Managed Care and Children With Special Health
Care Needs: Creating a Medical Home

Managed care occupies an increasingly prominent position in today's health care environment. Traditional non-managed indemnity plans now represent only 35 percent of insurance coverage. Managed care penetration in some states has risen as high as 35 to 40 percent, and 19 states have applied for or been granted waivers to develop managed care programs for their Medicaid-eligible population.

Few pediatricians in practice remain untouched by the rapid shifts in payment mechanisms, the insurer's goal of curbing utilization and reducing costs, and newly formed networks of specialists and hospitals. A recent AAP Department of Research periodic survey discovered that in 1993, 64.2 percent of AAP members providing ambulatory care said that at least half of their insured patients are in managed care. Nearly one-fourth (23.7 percent) of pediatricians said 90 to 100 percent of their patients are in managed care.

While the payment environment shifts to managed care, significant changes also have occurred in the shape of pediatrics itself. Advances in medicine and surgery have improved life expectancies for children with a wide variety of chronic illnesses and disabilities. These same advances have created new outpatient options for much of the care for both chronic and acute conditions. Yet there has been difficulty in developing a standard definition of "children with special health care needs," and thus identifying the size of this population. Current estimates are that 15 to 20 million children have some kind of chronic condition. Severe health conditions that are likely to require extensive daily caretaking affect between 1 million and 2 million youngsters. However, the definitions that have been developed tend to have a broader focus than just chronic conditions. For example, one of the many working definitions states, "Children with special health care needs are those who have or are at increased risk for chronic physical, developmental, behavioral, or emotional conditions and who also require health and related services of a type and amount beyond that required by children generally."

Children with special health care needs have a broad range of primary, specialized, and related service requirements. In addition to well child care, health promotion, and disease prevention, children with special health care needs often require specialty care, diagnostic and intervention strategies, home therapies, and ongoing ancillary services, such as occupational therapy, physical therapy, speech therapy, and individual and family counseling, as well as the long-term management of ongoing medical complications. Many of these children also depend on health care services at home, in school, and in the community. Recognizing that children with chronic conditions have these needs, managed care systems face a critical issue: can they control utilization and still offer the full range of appropriate services?

This question taps inherent tensions. Managed care plans, in striving to control costs, may or may not include the broad range of service options in the benefit packages necessary for children with chronic illness. Even if the managed care system has contractual language to cover needed services, the route to establish medical necessity may be complex, prolonged, and controlled by non-pediatric decision makers. In addition, the risk of caring for children with chronic conditions is not well-defined and is subject to unexpected and frequent changes of care plans with potentially costly additions. Given these challenges, it is critical to explore the role of pediatricians in the managed care environment as they work to balance the provision of comprehensive, quality health care with the demands to manage service utilization among children with special health care needs.

How Primary Care Physicians Fit

Managed care means accountability for the health care dollar. Utilization is closely monitored to avoid unnecessary duplication of service, unwarranted emergency room use, specialty referrals, and the use of out-of-network services.

Managed care can mean a tight surveillance of physician decision making regarding referrals, as well as the use of laboratory tests and ancillary services. Such surveillance quickly leads to provider frustration. Physicians find their health delivery options constrained and their medical judgment overruled. When health care plans monitor utilization and access to health care services solely to control costs, the delivery of quality health care may be in jeopardy.

By contrast, if managed care puts the keys in the hands of the provider to open and monitor the delivery of services through gatekeeping, an appropriate system of care is possible. Under the best of circumstances, the keys open the door to the medical home where the patient's family and provider work together to assure that services are family-centered, coordinated, and comprehensive. Only time will tell how often this model of care is achieved. The following sections outline the components of a successful medical home model for children with special health care needs.

Children with special health care needs demand a great deal from pediatric primary health care providers. Opening the door to the medical home requires specific well-honed skills to meet utilization and budgetary constraints imposed by managed care. Providers do best when they are able to manage their own time, ensure the appropriate flow of resources, and when they feel confident about how to deal with a wide range of medical problems. Specific skills: To create an effective medical home, the primary care physician should establish a partnership with the child's family. The AAP policy statement on the Medical Home provides a definition of "medical home."

Together, the primary care physician and the family should develop a long-range health care plan for the child. This plan should anticipate infancy, early and middle childhood, and adolescent issues, and should encompass the medical, developmental, educational, and social issues that are commonly encountered by children with chronic health conditions.

