C428 Final Paper

A1. Fiscally Sustainable Strategies A financially sustainable strategy that can be discussed is switching from a fee-for-service plan to a managed care plan. There are three different types of managed care organizations: • Health Maintenance Organizations (HMOs) • Preferred Provider Organizations (PPOs) • Point-of-Service Plans (POS) HMOs are the most common type of managed care organizations. HMO’s are business engagements between physicians, insurers, and hospitals. HMOs usually have little to no deductible and low-cost premiums, however HMOs are restrictive in when and whom the patient can see for care. HMO’s require patients to pick a primary care provider (PCP) in- network and see that provider for all their care. If a patient wants to see a specialist, they need to first get a referral from their PCP. HMOs keep costs low by restricting whom the patients can see as all services are kept within the network and out-of-network visits are usually denied passing the whole cost onto the patient, except for emergency care. Preferred Provider Organizations are another common managed care organization that is growing in popularity. Healthcare insurers contract with a large network of providers and hospitals to create the preferred provider network. With PPO insurance, you’ll have access to more doctors, specialists, clinics, hospitals, and other healthcare facilities. You will not be required to select a primary care physician, although it is highly recommended that you do, and you do not need physician generated referrals to see a specialist. To provide such flexibility and the greater pool of providers and facilities, a PPO with generally have much higher premiums deductibles, and copays than an HMO. PPOs will also usually cover out-of-network care but at a discounted rate, commonly around 60-70% with the other part being the responsibility of the patient. Point-of-Service plans are a hybrid of the previous two plans, as with the HMO patients must choose and in-network primary care provider but can choose to receive care outside the network as well. POS plans will pay less for out-of-network appointments, but more if you are referred to an out of network provider by your PCP. For example, you have a POS plan that pays 80% of an in-network visit, 60% for out-of-network visits, and 75% of out-of-network visits that your primary care provider referred you to. You get the benefits of lower premiums like the HMO, but the flexibility of choosing your providers like a PPO. A1a. Recommended Strategies Determining which plan to move to in the future, Seamus Company must examine the cost- savings, tax implications and advantages and general fiscal management improvements that each managed care organization (MCO) presents. Seamus Company must also balance such cost savings benefits with the quality of life improvements, or lack thereof, that may come with each plan. In looking at the 3 different plan options with switching to an MCO, in terms of sheer cost- savings the HMO is the better plan. HMOs have much lower deductibles that both the PPO and POS plan, decreasing the portion of costs that Seamus Company is responsible for. Every plan discussed however will bring a lower cost responsibility for Seamus Company in terms of deductibles and fixed premiums. With large HMOs and PPO plans the insurance companies will negotiate rates, the larger the insurance company the lower the negotiated rates, and with lower payment rates come lower premiums. Tax benefits with all three MCO plans are that the premiums paid by Seamus Company are tax deductible, thereby reducing Seamus Company’s tax costs per year. Lower premiums sidled with tax deductions for those premiums is another cost saving tool. Other tax benefits reside with the employees, any portion of the premium they must pay comes out of their income pre- tax, thereby lowering each employee's taxable income. Fiscal management benefits from the fixed costs of premiums, this affords Seamus Company a better budgeting tool, an easier ability to predict the future needs and allocate future expenses in other areas of need. Another fiscal management benefit is the reduction of needed staff in the human resources benefit department. With structured premiums and payments Seamus can reduce staff in human resources and decrease the overall salary budget. While all plans could benefit Seamus Company, as the CFO I would transition to a PPO plan. While an HMO would be cheaper, I believe that the staff would appreciate being able to see their provider of choice and not being forced to use a ‘gatekeeper’ physician to direct their care. A1b. Financial Management Principles Cost, control and cash. The costs with moving to a PPO plan can be mitigated in a few ways. We can require the employees to pay a portion of the monthly premiums, thereby enacting some cost sharing plans. Another way to decrease costs is through employee education, we can educate and empower the employees in wellness programs. This will encourage employees to take charge of their own health and well-being and would reduce healthcare expenses for both the company and the employee. Another way to reduce costs is to align with a High Value Network, or Centers of Excellence for specific care. With the reduction in costs Seamus can take better control of their finances, less money is being spent on premiums, employee procedures, and unnecessary office visits. As these costs come down, we can then use these resources in other areas of the company to better realize our vision. As a not-for-profit having more control over these resources will benefit Seamus as it will also provide us with more cash to manage our debts and other obligations. A1c. Strategy Alignment Transitioning to a PPO will realize the goals of reducing healthcare costs for Seamus Company. It does this by requiring employees to use a vast network of in-network providers. The use of a PPO also reduces premiums paid out by the company. With the switch to a PPO Seamus joins a network of providers that have already negotiated lower fixed costs with the insurance provider, these discounted payments translate to lower costs paid out by Seamus. With the expansive network of providers employees should be able to keep their current physician, and therefore keep employees in control of their own healthcare. By joining a PPO and using Centers of Excellence (CoE) and High Value Healthcare Networks (HVHCN) Seamus can reduce their costs by paying a set fee for certain services, such as total join replacements. With participation in a CoE Seamus pays a flat fee for the service and any extra costs incurred with the service are handled by the Center of Excellence. As their name suggests, Centers of excellence provide such superb care that the employees heal faster and return to work sooner, reducing time off benefits paid by Seamus. A2a. Utilization Risk Management Utilization risk management will be primarily handled by the payor, or the insurer. Transitioning to a PPO will shift much of the risk management to the hospitals and the insurers, this is accomplished with an increased use of prior authorizations and utilization review