HEALTH SERVICE BROKERS

A MONOGRAPH 
Richard P. Kusrow 
INSPECTOR GENERAL 
OEI-Q5-89-00510  OCTOBER 1990
 EXECUTIVE SUMMARY 
PURPOSE 
This study was conducte to identify mechansms use in the private setor to control medcal 
costs which might be suitable for goverment heath car progrs, parcularly Medcar. 
SCOPE 
repo 
The tenn "heath servce broker," as used in this  refers to any business that establishes 
seurs 
and monitors provider networks, provides utization magement servces or 
discounte medcal servces and supplies. Ths repo provides an overvew of method used 
by health service brokers to maage health car costs and utizatiaonr.  Ths study reports on 
techniques which brokers employ to ensur their succss in eah  mentioned above. 
trsfenig 
While this report looked at the overall feasibilty of  these approaches to 
government progr, working out the speifc mehanics wi be left for futue studies. 
METHODOLOGY 
In-person and telephone intervews were conducte with a pursive sample of brokers 
providing utilization maagement, taete discount purhasing and netWorkig servces. 
Discussions were held with the Health Ca Financig Admstrtion (HCFA), acadmicias, 
representatives of professional organzations, corportions and expert in ths field. A tota of 
51 intervews were conducte. 
FINDINGS 
Effective provider networks control network membership, regularly assess 
utiization of servces and remove servce intensive providers. 
A varety of approaches coupled with stadadize deision trs and other 
innovations ensur the success of utiization review. 
Targeting speifc goo and servces for bul purchase at different levels in the 
mata 
distrbution chain can produce savigs and  patient access. 
incras 
Individual case management could improve qualty of car,  efficiency and 
tealy il 
mae better use of benefits for chrnically or  patients. 
CONCLUSION 
Many private sector mechanisms for contrllng health car costs appear to have potential for 
progrs 
Medcar, Medcaid and other DHHS  including those adnistere by the Public 
Health Service. Each component should study the mechanisms used by the private setor to 
progrs. 
determne whether any can or should be adpted to their  . .. . . . .. .. . ..  ...   ..  ...   .....     .....     ......     . ..... .     . ..... .      .......       .......       .......       .......       .......       .......       .......       .......       .......       ........        ....... .      ... ....   .    .... ...    .   ..... ..       ........     ........   .....     
 
 .. . . . . . . . . . . . . . . . . . . . . . . ...   ... .  ...    ....   ...    .....    ......       .......      . .....      .......       ........        .........         ........        .........         ........  .      ........         .........        ........         ..........         .........          ...........          ..........          ..........          ..........          ..........          ..........          ..........          ..........          ..........          ..........          ..........          ..........          ...........           .......... .          ..........         . .......  .      .. .....  .    ... ....    .   .... ...    .   ..... ..      . ......       ......      ..... .    . ..... .     . ..... .     . ...... .     .  ..... ..     .  .... ...    .. . .. . . . .  . . . .. . . .  ..   .. . ... .  .   .  ..... ..       ......      ......    ......  ....    
TABLE OF CONTENTS 
EXECUTIVE SUMMARY 
INTRODUCTION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 
PURPOSE. . . . . . . . . 
BACKGROUND 
. . . . . . . e.

SCOPE 
METHODOLOGY. . . . . . .'. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 
CHAPTER 1: Provider NetworKS. . . . . 
Effective provider networks control membership, regularly 
assess utilzation of services, and remove service Intensive 
providers 
Employers as purchasers of comprehensive health 
services  . . . . . . . . . . . D . . .. 
The HCFA as purchaser 
of comprehensive health services. 
CHAPTER 2: Utilzation Review.. . . . 
Brokers, employers and organizations favor a combination 
of utilzation review (UR) techniques for an effective UR 
program 
. . . . . 8.8 . . . . . . . . . . . . ..

Employers as reviewers of health 
services. 
The HCFA as 
reviewer of health services. 
CHAPTER 3: Targeted Purchasing  .. 15 
Targeted purchasing In the private sector has developed 
beyond the purchase of prescription medicines and 
equipment.. . 
durable medical  .. 15 
Employers as purchasers of targeted medical services 
and supplies 
purchaser of targeted medical services and 
The HCFA  as 
supplies. 
CHAPTER 4: Individual Case Management (ICM) ......................... 18

Brokers believe ICM Improves quality of care, Increases 
efficiency and makes better use of benefits for patients 
with catastrophic or terminal diagnoses or with chronic 
conditions. .................................................... 18

Private Sector Individual case management 
The HCFA as Individual case manager  . . ..  ..  ..  ..  ..  ..  ..  ..  ..  ..  ..  ..  ..  ..  ..  ..  ..  ... ..  ..  ..  ..  ..  ..  ..  ..  ..  ..  ..  ..  ..  ..  ..  . . . . . . . . . . . . . . . . . ....  
CONCLUSION . . . . . . . . . II . . . . . . . 