By collaborating with the family on the child's care plan, the primary care physician can work toward optimal utilization of necessary services. Intervention points should be mapped out to clarify which specialists should be involved, why they are needed, and the amount of time for which they are needed. The primary care pediatrician should educate the managed care plan about the necessity for referrals to pediatric medical subspecialists and surgical specialists and the need for the primary care physician to serve as the coordinator of all care that will be provided. In addition, since education is paramount for children with special health care needs, pediatricians should also work with managed care plans to promote a relationship between the managed care plan and school-based or school-linked health care centers. Having such a conduit improves the family's access to critical information and ensures a central repository for the medical record. It also cuts down on the expensive physician shopping that so often results in duplication of effort and exhaustive evaluations.

To serve as the medical home, the primary care pediatrician needs a reliable network of pediatric medical subspecialists and surgical specialists available in the managed care system who can evaluate the patient and communicate their findings promptly and completely. Two issues continue to hamper this function in managed care systems. First, primary and specialty care pediatricians are most familiar with a fee-for-service world where such communication holds much less value. Managed care incentives are changing old patterns of behavior, but there is still a lot of progress to be made. The second problem is that some managed care systems see children as "little adults." They do not recognize the unique medical, developmental, and social concerns of children and the importance of referral to pediatric medical subspecialists and surgical specialists. As a result, some physicians working in managed care have found themselves severely constrained in their choice of specialists. Creating a medical home in managed care will require strong advocacy for the development of a network of pediatric medical subspecialists, pediatric surgical specialists and consultants as part of each managed care organization. It is incumbent upon the pediatrician entering a managed care contract to review the plan's provider list to determine the extent to which pediatric medical subspecialists and surgical specialists are part of the network. If a certain specialist is not part of the network, open a line of communication to the plan and document the reason why a child with certain conditions should be seen by this particular specialist. It is also important to educate families about the managed care plan's service coverage and prior authorization policies and convince them that they too should communicate their concerns to the managed care plan if problems arise.

Pediatricians should also work with managed care plans to assure that the array of services offered are pediatric in their orientation and that families can access these services without a major hassle. Managed care plans may assume that other state public health programs will fill the gaps, especially for Medicaid-enrolled children. Once again, pediatricians must become advocates for their patients and work with the managed care plans to ensure that both the array and focus of the services are pediatric-oriented.

Time: Caring for children with special health care needs takes more time than caring for their healthier peers. Their histories are longer and their physical examinations reveal more findings. Children who are developmentally disabled require different techniques for engagement with the provider to elicit the necessary information. Moreover, it takes time to coordinate subspecialty referrals and hospitalizations, document the medical record appropriately, and complete necessary forms. Communicating with home care companies, school nurses, and other community-based agencies also requires a significant amount of time. As a result, the pediatrician in practice who has agreed to manage the care of a panel of patients with chronic illness needs to factor that time into the workday and into any arrangements made with partners and clinical coworkers. It is critical to document the time spent with these patients. Documentation is a key defense, especially in this era of physician profiling.

Reimbursement: One way to protect the time for managing the care of children with special health care needs is to negotiate an enhanced capitation rate for caring for such children. To offer a medical home to a number of such children in their panel, the pediatrician should negotiate a favorable capitation rate with the managed care organization in advance. The capitation rate should include the complexity of coordinating activities as well as the increased time associated with face-to-face encounters. When making the case for an enhanced capitation rate, it is most helpful to have a clear idea of the number of children involved as well as the services they are likely to require. This is where documentation is important. Data on the covered population can be obtained from the managed care plan or the employer. Clinical pathways and practice guidelines offer valuable new resources to project needed resources. Always check with your managed care plan to determine the guidelines that are used and how they are used. If children are covered under Medicaid, it is important to ensure that the capitation rate reflects the full range of required benefits such as Early and Periodic Screening, Diagnosis, and Treatment (EPSDT).

