Sunday, October 28, 2007

New York City Public Hospitals drop managed care plans. Alligning patient interests with financial incentives is key.

Early in the week I heard from some of our staff physicians that the New York City Health and Hospitals Corporation (NYCHHC) had decided to drop all of its Medicaid, Child Health Plus and Family Health Plus programs - save three - Metroplus (owned by HHC), Healthfirst (owned by a consortium of hospitals) and HIP (which covers many hospital workers). Within the first week our community health centers were getting calls from people who had other health care plans but who used NYCHHC facilities as their primary care provider. They were scrambling around for a new primary care provider - not an easy task with the shortage of primary care providers that exists today in our city and throughout the country.

I am sure the motivation behind this came from the recognition that managed care is dependent on a sophisticated primary care delivery system and is supposed to focus on prevention, keeping people healthier and keeping them out of the hospital. Since NYCHHC "owns" their primary care delivery system then keeping people healthier and out of the hospital cuts into their inpatient revenue and actually does harm to the economics of the entire system. Any money saved is saved by the insurer and is of no benefit to the hospital or the primary care providers.

There is one critical exception - and that is if NYCHHC also owns or has stake in the insurer. In that case, saving money on hospitalization reduces their inpatient revenue but at the same time increases profits to the managed care company that they own. So if you own the hospital and the primary care system you must also own or have stake in the insurer or better care means less revenue.

So NYCHHC I suppose is gambling that patients, hearing about the drop of the formerly affiliated health plans in which they have no financial stake - will find another health plan that NYCHHC participates with and will join that plan to keep their doctor. But managed care plans don't like to lose members and while this is happening they are contacting their members who have primary care providers at HHC facilitites and encouraging them to switch to another provider for their primary care. This will cause the physician - patient relationships in many families to be disrupted severely and will surely increase health care costs in the short run as well as threaten the quality of care those members recieve.

**Please click "comment" below for a very articulate explanation of this issue written by Al Aviles, President of the New York City Health and Hospitals Corporation.**

1 comment:

Al Aviles said...

Neil -- You are right about our motivation for sharply limiting those health plans with which we contract. With the exception of HIP which is the choosen insurer of city employees, including many of our own workforce, we are opting to limit our Medicaid manage care contracts to two plans, including our own plan, MetroPlus, which provide us with maximum global capitation with minimum administrative expense.

Under these global capitation arrangements, the plan retains only what it needs to cover the adminstrative expense of running the plan, while the balance of the premium dollars go into risk pools that can be used to cover the expenses of direct delivery of healthcare services to the plan enrollees.

This "population-based" approach to managed care -- where clinicians are incentivized to do a better job of providing robust primary care, prevention, and chronic disease management to keep patients as healthy as possible -- was an original underpinning of managed care theory. But most managed care plans quickly steered away from a global capitation model and have simply instituted the same old fee-for-service model, albeit at discounted rates. This allows plans to make money by "managing utilization" (also known as denying claims for services rendered) and to generate profit (or "surplus") for their shareholders (or, for non-profit plans, their sponsors).

As a result of this slide back to the fee-for-service model, hospitals in particular are still incentivized to invest primarily in acute care services, because filling those inpatient beds drives most of the revenue.

At HHC, we have an activist agenda that is centered around comprehensive primary and preventive care, the screening and early detection of disease, and the assertive management of chronic diseases, such as asthma, diabetes, congestive heart failure and depression.

All of this requires investments at the front end of care and, if done effectively, reduces emergency department encounters and inpatient admissions. In other words, if we do the right thing for our patients and keep our asthmatics out of our hospital beds, our reward is that we forego all the revenue that would have been associated with those inpatient admissions under a fee-for-service system. You get the picture.

Our managed care contracting strategy is our effort to impose some rationality on an otherwise irrational reimbursement system and align our reimbursement so that it incentivizes everyone across our hospitals and health centers to focus on keeping our patients well, even if that leads to a decrease in our inpatient utilization. Global capitation creates that alignment better than any other reimbursement methodology that is currently available to us.

We share your concern about minimizing disruption to our patients. But the truth is that existing patient-physician relationships need not and should not be disrupted as a result of HHC’s termination of its fee-for-service Managed Care Plans. Members of those Plans will have and should have a full opportunity to keep their current HHC primary care providers by joining other Plans that will continue with HHC.

Under new State legislation, however, there is a brief moratorium on communicating with members about Plan terminations. During this period, which will last another four weeks, HHC as well as the Plans are prohibited from notifying the affected members about the need to change providers. (Your information that some Plans are doing so is troubling and would suggest that some plans are violating the law.) Thereafter, HHC will promptly advise these patients of the steps necessary to retain their current HHC physician and hospital and will provide all necessary assistance in doing so.

We will have offered to work with terminated plans to send out a joint letter that fairly informs patients of the choices that they can make and how to make the choice that they conclude is right for them. Only one plan has taken us up on that offer thus far.

You might want to ask the others why they have choosen to do otherwise.

Al Aviles