Eve A. Kerr

Managed Care and Capitation in California: How Do Physicians at Financial Risk Control Their Own Utilization?

Managed care has taken root as a major form of health care delivery in the United States and will continue to grow, whether propelled by congressional health care reform or by economic forces [1]. Until recently, managed care services have been provided primarily by staff- and group-model health maintenance organizations (HMOs) [2], in which physicians care only for patients enrolled in the HMO. In recent years, however, the delivery of managed care services by physician groups under capitated contracts with HMO plans has grown considerably. These groups include medical group practices and independent practice associations. Medical group practices function in the same way as private traditional group practices. Physicians share business and clinical facilities, records, and personnel and see patients enrolled in managed care plans as well as those with other forms of insurance. They generally practice together in one site but may have more than one site of practice. Physicians in independent practice associations, on the other hand, join together to provide professional services to patients enrolled in managed care plans but continue to care for patients with all forms of insurance in their own individual private offices. Only the patients enrolled in managed care plans are connected with the independent practice association. Managed care provided by these two types of physician groups currently represents at least two thirds of the HMO market [2]. In California, these physician groups typically contract with HMO plans to deliver care in what has been described as a three-tier arrangement (the HMO as the first tier, the physician group as the second tier, and member physicians as the third tier) [3, 4]. The groups establish contracts with HMOs, usually for full or partial capitation, and therefore become responsible for utilization of some or all services by the HMO enrollees. The groups receive capitated payments from the HMOs but retain control over how they reimburse their own physicians and other providers (for example, through salary, capitation, or fee-for-service). The locus of control, therefore, lies with the physician group and its physicians, not with the HMOs. Physicians in these groups share the financial risk and will profit from patients enrolled in an HMO only if the cost to the group for use of services is lower than capitated payments. Further, although the HMOs require that the groups perform basic utilization management functions (such as maintenance of a utilization review committee), most decisions about the utilization management process are left to the groups themselves. Accordingly, the financial risk associated with capitation has challenged physicians to develop effective ways to manage their own utilization and costs while maintaining quality of care for capitated patients. Although the literature has concentrated on the ethical dilemmas that arise when physicians are placed at financial risk [5-7] and when gatekeeping is used [1, 8], physicians practicing in capitated groups are implementing utilization management policies that go beyond gatekeeping. Utilization restrictions have previously been imposed on physicians by external parties, such as third-party payers and health plans, in the form of prospective, concurrent, or retrospective utilization management techniques [9, 10]. Capitated physician groups are adopting many of these same formal management techniques to control their own utilization. We refer to utilization management techniques that are initiated by physicians in response to capitation as internally imposed utilization management. Despite the growth of prepaid health care, we know little about these physician-initiated methods used to control utilization. We therefore examined the internally imposed utilization management techniques used by 94 physician groups in California caring for more than 2.9 million capitated patients. Methods We collected data on utilization management systems by administering two detailed self-report questionnaires to representatives (that is, medical directors or administrators) from a sample of California physician groups. Because the literature contains no descriptions of internally imposed utilization management systems, we based these instruments on a conceptual model of utilization management developed by reviewing literature on externally imposed utilization management; conducting exploratory, semistructured interviews with medical directors and utilization management directors in various managed care settings; and talking with the projects advisory panel, which is composed of medical directors and utilization management directors from eight physician groups (medical group practices and independent practice associations) in California. Conceptual Model Our model of internally imposed utilization management centers on five major components: gatekeeping, preauthorization, profiling of utilization patterns, guideline use, and education. The use of primary care providers as gatekeepers is designed to coordinate care and to control the use of specialty referrals and expensive tests by patients. Patients must first visit their primary care provider for evaluation of any medical condition. If further work-up is required, gatekeepers may be able to send patients directly to a specialist or to have a procedure, or they may have to submit preauthorization requests to the physician group. Preauthorization indicates that someone in the group, be it a nurse, doctor, or committee, must