A major concern for primary care physicians is the burden that risk-sharing arrangements may place on them. Partially and fully capitated reimbursement strategies can put the physician at risk for specialty referrals and other medically necessary, expensive ancillary services. Individual physicians should avoid accepting risk for all physician services. If physicians are to take risk, it should be at the medical group or IPA level (usually all physicians, but at least all primary care physicians). Ideally, an appropriate capitation rate adjusted for case-mix or severity should be negotiated with the insurer. Some managed care plans have adopted the Ambulatory Care Group (ACG) system developed by Johns Hopkins University. ACGs provide a method to compare costs to diagnoses in a known population. However, there is limited experience of using the ACGs in the pediatric population. ACGs work as follows:

1. Each patient in a population is assigned to a particular ACG depending upon a relatively complicated analysis of all diagnoses associated with each patient.
2. The capitation rate for each ACG in the population is calculated by summing the costs for all patients in that ACG and dividing by the number of patients assigned to that ACG.
3. The capitation rate for each ACG in this population is compared to the capitation rate for each ACG from a population with similar characteristics to mathematically evaluate the cost-efficiency of particular providers. This is a risk-adjusted comparison.

A 1995 Physician Payment Review Commission (PPRC) report highlighting the type of arrangements managed care plans make with physicians discovered that less than one-fifth of plans (group/staff and network/IPA models) use a health status adjuster to the physician capitation rate. For the most part, the capitation adjustments are based on demographic data. Network/IPA models use a health status risk adjuster more than group/staff models. Although the study only involved 80 plans, it does illustrate how infrequent health status is used to adjust capitation rates. Until better data are available on the appropriate capitation rates for children with complex medical and developmental needs, physicians should consider whether or not to purchase reinsurance with stop-loss provisions.

Primary care providers who work to establish a medical home for children with special health care needs may encounter other frustrations, specifically their limitations in deciding how the capitated dollar is allocated. Given a fixed amount of money, who chooses whether the dollars are spent on primary versus specialty care, inpatient versus outpatient services, or renting versus buying equipment? How radical can the solutions be? Can a family member or neighbor be paid to deliver home care services, thus saving nursing care dollars? Around the country, groups of health care policy experts are exploring such options under the auspices of the Robert Wood Johnson Foundation, the Annie E. Casey Foundation, the Packard Foundation, the Pew Charitable Trust, the federal Maternal and Child Health Bureau (MCHB), the Health Care Financing Administration (HCFA), and others concerned about balancing the cost and service requirements of children with special health care needs. New projects are underway to examine pediatric risk adjustment models, quality of care measures for chronic childhood illness, pediatric managed care models and innovations, and more.

To provide adequate care for children with special health care needs, it is often necessary to tap other monetary sources--the state Medicaid program, the Title V Maternal & Child Health Program, Supplemental Security Income (SSI), Part B and Part H of the Individuals with Disabilities Education Act, and children's mental health programs. These funding sources can sometimes help with home care, ancillary services, and family support. Unfortunately, it often takes families and their physicians an inordinate amount of time to learn about these resources and about the children's eligibility to receive these dollars. Some managed care plans are unaware of these resources; therefore, pediatricians may want to take the initiative and educate them on these options. Centralization of this information benefits the patient, family, provider, and plan.

Medical management: In pediatrics, an ongoing challenge for primary care physicians is the fact that while few children have severe chronic conditions and disabilities, there are many different causes of the conditions--congenital, infectious, traumatic, oncologic--and each specific condition may require a different management strategy. In part, it is the diverse nature of childhood chronic illness that has engendered the development of the many specialties and subspecialties. Pediatricians managing the care of children with special health care needs should have a strong network of pediatric medical subspecialists, pediatric surgical specialists, and consultants. Unfortunately, however, many managed care networks have a limited pediatric specialist network and rely on adult specialists who may be unfamiliar with the intricacies of the care of children with special health care needs. One single pediatrician cannot possibly know all the diagnostic, management, and treatment requirements for every chronic illness he or she may encounter over the course of practice, but there are certain underlying principles of chronic care management that are generic. The following principles allow effective co-management between primary care physicians and pediatric specialists.

1. A diagnosis and prognosis should be established, realizing that this is not always possible or cost-effective.
2. In the absence of an etiologic diagnosis, it is helpful to families to have as full an explanation of symptoms and function as possible and a forthright plan for dealing with uncertainty.
3. Once a diagnosis or characterization of the problem is established, functional/developmental abilities should be determined. It is also helpful to determine the medical, surgical, habilitative, and rehabilitative or maintenance interventions that are currently recommended and available for the child's condition.
4. The risks and benefits of each intervention need to be explored and pursued together with the child's family. These risks may include family burden as well as medical and psychosocial risks for the child.
5. Referral to appropriate specialists does not mean that care of the patient is relinquished by the primary care provider, which in some cases may be quite appropriate; however, confusion occurs if the transfer of the primary care responsibility is not made explicit. The best system is co-management with the use of clearly delineated care protocols.

