BUSINESS ASPECTS OF PRACTICE AND COST-EFFECTIVE CARE

Per Deloitte’s “2019 Global Health Care Outlook – Shaping the Future of Healthcare Trends”:

As the industry continues to move towards value-based system, a few trends US health care organizations should watch in 2019 include:

  • Collaboration between health systems and health plans
  • The shift to wellness rather than illness
  • How technology can help put patients at the center
  • Increased adoption of virtual care options
  • Greater focus on population health

Some Considerations for Physicians Entering into Capitated HMO Agreements

  • Costs of rendering medical care to capitated patients – if costs of rendering care exceeds amount of capitation rate, then physicians losing money and might want to re-think alternatives
  • Consider how to manage costs
  • Be able to track incurred but not reported (IBNR) liabilities incurred through referral of HMO patients to specialists in which physicians are responsible for payment to such specialists

Factors that affect a physician’s financial performance in a HMO contractual arrangement include:

  1. Utilization – For example, adverse selection where the HMO enrolls an inordinate number of patients requiring services greater than the premium established.
  2. Physician and hospital costs – Providers must be able to manage costs. This means providers must shift from a total cost to marginal cost method for managing their practice. This requires increased administrative sophistication, particularly to track the incurred but not reported (IBNR) liabilities incurred through referral of HMO patients to specialists.
  3. HMO underwriting proficiency – In a market with limited capitated HMO saturation, physicians may expect significant enrollee growth. In a more mature market, physicians begin to examine each HMO contract to compare capitation received from one HMO to another. This may lead to consolidation by physicians of the HMOs in which they participate to maximize revenue.
  4. Sales – Physicians may begin to consider discounting participation in an HMO if its growth flattens or the capitation received becomes less appropriate in proportion to the costs of providing care.  For capitation, it is not how many deals you sign, it is the potential profitability of the contract.
    • Three major areas of exposure for providers taking risk are:  (1) medical costs, (2) pricing and underwriting strategy, and (3) efficiency of administrative infrastructure.  Regular reviews of the key performance indicators in each of these areas can help identify potential problems and facilitate action to mitigate financial loss.
    • Information is crucial to good management.  There is great hope that Internet-based information processing and communications will make healthcare more efficient.  Lowering administrative costs can be significant, because administrative costs consumes as much as 25% of healthcare dollar.
    • Another important issue for risk taking entities is to create a framework to analyze if managed care contracts are within expectations. A part of this includes linking payments with clinical processes.  Clinically based risk-adjustment models links clinical and financial aspects of care to serve as a foundation of management systems that support clinical pathways, product-line management and case management.

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