review the medical necessity of requests for specialty referrals, tests, and procedures before they are conducted. In general, groups choose the types of services that require preauthorization. For example, a group might decide that a referral to a cardiothoracic surgeon must always be preauthorized but that a gatekeeper can send a patient directly to an obstetrician without preauthorization. Retrospective profiling of physicians utilization determines patterns of high and low utilization for various services. Such profiles may include the number of patients a physician referred for specialty care in a given time period, the mean number of specialty referrals for his or her colleagues, and possibly a recommendation for change if the particular physicians performance was far below or above the average. The dissemination of specific clinical practice guidelines to physicians represents another strategy for promoting appropriate utilization. Guidelines include recommendations and algorithms (developed by the group or by outside organizations) that specify appropriate use of preventive services such as mammography or specialized tests such as magnetic resonance imaging or that define appropriate management of clinical conditions such as diabetes. Finally, education programs, such as newsletters, conferences, and seminars, are designed to teach physicians to practice cost-effective managed care. In general, preauthorization and profiling involve more direct control and oversight by the group than do guideline use and education. Questionnaire Design and Study Methods We developed the questionnaire on the basis of the conceptual model detailed above. The first questionnaire examined group structural and organizational characteristics and was to be completed by the groups medical director or administrator. It contained 79 questions on physician characteristics, number and distribution of patients, reimbursement mechanisms, profitability, competition, and risk-sharing arrangements. The second questionnaire focused on the structure and intensity of utilization management and was to be completed by the physician most knowledgeable about the groups utilization management programs (generally the medical director or utilization management director). This questionnaire contained 80 questions on gatekeeping, preauthorization, profiling, education, guidelines, and quality assurance programs. Because capitated physician groups generally have several managed care contracts and establish utilization management policies that apply to all their capitated patients, questions focused on general utilization management policies rather than on those associated with one particular HMO. During the winter of 1993, we mailed the two self-administered questionnaires to the medical director of each of the 133 groups that have capitated contracts with one of the largest network-model HMOs in California. Groups not responding after 4 weeks were mailed a second copy of the questionnaires. Members of the advisory panel also called the medical directors of all nonresponding groups to encourage participation. The study was endorsed by members of the projects advisory panel and by the Unified Medical Group Association, a national association of more than 60 medical group practices that provide managed care in more than 350 separate sites. The Unified Medical Group Association did not provide any funding for the study. Our sources of grant support provided funding for the investigators salaries and for data collection but did not participate in acquiring, analyzing, or interpreting the data. Results Seventy-one percent (n = 94) of the groups responded to both surveys. Most responses came from the groups medical directors (73%), utilization management directors (13%), and administrators (9%). Independent practice associations and medical group practices were evenly represented, and groups with a widely ranging number of capitated patients and practice sites were included in the sample (Table 1). Groups cared for capitated patients an average of 8 years. Forty-six respondents represented independent practice associations, and 48 were from medical group practices. Twenty-one nonrespondents represented independent practice associations, and 18 were from medical group practices. Respondents and nonrespondents did not differ in the median number of primary care physicians (40 compared with 37, respecti

Follow-up After Hospital Discharge: Does Insurance Make a Difference?

As the length of hospital stays decreases, important medical problems are often deferred for follow-up after discharge. We investigated whether patients without regular physicians actually receive post-discharge care. Patients without regular physicians at the time of admission to a private nonprofit teaching hospital were surveyed by telephone one month after discharge. Forty-six percent were non-Caucasian and 53 percent had Medicaid or no insurance. Although discharge planning was documented for 97 percent of patients, only 54 percent of study participants had completed follow-up one month later and only 46 percent could identify a regular physician. Among all patients with a particular need for-follow-up, Medicaid and uninsured patients were less likely to receive follow-up (p=0.042), to identify a regular physician (p=0.007), or to complete discharge instructions (p=0.018). Cost of medical care was found to be a significant deterrent to obtaining follow-up for patients with Medicaid or with no insurance (p=0.001). Expanded access to care, along with focused discharge planning, may improve completion of follow-up for Medicaid and uninsured patients.