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12 Cards in this Set

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 Medical Cost Assumptions are Used by whom? By HMO’s:  for ratesetting  to develop capitation rates  for budgeting By capitated providers:  to evaluate a capitation rate.  to set a target utilization level. THE TWO METHODS USED BY HMOS TO PROJECT MEDICAL COSTS: The Budgetary Method  U represents demand  C represents cost of resources needed. The Fee-For-Service Method  U represents expected utilization  C represents the normal fee-for-service reimbursement Main Use of Ffs method:  to develop a capitation rate.  C set at 85% of Ffs, to encourage utilization control.  U set lower than current, to anticipate utilization drop Comparison of Budgetary and FFS Methods: Fee-for-Service Method: Adv:  Easier for a Medical Group to understand Disadv:  Fee-for-service charges not representative of true cost in resources  understimates physical services costs; overestimates ancillary costs Budgetary method: The opposite. SOURCES OF UTILIZATION (U) AND COST (C) DATA: Data Usefulness: Best: HMO’s own experience Split up by segment All on same basis Up-to-date. Worst: State / National data Lumps population/care type segments together All on different basises Out of date Reasons to Look to External Data Sources  for small HMO’s  when switching from Ffs to capitation (HMO’s U and C don’t apply)  As a benchmark for utilz, expenses Considerations in Using External Data Sources:  How was utilization computed? (what was included?)  How were costs computed? (at what discount?)  Effect of inflation The three key medical service categories (making up 95% of costs):  Hospital Inpatient,  Physician Office Procedures, and  Ancillary Services. Sources of Hospital Inpatient utilization and cost data:  American Hospital Association  Medicare Reports How an HMO should determine its hospital utilization target:  age/sex / industry/ location of enrollees  comprehensiveness of plan benefits  UM initiatives used  Compare itself to the industry norm How an HMO should determine its hospital cost target:  Negotiable rates (lower if membership is high)  Avg. LOS lower  cost per day higher Sources of Medical Group (Physician) utilization and cost data:  Other prepaid plans  adjust for different practice patterns  split data by procedure code  not all visits include a procedure  not all procedures are done by a doctor. Other factors affecting costs (C) and utilization (U)  Technology  Utilization trends  demographics  number of specialists (fewer outside referrals)  plan benefit richness Done.