BIBLIOGRAPHY.  INTRODUCTION

PURPOSE 
This study was conducted to identify mechanisms used in the private sector to control medical 
progrs, 
costs which might be suitable for government health care  parcularly Medcar. 
BACKGROUND 
In 1965, health care costs accounted for 6 percent of the gross national product (GNP). 
Accordig to a recent repon issued by the Commerce Deparent, health spending in 1990 
wil approach $661 bilion and account  5 percent of the GNP. The Commerce 
for 11.
Deparent also projects that spending on health car in the United States will rise 10
percent annually through 1995. 
The escalating cost of health car has led third par payers  employers, insurrs and the 
government  to seek new methods to curb these rising costs. In 1983, Medcare 
implemented the prospective payment system (PPS) to adess Par A 
inpatient costs. 
Following the adoption of PPS, Medcare undenok a number of policies intended to generate 
savings for ambulatory car services. These policy actions include a physician-fee frze, 
reductions in payments for overpriced procedurs, balance billing reform and incentives to 
encourage physicians to accept assignment. Despite Medcar s effons to  car 
contrl health 
costs, expenditurs continue to 
grow. 
As Medicar purued cost contanment measures, health car providers responded by shifting 
more of their costs to private sector third par payers. Prvate sector health car costs soard, 
trtional 
and employers became disenchante with  health car payment mechanisms and 
their inabilty to reduce costs and control utization. Increasing numbers of employers 
assumed control of their employees ' health plans and became self-insured. The more 
employers became involved with their health car plans, the more they realize that they 
lacked the expenise neeed to control costs and utization. New businesses specialzig in
health car cost contanment moved in to fil ths vacuum. 
To compete with the new companies offering specialze cost contanment servces, health 
maintenance organizations(HOs) and traditional health insurers "unbundled" segments of 
their existing business and began marketig the individual specialze services to employers. 
An employer might contrct for admistrative services from one company, provider networks 
from a second and utilization management services frm a third. This unbundling or 
boutiquing" of individual health care cost contament services spawned the health servces 
broker industr.

The essence of the philosophy of health service brokers is a flexible pragmatism and a 
progr 
willngness to  managing  costs and utiization, while 
tr innovative approaches to 
maintaning quality of care and ensuring access to needed services.  Health servce brokers rage from large national corpations to individuals providing 
services locally, and represent a wide varety of philosophies and approaches to controlling 
health car costs and securng health car servces. Some of the health servce brokers we 
contate for this repo provide a single heath relate servce, while others provide 
multiple heath services which they boutique or sell as customize packages to employers,
thir par 
payers and others, including other heath servce brokers. Health servces brokers 
attempt to contrl their clients' health car expenses in a varety of ways. Ths report focuses 
on four speific aras where brokers clai to achieve savigs and control costs by: 
establishing networks of doctor, hospitas and other health car spialties 
whose car is demed to be cost-effcient, medcaly competent and appropriate; 
combining a varety of utiization review (U) tehniques to educate health 
care providers concerning unnecessar, excessive and inappropriate procedurs; 
prices; and, 
tageting certn medcal supplies and seces for purhase at discounte
providing individual cas maagement (lCM) for some patients. 
SCOPE 
The tenn "heath service broker," as used in this repo refers to any business that establishes 
and monitors provider networks, provides utiization maagement servces or seurs 
discounted medcal servces and supplies. This report provides an overvew of method used 
Th 
by health service brokers to maage health car costs and utilization.  study report on 
tehniques which brokers-employ to ensur their succss in each area mentioned above. 
trsferrg 
Whle this report looked at the overa feasibilty of  these approaches to 
government progr, workig out. the spific mehanics wi be left for futu studies. 
The Offce of Inspetor General (DIG), Ofce of Evaluation and Insptions (DEI) plans to 
conduct more detaled insptions on some speifc approaches use by health serce 
brokers. There ar curntly studies in the DIG workplan focusing on private setor utilition 
review, seond surgical opinion and Medcaid cas management 
METHODOLOGY 
In-person and telephone intervews were conducte with a pursive sample of brokers 
providing utilization maagement, taeted discount purhasing and networkig servces. 
Discussions were held with the Health Cae Financing Admnistrtion (HCFA), acadmicias, 
representatives of professional organizations,  in ths field. A tota of 
corprations and experts 
51 interviews were conducted.  We asked the peple we contate durng ths study how they control health car expenses, 
prours  servs 
and to identify medcal  and other  which they found to be goo candidates 
for cost contrl effort. We also asked them to provide an estimate of savings they achieved 
from their method. 
Savings repone by broker and by clients vared dependig on the combination of servces 
provided and the aggrssiveness of the brker and client in applying these approaches. We 
did not attmpt to validate estites of savings, and therefore did not include them in this 
report. 
identi 
Qualitative analysis of the intervews was used to  method which might be suitable 
for addtional indepth researh to determe the feaibilty of transfenig the approach to 
government setor health progr. We expet that more detaled studies wi offer a more 
comprehensive analysis and statement of potential savings which can be derived from 
adopting health service broker tehniques. 
In adtion to collecting service intensity and payment data relate to specific proedures, 
DEI's Statistical Analysis Grup (SAG) develope a methodlogy and obtaned HCFA data to 
detennne whether HCFA had the capabilty to distiguish cost-effective providers frm 
outlier" providers who bil for substatily mor seces than their pers. Th analysis was 
refined by examing the data bas on physician  including data on patient
spialty and by 
hospitaiztions as a measur of severity of iless. 
In the developmenta stage of ths study, we taed to acadmicias and business peple
knowledgeable in employee health benefits, as well as some health servce brokers. 
Based on 
these exploratory dicussions, we identified two broad aras where health servce brokers and 
employers have concentrate their effort in an attmpt to contrl rising health car costs: 
provider networks which provide a comprehensive rage of servces at a 
discount to their clients, and 
utilization review tehniques which assur that appropriate car has ben 
rendere in appropriate settgs. 
We also discovere that many brokers and employers had refined these 
tehniques and applied 
them to speifcaly identified servces and patients 
though tagete purhasing and 
individual cas management. 
This report reflects what we leared frm brokers and employers who purhase their servces. 
The report is divided into four chapters: provider networks, utiization review tehniques, 
tagete purhasing and individual cas maagement.. In each of these four chapters we 
examne what the private sector is doing and have attmpte to identi 
litations and 
obstacles to implementation of these concepts and key elements necessar for success.  CHAPTER 1: Provider Networks

