The Managed-Care Conundrum: Balancing Cost and Quality of Care

The Managed-Care Conundrum: Balancing Cost and Quality of Care

By Kelly M. Pyrek

No matter what actually happens on Capitol Hill, politicians pay lip service to healthcare professionals' desire for a shift in focus on cost-containment to a model that balances cost and quality of patient-care delivery. Many clinicians say that managed-care organizations are more interested in managing risk than they are providing quality healthcare, and that in today's political and economical climate, quality improvement is more of a dream than a reality.

One clinician who believes quality care is not mutually exclusive with good business practice is Brent James, MD, executive director of the Institute for Health Care Delivery Research. In a message to the membership of the Accreditation Association for Ambulatory Health Care (AAAHC) Institute's National Quality Forum held in December 2002, James challenged the common misconception that providing quality care is too costly. He emphasized that in the long run, providing quality care is very economical.

"The money invested in quality improvement programs is easily recouped in the number of saved lives, decreased disabilities and decreased medical errors," James said. "Practitioners must also shift their thinking from, 'I know I'm doing it right' or 'In my experience...' to, 'I need to take a look at what I'm doing to see where I can improve.'"

While most agree that quality improvement is a good thing, the motivation behind using the concept can be questioned, says Norbert Goldfield, MD, who, with David B. Nash, MD, MBA, edited Managing Quality of Care in a Cost-Focused Environment. He writes, "Quality of care measurement is being utilized to support a decision to buttress managed competition, instead of to adopt a quality improvement perspective and identify the best organizational structure for our healthcare system--one that will maximize quality improvement. Ideally, healthcare professionals committed to quality improvement will encourage development of organizational structures consistent with quality improvement principles rather than the current push to incorporate managed competition, which is wagging the 'quality of care tail.'"

Regardless of where clinicians fall within this political and ethical continuum, they can't dispute the fact that for ambulatory surgery centers (ASCs) to be successful in the competitive managed-care environment, they must distinguish themselves in both quality and cost in the eyes of their patients, providers and payors.

Craig Jeffries, executive director of the American Association of Ambulatory Surgery Centers (AAASC), says ASCs not only beat the healthcare-delivery competition, they meet that all-important triple play of cost, quality and convenience that satisfies all managed-care parties.

"Ambulatory surgery centers have distinguished themselves as a preferred site for surgery for three important reasons," Jeffries explains. "First, the ASC is a very customer-friendly, supportive environment. It is not your typical experience where you wait seven hours for a doctor to see you. Or where you come in for surgery and end up waiting three hours until the operating room is available. Second, because the surgeons have a higher degree of control over their scheduling, they operate much more efficiently. Therefore their stress level is reduced significantly. It's a more predictable environment for the surgeon. And third, costs are contained. Traditionally, the payment that the managed care organization made for a procedure in the ASC is lower than what they would pay in the hospital outpatient department."

An industry outsider could assume, then, that ASCs are sheltered from the hailstorm of managed-care abuses, healthcare reform, excessive regulation and reimbursement fights. Jeffries says to the contrary.

"I think ASCs are right in the middle of the fray," Jeffries says. "Their success has a direct and perhaps opposite effect on alternative choices for where that patient would go for elective surgery. That means those facilities that had traditionally received that patient for elective surgery will use whatever means they can to continue to enjoy that part of their system business. That puts the ASC in the middle of the issues and debates. The good news is, they have physicians on their side and they have patients on their side. Those are certainly encouraging aspects in a difficult time."

Some of the difficulties clinicians face, whether they are in the acute care or outpatient arena, include hassling over managed-care issues such as claims denials and down-coding. The Western Journal of Medicine reported in 2001 that the average primary-care clinician spends 40 minutes a day on these managed-care related problems. The white paper reasoned that an estimated 137,000 primary-care physicians with managed-care contracts lost 21.9 million hours of primary care per year. Assuming a 20-minute visit, this time could be devoted to 65.7 million potential patient-care visits. Instead, many physicians are bogged down with paperwork and endless circles of appeals for reimbursement.

In the white paper, the membership of state medical associations was asked to cite the top five hassles experienced in daily practice. Eighty-two percent of the respondents identified prompt payment as the most nagging issue, followed by 62 percent listing administrative problems, down-coding and lack of bargaining power. Rounding out the list were other reimbursement issues (38 percent), medical necessity decisions/denials (32 percent) and bundling (20 percent).

