PPO review: will it tell employers what they want to know?

PPO review: will it tell employers what they want to know? – Examining Managed Care Quality: New Options; includes article on new groups involved in rating physicians

Joyce Frieden

PPO review: Will it tell employers what they want to know?

An often-heard complaint about preferred provider organizations is that they’re “hard to get a handle on” because there are so many different types. There’s the standard PPO, which provides discounted fee-for-service medicine to employees who stay within a broad physician and hospital network. There’s the “exclusive provider organization,” which provides the discount only if patients go to a smaller, more select group of physicians.

Then there are hybrids such as the “open-ended” health maintenance organization, in which patients are allowed to go outside the provider network, but instead of being charged the flat $10 fee they would pay in the network, they pay 20 or 30 percent of the bill, with the insurer footing the rest. As one wag put it, “If you’ve seen one PPO, you’ve seen one PPO.”

Because PPOs are hard to categorize, evaluating them is difficult. “PPOs are quite diverse, and there’s no federal or statutory definition of PPOs,” notes Brant Kelch, president of the American Accreditation Program, Inc., Reston, Va. AAPI is a joint venture between Kelch’s firm, MedStrategies, and the American Association of Prefferred Provider Organizations, a trade association for PPOs. The new company, which began accrediting PPOs last September, is one of the first to enter the field.

The program began as a result of employer demand, says Kelch. “We were getting numerous calls at AAPPO to help purchasers distinguish among PPOs.” AAPI’s evaluation costs $9,000 for AAPPO members and $11,000 for non-members. The cost is usually paid by the PPOs themselves, although AAPI will also evaluate a specific PPO for an employer. The company’s accreditation team does a two-day site visit, and finishes its report within another week.

Among the factors looked at are: * The managed care network. What provider types and health care services are available? How stable is the network? How are out-of-panel referrals controlled? * Provider selection. What objective criteria are used for selecting providers? Is there an [internal] credentialing and recredentialing process? * Payment methods. What methods are used? Are they competitive and equitable? How are fee increases controlled? * Utilization management. Who staffs the utilization management program and what is their experience? What standards and criteria are used by the program? * Quality assessment. How effective is the quality assessment program in identifying problems? What actions are taken to correct them? Are quality assessment data used in provider credentialing? * Management and administration. What is the PPO’s structure? How is the PPO marketed? What is the content of the patient relations program? * Financial stability. What are the PPO’s reserves? What is the profit-and-loss history? How adequate is insurance coverage?

Once the on-site evaluation is completed, AAPI calculates the total point score the PPO has received, and tells it whether it has failed or passed accreditation. If it has passed, it will be assigned to one of three “levels” of accreditation, with level 3 representing the most sophisticated PPO, Kelch says.

“For example, in terms of utilization management, a Level 1 PPO may have a precertification program to determine whether patients are admitted to a particular hospital; a Level 3 may have a comprehensive program with precertification, current, retrospective, and ambulatory care review, and also have good results,” he says.

So far, AAPI has done 10 accreditation reviews; six plans were accredited, one failed, and three have “provisional accreditation.” The provisionally accredited PPOs were approved in at least five of eight areas, and have three months to correct remaining deficiencies.

Many of the deficiencies Kelch’s firm finds are in the area of quality assurance. “Quality assurance is not what’s selling [the PPOs]; utilization review – saving employers money – is what’s selling,” he says. “Because there hasn’t been significant demand for it, quality assurance has been rolled into a UR program.” AAPI checks to see that the PPO has a separate quality assurance program with staff devoted solely to it.

Upon request, AAPI will tell employers whether a given PPO has passed the accreditation test; the company also gives the PPOs themselves a report. “We report on their strengths and weaknesses, and we encourage employers to ask PPOs for a copy of the detailed report,” Kelch says. AAPI will not release the reports to employers, but will simply indicate whether a particular plan has passed or failed.

Knowing a PPO’s accreditation level can also help employers decide whether a particular PPO is cost effective, he adds. “Accreditation means the PPO can provide value and help the employer save money, that it has the type of [service] contracts that will help protect employers,” he says.

Is this what employers want?

Is PPO credentialing sought after by employers? The answer depends on whom you talk to.

“There’s a great deal of interest in the whole issue of whether a managed care entity meets certain criteria established by an accrediting body,” says Carol Cronin, vice president of the Washington Business Group on Health. “That’s particularly true in terms of the financial stability and the organization of the entities and, to the extent possible, the quality of care provided by the entity, which might be elicited through consumer satisfaction surveys, complaint rates, and grievance procedures.”

