Building Managed Care Business

While more and more providers are interested in diversifying out of Medicare, the prospect of building a strong managed care business line has come back into the forefront of home medical equipment company marketing strategies. Managed care is a much more complex business than Medicare because there are many different types of managed care organizations, and each works a bit differently than the others.

But managed care should be an important part of any home care company's strategy. While enrollment has declined slightly since its peak at the end of the 1990s, managed care remains the majority of coverage for the U.S. population. In 2004, HMO and PPO enrollment made up 60 percent of the country's population excluding Medicare and Medicaid HMO enrollment.

The penetration of managed care differs significantly by state, but even in states that have relatively low penetration, managed care companies can have a large influence over HME patients by keeping them away from providers.

Sort Them Out

Managed care organizations are numerous, but they can be divided in two essential categories: payer-based and provider-based organizations.

Payer-based managed care organizations raise funds from employers, individuals and government sources (e.g. Medicare and Medicaid), then establish their services. With the development of risk contracts, many functions traditionally performed by payer-based MCOs were transferred to hospitals, physician groups and alternate site companies. These functions include utilization review, case management and subcontracting for services from other health care providers. The number of risk-based contracts has steadily declined, however, as capitation and other risk-sharing pricing strategies have proven difficult to manage profitably.

Since HMOs and PPOs represent the most dominant forms of managed care organizations in the U.S. today, focusing on marketing and sales strategies for these two organizations is a good place to start. Let's look at the differences and similarities within these organizations.

HMOs (health maintenance organizations) are corporations licensed under the insurance laws of the states in which they operate, and which assume financial responsibility for providing a defined set of medical services to their enrollees in return for a fixed premium.