An Update from the Committee on Child Health
Financing
(February 1997)
Medicaid Managed Care Contracts:
Key Issues For Pediatricians
The transition to Medicaid managed care is gaining
momentum at the state level. According to the Health Care
Financing Administration, as of June 30, 1995, almost one
third of the Medicaid population, or approximately 11.6
million Medicaid beneficiaries, were enrolled in some form of
managed care. This represents a 49% increase in Medicaid
managed care enrollment from 1994 to 1995.1
States are increasingly turning to managed care in the
hope of curtailing rising health care costs, increasing
Medicaid beneficiaries' access to health care services,
enhancing the coordination of services and improving the
continuum of care.
In addition, with the savings from managed care, states
are hoping to extend Medicaid coverage to uninsured children
and adults as a response to declining employer coverage for
dependents and the 40 million uninsured Americans.
Medicaid has increasingly become one of the nation's major
insurers of children's health care. Currently, one in four
children is enrolled in Medicaid.2 More than half
of these children are members of households with at least one
working adult. As the number of children dependent on
Medicaid continues to increase and the use of Medicaid
managed care accelerates, more and more pediatricians will be
moving from fee-for-service arrangements to partial or full
risk contracting with managed care plans.
There are several contract issues of particular importance
that pediatricians must recognize and understand as they
negotiate Medicaid managed care contracts, given the greater
prevalence and severity of illness among Medicaid insured
children and the unique requirements of Medicaid law. Thus,
contracts between the plans and the providers are critical to
both pediatrician's financial survival and, equally important
in determining the degree to which they can practice medicine
as they deem most appropriate for their young patients.
In an effort to assist pediatricians in Medicaid managed
care contracting, this article highlights the significance of
the contractual relationship between the pediatrician and the
managed care organization. The elements identified focus on
several of the contractual issues to which providers should
pay special attention, and these elements should serve as an
impetus for pediatricians to identify additional provisions
that should be included in their contracts with plans. As
with any binding contract, pediatricians should discuss
Medicaid managed care contracts with an attorney to ensure
that their interests are protected. It is important to note
that pediatricians may not have separate contracts with
managed care organizations for Medicaid patients. If
pediatricians do not have separate Medicaid managed care
contracts, they should determine if their general managed
care contracts include contractual components for Medicaid
beneficiaries.
EPSDT And Managed Care
Medicaid's Early and Periodic Screening, Diagnosis, and
Treatment (EPSDT) services, a comprehensive child health
benefit package for Medicaid beneficiaries 21 years of age
and under, entitles children eligible for Medicaid to
periodic examinations and medically necessary follow-up care.
Its purpose is for the early detection and treatment of
health problems, thus preventing health conditions and
illnesses that could pose a risk to children and become
complex and costly to treat. Under the EPSDT program, states
are required to cover any and all services that are necessary
to treat the conditions detected through EPSDT screens, even
if these services are not provided for adult Medicaid
beneficiaries.3
In the advent of managed care, there are new challenges
that the EPSDT program faces. Pediatricians should review
their Medicaid managed care contract so they are aware of the
full scope of their responsibilities for providing EPSDT
services, which is usually a more comprehensive set of
benefits than offered to privately insured children.
Contracts should be evaluated to assure that capitation
payments (if the provider is engaging in a capitation
agreement) is sufficient to cover all EPSDT services. Also,
pediatricians should be aware of the EPSDT data requirements
that the managed care organization is required to report. It
is important to note, that reporting requirements are often
subsumed in the "procedures and policies" sections
of contracts.
Pediatricians are often not the only ones to provide EPSDT
services. Methods of coordinating EPSDT services provided by
other agents, such as health departments, clinics, dentists,
school health centers, and Head Start program sites should be
examined. Pediatricians should also examine if and to what
extent managed care plans provide assistance with care
coordination.
Evaluating Managed Care Plans
Pediatricians should assess several aspects of the managed
care organization in relation to Medicaid, prior to signing a
Medicaid managed care contract. The following have been
identified as some of these characteristics.