Effective provider networks control membership, regularly assess 
utilzation of 
services, and remove service intensive providers. 
Employers as Purchaers of Comprehensive Health Serves 
As employers beam self-insur and took over contrl of their health benefit plans, they 
beame awar of the trmendous power they hold as purhasrs of health car servces. They 
reasoned that they could apply the sam prudent buyer priciples they used in their business 
operations to the purchas of health services. Using heath service brokers, they exercised 
their purhasing power to establish provider networks. 
Provider networks operate on the principle of channeling a prectable patient load to 
physicians and suppliers who pratice medcine effciently. In exchange for an incrased 
agr 
patient load, physicias and other providers of medcal car and supplies  to discount the 
fees they chare for their servces. Twenty-one health servce brokers intervewed for ths 
report ar involved in establishig networks to prvide health car servces for their clients. 
The networks encompass prefeIT provider organzations (PPOs), HMOs, independent 
practice associations (!As) and exclusive provider orantions (Es). 
Health service brokers contol membershi by screening canddates for their networks; 
all request malpractice and disciplinary informtion from candidates. 
var 
Crteria used by health servce brokers in selectig providers for their networks 
considerably depending on local conditions. Al the brokers we spoke with reueste 
information concerning mapratice clais or discipliar actions from candidates. By 
checking for any evidence of mapractice or  feel they can exclude 
disciplinar actions, brokers 
frm their networks providers whose qualty of car may be questionable. 
agr 
Prviders reueste to join networks must  to discount the price of their servces in 
retu for a potential incras in their patient case load Institutional providers, such as 
hospitas and nuring homes, ar usualy reimbur on a per diem basis. Individual 
practitioners, such as physicians, ar usually paid using fee schedules. The amount of 
payment a provider parcipating in a network can expet to reive is documente in a 
contrt which is periodcaly renegotite 
Patients ar encourged to use the network providers though incentives such as lower 
deuctibles and copayments, and discourged from using "out of network" providers by 
EP, 
higher out of pocket expenses. In an  patients pay al of the medcal expenses they incur 
outside of the network. 
wi 
Most brokers feel that negotiatig discounts on fees alone  not produce suffcient savings 
unless utiization contrls ar also built into the provider contrt. A potential exists for 
providers in networks to offset discounts for servces by incrasing the number or intensity of  services they provide to patients. Five brkers said that the networks they established had 
faied to prouce anticipate savings beause discounts were offset by increased services. 
Accordig to one broker, service intensive providers ar often those most wiling to give the 
greatest discounts beause they know that they will mae up the difference by increasing their 
volume of servces. 
re 
Some HMO failurs, and the inabilty of some networks to produce  dollar savings, were 
attrbuted by some to a network's failur either to exclude service intensive providers or to 
contrl their intensity of servce. Whle aberrt providers of this sort may be a sma 
erod or negate any savings expete from the network. Six brokers said 
percentage, they can 
that buildig a goo utiization review prgram to complement the discounte pricing is the 
adssing 
key to  this problem. 
Seven brokers identiy potential candidates for their networks by analyzing relevant claims 
data to determe utiization pattrns. They use this infonnation and provider background 
infonnation to detennne whether a physician is a suitable candidate for their network. For 
institutional providers, they look at the range of seces offere  utization data 
cost report, 
stag 
occupancy rates,  ratios, etc. These brokers ar confdent that these measurs enable 
scrn 
them to  out providers with less than perfect crntials, as well as those providers with 
aberrt utiliztion patterns. 
Some brokers build utilization controls into their contacts with providers. Many more 
use claims data analysis to evaluae provider 
utlizatin before renegotiating the 
provider contract. 
agr 
Seven networks requir that their members  to submit-to the network' s pratice protocols 
and utilization review mechanisms. These agrments ar viewed by brokers, as an effective 
means to contrl utiiztion, ensur qualty of patient car and reuce malpratice rik. 
stada 
Prtice protocols are usually based on accepte  of medcal pratice, researh on 
effectiveness, consultation with expert and consensus of the network mem  rs. Post 
payment analysis is often use tahs tnhe  basis of review pror toc rleaneiw al of individual member 
contrts. One employer and  brokers said they use  data either in valdatig 
curnt contract compliance or to renegotiate contrts at renewal tie. Brokers using 
practice protocols ensur compliance by periodcally analyzig individual member pratice 
pattrns. 
Clearly, access to and analysis of claims data is crtical to the success of a network, whether 
use in selecting potenti providers, or monitoring their behavior afr inclusion in the 
network. Any network that has the means to identi and wee out servce-intensive providers 
before inclusion in the network, and monitor utization with the network, is well ahead of 
