Q.1 Week 3: Managed Care

Q.1Why do employers prefer managed care organizations (MCOs)? How have MCOs evolved and changed over the years, and what values do they provide to the U.S. healthcare delivery system?

Q.2 Write a reply for this discussion

Employers prefer managed care organizations because MCOs’ main goal is cost controlling without sacrificing quality, as these assume financial risk for expenditures, therefore, hold strong incentives to control the cost and utilization of health services. MCOs manage high risk; they contain fees with aggressive approaches to controlling utilization, including careful selection of subscribers and providers, physician incentives, and employer/subscriber incentives.

Employers their employee’s health insurance so they could receive a tax break for every dollar spent on health plans for their employees. In the 1950s, nearly half of the United States had a specific sort of health insurance often provided by their employer. However, these have changed over the years under legal consumer demands for more freedom of choice (point-of-service strategies) and challenges (the corporate practice of medicine); thus, there has been a move towards consumer-driven methods. As healthcare administrators, MCOs are essential because they attempt to control costs with primary care providers, co-pays, deductibles, and networks.

Nowicki, M. (2018). Financial Management of Healthcare Organizations. Chicago: HAP.

Q.3 Summarize what I learn. (100 words)

A successful bottom-line month for your hospital always begins with one thing—plenty of revenue at the top of the financials. There will be deductions from revenue, bad debt adjustments, and contractual write-offs: many things that eat away at revenue. Of course, there are the usual monthly expenses for salaries, supplies, services, and the like. Sometimes there will be a surprise expense when a major piece of equipment fails or staffing needs to be suddenly increased. One significant winter flu epidemic can increase salary expenses by 20–30% for the month. The challenge in medicine is that we never really know whether that epidemic will or will not happen, so in order to be successful, you simply must generate a big revenue number at the top of the financials. That means generating volume, being busy, and capturing every legitimate charge for services.

Our CO this week is “Given that healthcare is pluralistic in the way it is financed, formulate a plan to address the issues surrounding third-party payments: payment methodologies of government healthcare programs, complex receivables management, managed care requirements, and corporate compliance plans.” Another way to put this is that we will discuss how healthcare has evolved into products and services that we consume but generally with someone else paying for it. For those of us with commercial insurance, either employer subsidized or a personal policy, the insurance companies are the third-party payers. Given the age-based requirements for Medicare, all of us may one day be part of that government program. It’s important to know how the various programs work, how they are interrelated, and what they cost us, both through premiums and taxes.

In addition to our CO, this week’s discussions will allow you to address cost shifting and accounts receivable management. You will read about and discuss how healthcare services are paid for by individuals and insurers, as well as the different rates they pay. You will develop an understanding of how medical charges are calculated and why they can vary so widely.

There is a very important You Decide activity this week. You will be placed in the CFO chair for a little while, and you will work with your team to bring the hospital out of an accounts receivable crisis. This case example is not pulled out of thin air; it is a real-world scenario faced by many U.S. hospitals at this time. Hospitals are now finding it much harder to collect from payers than ever. Medicare and Medicaid pay only a small percentage of charges, insurance companies are delaying payments and taking larger discounts, and the terrible U.S. economy has made it extremely difficult to collect from patients themselves. But hospitals simply must collect to remain viable and fulfill their mission to the communities they serve.

Think back to your experience(s) as a patient. Knowing more about the process will enable you to understand the cost of your care and choose some options accordingly. When payments are made by your insurance company, it sends you an explanation of benefits form (an EOB). Looking at an EOB can reveal how much impact group contracts have on the rate you pay. For services such as lab tests where the additional tests have low variable costs associated with them, the discounts are dramatic.

In short, this is a very important week in our course. I look forward to your comments in the discussion area, especially your findings and recommendations from the You Decide activity!