Managed Care and Managing Risks

Growth in managed care is changing the way care is financed, delivered, and evaluated. Managed care is a system that links financing and delivery of care and monitors usage, cost, and performance of health services. The vast and rapid changes in health care have many consequences for nurses. For example, nursing roles are changing to reflect the goals of managed care: triage, prevention, health promotion, care management, utilization management, and care coordination to name a few. Managed care organizations (MCOs) are employing nurses in new or expanded roles. The new responsibilities are accompanied by emerging areas of accountability. The purpose of this chapter is to explore ways that managed care has changed roles and subsequently impacted risk for nurses.

Managed Care

Managed care has expanded considerably in the last two decades. It has become the dominant form of health insurance in the United States. Early research comparing managed care to fee for-service care suggested reductions in overall health expenditures through a managed care approach (Prospective Payment Assessment Commission, 1997). There are indications that, at least in the private sector, managed care is contributing to decreased growth in health care spending. This has been accomplished, at least in part, by limiting both the price and use of services (Prospective Payment Assessment Commission, 1997). Because of the apparent success of limiting growth in spending at a time when this goal is crucial, the adoption of managed care strategies is likely to continue.

The move from fee-for-service care to capitated delivery systems requires a drastic change in thinking. These changes are summarized below (Sprenger, 1995):

Traditional
Capitation
Patient Model
Population-Based
Illness/Curative
Preventive/Wellness
Tracking Beds, Admits
Tracking Health Status/Outcomes
Service Use Generated Revenue
Service Use Increases Costs

Changing from fee-for-service to managed care involves many other transitions as well. The financial incentives of fee for-service involved reimbursement for each service provided; thus, the incentive was to provide more services. Instead of the insurer paying for services based on a fee-for-service, most managed care plans involve some form of capitation. This means that the providers are paid a set amount to provide care for a group of people over a defined period of time. Since capitated payment takes place prior to service delivery and covers a defined population over time, financial risk is shifted from the insurer to the provider. Capitation reverses the incentive because of the need to care for many people with a fixed amount of money. While over-service was the potential danger in fee-for service care, under-service poses a similar potential danger under capitation.

Well-established, traditional managed care organizations have several common attributes which can be maximized to provide high quality, evidence-based care. These have been identified as (Wagner, 1996):

• A clearly defined population
• Enrollees that are linked with a primary care provider
• Integrated services, providers, and facilities
• Integrated financial and clinical data systems
• A balance of professional power between primary and specialty care providers
• A unifying mission, culture, and organizational identity among providers
• Centralized resources such as patient education and home care
• A preventive orientation

These attributes make it possible to manage the care of patient populations. For instance, they provide the opportunity to identify patients with specific health problems, track health status, and monitor service use. If used effectively, these attributes can support collaborative efforts to optimize outcomes and manage costs by assuring delivery of effective services, without redundancy or gaps in care. In order to make the individual components work together, however, organizational structures and leadership must support population-based management with resources and staff that are capable of systematic care delivery (Wagner, 1996).

Of course, in addition to the potential promise of managed care, there are many areas of caution. The focus on self-management of health and preventive strategies is refreshing, yet it must be balanced with assurances of quality and access. Trade-offs between cost, quality, and access are at the center of this debate (Porter O'Grady, 1995).

The financial incentive in managed care is on not providing services and keeping as much of the capitation payment for reinvestment as possible. Short-term financial incentives provide significant areas of concern for policy makers, health care providers, and patients who yearn for long-term, high-quality solutions beyond the "bottom line." This poses serious questions related to access and quality. Nurses must be keenly aware of the underlying strategies and mechanisms in managed care in order to guard against poor patient care (Porter O'Grady, 1995).

Changes in the funding structure have had repercussions for the relationships between insurers, providers, and patients. Hospitals, in particular, have experienced financial pressures that have resulted from greater competition and insurer's demands for lower prices. Many hospitals, home health agencies, and managed care organizations have responded by changing the services they offer and contracting with other provider agencies (Prospective Payment Assessment Commission, 1997). These changes have contributed to a broadening array of roles for nurses.

Roles for Nurses in Managed Care

This section will explore emerging roles for nurses in managed care environments. These roles add challenges and opportunities for nurses. However, new opportunities bring new responsibilities that nurses must be aware of in order to manage risk effectively.

