Northshore attended virtual Healthcare seminar highlighting the Economics of Managed Care and the Payment Models that Work

4th October 2021

At Northshore we specialize in claim reviews and audit solutions in the healthcare sector so we were delighted to attend a recent industry sponsored event featuring Paul Keckley, a noted healthcare industry researcher and guest speaker to discuss healthcare economics. He focused on alternate payment models & methods, payment reforms and risk sharing contracts and how the U.S. healthcare industry is so labor, capital and regulation concentrated.  During the session Mr. Keckley also shared his thoughts on the industry’s economics, its future and how payment models and reforms affect organizations at every level, providers, payers and risk-sharing partners.

The capitation payment model grew in popularity in the late 1970s and 1980s as healthcare insurance for employer groups and government programs turned away from major medical comprehensive/indemnity plans to offering HMO healthplans.  HMOs offered financial incentives to physicians willing to accept the risk for large volumes of healthplan members in return for monthly capitation payments. Providers began to take on the role of risk takers through contractual agreements with healthplans that rewarded them for sharing risk of their membership roles.

Since the 1980s and through the 2000s healthplans, providers and government programs have struggled with the costs of access to healthcare, drugs and new technologies.  The cost of healthcare services outpace cost of living and wages so payors and providers were seeking to improve their bottom lines. Health plans, payors and riskholders sought alternate payment models that gave incentives to providers willing to accept more risk with ensuring a wide net of access, greater quality and improved outcome of care.

For their part providers have assembled various organizations to construct ways of maximizing treatment options, create ways of capturing data for reporting for the masses while ensuring quality and outcome metrics are maximized.  Data reporting became a significant tool to measure the effects of managed care through incentive payments, and to play a pivotal role in shaping the payment models of the future, those that work and those that have no affect on the access, quality and outcome of care.

Capitation and bundled payments continue to lead the way as the preferred methods of payment. Capitation provides steady, reliable income for the participating providers based on per member per month reimbursement.  Bundled payments provide a known flat fee for an episode of care; managing that episode of care efficiently has an affect on the patient’s outcome, and the better the care, the shorter the period of care is needed.

With all of this risk sharing, entities can become vulnerable to insolvency, debt and bankruptcy.  To prevent financial crisis, reinsurance is often a mandated solution to protect the risk bearing entity from catastrophic loss.  Government programs often require reinsurance to protect the financial investment shared with healthplans that administer benefits for Commercial, Medicare and Medicaid populations.

Reinsurance carriers, MGUs and others provide catastrophic coverage as a means to insulate organizations willing to manage risk. As a consequence, the availability of private sector reinsurance allows riskholders the opportunity to select and obtain coverage that fits or meets their needs.

At Northshore, we support risk bearing entities by delivering claim review and auditing solutions that validate, quantify, and verify the accuracy of claims filed under these reinsurance products.

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