Group practice strategies to manage pharmaceutical cost in an HMO network.

OBJECTIVE: To evaluate the prevalence of various pharmaceutical cost management strategies used by group practices within a managed care network and their relationship to drug costs among enrollees. STRATEGIES STUDIED: Care management (gatekeeping, practice profiling, practice guidelines, case management), techniques for maintaining clinic medication records, and policies regulating physician interaction with pharmaceutical sales representatives (PSRs). STUDY DESIGN: Cross-sectional survey of primary care group practice organizations (n = 103) affiliated with Blue Cross Blue Shield of Minnesota in early 1996. METHODS: Multivariate linear regression analysis was performed on corresponding claims data for members continuously enrolled in these practices from January 1 to December 31, 1995 (n = 76,387), using the patient as the unit of analysis. RESULTS: Substantial variation in strategy prevalence was observed; this variation was thought to influence pharmaceutical costs. Seventy-six percent of practices had medication lists in outpatient medical records, 53% had policies limiting pharmaceutical detailing, and 44% had patients assigned to primary care gatekeepers; however, only 10% used outpatient nurse case managers. Use of outpatient nurse case managers (P < .010), primary care physician gatekeeping (P < .002), policies to control pharmaceutical detailing (P < .001), and medication lists and outpatient charts (P < .001) was found to be independently associated with lower pharmaceutical expenditures. Significant colinearity was found between group size and the strategies studied. CONCLUSIONS: Significantly lower pharmaceutical costs per member per year were observed in the groups reporting primary care gatekeeping, outpatient medication records, outpatient case managers, and policies regarding physician interactions with PSRs.

The American College of Medical Practice Executives' competency study.

This article is the first of two studies conducted by the American College of Medical Practice Executives (ACMPE) that examines the perceived roles of medical practice executives. (Founded in 1956, the American College of Medical Practice Executives is the professional development and credentialing arm of the Medical Group Management Association (MGMA)). This study asked groups of physicians and nonphysician administrators to identify the competencies and associated skills and knowledge for administering group practices in today's changing environment. Those surveyed included administrators who are Fellows in ACMPE and 795 physicians who comprise the Society of Physician Administrators of the Medical Group Management Association. The responses were examined through a framework provided by the Managed Care Process Model. In this model, the focus is on the administrative and clinical processes required by different levels of managed care market penetration. The model progresses from a focus on relatively traditional practice management functions to those activities that are more complex with a greater focus on the integration of both clinical and business processes aimed at the health of populations. The analysis of the perceived competencies indicated that while both executive types perceived the importance of managing the health of populations, that task is not yet being incorporated into their professional roles.

The effects of medical group practice and physician payment methods on costs of care.

OBJECTIVE: To assess the effects of payment methods on the costs of care in medical group practices. DATA SOURCES: Eighty-six clinics providing services for a Blue Cross managed care program during 1995. The clinics were analyzed to determine the relationship between payment methods and cost of care. Cost and patient data were obtained from Blue Cross records, and medical group practice clinic data were obtained by a survey of those organizations. STUDY DESIGN: The effects of clinic and physician payment methods on per member per year (PMPY) adjusted patient costs are evaluated using a two-stage regression model. Patient costs are adjusted for differences in payment schedules; patient age, gender, and ACG; clinic organizational variables are included as explanatory variables. DATA COLLECTION: Patient cost data were extracted from Blue Cross claims files, and patient and physician data from their enrollee and provider data banks. Medical group practice data were obtained by a mailed survey with telephone follow-up. PRINCIPAL FINDINGS: Capitation payment is correlated with lower patient care costs. When combined with fee-for-service with withhold provisions, this effect is smaller indicating that these two clinic payment methods are not interchangeable. Clinics with more physician compensation based on measures of resource use or based on some share of the net revenue of the clinic have lower patient care costs than those with more compensation related to productivity or based on salary. Salary compensation is strongly associated with higher costs. The use of physician profiles and clinical guidelines is associated with lower costs, but referral management systems have no such effect. The lower cost clinics are the smaller, multispecialty clinics. CONCLUSIONS: This study indicates that payment methods at both the medical group practice and physician levels influence the cost of care. However, the methods by which that influence is manifest is not clear. Although the organizational structure of clinics and their use of managed care programs appear to play a role, this influence is less than expected.

The effects of medical group practice organizational factors on physicians' use of resources.