the game.  The HCFA as Purchaer of Comprehensive Heal Serves 
Although beneficiary freedom of choice is protected by law, HCF A is 
exerimenting
with demonstration projects to evaluae thefeasibility of using provider networksfor 
Medicare. 
The HCFA has reently undenaen five PPO demonstrtion projects to evaluate the feasibilty 
of using networks in the Medcar progr. The objectives of these demonstrtion projects 
are to test the feasibilty of this fonn of servce delivery, to determne its 
attactiveness to 
beneficiares and to assess its effectiveness in controllng the volume of 
services biled to 
Medcar. 
Four PPO projects under study ar enrollment modls; the fifth is a non-enrllment modl. 
Enrllment moels reuir that beneficiares elect to parcipate. Beneficiares must use 
network providers or pay a grater shar of their health car bil. In the non-enrllment 
project, beneficiares do not elect to parcipate in the PPO network but ar enrlled 
temporay whenever they use the servces of a provider in the PPO network. Unlike the 
enrollment modls, the patient pays no penalty for using a non-network provider. 
detee 
While HCFA has the authority to conduct demonstrtion projects to  the feasibilty 
of using networks to provide comprehensive heath servces, widespread implementation 
appear to be prohibite by curnt Medcar law, which guartes beneficiares tTom 
choice in selection of medcal providers. Accordig to HCFA, the law prohibits Medcare 
from stering patients to selecte providers. The HCFA  curnt reimbursement 
alSO feels that 
mechanisms preclude negotiating with providers for dicounts. In HCFA's view, these 
constraits severely limt their abilty to experiment in ths area. 
ha 
The HCF A 
the capabilty of identifing service intensive providers through analysis 
of its own Medicare daa bases. 
scn 
To determe whether HCFA data could be use to  provirs for a network, we 
analyze HCFA's Pan B Medcar Annual Data (BMA) files and hospi  adsion fies 
cla 
for 1987 to see if we could simulate the reviews of  data that brokers perform when 
evaluatig  BMA data 
potential physicians for their networks. Using the 1987  we aggrgated 
the servces each beneficiar had reeived to the physician who lat saw the patient. We 
assume that the physician last sen by the patient operate as gatekeeper and was respnsible 
for ordrig the services that followed Once we aggrgate services, we aryed the 
Figu 
providers accordng to servce intensity.  1 indicates the results of our analysis. 
shows that 91 percent of physicians who biled Medcar in 1987 provide on average, 20 or 
fewer medcal servces to their patients. We assumed that physicians billig more than 20 
services were outliers and may not be goo candidates for a network beause of their service 
intensity.  FIGURE 1 
Provider Service Intensity 
(% = number of providers) 
LESS 
Services 
91% 
MORE 
Services 
Based on a one percent sample of the 1987 BMAD files 
If Medcar had the abilty to influence a patient s choice of physician, patients who chose an 
outlier physician would have to bear a  the medcal costs though incrased 
grter shar of 
coinsurce and other incentives. Whle our assumptions may bias which physicians 
identied similar aIYs of data could be done using dierent assumptions. 
We found that neither severity of ilness (measur by hospitations) 
nor speialty 
accounte for the intensity of servces some physicis provide. In the past, physicians 
ar 
providing intensive services to their patients have argued that their patients  sicker and 
therefore reuir more medcal servces. Oter physicis argued that their pratice 
speialization accounte for the intensive servces their patients reived We analyze the 
fruency of services provide to beneficiares who were hospitaze in 1987. We also 
analyze the intensity of servces by physician speialty. Physicians who were outlers in our 
initial analysis were also outliers in their speialty. Patients of outlier physicians did not have 
a grater incidence of hospitazation than their more conseative counterpar. 
While this method of analysis enables tagetig of individual physicians, geogrphical 
location and other factors should be taen into consideration before excludig a parular 
provider frm a network or penalg Medcar patients for using them. The purse of our 
ilustration is to demonstrte that HCFA has data which could enable them to identi servce 
intensive physicians whose parcipation in a network might be undesirble. 
stu 
Issues for further 
nee 
Studies should be considered on the tys of legislative changes that would be 
ty
pennt the establishment of provider networks. Other studies should exame the 
nee. 
network that w  uld be neeed to meet patient  Is it bettr to have national, regpionarl oir 
local networks? Should they include the full spectrm of medcal providers, or only 
care physicians? Should government piggyback on alady 
established private seCtor 
agr 
progrs, or contrl their own networks? Do providers who  to the largest discounts use 
more services to offset their discounts?  Regardless of the answers found to these questions, successful networks include the following 
items: 
a means of identifyng and excluding servce intensive providers; 
a method of incorpting prtice guidelines into provider contrcts; 
stadaze 
a means of collecting  data to monitor network utization and 
efficiency; 
a method for analyzing data to determe network financial condition and 
individual perfonnce with the networ; and 
a means of influencing patient choice of provide.  CHAPTER 2: Utilzation Review

