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					Caring is Good. Doing Something is Better.




                  Medicare and PPOs


                                 Brian Jeffrey
                                 VP, Provider Network Strategy
                                 PacifiCare Health Systems
 PPO Value Proposition for Providers
• Discounts to standard fee-for-service rates offered
  in return for preferred access to patient population
  that would otherwise face higher out-of-network
  copayments.
• Provider trades lower profit margin per service in
  return for potential of greater volume.
• PPO payments generally prompt and predictable vs.
  challenge of collecting from self-pay or high
  coinsurance patients.
 Medicare PPO Demonstration
• RFP Issued by CMS April 2002
• Plans to be paid greater of Medicare+Choice rates
  or 99% of FFS Medicare
• Reciprocal risk-sharing option offered by CMS
• 35 PPOs offered in 22 states during 2004 contract
  year
     Secure Horizons Medicare PPO
            Demonstration
• Targeted for Southern California, Arizona and
  Nevada
• Southern California initiative unsuccessful in
  contracting adequate provider network
• Current total Arizona/Nevada PPO membership
  < 1,000
• Challenges include positioning between
  Medicare+Choice and Medicare supplement benefit
  packages
     Medicare PPO (PoS) Benefits vs
     Medicare HMO (Pima County, AZ)

                   Secure Horizons HMO Secure Horizons PoS
Monthly Premium            $0                    $49
Office Visits $10 PCP/$30 Specialist $10 In-Network/20% OON
Inpatient Hospital     $300/Admit      $0 In-Network/$840 OON
    Medicare PPO Provider Network
       Challenges in California
• Targeted provider rates ~ 90% of FFS Medicare.
• Providers were not satisfied with FFS Medicare
  rates; not willing to trade discounts for volume.
• Collection issues mitigated for Medicare members
  with Med Supp policies.
• California organized provider groups generally
  successful in Medicare HMO; concerned about
  cannibalizing business.
• No current Medicare PPO competition meant no
  downside if demonstration did not move forward.
         Medicare Physician Payments Have
          Lagged Behind Practice Inflation




Source: AMA Website
  Future Outlook for Medicare PPOs
• Medicare Modernization Act of 2003 changes
  everything.
• Medicare Advantage revitalizes Medicare HMOs,
  allowing expansion of benefits and entry or re-entry
  into new markets.
• Medicare Part D benefit replaces Medicare PPO as
  key opportunity for 2006 and beyond.
• Medicare PPOs likely to remain a viable option in
  certain geographies, but not to replace HMOs as
  predominant model.
  Success Criteria for Medicare PPO
               Markets
• Medicare FFS rates perceived as generous enough
  to allow mainstream providers to discount for
  volume.
• Current health plan PPO rates/fee schedules yield
  sufficient discounts to Medicare to allow program to
  be financially viable.
• Absence of Medicare HMO competition provides
  greater flexibility for benefits.
                Overall, how dissatisfied are you with your family’s health care?
                            11%


                            10%
     Percent Dissatisfied




                                                                                                                 10.1%
                                     9.7%
                            9%
                                                     8.8%
                            8%
                                                                                                  8.0%

                            7%
                                                                                   7.1%

                            6%                                     6.3%

                                   People who     People who     Think PPO,      People who     People who     Think HMO,
                                  think they’re   actually are   but actually   think they’re   actually are   but actually
                                   in an HMO      in an HMO      in an HMO        in an PPO      in an PPO      in an PPO

Source: J. Reschovsky, J. L. Hargraves, CSHSC Issue Brief No. 30, September 2000

				
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posted:10/2/2011
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