Managed Care In Your Future

Isn't managed care old hat? Something we obsessed about in the '90s and promptly forgot when the pundits were proven wrong? Perhaps, but it's time for another look.

There may be a tsunami headed our way, driven by managed care organizations taking another run at Medicare beneficiaries. HMOs and PPOs are rolling out Medicare Advantage plans in droves.

We're living in an environment that is far different than it was just 10 years ago. Over the next 10 years, it's very likely that people who become eligible for Medicare will increasingly choose a Medicare Advantage plan.

Participation in managed care by HME providers is mandatory for future survival. Many independent or regional providers may be able to navigate the competitive managed care sea safely, although it won't be easy to go it alone. It will be expensive, and the experienced talent necessary to achieve objectives may be hard to find — but there is certainly opportunity for growth.

Noteworthy Trends

• Demographics

  The numbers are staggering:

  • 43 million people enrolled in Medicare.

  • 55 million enrolled in Medicaid.

  • 8,000 baby boomers turn 60 every day.

  • Population is shifting from traditional strongholds to coastal areas.

  • The U.S. population hit 300 million in October 2006. Immigration continues to grow dramatically. Immigrants account for 40 percent of the nation's population growth, according to a recent Wall Street Journal article. This explosive growth will result in language, cultural, income and education gaps.

  These trends will put enormous pressure on the nation's health care delivery and financing systems. Home care will become an increasingly important setting for health care delivery.

  It's likely that the country's 78 million baby boomers will demand home care alternatives to maintain their independence as long as possible. This is not a generation that intends to fade quietly into the background. Many boomers insist they plan to work well beyond traditional retirement.

  The success that payers and home care providers have in addressing concerns about medical necessity and appropriateness of care will determine both the scope and amount of services provided at home. The HME industry must be prepared to work with payers to develop technology that reduces the cost of care and provides effective oversight.

• Health Care Costs

  We're now spending more than $2 trillion annually on health care in this country. According to CMS, by 2016, that number is expected to reach $4.1 trillion, or $12,782 per person, 20 percent of the economy.

  • Medicare spending in 2005 was $332 billion; Medicaid spending was $316 billion.

  • According to a PriceWaterhouseCoopers report, contributing cost factors in health insurance premiums for 2004-2005 broke out as follows: general inflation, 27 percent; health care price increases in excess of inflation, 30 percent; increased utilization, 43 percent.

  The best opportunity to hold down spending is to reduce utilization of services. Encouraging healthy lifestyles and using cost-effective alternatives like home care are a must to keep a lid on expenses.

  Our industry has to change the perception that it is part of the problem; HME can be part of the solution to health care costs.

• Managed Care Organizations

  MCOs account for the vast majority of commercial insurance coverage today. Traditional fee-for-service plans account for only 6 percent of enrollees.

  The top 25 managed care plans have a combined enrollment of 208 million members. The breakdown:

  PPO	47%
  HMO	29%
  POS	10%
  FFS	6%
  Medicare Sup.	3%
  Other	5%

  Looking at the major sectors, the current breakdown is:

  Commercial	86%
  Medicaid	11%
  Medicare	3%

  Medicare Advantage, a program reborn of the Medicare Modernization Act of 2003, is beginning to attract payers and Medicare beneficiaries alike. CMS pays qualified plans about $10,000 per Medicare Advantage enrollee per year. Payers are finding this an attractive source of revenue.

  Of all the private Medicare options, fee-for-service is the alternative seeing the most growth.

  As of July 2006, more than 7 million Medicare eligibles were enrolled in some form of Medicare Advantage plan, accounting for about 17 percent of all Medicare beneficiaries. Enrollment in the private fee-for-service plan option (as opposed to HMO and PPO options) jumped to 800,000 from just 20,000 enrolled three years ago.

  Only 11 health plans account for about 4.7 million of the enrolled Medicare members. Recently, United Health Care, a prominent MCO, struck a deal with Wal-Mart to place kiosks in 700 locations to promote its Medicare Advantage program to senior citizens during an open enrollment period.

  As baby boomers reach retirement age, the transition to a managed Medicare plan won't be a transition at all. Nearly all of them have been enrolled in managed care health plans for years. It will seem natural. Substantial increases in Medicare Advantage enrollment might make competitive bidding less relevant in the long run.

  The managed care sector has matured significantly in the last 10 years. The industry has consolidated, making it possible for fewer plans to offer more uniform benefit programs and over much wider geographic areas. This has also led to considerably more standardization in medical policy and procedure.

  Another concern is that some payers may be returning to the concept of “narrow networks,” which means fewer providers in their panel. These trends could make it harder for independent HME providers to compete for this business.

