Vol. 1. No. 2

The Cornerstones of Management Infrastructure

Laying the groundwork for the managed care organization (MCO) through effective management of the medical budget is much akin to building a solid foundation for a home, beginning with the basic structure to which architectural supports are added to maintain strength and integrity for functionality and expansion in the future. In this article, we've outlined the basic necessary management infrastructure and, within each category, listed the most important components that must be in place to ensure that your medical budget is managed effectively.

Revenue Streams - Money to Deliver and Manage

The main revenue source is premium income. Initial construction and ongoing maintenance cannot occur without sufficient funding. Despite this obvious fact, we often find that underwriting, enrollment, billing and collections are relegated to "back room" status -- out of sight, out of mind, but deserving thoughtful attention and allocation of suitable resources.

· Underwriting and Enrollment:

Guidelines consistent with marketing goals, risk protection and profitability; routine rate review and adjustment; proper application of rates; and routine reconciliation of membership.

· Marketing:

Well-defined guidelines; revenue- and profitability-based incentive systems; effective broker management; time frames that assure "prepayment" of premium; appropriate employer and member orientation; and ongoing feedback for product development, competitive analysis and administrative performance.

· Billing and Collection:

Timely, accurate billing; strict collection procedures; routine premium/capitation reconciliation; prudent parameters for extending credit; posting and allocation procedures; and fiscally sound policy for "write-offs."

Provider Network - Medical Commitments

The provider network is all too often poorly planned, hastily developed and inadequately maintained. Providers are key partners for viability and prosperity.

· Provider Mix:

Access to comprehensive set of provider types and specialties for all covered benefits; availability within -- provider panels to serve all MCO members in a timely manner; distribution and proximity of providers by geographic location and logical groupings of professional and facility providers.

· Provider Reimbursement:

Methods and amounts of risk-sharing and reimbursement by type of care and provider; logical reimbursement ; mechanisms, across the continuum, for care that is provided in the least costly, medically appropriate setting.

· Network Maintenance:

Continual reevaluation of provider network and out-of-network care; recontracting; ongoing provider education and performance feedback.

Medical Management - Guide the Delivery of Medical Care

Without initial and constant attention to the quality, use and cost of resources, MCOs cannot remain financially viable. The resource management tools include the following:

· Clinical Committees:

Comprised of PCPs, specialists, and other providers to provide policy making and oversight support to utilization and quality programs.

· Utilization and Quality Management Plans:

Define overall utilization and quality goals; identify the techniques, activities and processes to achieve those goals; provide criteria and standards to carry out and evaluate performance.

· Utilization Management:

Incentives, clinical guidelines, educational activities and utilization controls to effect appropriate use of medical care resources including: risk sharing, financial rewards, physician-developed clinical protocols, provider utilization profiling, alternative care resources, authorization, case management and disease management.

· Quality Management:

Population-specific preventive and health maintenance programs; credentialing, recredentialing, medical records and clinical standards; access and availability standards; quality indicator monitoring; over- and under-utilization and continuity of care monitoring; trend and individual provider performance assessment with corrective action plans and monitoring as required.

Operational Supports - Infrastructure and Systems to Manage

Operational supports can either make or break the ability of the MCO to effectively manage the medical budget:

· Information System:

Automated system to serve as the collector, integrator, processor and reporter of all managed care data and transactions, that provides reporting capabilities to tracking management controls and performance. Takes in, processes and provides output for health care delivery, marketing administration, membership administration, utilization management, claims administration, financial system, and provider relations.

Building Maintenance, Repair and Renovation - UPDATE!

Once the cornerstones of medical budget management are in place, they must be continually reevaluated and modified to better serve new and modified markets, membership, products, requirements and opportunities.

Conclusion

Following these "blueprints" for building and maintaining this infrastructure is the essence of managing your medical budget. It will help ensure your financial success, increase market growth, and deliver superior outcomes and a value-added product.