boards. Another way to mitigate utilization risk is by aligning with a Centers of Excellence, and having their employees utilize high-quality hospitals and surgeons for select procedures. By using a CoE program decreased costs and increased quality improvements are realized by improved care coordination, better discharge planning which reduces re-admission rates, and increase in optimal patient outcomes. Additionally, there are a few other notable programs that can reduce utilization rates, such as, preventative medicine, (including annual physicals, routine mammography, and vaccinations), telemedicine or remote medicine, and wellness benefits like smoking cessation programs. A2b. Financial Benefits Three financial benefits to switching to a PPO are lower overall healthcare costs, increased employee health, and increased employee productivity, and retention. Moving to a PPO will see a decrease in monthly premiums which would be the single largest contributor to lowering the realized healthcare costs that Seamus must pay. Using a CoE for specific procedures, such as bariatric surgery and total joint surgery will lower costs as well, as bundled payments are negotiated between the employer, the insurer and the CoE, this provides high-quality care at a predictable cost. Switching to a PPO allows employees to oversee their own healthcare. It allows employees to see the physician they want without having to make a separate visit to their primary care provider. Providing free preventative medicine visits, such as an annual physical, keeps the employees costs of healthcare down and generally makes staff happy. Focusing on preventative medicine and other benefits such as providing free or reduced cost gym memberships and free smoking cessation programs empowers employees to live a better lifestyle. Healthier employees are happier employees. The financial benefit to Seamus is that by focusing on preventative medicine we will be creating a healthier workforce. An emphasis on preventative medicines also cuts down on the amount of paid sick time that is used by employees, reducing related costs associated with paying employees that are not at work. Healthier employees are happier and more productive employees. Providing a better healthcare plan can be a big draw for current and prospective staff. Retaining employees is better for financial health than training new employees due to high attrition rates. A2c. Potential Financial Drawbacks Some potential fiscal drawbacks to switching to a PPO would be the abuse or misuse of the health plan causing increased payments for unnecessary services, increased costs due to employee illness caused by not seeing a provider or not taking advantage of offered benefits, and increasing premiums in the future due to the rising costs of healthcare. The new PPO health plan would allow employees to see whatever provider they wanted for whatever problem they had. Employees seeing specialists unnecessarily and without receiving a referral from their primary care provider will drive up the office visit costs that Seamus Company will have to pay. Contralaterally, some employees may not use the offered benefits at all, preferring to never see the physician even when they are sick. These employees have the potential to drive up costs with missed workdays out sick, illnesses becoming more severe requiring complicated and costly specialty care and lengthy inpatient treatment, and general decreased productivity. The third financial drawback is the hardest to avoid, the rising costs of healthcare. Every year premiums will most likely go up and Seamus will have to either be in a financial position to absorb these rising costs or pass them along to their employees or find themselves in yet again seeking a new managed care plan. A2d. Increased Employee Usage When Seamus Company switches to the new PPO managed care plan, they can offer an exciting new array of extra benefits and services to its employees. The PPO will stress preventative medicine programs to empower the staff to take control of their health and well- being. When used properly this will reduce costs for both the employee and the company. Wellness programs such as weight loss clinics or smoking cessation programs can require medical screenings. These screenings can help correctly identify which employees could benefit most from these programs. All of this leads to happier, healthier employees, and as mentioned earlier these employees are more productive for the company, and they spend less on healthcare. A3a. Financial Benefits from External Healthcare Partnerships Two financial benefits that could arise for Seamus Company would be to partner with a local fitness center and to partner with a whole health program such as Vera Whole Health. The financial benefits of partnering with a local fitness center would allow employees to further take charge of their health and fitness, Seamus could negotiate a flat fee per employee or a lump sum payment to the fitness center for reducing their rates for Seamus employees. Partnering with Vera Whole Health can bring the benefits of primary care straight to Seamus Company. Vera Whole Health can provide for the employees planned care such as whole health evaluations, annual physical exams, health risk assessments and other services. They can also provide unplanned urgent care, health coaching, disease management and occupational health services. (Vera Whole Health ,2019). The financial benefits of partnering with Vera are healthier, happier and more productive employees. A3b. Financial Drawbacks from External Healthcare Partnerships Financial drawbacks with external healthcare partnerships would under-utilization of the fitness center and over-utilization of clinical services. Paying for fitness center memberships that go unused could be a large waste of cash for Seamus Company. Employees not actively trying to be healthier do nothing to achieve the benefits that come with a free or reduced cost fitness center membership. The other drawback is over utilization of the clinical services provided by Vera Whole Health. If employees only treat it as a walk-in clinic for every ache and pain instead of participating in the health coaching sessions or biometric screenings this will drive up the costs that Seamus Company will have to burden. A3c. External Healthcare Partnership As the CFO I propose that Seamus Company transition to a PPO managed care plan and I would also suggest that Seamus partner with Vera Whole Health for their comprehensive advanced primary care system. Utilizing this external clinic for primary care and health screenings could see Seamus realize a 21% reduction in reduction in total healthcare costs, a 31% reduction in primary care claims and a 1.44.1 ROI in the first year with them. Vera Whole Health also boasts roughly a 60-80% employee engagement rate (Vera Whole Health, 2019). The benefits from this partnership would far exceed the drawbacks that could be associated with it. Routine monitoring would need to be done to see if results are common or if utilization is lower than anticipated. Bibliography Custom primary care solutions for your company. (n.d.). Retrieved from