The American Nurses' Association has outlined a managed care curriculum for baccalaureate nursing programs, which highlights many roles for nurses in managed care environments (ANA, 1995). Major responsibilities and skills include provision of health promotion, prevention, health screening, and educational programs and services. In addition, nurses are called upon to engage in triage, referral, and case management activities. Nurses help patients learn and adopt self-care strategies and personal health management capabilities. Leadership roles include direction and support of ancillary personnel, staff performance evaluation, use of information systems, and effective communication (ANA, 1995). Advanced practice nurses such as nurse practitioners and nurse midwives are in high demand with MCOs. The added accountabilites in these new roles revolve around clinical competence not only for individuals, but also for population-based care management.

The transition from concentrating on an individual patient to focusing on patient aggregates or specific populations requires nurses to think in broader terms. Population-based care should expand upon a firm foundation of knowledge, competence, and skills focused on individualized patient care. The discipline of nursing has this strong knowledge base coupled with a fine tradition of community-based care. In many ways, the emergence of managed care represents opportunities for nursing to influence the future of health care delivery and financing. However, nurses must be poised to face this challenge by acquiring and using accurate information, responsible strategies, and a strong clinical foundation (Britt, Schraeder & Shelton, in press).

Population-based care involves skills that require an expanded nursing role. Graff, Bensissen-Walls, Cody, & Williamson (1995) describe the major elements of care provided by nurses in their expanded roles. Those that are applicable to population-based care include:

• Analysis of health services and systems in terms of accessibility, sensitivity to patient needs, and cost-effectiveness for the target population
• Design, direction, implementation, and evaluation of programmatic, technological, and educational directions for specified populations
• Care coordination across the health-illness continuum and across settings and beyond geographic boundaries
• Consideration of organizational, community, and cultural implications of events and decisions related to care coordination
• An emphasis on networks of providers, colleagues, and resources
• Enhanced relationships with patients and providers as a result of clearly defining and demonstrating the contribution of nursing to the consumer's health
• An emphasis on interdependent learning, open dialogue, collaboration, and a collective sense of responsibility
• Support of organization-wide, ongoing processes to improve service, clinical outcomes, and satisfaction

Nurses in population-based care must establish a system of care coordination for a specified sub-population of patients that spans the health care continuum and bridges the spectrum of health-illness. Nurses collaborate with physician colleagues to improve care for specified sub-populations (Graff et al, 1995). Roles and responsibilities for the expanded role of nurses in Graff's study included:

• Identification of an at-risk population
• Development of interventions to reduce risk factors
• Establishment of care coordination system
• Resource networks and critical linkages for patients and staff to assure access to needed services
• Data collection, monitoring, and analysis
• Identification of strategies to reduce hospital length of stay
• A focus on outcomes and a review of variances from standards of care
• Use of data to improve care and outcomes across the population

Population-based care creates an environment where nurses can use established skills and gain new ones. For instance, nurses can facilitate linkages between providers, managed care organizations, and patients by understanding and articulating the financial and clinical interests each party brings to the health system. Nurses can help define and quantify risk by participating in the assessment of patient and population health needs. When managed care organizations examine the community to determine and reduce high-risk health practices, nurses can play central roles. Nurses are well-equipped to define, measure, and manage outcome- related data to improve care strategies. However, the responsibilities of population-based care require that nurses be cognizant of the risks involved in potentially denying necessary services, violating confidentiality, and working with dueling financial and clinical incentives.

Managed care systems may give nurses strong forums for patient education, advocacy, and preventive efforts across care settings. In addition, nurses can provide unique insights into multiple aspects of quality issues (Britt, Schraeder, and Shelton, 1998). Nurses can play a vital role in the development of care strategies and clinical decision-making tools. For instance, the ethical questions arising from managed care stand to benefit from an informed and active voice representing the nursing perspective. In addition to promoting nursing opportunities, managed care highlights the need for nurses to be aware of risk management associated with innovative roles.

Some of the roles in managed care involve a different type of relationship between the health care provider and the patient. The role may be more detached, and the personal relationship with the patient may be absent (Emanuel, Ezekie & Bubler, 1995). This issue has concerned risk managers because of the potential for claim exposure. It has been suggested that as depersonalization of care increases, there may be an increase in the number of claims initiated (Fiesta, 1997). Furthermore, when the patient's expectations for care do not match the provider's expectations, it creates a strong potential for conflict (Guanowsky, 1995).