It's a long list of managed care-related complaints that is mirrored within the ambulatory surgery marketplace. Jeffries says he recently conducted a survey of AAASC members and found ASC owners/operators raised similar issues.

"Problems with provider network restrictions that limit ASC access to managed-care plans came up 54 percent of the time," Jeffries reports. "The other big issue was payment problems. Fifty-four percent reported slow payment and 45 percent reported inappropriate claims denial. Partial claims payment came up 27 percent of the time. What is to blame is the insurance companies' software that edits for ASCs, essentially changing the practice on denials even though they haven't signed a new contract. The claims systems changes the way the surgery center is used to getting paid. When an insurance company makes that change, they are not sending out a notice to ASCs saying, 'We upgraded our systems so you should be expecting more denials.' That's not happening, so the ASC looks at its accounts receivable and for the last three months they have had problems. So they spend the next three months trying to figure out what those problems are. And that looks like a slow payment when in fact it could be an inappropriate claims denial." Jeffries says he doesn't see any particular code or procedure as the culprit. "I don't see a consistent pattern. It's hard to identify the specifics on the techniques the payors are using for claims denial."

Down-coding persists as a major concern. In 1999, the American Medical Association (AMA) passed a resolution calling for the group to study the reasons for managed-care restrospective payment denials or down-coding for care provided, as well as the effect of these practices on patients, physicians and hospitals. Retrospective denials of payment involve a managed-care plan or other health insurer refusing to pay a claim for health services that had already been provided to the patient. Also, the AMA identified that some insurers and third-party review companies have implemented computer-based edit programs that systematically down-code services to less complex and lower-paying services. The AMA suspected that few physicians regularly challenged the down-coding because of the relatively small dollar amounts involved and the administrative burden associated with appealing the decision, but that doing so created a substantial savings for insurers.

The AMA conducted an online survey in 2000, garnering a total of 759 responses out of 28,094 members who had email addresses. Half of the respondents reported that in the past 12 months, between 1 percent and 9 percent of their claims had been retrospectively denied by a managed-care plan. Almost one-third of the physicians indicated that between 10 percent and 19 percent of their claims had been denied. Thirteen percent had more than 20 percent of their claims denied and 8 percent of respondents had zero claims denied. Reasons for denial included lack of medical necessity (27 percent), the service was not a covered service (26 percent), the service was coded incorrectly (12 percent) and prior authorization was not obtained (22 percent).

According to the AMA survey, radiologists (39 percent) were more likely than physicians in other specialties to receive payment denial due to a lack of medical necessity. OB-GYNs (40 percent) were more likely to be denied payment because a service was not covered, and 34 percent of surgeons were denied payment because prior authorization was not obtained. As a result, the AMA survey reported that 74 percent of respondents said these denials resulted in a loss of dollars, while 58 percent reported that it caused time away from patient care in order to appeal the decision. Anesthesiologists reported that denial of payment had resulted in termination of a hospital or physician contract. Other effects of payment denial reported included stress, frustration, loss of patient confidence, loss of staff time and attempts to bill patients for services.

The AMA says it is concerned that payment denials will result in "patients becoming responsible for paying for performed services and may impact future access to the provision of specific services that are continually denied." The AMA also believes "denials based on medical necessity determinations or incorrect coding may be occurring without adequate due process and appeals rights."

"We see down-coding (in the ambulatory surgery arena)," Jeffries says. "Most ambulatory surgery centers are tracking the problem and where it becomes meaningful when trying to correct those problems. They sometimes try to reconcile the problem and the managed-care organization says that's just the way it is. Sometimes they modify their behavior, in terms of not taking those patients, but I am not hearing (from the AAASC membership) that they are turning away patients. I think they are balancing the needs of their patients with whether they can afford to perform the surgery in the surgery center environment. When they can't, they try to channel them to other alternatives."

What it comes down to, Jeffries says, is creating awareness among lawmakers that controlling costs without affecting healthcare quality is possible.

"As an industry, the ASC sector has been well served by the representation of our Washington counsel," Jeffries says. "They have done a superb job of representing the industry's interests. We are entering a phase now where our success is threatened. We need to have every ASC in the country establish a relationship with their elected officials in Washington so that these politicians will have a first-hand knowledge of the surgery center in their district when they are making decisions that might affect the reimbursement or the access of Medicare beneficiaries to the ASC. The industry is going to be hearing more and more from the leadership of the AAASC on how to be more successful at using those traditional skills they have used with their patients, i.e., good customer service."