Brokers, employers and organizations favor a combination of utilzation review 
(UR) techniques for an effective UR program. 
Employers as Reviwers of Hell Serves 
sptr 
use 
Utilization review (U) is a tenn that covers a broad  of tehnques 
individually or in combination, to exame the use and intensity of servces rendere to a 
lite 
patient. Such tehniques include, but ar not  to, prosptive review, concunnt 
dead, 
review, retrosptive review and secionnd csurrg ica opinon (SSQ). In the last  the use of 
UR cost contanment strtegies has  signcantly. 
The Health Insurance Association of America estiates that about half of all U.S. businesses 
are using some fonn of UR. These businesses and health servce brokers believe that 
contrllng the use and intensity of servces provide to  contrllng rising 
patients is crtical to 
health car expenditus. Of the 37 health car brker we intervewed 32 offere utization 
review or utiization maagement servCes. Ony one broker did strctly retrosptive review 
and severa did strctly prosptive reviews. The vast majority employed a combination of 
strategies. 
The scope and focus of UR vares by employer and by broker. Some approaches review 
prurs, 
servces rendere The more common approach tagets speifc  diagnoses, 
providers or high doll servces for review. 
The infonnation resulting frm UR is use by brokers for may purses: 
to identify potential members for inclusion in networks; 
to monitor networ provide compliance with agr-upon prtice gudelies; 
to make coverage determnations or paymnt deisions; 
to identify medicaly unnecessar or excessive servces; 
cert 
to preclude  the kinds of servces which have ben demonstrte by 
medcal evidence to be ineffective; and, 
to identify patients for individual case maagement (lCM). 
Many brokers and employers use UR services to educate patients about probable outcomes 
from using certn services and tr-offs associate with using alternate servces. Utition 
review can result not only in less expensive  in improved qualty of car. 
car, but also  Prospective review can reduce the nwner of costly invasive procedures. 
Prspective review is used to ensur a 
course of treatment which is appropriate, 
cost effective and of high qualty. 
Prospective review is not applied to 
episodes of emergency treatment. The 
people with whom we spoke generaly 
agreed that prospective review has the 
greatest impact on contrllng health 
costs, because it can result in the use of a 
less costly tratment or procedur, the 
use of a less costly settng or the 
postponement of a proedure unti 
ben 
alternative medical tratments have 
tred. 
Table 1 lits 21 of the. 57 specifc items 
which brokers mentioned as suitable for 
prospective review. Table 1 contans 
only those items with Medcar 
mion 
expenditurs exceeng $15 
annually. While the servces identified in 
Table 1 ar based on broker experience 
with prospective review, many have a 
considerable body of medical research 
questioning the abilty of the servce(s) to 
improve a patient s quality of life. For 
example, in research conducte by the 
Rand Corporation on physician behavior 
for the National Institutes of Health 
Progr, 
Consensus Development 
coronar arery bypass surgery was 
found to be unjustied for 14 percent of their 
sample, and "equivocal" for another 30 percent 
Conqurrent review can identif potential cases for ICM. 
Concurnt review occurs during the coure of a patient s tratment and reuirs that approved 
admssions be recertfied at specific intervals. Virally al the brokers involved in prospective 
priary 
which are  used to monitor hospital 
review also conduct conCUITent reviews 
admssions and other institutional car. Most brokers conduct concurent reviews over the 
conductig 
telephone; some conduct on-site reviews. . Many brokers  conCUITent care reviews 
progrs 
to minimze reviewer subjectivity and to ensure consistency in the 
use software 
decision process.
 The goal of concurnt review is to prvent the use of unnecssar or inappropriate services; 
fuer 
thereby reucing costs. Continued stay review determes whether  hospitaization is 
necessar, identifies other trtmeinmt optito ns and evaluates potential discharge planing nee. 
Concurnt review also plays an  pan in identiyig cass that might be suitable for 
ICM. 
an 
Retrospective review can idntif providrs with abe"ant utlization  procedures 
vulnerable to manipulaton. 
ocur 
Retrospetive review is a multi-facte approh to UR which  after the patient 
tratment has ben prvide It is used by heath sece brokers to idnti: 1) potential 
agr 
exce 
providers for network; 2) provide who  upon tratment norm; 3) servce 
intensive providers; and 4) patients for ICM 
Retrospetive review is also use to document for the employer or insurr that the goos and 
services they paid for were actually reived by the patient. It assesses the abilty of systems 
alady in place, such as prospetive review, to ensur the medcal appropriateness of 
servces. It is also use to identiy speifc servces which have a high lielihoo of havig 
incr 
ben upcod frgmnte or otherse mapulate to  reimburment. Data frm 
retrosptive reviews is alo use by brokers to renegotite ras and contrts with prviders 
in their networks. 
Brokers feel all UR program benefit from use of standdized softare program 
which provide more consistent criteria for evaluation. 
progr 
A number of brokers have purhased softwar  designed to provide mor consistent 
warte 
procurs ar 
means for detennning whether cert medcal  These softare 
progrs  stada 
employ clinically documente  of car which enable their users to 
prour 
detennne whether a propose medcal  is necssar and approprte. The softwar 
not only promotes mor consistency in the deision procss, but alo douments the crteria 
prour. If 
for deni or approval of a medcal  the computer assiste review indicates that a 
prour 
propose  is of questionable value, a seond opinon may be scheduled and/or a 
prur 
medcal consultat may discuss the propose  with the attndig physician befor 
procur. 
deiding whether to approve the 
Second surgical opinon (SSO) is a UR mechansm that some brokers feel benefits from the 
stadaze 
use of  softwar. While most brokers felt that SSO was not a very cost effective 
disagr 
UR tehnque, others  and claied signcant SSO savings. Those broker who 
claime success with SSO, use SSO only in selecte cass. Some brokers selecte 
procedurs which researh has shown to be most lieslyt ato dbe ain appropritely used Others 
softar. 
selecte candidates suitable for SSO by using their  prior authorization 
Those brokers who felt that SSO was not a very cost effective UR tehnique cite extrmely 
high SSO confmnation rates as the ma reason for SSO program faiur. Ths may be due to 
use 
the blanet approach often  rather than the more focused approach use by those who 
have had more success. Brokers claiming SSO success also speified who would conduct the  ditig  mize 
SSO consultation. They felt that  patents to select providers  any conflct 
of interest and resulte in a more objective SSO. 
Obstacles to effective UR are resistane by providers and amivalence by 
employers/payers regarding enforcement ofUR decisions. 
as 
Durg the cour of our intervews, we 
what the major obstales to cost/utization 
management were at this time. Ten brokers told us that ther was prvide resistace to the 
system, a lak of physician coopetion, and a nee for employers and insur to enforc their 
nee 
DR deisions. When questioned about what changes wer  to overcome these 
obstales, twelve brokers observed that tdhere is  a nee to wor mo closely with providers 
advers 
and establish workig relationships that  situations. 
adss 
One way to  these obstales may be though use of 