The new roles emerging in managed care emphasize the need for nurses to maintain a thirst for learning, ongoing persistence, keen awareness, and a willingness to be flexible (Spitzer, 1997). Innovative roles imply emerging areas of responsibility, including legal, ethical, and clinical accountability. The legal system is beginning to address these areas as managed care becomes more prominent.

Accountabilities for Health Care Providers

The expanded opportunities that managed care offers to nurses are accompanied by new accountabilites. As financial risk is shared by providers, including nurses, new areas of risk and risk management are also emerging. For instance, triage and utilization- management nurses now have obligations to ensure that the appropriate care is given. Difficulties may arise when nurses are trying to manage resources frugally and with allegiance to their employers, yet also trying to act in the patient's best interest. These issues have emerged in medical literature concerning physicians and their clinical decision-making. The nursing literature has also begun to reflect these issues as they impact nursing practice (Fiesta, 1997).

Some aspects of nursing accountability rest on traditional guidelines and standards, but their interpretations within a managed care environment are not yet well-established. Three areas of conduct that remain the focus of ethical and legal consideration are competence (measured by nursing standards), ethical practice (evaluated using the Code for Nurses), and illegal practice (as departures from the law) (ANA, 1994). While these three areas have long been used to determine the scope of ethical and legal practice, their interpretations and implications within a managed care context are new and still evolving. Nurses must be vigilant about staying up to date on the Nurse Practice Act in their state, nursing standards specific for their area of expertise, and current state and federal health laws. As managed care becomes the "workplace" for more nurses, it is likely that these ethical and legal tools will be used to guide the profession.

Legal Implications

Several factors have complicated the process of extracting risk management guidelines for nurses in managed care. These include the relative "newness" of managed care, the limited volume of litigation leading to a foundation of legal precedence, and the complex contractual agreements among the parties involved (Faulkner & Gray, 1996).

A number of suits involving managed care organizations are starting to wind their way through the appellate courts. As a result, liability issues are becoming clearer. For instance, failure to process claims appropriately, denial of claims (also referred to as a negligent utilization decision), and undue delay of treatment can lead to liability (Fiesta, 1997). Most of these issues have a common theme: "Who should be held liable when things go wrong?"(Faulkner & Gray, 1996).

The courts have addressed several cases related to poor patient outcomes alleged to have resulted from care received from or through managed care organizations. Traditionally, these claims would have been treated as malpractice claims. However, due to the intricate contractual arrangements between the many stakeholders (MCO, provider, patient, contracted service providers, etc.), it is quite challenging to delineate the legal responsibilities (Faulkner & Gray, 1996).

Following the legal process from the time a suit is filed to the establishment of legal precedent is lengthy and complicated. Legal precedent, and therefore guidance, is linked to the long time delay between a lawsuit being filed, counter-claims filed, cross-claims, preliminary motions, and the appeals process. Only after a trial verdict is appealed on legal grounds to a higher court and the court formulates an opinion can a precedent be established. As a result, risk management guidelines are difficult to institute because of incomplete information (Faulkner & Gray, 1996).

A stakeholder analysis, defining the various positions of the involved parties, is useful in delineating some of the perspectives involved (Faulkner & Gray, 1996): Managed Care Organizations. MCOs argue that they arrange for but do not actually provide care; therefore, if something goes wrong, traditional malpractice law should apply. The health care provider should be liable. Health Care Providers: The physicians counter the MCO argument by stating that they must follow the MCO contractual rules as expressed in peer review, utilization review, and clinical protocols. They maintain that the MCO should be held liable for the rules it imposes. Physicians have been the predominant clinicians involved in the managed care legal debates, but as nurses become more visible in managed care activities, they are likely to experience similar perspectives. Utilization Review Companies Behavioral Health Managers: These players determine the appropriate setting for care as well as whether and how long the care will be compensated by the MCO. However, when something goes wrong, they claim that they do not make clinical decisions: they determine compensation. Nurses working for these companies or in similar roles may be involved in this aspect of the debate as well.

These various perspectives have challenged the legal system. Traditionally, law relies on precedent when faced with new forms of behavior. When there is an absence of precedent, the system is forced to draw from other bodies of law to reach conclusions. This situation has led to some very interesting dynamics concerning managed care law (Faulkner & Gray, 1996). While a comprehensive treatment of these issues is well beyond the scope of this chapter, a few compelling examples will be outlined. An interview with nurse attorney, Jane Nelson Bolin, will then be presented.