Managed Care Plan's Experience With Serving the
Medicaid Population
Since many managed care organizations are new to Medicaid,
pediatricians should determine the extent of the plan's past
experience with the Medicaid population. Medicaid
beneficiaries have different health care needs than the
general population. For example, children from low-income
families are at risk for health adversities associated with
poverty, such as inadequate housing and malnutrition. The
health needs of these children are addressed not only by
pediatricians, but also by case managers, social workers, and
various public programs. Thus, to ensure that these children
reach their optimal health, pediatricians should determine if
and how managed care organizations monitor the receipt of
services by low income children. If managed care
organizations do not have experience with the Medicaid
population, and assume that the needs of these children do
not go beyond basic preventive and primary care, then the
needs of these children will not be met.
Category of the Medicaid Population Enrolled in Managed
Care Organizations
State Medicaid agencies first enrolled in managed care
those children and parents who received Aid to Families with
Dependent Children (AFDC).4 Children eligible for
SSI assistance and children entering state custody are being
enrolled at a much slower pace. Pediatricians should
understand exactly what groups of children are being enrolled
and, if possible, request that children with chronic
conditions be identified in some way. Moreover, it is
critical to evaluate the scope of covered services that the
plan and in turn the physician is at risk for to assure that
capitation rates and risk sharing mechanisms are sufficient.
Care Coordination
Comprehensive care coordination is vital to the health of
Medicaid insured children, especially those with chronic
conditions. Pediatricians should determine how case
management is offered to individual patients and who
typically is eligible for this service. It would be in the
best interests of pediatricians to determine if they are
obligated to provide any case management services. Due to the
fact that case management is often very time consuming,
pediatricians should ascertain the extent to which they are
reimbursed for their case management services. To complement
the health care services children receive from the physician,
it would be important to understand how best to coordinate
with other case management programs provided by Title V,
early intervention programs and other community-based
resources. Pediatricians should also learn to what extent
managed care organizations employ EPSDT coordinators or case
managers who have extensive experience with children and
their families.
When states sign contracts with managed care
organizations, some services are often carved-out or remain
the responsibility of the state. Pediatricians should
determine which, if any, services are carved-out and if there
are contracts, letters of understanding, or even interagency
agreements with out-of-network providers to provide these
carved-out services. Pediatricians should determine how best
to coordinate covered and carved out services. Having a clear
understanding of these agreements will enable pediatricians
to better serve children who require these designated
services.
Managed Care Organization's Relationship With Public
Programs
Medicaid beneficiaries are often eligible for various
public programs such as state Title V, maternal and child
health programs, early intervention programs, special
education programs and others. Pediatricians should determine
what kind of relationship, if any, exists between the managed
care organizations and these public programs. Thus, any
overlap of service would not only be prevented, but these
programs would provide physicians with a useful resource. The
better the relationship, the more likely children can be
served in an integrated and effective manner. If the staff of
the managed care plan is not fully aware of the services the
programs provide, pediatricians may need to educate them.
Patient Education
The newness of managed care for many Medicaid
beneficiaries places a premium on educating this population
about accessing care and benefits in managed care
organizations. Pediatricians should consider the patients'
level of understanding and experience they have about
obtaining needed health care within given managed care plans,
and the various strategies that plans have in place to
educate families about using plan services. Pediatricians
could better advocate for their patients by realizing the
patient's limitations within the system. Copies of
informa-tional brochures or pamphlets the managed care plan
distributes to its Medicaid enrollees would provide useful
information. Other educational activities might be considered
by individual pediatricians.
The Managed Care Contract
The following are the different contractual relationships
that are the essence of the Medicaid managed care system.
First, the contract between the state and the managed care
organization outlines those services that are to become the
responsibility of the managed care organization. Second, the
contracts between health care providers and managed care
organizations delineate the responsibilities of providers.
Although each contract stands alone, the contents of both are
dramatically affected by each other. For providers, their
contract with the managed care organization is inevitably
shaped by the plan's arrangements with the state. Although
this report focuses on the contracts between providers and
man-aged care organizations, it is important to bear in mind
the interrelated nature of these arrangements.