Few studies have systematically examined the influence of physician, patient, and practice characteristics on physician-directed use of resources within the overall environment of medical group practices and none have included the practice culture in the analysis. This study analyzes the effects of the structure and culture of medical group practices on the amount of resources used to manage uncomplicated hypertension episodes of care for enrollees in a Minneapolis/St. Paul HMO during 1990. Three findings emerged from this study: (1) resource use for a well-defined episode of care varies much more than one would expect in this highly competitive managed care environment; (2) the culture of the group practice appears to be more important than organizational structure in determining resource use for the treatment of hypertension; and (3) together the culture and structural variables only explain 8 percent of the variance in resource use. The study indicated that medical group practice organizations have less influence on physicians' practice styles than expected. The group practices studied are all located in a highly competitive managed care environment and these conditions should be causing them to create more standardized practice styles among their physicians. However, wide variations in individual physician practice styles account for most of the differences observed. Either much of the unexplained variance in resource use for this episode of care results from unobserved patient and illness characteristics, or managed healthcare is not yet causing medical group practices in Minnesota to challenge physicians' individualistic practice styles.

The organizational structure of medical group practices in a managed care environment.

This article analyzes the organizational structures of 155 medical group practices providing services in the highly competitive managed care environment in the upper midwest. The structure of the group practices and the methods of physicians' payment are analyzed in terms of the proportion of revenue obtained from financial risk-sharing managed care payment systems and the length of time involved with those systems.

Assessing the culture of medical group practices.

This study was designed to identify the relevant components of the organizational culture of medical group practices and to develop an instrument to measure those cultures. Building on the work of industrial psychologists and organizational sociologists, a 35-item instrument was developed through an iterative process with more than 100 medical groups. The final instrument was tested using responses from physicians practicing in two very different medical groups: one a prepaid group practice with salaried physicians and the other, until recently, a fee-for-service practice. Using stepwise discriminant analysis of the responses to this instrument, more than 90% of the physicians were able to be placed in the appropriate practice setting.

The effects of capitation payment on the organizational structure of medical group practices.

This study explores the effects of capitation payment on the structural elements used by medical group practices to control physician-directed use of resources and the quality of patient care. Forty-five medical groups located in the highly competitive Minneapolis/St. Paul metropolitan area were studied. The range of capitation payment in these medical group practices is from 2% to 87%. Although the practices vary considerably in the extent to which they have developed these control mechanisms, it does not appear that capitation payment is a major factor influencing that pattern. It appears that many of these medical group practices either use less formal mechanisms than those included in this study to control resource use and the quality of care or use none at all. In either event, the data suggest that the effects of capitation payment on the structure of medical practices may be overestimated.

Can academic medical centers compete in a managed care system?

The authors review characteristics of successful group practices, health maintenance organizations, and integrated service networks and then identify the critical actions that academic medical centers must take in order to compete with such service-oriented community providers. Centers must (1) form the clinical faculty into a competitive medical group that offers more price-competitive and user-friendly services; (2) restructure clinical training to be more relevant to the emerging practice situation; and (3) clearly delineate funding streams and identify the cross-subsidies taking place in the teaching, research, and patient care enterprises. These changes have the potential to strengthen clinical training and improve the financial positions of both the faculty and the university hospitals. The authors maintain that centers can make these and other necessary changes while still providing high-quality care and maintaining their educational and research functions; they cite organizations that have succeeded in these ways. However, as with all complex, large-scale organizations, public and private alike, the major factor limiting centers' ability to make the organizational changes required to successfully compete in the new health care environment is the lack of political will. It will be very difficult for academic medical centers to unite their powerful internal interest groups and take action without first experiencing a rather severe external jolt. The challenge for the leaders of academic medical centers is to prepare for the managed care jolt so that they can then guide their institutions to a new, more competitive position.

The development of integrated service networks in Minnesota.

The formation of health insurance purchasing alliances in Minnesota has caused a restructuring of the provider system. One of the results has been the formation of competing delivery systems that organize hospitals, physicians, and insurance plans into vertically and horizontally integrated organizations termed integrated service networks (ISNs). This article describes the formation of these ISNs and identifies some of the salient features that distinguish them from other provider systems.

Constructing episodes of care from encounter and claims data: some methodological issues.

There is growing agreement that episodes of care methodology provides the most effective means of analyzing health care delivery because it organizes health care services around the condition or illness for which they were prescribed. This paper presents a computerized approach for developing episodes of care from encounter and claims data and discusses some methodological issues. We found that we could group into five generic types of episodes of care the 31 illnesses that incur the majority of expenses for a health maintenance organization. This article describes the process for developing these types and summarizes the specific criteria defining the episodes of care for the 31 illnesses.

An analysis of physician recruitment strategies in rural hospitals.

This article analyzes the importance and effectiveness of several physician recruitment strategies in 60 short-term general hospitals in rural Minnesota. The results suggest that rural hospitals should continue to attract physicians with quality facilities and services, increase efforts to facilitate group practice opportunities, and rely less on direct financial incentives.

Association between rural hospitals' residencies and recruitment and retention of physicians.