• HME Industry Turmoil

  The HME/respiratory industry has been rocked by sudden and swift changes in Medicare reimbursement, competitive bidding, accreditation requirements and the decision to treat oxygen as a capped rental item. Independent and national providers alike have been shaken by these changes, the impact of which is difficult to predict.

Managed care may be viewed once again as an oasis that can help home care providers balance their patient portfolio. However, unlike in the '90s, managed care is a mature industry today with networks in place and experimentation with unique payment or home care management arrangements more or less worked out.

The relative stability is likely to be a good thing for providers and payers who can now innovate and evaluate from a solid foundation. However, providers who are not prepared to invest resources to develop and deliver innovative clinical and reimbursement programs will be left behind.

National providers may have the wherewithal to delve into managed care again. The task may be more difficult for independent providers, but this revenue source should not be overlooked.

A Game Plan

It's likely that national HME companies have a managed care strategy in place. They have a built-in, homogenous provider network. Local providers could be at a disadvantage because payers, some of which are licensed in multiple markets, will seek to limit the number of organizations they contract with.

One strategy available to independent and regional providers would be to affiliate with any of a number of group purchasing organizations. Taking advantage of provider networks can certainly improve chances for independent providers to play in the managed care game.

Such organizations are in a good position to attract the talent needed to build lasting relationships with key managed care organizations and develop programs that will differentiate their networks from competitors.

Other specific actions to consider:

• Make certain before joining a provider network that it includes a broad provider base that offers a uniform set of services to patients and satisfies provider participation criteria set by MCOs. A geographically balanced network that matches managed care enrollment strongholds will be essential to securing agreements with large national HMO and PPO firms.

  Through a buying group or other network organization, providers may have the opportunity to contract with insurers in their service area and take advantage of bid services, negotiation and administration to support the insurers' needs.

• All providers should work with manufacturers to develop technology that reduces costs and documents compliance and outcomes. CPAP devices are a case in point. Compliance information is available, but up until now it hasn't been used to maximum advantage with payer sources.

  Manufacturers are incorporating more early warning systems in their products that quickly detect patient non-compliance. Such information is critical, because payers are always concerned about the medical necessity and effectiveness of home care services.

  Home care providers that offer to monitor patient care and compliance will attract more payer sources.

• Approach disease management companies to become an integral part of their programs. These companies could strengthen their offerings with on-site monitoring and evaluation in the patient's home.

  For example, XL Health, a Baltimore-based disease management company, has developed “special needs” PPOs and is initiating the process in several markets, including Texas.

  This concept is unique because the company is selecting patients with chronic illness, including COPD, for enrollment. This is referred to as “adverse selection” by insurers and, if possible, is usually avoided. However, XL Health believes it can manage costs effectively through disease management; the company will need provider networks.

• Work with sleep manufacturers to develop independent certification of sleep program specialists. MCOs would welcome the idea that a provider has “certified” specialists who ensure that patients with obstructive sleep apnea will get thorough training and proper mask-fitting to improve compliance rates.

• The U.S. pays $90.7 billion a year in obesity-related health care costs. With 66 percent of the population classified as overweight or obese, the country has the highest rate of obesity of all developed nations. Researchers with the University of Pennsylvania found costs linked to obesity make up 5 percent of U.S. health care costs.

  Perhaps HME providers can't solve this problem, but the industry does provide equipment designed to meet this particular need. This fact should be emphasized with prospective payers. Providers might also link with organizations concerned with fighting obesity to develop a value-added health promotion program.

• Networks can develop innovative ways to leverage cultural diversity to give all members access to these services. For example, if one provider has a specialist in an Asian language, make that information available to all network providers in the event they may need assistance with translation. This will mean better patient care, and it will make payers take notice.

• Work to build long term relationships with key payer sources, including provider relations, utilization and claims managers. People who work in the payer field tend to stay put, giving providers time to develop these relationships. Some payers will agree to pay HME providers more if they can demonstrate value and credibility over time.

Managed Care in Your Future

Managed care is almost certainly in your future. While it's important to continue the fight to make sure Medicare beneficiaries receive good care and service, the HME industry cannot afford to ignore the implications of managed care initiatives that, in the long run, may have far greater consequences than our current battle with CMS.

The HME industry is vital to all people requiring home care services. Managed care enrollees are no exception.

A former vice president of purchasing and support services for American HomePatient, Len Serafino serves as vice president, eastern division, for Chad Therapeutics, Chatsworth, Calif. He also is the author of Sales Talk, a book for sales professionals, and has contributed several past articles to HomeCare magazine. He can be reached at lserafino@comcast.net or at 615/778-0401.