clical pratice protools or 
guidelines. The development of pratice guidelines is viewed by some brokers and expert as 
the key to improvig the qualty of car provide to patients as well as contrllg use. 
stada  cla 
Brokers that have develope their own  of pratice  that most physicis 
respond well to them and that changes in physician behavior do occur. Physicias who 
prce 
repeatey fail to abide by cliical  gudelies ar removed from the network. 
The HCFA lI Reviwer of Healh Serves 
priy  lite 
In comparson to the private setor, Medca s apprach to UR  has ben 
retrosptive reviews. In reent year, HCFA has undenaen severa projects designed to 
broadn their approach to UR. 
The HCF A' s fiscal agents hae developed alternative review program for their private 
business, but hae no incentve to use themfor Medicare. 
May of HCFA's contractors have purchas or develope alternative UR progrs simar 
those offere by brokers for use in their  purha UR
prvate business. Several have 
deision softar for use in their private business. These contrto raly extend to their 
Medcar business the UR progr they have develope or purhas for their private 
business, beause there ar no incentives for them to do so. Softar which has ben 
purchas or develope by HCFA's fiscal agents is not use for Medcar clai 1iause the 
mag 
authporrityi lfyor   deisions concerning the appropriateness of medcal car and procurs
lies  with Peer Review Organizations (PROs). 
HCF A' s PROs prospectively review a few surgical procedues, but muh is left to each 
PRO' s dicretion. 
The HCFA curntly reuirs PROs to prospetively review a select number of proedurs
includig coronar arry bypass and catat surgeries. The PROs have the option of 
selecting which procedurs they will prospetively review. Each PRO has ben left to develop 
its own crteria for use in assessing the mecal necessity of the procedurs it 
has selecte for 
prospective review.  The HCFA would lie to move towar computerization of the prior authorization process. 
However, their plans do not call for the establishment of a national system using a uniform 
decision tree for all PROs. The system HCFA envisions would allow each PRO to establish 
cena 
its own system. Accordig to HCFA, the statute which pennts prior authorization of 
Medicare services does not contemplate national stadads for PRO decisions. But the statute 
stada 
does not preclude the use of national  either. Failur to adopt a national uniform 
approach with documented stadads for allowing or disalowing a parcular proedure may 
leave Medicare s prospective review program vulnerable to inconsistent decisions. 
The Medicare program conducts concurent review on certain Part A services, but 
without computer assisted guidelines. 
Medicare conducts "concUIent" reviews on some skilled nuring home stays, rehabiltation 
services, home health visits and other Par A servces as par of their claims processing. 
Informtion, in the form of treatment plans and, in some cases, physician 
certfication as to the 
need for continued care, is provided on the claims submitted by providers. Decisions on 
whether to continue coverage of a benefit, and for how long, is detennned by examning me 
infonnation submitted along. with the clais. The Medcar proess can be descnbed as less 
aggressive compared to some private sector approaches which ar conducte on site or over 
the telephone, and less "objective" compar to the use of computer assisted 
guidelies used 
by brokers to reuce the subjectivity of UR deisions. 
The HCF A is exerimenting with alternative approaches to retrospective review. 
The HCFA is cUIently sponsoring some demonstration projects involvig retrspective 
review. In one project, a health servce broker has been subcontracted to conduct utilization 
reviews. The purpose of this project is to detennne if the use of private sector contrctors 
would improve Medicar DR effons. This project has generated some complaits from the 
provider community but appears not to have had an effect on patient satisfaction with the 
Medicare Program. The savings from the use of an independent UR firm appear to be 
significant. In another demonstrtion project, a Medcar caner has ben developing screens 
scrns 
which will enable them to match diagnosis with tratment. Early res  lts indicate the 
have been successful in identifyig aberrant practices where the car and servces given to a 
patient ar not indicated given the diagnosis. 
curnt 
These experiments indicate a recognition on the par of HCFA that its  UR activities are 
not yielding the expected results in terms of cost avoidace and savings. Some people with 
whom we spoke felt that HCFA has permtted their contractors too much latitude in their ap
proaches to UR and that many of HCFA' s contractors did not effectively use their UR data: to 
corrct problems in the Medicar system. One broker we spoke to felt that there may be a con
flct of interest on the par of caners, and a reluctance by PROs to challenge peers, when it 
comes to dealing with utiization issues.  Issues/or 
fuher stud 
detee 
Studies should be conducte to  the effecveness of UR activities alady in plac 
government progr. New apprhes to UR should be explore Would national
stadadi  apprh  mag? 
softwar f  tate a more consistent  to desion- Should 
independent subcontrto be use for UR activities? Should Meca s fIScal contrtors, 
scn 
softar, 
many of whom own pror authortion  cass so that only unrsolved cass 
ar forwarde to the PRO? Should SSO be perfor by a designate group of independent 
subcontrto, 
rather than left to a physician of the patient s choice? 
prgr 
Whatever tehniques, or combination of tehniques, ar use an effective UR  should: 
tr 
provide a review  so that the proess can be duplicated by an independent 
thir par; 
provide some method for doumentig the procss and assurng consistent, 
unifonn decisions; and 
prouce reliable, unifonn data to assess individual contrctor performce, and 
trk 
to accurtely  cost savigs and effectiveness.  .. 
.. 
'" 
. ....
.....  .
...............:.............. . : ..... .............:................................:....:........::............'.:....".........:.. .............. ....... ........ . .. .... "..........."..; ."...;......:".......:"....:........ ".,.:.......".... ......... '.......:.".".. ."... .:. ....:....'.." ...:.......':......,..:...'." ...... .:.'...:..:..:......';..."...:.......;..'.:...... ......:.'..'.........:.....'......:......'...:.............':...........:..'...,.........,..'.......-..'. .......,...'. .,...!.. ' ............'..........:~  ... "... ........,.........":.....~........  ..:....'. .":,.... ....'....~:..........'..'.:............'....:.."... ...~ ......:........ .:.. .......".;....... ....;.....~.,...;"........ ,~ ............-..."..........~,. ...........-......~....... ....-............~... .."....... ........~....."...................,...... .. ..:..". ..: ..,...~.................-.....".......:........... ......:.~.......".......... .........:....-....";.......:........ :.....:.'...... .....:":...:..)......:.:.:...... :~.:.....:. :. .:.:...":........~:"..:.:.".....:.....")..:;..~ :..:....'..:....,.,.).,:.....~.:  .. .:... :........:..~..:.......?".:..........,......:-....... .:: ...........:.. ...... ...../.......:..  ....:....: .::....:...:.. .::(...:.....:.:
...:..:...:....::. . ..::...:::~.. ....:.../:...~.:.....:
..~.................  ................ ....... ........... ................. ......... ....... .........!......!.:
Purchasin 
CHAPTR 3:  eted 
Targeted purchasing in the private sector has developed beyond the purchase 
of prescription medicines and durable medical equipment. 
Employers as Purchasers  of Tareted  Medical Servces and Supplies