• MCOs often adopt clinical practice guidelines to manage particular problems and improve care outcomes. In a relatively new phenomenon, guidelines may be admitted as inculpatory or exculpatory evidence by judges in malpractice claims (Brennan, 1997).

• Credentialing refers to the process of including the appropriate delineation of clinical privileges. In addition to physicians, MCOs may decide to credential "limited-license practitioners" (nurse practitioners, nurse midwives, physician assistants, physical therapists, etc.). MCOs may prefer to credential limited license practitioners because of their cost-saving potential and consumer demand, but physicians may protest because of the way the supervision of limited license providers impacts physician liability. Conversely, antitrust actions have been filed against MCOs by limited-liability providers who were excluded from credentialing (Mattioli, 1997).

• Any willing provider laws. These proposed laws were set up to require MCOs to pay any provider who agreed to meet the MCO's terms and conditions of participation for services provided to the enrollees, whether or not the provider is part of the MCO's network. They were launched by the concern that MCOs were restricting enrollee choice of provider. In 1996, 69 AWP proposals were introduced in 24 states but none passed. AWP proposals have now given way to new initiatives by MCOs to increase choice of providers including point of service (POS) options and self-referral systems (Roth, 1997).

"Gag" rules. "Gag" rules are a group of MCO contract provisions that restrict what a physician can discuss with a patient, primarily regarding treatment options, particularly those the plan does not cover. Many states have passed laws prohibiting gag rules, and the federal government (through the Health Care Financing Administration, HCFA) notified HMOs that Medicare and Medicaid beneficiaries were to be advised about all medically necessary treatment options (Roth, 1997).

• Disclosure of physician incentives. This is a provision of a proposal by the American Medical Association (AMA) that would require MCOs to disclose all "financial arrangements, incentives, or contractual provisions with hospitals, review companies, physicians, or any other provider of health services that could limit or induce the limitation of the services offered (or) restrict referral or treatment options (Roth, 1997)."

Interview with Jane Nelson Bolin R.n. Bsn J.d.

Many hospitals carry the BNA Health Law Reporter which provides monthly updates on reported decisions from around the country in all aspects of health law. I also recommend Alice Gosfield's book entitled, Guide to Key Legal Issues in Managed Care Quality, published by Faulkner & Gray, New York, NY (1996).

Finally, some Web sites of interest are: www.NHLA-AAHA.am (National Health Lawyers Assoc. Web site) www.medsite.com (Reports general medical news including cases of interest) wwwjjX.com42racficeAea1(h4ndex (National Law Journal Web site for health law articles and reported decisions) www.medchat.com (General medical news, including some decisions)

3. "Traditionally, if nurses worked in hospitals, they felt somewhat protected by the institution's liability policy. Do MCOs offer the same protection for nursing employees?"

ANSWER: I have not seen a case where an MCO denied liability for the acts of one of its employees, including nurses, but that does not mean it will not happen. The mere fact of an employment relationship does not guarantee that a nurse will not be named individually in a negligence lawsuit. Physicians are worried that the more complex nature of the MCO health care delivery environment will lead to added areas of exposure (Gosfield, Today's Internist,July/August 1997).

Because of the evolving nature of roles, nurses should not assume their actions are protected under the MCO's liability insurance policy. Depending upon the nature of the conduct, the MCO might make a decision not to defend a nurse in a malpractice lawsuit. The bottom line is that this is an area that is largely undefined in managed care case law. Read the MCO's policies and procedures and seriously consider purchasing your own policy of professional liability insurance.

Summary

Managed care has brought about many changes for the health care industry. Among these are transitions in nursing practice that are accompanied by new responsibilities. The legal system is developing a body of knowledge to guide the liability features of managed care, but its growth is incremental. Risk management strategies must rely on this developing body of legal knowledge. Emerging legal and clinical developments are adding twists and nuances to the way in which laws are interpreted. In order to manage risk in the new era, nurses must stay apprised of changes in managed care health law as well as being mindful of traditional malpractice concerns.

References

American Nurses Association (1994). Guidelines on reporting incompetent, unethical, or illegal practices. Washington, DC: ANA.

American Nurses Association (1995). Managed care curriculum for baccalaureate nursing programs. Washington, DC: ANA.