Medicaid managed care contracts impose legal obligations,
and providers should review their contracts with lawyers who
have an expertise in this area. As with general contracts
between providers and managed care organizations, providers
should not sign Medicaid managed care contracts without first
negotiating their terms with the plan. This is especially
important because every practice varies to some degree, and
tailoring the Medicaid managed care contract to the
provider's capacity and circumstances will ensure the
provider's ability to meet the obligations imposed by the
contract. The contracts between the pediatrician and the
managed care organization are the blueprint for the services
that the pediatrician is responsible for administering to
Medicaid beneficiaries, as well as an agreement outlining the
plan's responsibilities to the pediatrician and the
pediatrician's obligations to the plan. Pediatricians should
not enter into Medicaid managed care contracts without a
thorough understanding of the contractual obligations they
are undertaking. Although every pediatric practice varies,
the following are only some of the many issues that
pediatricians should consider with their attorneys before
signing a Medicaid managed care contract. The following are
some contract elements that should be evaluated before
signing any managed care contract, however in light of the
special needs of the Medicaid population they are
particularly important aspects of Medicaid managed care
contracts.
Definition of Primary Care Provider
Pediatricians should determine how the managed care plan
defines a primary care provider. Children's health care needs
differ from those of adults due to many factors, such as
their continuous growth and development. Pediatricians are
the most qualified to meet the health needs of children, and
should therefore be identified as their primary care
provider. It is important to determine if a managed care
organization does indeed assign children to pediatricians as
their primary care providers, as opposed to other health care
providers such as family physicians or nurse practitioners.
In addition, pediatricians should ascertain the extent of
their "gatekeeper" role. A gatekeeper has the
responsibility of providing primary patient care and care
coordination. In addition, a gatekeeper is instilled with the
responsibility of authorizing referrals, tests, hospital
admissions, therapies, and certain treatments. To better
serve patients, pediatricians should also determine the
process for obtaining service approvals.
For children with special health care needs, pediatric
subspecialists may be the most appropriate individuals to
serve as the primary care provider. Hence, contracts should
be reviewed in order to determine if this arrangement is
allowed by the managed care organization. Pediatric
subspecialists who care for children with special needs often
have the greatest understanding of the needs of this
population.
Referral Process
Understanding the referral process will enable
pediatricians to provide care for children in a timely
fashion. Each managed care organization has different methods
of authorizing referrals. Pediatricians serving Medicaid
beneficiaries should determine if the referral process
differs from the process used for children with commercial
insurance. Here are some questions to consider: Are the
managed care organization's decision makers experienced in
pediatric issues? Are there any provisions for expedited
review if a referral is needed urgently?
Appeals Process
Pediatricians should become familiar with the appeals and
grievance processes of the managed care organization. This
includes the time frame of the process and who makes the
decisions within the appeals process. Pediatricians should
assure that there is an expedient appeals process for both
urgent and emergency care. Understanding a managed care
organization's appeals process is important in advocating for
patients. In addition, understanding the process will enable
pediatricians to protect their own interests.
Provider Network
Similar to the argument that pediatricians should be
classified as primary care providers, children should also
have access to pediatric medical subspecialists and pediatric
surgical specialists. The conditions and illnesses that
children commonly have differ from the common illnesses and
conditions found in the adult population. The education and
training of pediatric medical subspecialists and pediatric
surgical specialists enable them to be the most qualified to
care for children. Children should therefore receive care
from pediatricians who have the training and experience to
meet their health needs. Pediatricians should ascertain that
there is an appropriate and comprehensive provider network
that would be able to meet the needs of children. If the
provider network is not comprehensive, the protocol of
accessing out-of-network pediatric subspecialists should be
evaluated. Pediatricians should also ascertain whether
children's hospitals are included in the plan's network. In
addition, all hospitals included in the network should have
dedicated inpatient units for pediatric patients.
Ancillary Facilities
In an attempt to cut costs, some managed care
organizations may contract with facilities that provide
ancillary services, such as imaging and laboratory services.
It would be important to determine the experience these
facilities have with providing services to children. Managed
care organizations may assume that they are saving money by
contracting with such facilities when it actually may be more
costly. For example, some children may need to be sedated for
a magnetic resonance imaging (MRI). However, unlike a
children's hospital, such ancillary facilities would most
likely not have an anesthesiologist on staff, especially a
pediatric anesthesiologist.
Definition of Terms
In many contracts, there are various terms that lack a
standard definition. It is important to assess how a managed
care organization defines critical terms. Typically,
contracts provide ambiguous definitions for such terms as
urgent care, preventive care, and emergency care. Examine
these definitions with caution and ensure that they relate to
the needs of children.