Volume discounts, "bulk" purchasing and competitive biddg for supplies and servces 
varations of the purhasing principle used by health service brokers to establish networks. As 
with networks, volume discounts ar negotiate for specifc medcal goos and 
retu  diting  services in 
for  patients to contract providers. 
Targeted purchaing now includes a wide variety of costly medical services, such as 
coronary artery bypass grafts (CABG), intraocular lens implants, home intravenous 
therapy and diagnostic imaging. 
While the concept of securng certain medcal items and goos at discount is not new, many of 
the medical supplies and services being purued by brokers are innovative. These tageted
discounts ar frequently negotiate for very specifc servces or episodes of treatment. Thus 
they differ frm independent of, the discounts derived from a comprehensive network 
, and 
of providers. The brokers we spoke with believe this ara has developed beyond the purchase 
of medcal supplies, equipment and drgs to include a wide varety of costly medcal and 
surgical services.

Eighteen of the health service brokers  n..."...  ........ ""0 .

we spoke with are involved in tageted 
:tt  :J::
purchasing. Table 2 lists some of the 
items they believe can be tageted for  :$(m.)tQflj'  erilfl  :$ijij 
purchase at a discount. The services 
:OC 
listed in Table 2 are high cost servces 
mentioned by more than one broker.
Cert surgical proedurs, such  li!iili  i:;;;ii.  il::........... ""..0...::.:.t.  .:.::.:.::.i:. ............:.:.:.:
::i:::::::
coronar arery bypass and catact  ::i::  :i. :gHr  i::M  1:.  9yjpm nli:. ii:  :i.i:::i. iii. i::.
surgery, also were mentioned as items 
suitable for tageted purchase. These and  !!I:I:il!iiii1jlll!!!llillil:il!!;  j!I  Milllilllli!111 
illjll!llil!llilll
other surgical proedurs were not  illl 
lilll!ii(lil!ii!i:llllllijill:j!i;ilt611  r,!i!! 
shown in Table 2 because HCFA has  li:::i!jil!iill!ijj 
recogniz that alternative procurment  ;tt::::.8rtff  ?Br9 jhi!iB.  Y19!:  ::U::.
and reimburement methods are suitable  ll:::  ijp Bm. 
iY!. 
for some high cost surgical proedures.  ::ff:
ff.  19ry. 
Equally as imaginative as the items and  ,II  JQg 
procedures being targeted by brokers for 
discount purchase 
ar the unconventional 
applications of the methods being used to  seur 
them. Negotiate package rates with "censtep ocf e xcellence" (hospitas, ambulatory 
surgical centers and certn physician offces for  surcal procurs) can, acording 
to brokers and others we inteewed imrove the qualty of patient car and prouce savigs. 
maufactu  raer 
Discounts negotiatae wri th  and wholesalers  than reta providers 
frm phanutical maufactus 
another promising  One broker negotiats rebates 
and does not attempt to secur dicounts frm dispnser. Patients purhas their 
prescptions wherever they choose. Billng for reimburment also remas unchanged The 
patient s insurr reord the quantity and amunt pai for eah drg and periodcaly noties 
the drg maufactur of eah drg quatity reimbur The maufactur repays the broker 
appe 
a pre-negotiate amounL Ths approah  to pbe rthiey le at intrsive and leat disrptive 
method for seurg drgs at discount. Whe used  aforr  prescption drgs, it appears 
that this method may alo have possible application to other  such as durble medcal 
feengs. 
equipment and parntera and entera 
One employer, with plants in four communities acoss the countr, uses a ma-oder 
phany 
for prescptions, contortsg forr  discounte durble medcal equipment, has a 
single-sour  mamm and is explorig the comptitive bid approach for 
contrt for  ca. 
poatr and home health 
denta car, viion car, chiopratic servces, 
Ths employer, and in fact al of the employers and broker negotiatig discounts for tagete 
nee 
servces, felt that a detaed analysis of servce  and maket conditions was essential 
before entering negotiations or lettng out a reuest for comptitive bids. They also felt that 
while a lage-scale, national approach may be appropriate for some seces and some 
markets, the same approach may not be suitable for other. 
The HCFA as Purchaser of Tareted Medical Serves and Supplis 
Although Medicare law does not permt HCFA to engage in targeted purchaing of 
an 
medical equipment  supplies, HCF A ha begun exloring Itcenters of excellence" in 
a demonstraton project involving CABG. 
There is curntly no provision in the Medcar law which would pet HCFA to engage in 
competitive biddng or in negotiation for spifc medcal servces and supplies. Medcar 
would nee a legislative change to implement selective purhasing of servces and supplies. 
Repercussions from exclude providers and suppliers is liely. 
Despite no speific legislative authority to implement taete purhasing, HCFA does have 
seurg 
the authority to conduct demonstrtion projects to study the feasibilty of  some ser
vices in ways which were not contemplate when Medcar legislation was enacte One such 
demonstrtion project, curntly being underten by HCFA, involves the use of "centers of 
excellence" to provide some surgical proedurs. The project is just gettng underway with 
selection of providers stil in proess.  Issues for further stud 
appe 
There  to be a nee to explore what tys of legislative changes would be reuir 
progr 
enable governent  to engage in tagete purhasing. Studies should alo explore 
the following questions: Wht tys of servces would be suitable for tagete purhasing? 
Where in the distrbution chai is it most advantageous to taget purchass, e.g., at the 
manufactur, distrbutor or retal level? 
Regardless of which seces ar tagete or how savigs ar achieved a tagete purhasing 
approach should: 
incorprate utization controls to detet and avoid increas use that might 
negate discount savings; and, 
produce reliable data which can be used to assess cost effectiveness and to 
futu 
negotiate  discounts.  . ..
:".:-::."."::.:,:.."""::."..::-.:":.."::":-:"..:'::",:":"."::":':.::'.:j.:.:'"":":.:':..::'::.:".'."'::':...:.'::":'."":..::':.:.'":.;:.'.. ::.'"..:':..':.:..'"::.'.:..:.:".:.:::'...::,':".::..':..j:':..:.:.':::.'..:"::':...::'.:.-...:....'":..':..''.:.".''.:..'-:..',.:":'.':...:'':.:.'."-.::.:..'::""..-:.::..:.-.:"::..:.:":'..:::',.:.:.:'.::..:j'..:.::'. :..:.':..,:'".::'..:..:':..:.'.:.:.'.:..j''.:.,; '.:.:'..:'..:'.:.":'.:.'.:'.:.j.'":..':':..::.'::,.".:'':.::'.:.:. :'':.:.;.':":.:. ':':."j'::,.:.':.'::., :..::.."'j:....::.'.":.:..::. .:'":.:...::.':"...:.::..':".::..::.'.:".:.::.'..:':.:-::..".:::.-::: .".::."::'.   :::':....":":.:: .:.:''.:::'".:::.."';::.:::".'.:::.:::.'."":::::::..'::,.:-.:::.':::.".":::...::':.:::.'.:!.:'.-.:.::.:::.'.::"":.:.::.'.:::"."::.:.'::.."::"..'.:':"...":'..:.:..'.": .:.'.'.:"':'...''":'.".::.:.:..'::".'..,::'.:.:::."..:..:::.:'::..':':.::'','.,::.::'::-:.:'..:.':'::::'".-:.;;''".::::':.':.:::'':":.':::'.."::'':::.':':.:::'"'.::.'"::':,::':':::.':.-':.::.::.'::.:,
:;:.::..:,.::.:::..:.::::.:.::.::.::::::.::.::..::::,::..:.::.::::..:':..:::..:::.:.:.:::.:::::.:::::::.::::::.:::.:;.::.::.:;::
CHAPTR 4: Individual Case ManatJement

