Contract Completion

Managed Care Organization (MCO) Team Project “Contracts Review

Name

Institution affiliation

A. Analysis of the ACA and its future implications on MCOs.

Enacted to ensure that the cost of accessing medical care by the laypeople is reduced, the Affordable Care Act is a key part of health insurance reform legislation that has had a huge impact on the healthcare system in the United States today. To achieve its mandate, ACA uses the medical covers provided by the Centres for Medicare and Medicaid Services (Sommers et al 2015). The ACA links the fee-for-service payment that the government makes to the performance of the health service provider. As a result, in case a provider proves to be an exception, it receives a 2 percent bonus in its reimbursement. However, given that the ACA is at its initial stages, it is hard to determine the effects that it stands to have on the healthcare part in terms of revenue and reimbursements(Sommers et al 2015).

Despite these uncertainties and the fact that there lack any absolute conclusions, it is certain that ACA stands to bring enormous changes to the healthcare system. While most services in the US are paid for by the end user, the healthcare providers get reimbursements from the health insurance industry(Basu et al 2015). The health care industry cut across a lot of areas including self-insurers, government programs, and managed care companies as well as managed care companies which incorporate both healthcare and insurance services.

Managed care plans increased in the 1980s as the need to control healthcare costs increased. The 1990s witnessed a number of mergers and acquisitions while Blue Cross and Blue Shield also restructured. These together with commercial insurers have been keen on consolidating the health insurance market (Basu et al 2015). With an increased number of registered users of Medicare and Medicaid, more government payments will be made, and therefore the service providers will be looking to benefits from the 2 percent bonus assured for getting positive results.

B. Check list that will be utilized as a tool to review managed care contracts

Managed care contract analysis checklist

Name ________________________________ Date______________________

PRE-CONTRACTING CONSIDERATION:

Yes No N/A

1. Have you reviewed or received financial statements? ___ ____ ____

2. Have your made a call to the regulatory agency to

a. Review records? ____ -______ ____

b. Verify amount and type of insurance carried

by the MCO? _____ ______ _____

c. Verify licensure? _____ ______ _____

d. Ascertain the accreditation of MCO? _____ ______ _____

e. Ascertain lawsuits/compliance/complaints _____ ______ _____

Specify _____

3. Who are the owners of the MCO

a. Who are the MCO’s medical directors?

b. For how long has the MCO been in operation?

c. What are the growth projections of the MCO?

4. What are the demographics:

a. Annual enrolment/disenrollment rate:

b. Annual turnover rate among physicians:

c. Number of covered or enrolled lives:

TYPES OF SERVICE Yes No N/A

1. Are physicians required to provide care for a number _____ ______ _____

Patients?

2. How many patients will the MCO provide? _____ ______ _____

3. Are the physicians required to be available at all time? _____ ______ _____

4. Does the MCO have Medicaid and/or Medicare contracts? _____ ______ _____

5. Does the agreement require physicians to provide high

quality care? _____ ______ _____

PRICE Yes NoNA

1. Is payment based on fee-for-service? _____ ______ _____

2. Does the contract specify how to determine maximum charges? ____ ______ _____

3. How much cash flow us created by the MCO?_____ ______ ____

4. Is rates confidentiality maintained? _____ ______ _____

TERMINATION Yes No NA

1. Are there specified reasons for termination of the contract? _____ ______ _____

2. How long does it take to terminate the contract? _____ ______ _____

C. A one year (1) financial analysis as a predictive measure/tool projecting the financial performance based on the adoption of the selected health plan and reimbursement model

Total members = 500

Capital payment per member = $ 200 per annum

Total capital payment per annum = 500 * 200 = $ 100,000

Expected number of inpatients = 10 % of member population = 50 per annum.

Average cost per hospitalization = $ 2250

It is given that per 5,000, the average utilization is 10 percent while the average length of stay is 5 days.

In this case the member population = 500

This implies that the average utilization will be 10 % of 500 = 50.

50 * 5 days (average length of stay) = 250 days

Therefore, the average cost = $ 2500 * 250 days = $ 625,000

Total capital payment per annum ($ 100,000) is less that the average cost $ 625,000.

Therefore, the contract, in this case, cannot be termed as viable since the average cost is higher than capital payment.

It is therefore important to raise the per member per year (PMPY) amount to ensure that it is more than the average cost.

Average cost = $ 625,000

Total members = 500

Capital payment per member = $ 250 per year

We will have to increase the capital payment so as to break even = 625,000/500 = $1250

Therefore, any amount above $1250 will be profitable.

By assuming that capital payment is $1500, the capital will be 1500 * 500 = 750,000

Therefore the contract will be viable as it will have a profit of 125,000 (750,000 – 625,000)

D. Three (3) involved parties

Managed care contracts can be described as contracts between physicians as well as other health care professionals and a managed care organization (MCO) such as health maintenance organization and provider sponsored network. MCO is the basic contracts responsible for laying down the basic terms of the relationship. There are a number of parties that contribute to the review of the managed care contracts.

One of the key parties involved in the physician or the service providers in general. Both the physicians and the service providers engage the Managed Care Organization after considering its performance as well as the reputation that the MCO has. The service providers also contribute to the MCOs based on the frequency by which they enroll in (Fox, 2014). The physicians or the provider of services are also involved in the analysis of agreement terms including the rates of contribution. Based on these contributions, it is clear that physicians and service providers are key parties in reviewing managing care contracts.

Another key party that can contribute to the review of managed care contract is the receiver of services. Patients who receive medical treatment or other services in the health care department should also be consulted in reviewing the managed contracts(Fox, 2014).

The third party to be consulted when it comes to reviewing managed care contract is the managed care organization. The managed care organization cover the medical expenses that the patients incur and therefore they form a key part during the reviewing of contracts between them and the service provider(Fox, 2014). Given that the managed care organization have to determine whether the patients or the parties involved are worthy of receiving help in the medical expenses, they have to be involved in the contracting process.

References

Basu, S., Phillips, R. S., Bitton, A., Song, Z., & Landon, B. E. (2015). Medicare chronic care management payments and financial returns to primary care practices: a modeling study. Annals of internal medicine, 163(8), 580-588.

Fox, P. D. (2014). An overview of managed care. The managed health care handbook, 3-15.

Sommers, B. D., Gunja, M. Z., Finegold, K., &Musco, T. (2015). Changes in self-reported insurance coverage, access to care, and health under the Affordable Care Act. Jama, 314(4), 366-374.