The Role of Specialists in Managed Care

Specialty care is also affected by the new managed care arrangements. On one hand, pediatric medical subspecialists, pediatric surgical specialists, and hospitals can count on a referral base from the managed care alliances they make. On the other hand, these pediatric specialists may have an increasingly difficult time attracting patients because of preferred provider arrangements. Moreover, as managed care plans strive to constrain utilization, they may tend to use adult specialists.

For managed care to work for children with special health care needs, effective communication systems are essential. To the extent that primary care and specialty providers can share a common database that includes pertinent history, physical examination, laboratory, and radiological information, care can be streamlined and coordinated. Open and timely communication between the primary care physician and specialists should result in appropriate management of problems and elimination of unnecessary referrals.

In a well-defined or organized system, the primary care provider serves as the coordinator of all care provided. In this role, the pediatrician obtains all the initial data before referring the child to the specialist. The pediatric medical subspecialist or surgical specialist can then proceed to evaluate the need for specialized procedures and interventions, provide the necessary care, and communicate with the primary care physician. Such a system works when pediatric medical subspecialists, pediatric surgical specialists, and primary care pediatricians can spend some of their time educating each other about the need for communication of complete clinical information regarding the referral and after-care. Patient-specific communication is best done on a one-to-one basis. More generic education about care coordination/case management takes place at hospital grand rounds, pediatric society meetings, and continuing medical education (CME) courses. Increasingly, these courses are being sponsored by the managed care programs themselves. As new house officers and fellows take part in training programs, there will need to be increased emphasis on the specialist-generalist co-management paradigms.

Steps to Meet the Challenge

There is no question that fitting children with special health care needs into managed care is a challenge, but several steps should improve the chances for success:

1. Define the population of children you are seeing who have special health care needs. To characterize the children with more complex needs, several alternatives are available. If the managed care company uses ICD-9 codes, you can request a computer printout for children with codes covering chronic illness and disabilities. Another way of capturing the children with complex conditions in your panel is to ask for a computer printout of hospitalizations and select the group of children with the most frequent, highest cost, and longest stays. This initial step of defining the population will give a sense of the work that is needed, targets for decreasing utilization, and information for negotiating an enhanced capitation rate.
2. Work with the utilization management and quality of care staff in the managed care organization to create a shared data-base between primary care and specialist physicians, the emergency department, and the hospital(s). This will capitalize on the major benefit of network development, reduce duplicate work, and improve patient care.
3. With each patient and family, define the extent of the health and functional needs based on the diagnosis, condition, and resources at home and in the community. Creating such a yardstick helps with both short-term and long-term goals and may serve as a basis for a care pathway that can be approved by the managed care plan.
4. Create a health care plan together with the family and the child's other providers that is approved by the managed care plan. Outline the efforts to be made to cut down on duplication of effort and establish improved communication. Monitor the health care plan on a periodic basis to help ensure that the child indeed has a medical home.
5. Work with the quality of care staff of the managed care plan to develop new and improved approaches for continuously improving the care of children with various chronic conditions.
6. Develop comprehensive pediatric case management/care coordination, family education, and support programs through the managed care plan to enable both the primary and specialty physicians to more efficiently use their time and improve families' satisfaction with care.
7. Create ongoing education and training opportunities within the managed care plan for primary care physicians and specialists (including adult specialists serving children) in state-of-the-art approaches for the evaluation, diagnosis, and treatment of chronic childhood conditions.
8. Work with each family to help them understand how the managed care plan operates in terms of service coverage and authorization policies.
9. Work with the managed care plan to explore options to implement a health status adjustment to the capitation rate (i.e., ACGs).

In closing, physician decision makers should not be controlled by the cost issue, but by medical judgment- capitated risk situations should not be structured to make the physician suffer financially for providing care to this vulnerable population.

Contributing Authors

Judith Palfrey, MD
Marilynn Haynie, MD
AAP Medical Home Program for Children With Special Needs

Reprinted from AAP News