Perhaps the most important term to understand is the term
"medical necessity", because it is used by managed
care organizations to determine the amount, scope, and
duration of services. Managed care organizations often define
medical necessity in relation to illness and injury. While
many managed care organizations narrowly define medical
necessity, EPSDT has a very broad definition of what is
medically necessary. Under EPSDT children are entitled to
very comprehensive periodic screening and any follow-up
diagnosis and treatment services that have been shown to be
"necessary" in the screens. Pediatricians should
determine if their managed care organization has a pedia-tric
definition of medical necessity, which takes into
consideration the unique needs of children.
Method of Reimbursement
The following lists the most prevalent forms of physician
reimbursement in managed care plans:
- Fee-for-service. Primary Care Case Managers
are often reimbursed on a discounted fee-for-service
basis for the services that they provide. In
addition, they receive a fee to monitor and
coordinate the services rendered to their Medicaid
patients.
- Partial Capitation. Pediatricians could also
be in partially capitated arrangements in which they
are only at risk for certain services that are
typically provided in their offices. If pediatricians
are signing contracts with managed care organizations
on a partially capitated basis, they should determine
those services that are capitated and those that may
still be directly reimbursed by Medicaid.
- Full Capitation. Fully capitated arrangements
place providers at total risk for all services. If
pediatricians are in fully capitated arrangements,
they want to ensure that capitated rates are risk
adjusted in a manner that incorporates the special
needs of certain populations. Pediatricians should
make sure that they are able to provide all the
services that Medicaid patients are entitled to if
they are in fully capitated arrangements. Finally,
look for and evaluate any risk-sharing or reinsurance
arrangements that may be available or required by the
plan.
Primary Care Provider/Patient Ratio
Pediatricians should determine if the managed care
organization requires them to have a certain number of
Medicaid enrollees. Since there are capacity variations in
each practice, pediatricians should determine their
practice's ability to absorb the number of Medicaid patients
that the managed care organization requires in their
practice. Pediatricians should also ascertain whether their
contracts enable them to close their practice to additional
Medicaid beneficiaries, if they feel their practices can no
longer absorb additional enrollees.
Quality of Care
Pediatricians should become familiar with any and all of
the quality of care reporting requirements. Reporting
requirements are generally more expansive for Medicaid. In
addition, pediatricians should determine if managed care
organizations require different information for their
privately insured child population. It would be helpful to
determine if the plan provides any assistance with setting up
management information systems.
CONCLUSION
Providing health care services to Medicaid beneficiaries
in a managed care environment brings new challenges to
pediatricians. Pediatricians caring for children in Medicaid
managed care could limit the adversities that these children
may face by understanding the components of their contracts.
Pediatricians should assure that their contracts allow them
to provide appropriate medical care to Medicaid beneficiaries
according to both state and federal regulations in a manner
that neither places the provider at risk nor denies children
access to medically needed health care services.
Contributing Author
Dorit Naftalin
Senior Health Policy Analyst
Division of Physician Payment Systems
The Committee on Child
Health Financing would like to acknowledge the expert
input of Elizabeth Wehr, JD, Research Scientist, Center for
Health Policy Research, The George Washington University, and
Margaret McManus, President, McManus Health Policy,
Incorporated.
Sources:
1. Health Care Financing Administration, Office of Managed
Care & Medicaid Bureau. Integrating EPSDT and Medicaid
Managed Care: Strategies for States and Managed Care Plans.
Baltimore, MD: U.S. Department of Health and Human Services;
1996:4
2. American Academy of Pediatrics. Medicaid State Reports -
FY 1994. Elk Grove Village, IL: American Academy of
Pediatrics; 1996
3. 42 U.S. - 1396d(a)(4)(B), 1396d(r), and 1396a(a)(43);
42C.F.R.-441.50-441.62
4. Fox HB and McManus MA. Medicaid Managed Care for Children
with Chronic or Disabling Conditions: Improved Strategies for
States and Plans. Washington, DC: Fox Health Policy
Consultants; July 1996
An important aspect of the performance profile is the fact
that physicians must "buy in" to the profile.
Practicing physicians can and should be involved in
developing these profiles.
Made possible by a grant from the Friends of Children
Corporate Fund, comprised of companies supporting AAP
research and education programs.