Brennan, T. (1997). Practice guidelines and malpractice litigation: Collision or cohesion? Presented at AHCPR Conference: Translating Evidence into Practice. Washington, DC.

Britt, T., Schraeder, C., & Shelton, P. (in press) Managed care and capitation issues. Monograph prepared for the American Nurses Association, Washington, DC.

Emanuel, E., Ezekie, & Bubler (1995). Preserving the physicianpatient relationship in the era of managed care. Journal of the American Medical Association. 273 (4), 338-339.

Faulkner & Gray (1996). Guide to key legal issues in managed care quality. New York: Faulkner & Gray's Healthcare Information Center.

Fiesta, J. (1997). Managed care liability update. Nursing Management. 28, 20-22.

Gosfield, A. (1997). Guide to key legal issues in managed care quality. New York: Faulkner & Gray's Healthcare Information Center.

Graff, W., Bensussen-Walls, W., Cody, E., & Williamson, J.(1995). Population management in an HMO: New rules for nursing. Public Health Nursing 12, 213-221.

Grimaldi, P. (1995). Capitation savvy a must. Nursing Management, 26,33-34.

Guanowsky, G. (1995) Liability in managed care for the health care provider. Nursing Management, 26,24.

Luft, H. (1981). Health maintenance organizations: Dimensions of Performance. New York: John Wiley.

Matliotti, M. (1997). Credentialing of limited license practitioners in a managed care environment: Antitrust liabilities and risk avoidance strategies. In A. Gosfield (Ed.) Health Law Handbook (pp.131-62). New York: Clark Boardman Callaghan.

Nelson Bolin, J., R.N. BSN J.D. (personal communication, February 26, 1998).

Porter-O'Grady, T. (1995). Introduction. Power, politics & public policy: A matter of caring. New York: National League for Nursing Press.

Prospective Payment Assessment Commission (1997). Medicare and the American health care system: Report to Congress. Washington, DC: Prospective Payment Assessment Commission.

Shamansky, S. L. (1996). Population-based managed care to improve outcomes. Nursing Economics, 14, 245-247.

Spitzer-Lehmann, R. (1996). "A new framework for managed care: Marrying finance and service delivery" presented at Managed Care: How to Negotiate and Administer Capitated Contracts, Nursing Management Congress, September 28, Chicago, IL.

Sprenger, G. (1995). "Healthier communities: A paradox in a capitated environment." Presented at The Healthcare Quest: Creativity in Capitation, July 15-16, Minneapolis, MN.

Roth, (1997). Anti-managed care laws: Patient protection or provider self-interest. In A. Gosfield (Ed.) Health Law Handbook (pp. 163-18 1). New York: Clark Boardman Callaghan.

Wagner, E., Austin, B., & Von Korff, M. (1996). Improving outcomes in chronic illness. Managed Care Quarterly, 4, 12-25.

Wagner, E. (1996). The promise and perfon-nance of HMOs in improving outcomes in older adults. Journal of the American Geriatrics Society, 11, 1251-1257.

Teri Britt, MS, RN is a doctoral student in the Health Policy and Administration program at the Pennsylvania State University. She also works as a Research Analyst with Carle Clinic Association's Health Services Research Center, Urbana, Illinois.

Updated Selected References: 1999 through June 2001

Note: These references are not part of the independent study module, but are provided to you as suggestions for additional reading.

Gingerich, B.S. (August 1999). Corporate compliance. Compliance concerns: risk management and management of employee risk. Home Health Care Management & Practice, 11 (5), 65-66.

Lentz, J. (August 1999). Employment screening: risk management tools and essential compliance utility. Home Health Care Management & Practice 11 (5), 16-20.

Mahlmeister, L. , Van Mullem, C. (March 2000). The process of triage in perinatal settings: clinical and legal issues. Journal of Perinatal and Neonatal Nursing, 13 (4), 14-30.

Morris, M.R. (September 1999). Legally speaking. Preventing med errors. RN, 62 (9), 69-70, 72-3, 86.

Stahl, D. (October 1999). Tips for negotiating managed care contracts…surviving risk-sharing contracts. Curtin Calls, 1 (11), 8-9.

Sullivan, G.H. (March 2001). Legally speaking. Reduce your risk in the managed care jungle, RN 64 (3), 71-72, 74.