financial system and care management. Care management involves how care is delivered – seeking to manage the care of the health of populations, rather than individual patients. Systems-based practice includes a widely accepted systematic approach to health care for large groups of people, rooted in evidence-based medicine and managed by consistent outcomes measurement.

Some Issues Physicians should consider in Analyzing Capitated Contracts – Considerations for Contracting

  • What is the financial risk involved for Physician
  • Is there a guaranty on the number of patients each month
  • Clarify specific services to be provided/ Covered Services – Be Specific
  • What happens if actuarial used by system are wrong and Physician has sicker group of patients than anticipated – Is there stop-loss insurance to limit Physician’s loss
  • Who are the patients/ Where do the patients come from
  • Able to handle increased volume of patients
  • After Covered Services are provided can Physician make the profit it expects
  • Can Physician comply with Conditions in Agreement such as utilization management – such as certain required notifications prior to hospital admissions
  • Note: There are a variety of ways to calculate Capitated Rate such as by a Flat Rate Per Member Per Month (PM/PM)
  • See chart above: Considerations for physicians for Utilization Management provisions of HMO contract

Providers must utilize resources efficiently without reducing needed services or diminishing quality. Medical management is the process where financing of care and the measurement of clinical outcomes is linked to the delivery of clinical care services in a high quality, cost-effective manner, resulting in both patient and physician satisfaction. The key elements of a medical management strategy and program include: compensation program with aligned incentives; information systems that effectively integrate claims and clinical data to provide timely and comprehensive information to providers for measuring quality, outcomes and efficiency; comprehensive health management program that includes both inpatient and outpatient care; a method for determining and measuring utilization appropriateness; education and involvement of key participants such as physicians, patients and employers. It has been said, “the best way to lower costs is to improve quality.”

Considerations for physicians for Utilization Management provisions of Systems-Based Practice contract

  • Can comply with the utilization management provisions of the contract in a timely and cost-effective manner
  • Can meet notice requirements, such as any notification requirements prior to elective hospital admissions
  • Can Use system’s network of contracted providers
  • Understands system’s grievance procedures and patient remedies
  • Understands applicable care pathways and what to do if there is a dispute such as to what is an “experimental procedure” or “medically necessary”

Under the systems-based practice, providers must clearly understand the premise under which they are being paid. In order for professional care services budgets to be adequate, accurate actuarial analysis must be performed. Care delivered must be necessary and appropriate for that level of funding. Excessive readmission to an acute care bed due to a patient’s inability to access their physician cannot be tolerated. Trips to the emergency room for minor illnesses cannot be ignored. Overutilization of unnecessary and costly procedures by specialists must be avoided. This “preventive-maintenance” strategy is possible with a well thought-out management program.

Systems must be capable of tracking patients by physician, by diagnosis, and by payer so that risk intervention and assessment can allow physicians to anticipate and prevent potential health problems and complications within their practices. They are also important in determining risk adjustments for sicker patients, to ensure that risks are spread and shared equitably.

Systems-based practice, is a health care delivery system that aims to contain health care costs by channeling patients of the employer groups or health care exchanges to specific providers (network of providers). This allows the insurers to: (1) negotiate volume discounts with providers in exchange for sending patients to them, and (2) exert more control over what care is provided and when care is provided, based on the agreement between the insurers and provider groups.

For example: suppose an insurer enters into an agreement with a provider group (such as a group of physicians) to send that group 2000 patients to serve. Because the provider group is getting a large volume of patients, the group may agree to a capitated rate and to certain conditions in the agreement. Provider group may agree to provide all medical care as defined in the contract to the insurer’s members for in return a flat rate per member per month. This agreement may specify certain terms that the providers must comply with to be in accordance with the agreement. The terms might include, among a broad variety of others, certain utilization review procedures such as requiring the provider group to notify the insurer prior to any admission to a hospital of a member of the insurer’s, or requirements to use only specified contracted hospitals except for certain circumstances.

“Covered Services”

Under the example cited, this does not necessarily mean less medical care is to be provided to the patient. The agreement with the insurer simply defines what is covered – meaning the insurance company or benefit plan  will pay for those services and what is not covered – meaning the patient is responsible for paying for those services if they choose to receive the uncovered medical service. Services not covered by the insurance policy or benefit plan does not necessarily mean the services are not to be rendered. It then becomes a question of who is going to pay for those services.

In the example above, the insurer directs these 2000 patients (which are the employees and their families of the employer group) to a specific provider group. But, as a pre-condition to get these patients, the providers have to agree to do certain things. For example, they have to call and get authorization before they admit any of these patients for non-emergency surgery and they basically have touse certain specialists and certain hospitals that are part of the HMOs network of providers.

Consider the elements under the definition of systems-based practice. Systems-based practice is defined as any system that integrates the financing and delivery of appropriate medical care by means of (at least one of) the following four features: (1)contracts with selected physicians and hospitals that furnish a comprehensive set of health care services to enrolled members, usually for a predetermined monthly premium; (2) utilization and quality controls that contracting providers agree to accept; (3) financial incentives for patients to use providers and facilities associated with the insurer’s plan; and (4) assumption of some financial risk by doctors.

Overview – Systems-Based Practice Involves:

  • Cost of Health Care
  • Quality Of Care
  • Access to Providers