PURPOSE: To analyze the association between rural hospitals' participation in residency training and their subsequent success in physician recruitment and retention. METHOD: The units of observation were 1,789 short-term, general hospitals that were located in nonmetropolitan U.S. countries, had medical staff information available, and did not close, open, or merge from 1985 through 1989. Multivariate analysis was done using ordinary least-squares estimation. The dependent variable was the change in the size of the medical staff at each hospital. Several characteristics of the hospitals and their counties were used as independent variables, the primary one being the number of housestaff at each hospital in 1985. RESULTS: The 66 rural hospitals that invested in housestaff were found to be more successful in physician recruitment and retention in subsequent years. On average, for every eight housestaff in 1985, each hospital gained approximately one additional physician on its medical staff from 1985 through 1989. CONCLUSION: The rural hospitals with residencies were more likely to be successful at recruiting and retaining physician staff than were the hospitals without residencies. Because most of the residencies were probably in primary care specialties, this finding is suggestive in light of the national need for primary care training as well as for successful recruiting strategies for rural hospitals.

Organizational and administrative factors influencing the adoption of consortia programs by rural hospitals.

This study was designed to assess the effects of various hospital and environmental characteristics on the involvement of rural hospitals in forming and governing consortia and adopting consortia programs. The study focused on the 127 hospitals that are members of the nine rural consortia developed by grants from the Robert Wood Johnson Foundation during 1989 under its Hospital-Based Rural Hospital Consortia Program. Hospital involvement in the formation and governance of the consortia was found to be far less than expected for these grass-roots organizations. Only 38 percent of the administrators said that their hospitals were involved in developing the consortia, and 44 percent said that they played a role in determining the program menu. Governing board and medical staff involvement was even more limited. Program adoption rates were found to be related to both the types of programs offered by the consortia and the characteristics of the hospitals. In general, greater involvement of physicians and governing board members in hospital decisions was found to enhance program adoption rates, but the influence varied by type of involvement in the hospital and program content.

Rural health care: an American perspective.

Over the past five years, the authors have researched various aspects of health care in rural communities in the United States. Interviews were conducted with some 100 rural physicians and hospital administrators, 75 hospital governing board members, and other rural community leaders. The difficulties of maintaining reasonable access to health services in rural communities are discussed, as are the strategies for rural health care used by policy makers and hospital governing boards.

A descriptive analysis of health insurance coverage among farm families in Minnesota.

This paper reports the findings of a study of health insurance coverage and access to health services among farm families in Minnesota. The study included 1,482 families actively engaged in farming during 1989. While less than 10 percent of the population were uninsured during this period, the majority had limited coverage with high deductible and coinsurance provisions. Moreover, they were paying an estimated 15 to 20 percent more for their plans than a similar plan would have cost in the Minneapolis-St. Paul, MN, area. With the exception of cost, satisfaction with health services was found to be very high, and there were few indications of access problems.

Factors related to the provision of hospital discounts for HMO inpatients.

Using 1986 AHA hospital survey data, we analyzed hospital-HMO contract provisions, hospital operating characteristics, and market conditions for a national sample of 801 hospitals with HMO contracts to determine the factors related to provision of a discount and the magnitude of the discount if present. Seventy-eight percent of the hospitals reported that at least one of their HMO contracts provided a discount for inpatient services. Risk-sharing provisions, the number of hospitals within a five-mile radius, the proportion of the population enrolled in HMOs, and the number of HMOs operating in the metropolitan statistical area (MSA) were directly related to provision of discounts. Public hospitals were less likely than other facilities to provide discounts. For the magnitude of the discounts, risk-sharing provisions and the number of hospitals within a five-mile radius were again related, as was the number of HMOs operating in the MSA--but this time the number-of-HMOs variable had an inverse relationship. The results suggest that increased HMO market activity does result in price competition for hospital services but that hospital discounting strategies are extremely complex and may not follow conventional market theories. Hospitals appear to be using contracts both to stabilize their relationships with HMOs and increase market share, and they are increasingly giving discounts to achieve those ends.

Physician perspectives on the structure and function of group practice HMOs.

This article explores physicians' perspectives regarding how their HMOs function and their satisfaction with and loyalty to HMOs. Three HMOs were studied: a mature (28-year-old) staff model, a 16-year-old staff model, and a 13-year-old group model with both HMO and fee-for-service patients. While these HMOs were found to vary somewhat in terms of emphasis on patient care versus costs, methods used to control costs and degrees of centralization of decision making, they all received high overall satisfaction and loyalty scores. The staff model HMO with a more decentralized decision making structure received the highest satisfaction/loyalty score from its physicians. The degree to which physicians perceive the HMO to be effective and supportive and the use of educational programs and peer review to influence resource use were also found to be significantly related to physician satisfaction and loyalty.

Strategies employed by HMOs to achieve hospital discounts: a case study of seven HMOs.

This article is a summary of seven health maintenance organization (HMO) case studies focusing on strategies used to obtain favorable prices for inpatient hospital services. All of the HMOs stressed that the effort should be based on the local environment and should accommodate the special circumstances of organization of physicians' practices and hospitals, as well as the structure of the HMO and its strategic plan for growth.