That PPOs haven’t been accredited up to now is due, in part, to state legislative roadblocks put up by participating PPO physicians, Cronin says. “The PPOs, to counteract attempts to regulate managed care entities and the way they do business, are reacting by establishing private agencies and saying `We’ll do it ourselves.” And, since PPOs are relatively new, employers are only now becoming more aware of the risks of not choosing a good PPO, she notes.

Some PPOs don’t want to go through accreditation, Kelch says. “We’ve had some insurance companies [with PPOs] requesting details on our protocols and, after looking at them, deciding their plans wouldn’t pass, so they’re not interested. Some PPOs,” he adds, “are saying that establishing standards is going to make it tougher for PPOs to operate.”

What employers say they are really looking for is outcomes data, not an outside firm’s approval. “How do you know whether what [accreditors] are calling all right is [really] all right?” says Bob Hungate, government affairs-health care manager at Hewlett-Packard Co., Washington.

“It’s the generic problem of managed care in that nobody says what it is,” he says. “If they had risk-adjusted outcomes data that were diagnosis-specific, so they could tell you how they manage a population and its disease state, then they would be providing a needed service. Just looking at the structure [of the PPO] doesn’t work.”

Tom Burke, principal at A. Foster Higgins & Co., Inc., Washington, agrees, noting that employers need to be assured that PPOs are choosing doctors who are good practitioners as well as cost effective care providers. “Until you get data that will only bring in doctors who aren’t wild utilizers, what good is credentialing?” he says.

Discounted fee-for-service medicine is taken advantage of by doctors who simply increase patient utilization of services to make up for lost revenue, Burke continues. “They should have performance standards, with provisions for collection of outcomes data, and a physician profiling system that will weed out physicians that aren’t practicing the kind of medicine you want in the PPO. If you get that, and I don’t think it’s likely in the near term – if ever, then credentialing would mean something.”

While much outcomes data is still in the formative stages, Kelch says AAPI tries to determine what information a PPO uses to evaluate providers, such as hospital mortality and investigations of unexpected deaths. Admissions rates and patient days per thousand also are looked at; “we try to evaluate whether the PPO has the ability and commitment” to monitor those factors, he adds.

Slow to catch on?

If employers are anxious to see credentialing information, they’re being awfully quiet about it, notes Frank Lieb, M.D., corporate medical director at CIGNA Corp., Hartford. “So far, employers haven’t been interested in whether we’re accredited or have put ourselves through any external review,” Lieb says. “I can’t see any way that an external credentialing activity would add anything as far as our providers are concerned. Employers ask, but it doesn’t seem to play a part in their decision-making process.”

PepsiCo, Inc., a soft drink and snack food manufacturer based in Purchase, N.Y., is a case in point. The company uses a PPO network designed by Metropolitan Life Insurance Co., New York. “Metropolitan selects the doctors and hospitals, and they go through a quality check, making sure the doctor is board-certified,” says Lori Gage, manager of benefits operations at PepsiCo. “Metropolitan also looks at the morbidity and mortality rates of providers, their practice patterns, and their geographic access to employees.” Once providers are chosen, PepsiCo puts the information into an employee booklet, which is updated annually.

PepsiCo hires consultants to check up on Metropolitan’s credentialing process “and make sure we feel comfortable with it,” Gage says. Would the company be interested in having the PPO get outside accreditation? “We’d consider it, but it’s not absolutely necessary for us, because we feel comfortable with the network,” she says.

There might be a greater demand for credentialing among companies considering a small PPO network, she adds. “And some companies are trying to develop their own networks; for that, there probably is a good use for credentialing.”

For its 34 PPOs, CIGNA uses its own physician credentialing program, which involves checking each doctor’s professional qualifications and looking for malpractice actions or adverse medical staff determinations, Lieb explains. “Outcomes data is hard to come by, because the PPO structure doesn’t lend itself to that kind of review. We do retrospective reviews more on HMO providers than PPO providers.”

Although many PPOs have their own internal credentialing programs, there appears to be some demand for AAPI’s services; Kelch says that in April, his firm was already booked for reviews through June. But he admits that momentum is slow right now.

“I don’t think the demand exists now,” Kelch says, “partly because purchasers don’t know there’s the accreditation option. There’s not enough sophistication to distinguish among PPOs, but I think that will grow, partly because of this program.”

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