Brokers believe ICM improves qualit of care, increase efficiency and makes 
better use of benefits for patients with catastophic or terminal diagnoses or
with chronic conditions. 
Privat Sector Case Management 
Individual case management is a prss of diting patients, identied thugh other form 
of UR, into more cost-effective mods of trtment. It is tyicaly use for catatrophic, long 
doll  progr 
tenn or high  medca cas. It may be an integrte component of a UR  or a 
stad-alone component. Lie other UR progr, its goal is to ensur approprite, qualty 
car and prmote cost control. 
Table 3 identifies some of the aras 
brokers find suitable for ICM. The list  _11111811
was limte to costly conditions 
mentioned by more than one employer or 
broker. The conditions liste ar also
 II;  III;;IIII;I;IIII.
those in which a coordnate approach  ::I:llllliil:III;I;II;;  1111IIIIIIIji
would provide signifcantly better 
car to  :::::::::::::j:j::::::I,  j:j:I::::::j::;::;:::::j:::::::::::::::::Ij::i::j:::::::::::::::::::;:::i:::j:::
the patient than the piecmeal approach  ::::::::::i:::::::II:::::;:;::8  9::  jM:::::::::::::::::::::  ::::::;::::::::I::::::::::::::: 
::::::::i:lq 
which sometimes results under  !P!!::m'!mI::::::: 
::::::::::::j:::I::I:::I:IjI:::i:I:I::i::::::j::::i::::::::::::::::j:::::,::I::::::: 
trtional 
coverage. 
illllllllllllllll:llllllllil:illli. 
111 
Individual case management is often 
IIII'IIIII'1I:IIIIIIIIIIIIIIIIIII,I:IIIII:IIII!IIIIIII:I:IIII!:IIIIljlllll
referr to as "car maagement  ::::::::::::::::::::::i1:  mt9M: ::::::::::::::i:::':i:::::::::::::::::::j:j::::i::::::::I:  ::::::I::::::::::::j::::,:::
beause it coordnate$ the mi and level  ::::J;!!t:' er.  9m:'9  :emRI!
of patient car  tit
ghout the entie 
course of tratment. Coordation of 
services may include home health car 
services, outpatient treatment or 
procurment of 
rehabiltation and the 
durable medcal equipment or supplies. 
These servces and supplies may be 
delivere by networks or by suppliers 
under spial contrt.. The ICM servces may include some health benefits not usualy 
cert  bas 
covered under the health plan (such as  fonns of home- car), but demed more 
cost effective in these speial cass. 
Twenty-seven of the brokers and  employers we intervewed have some involvement 
al of the 
in ICM. They felt ICM was valuable beause in toy s envionment catastrophic cass 
constitute a disproportonate share of health care expenditus. Brokers believe that the earlier 
the intruction of a patient to ICM, the  the use of effcient and cost 
grater the control over 
effective services.
 In its best for, ICM is a collabotive prss to conate a plan of car. Typicaly, the 
case maager or health car consultat assigned to a patient develops, in conjunction with the 
car providers, a trtmnt plan and alternatives which cover both 
patient, famly, and health 
reui. 
hospita car that may be  The case maager assists 
the hospitaization and any post-
the patient in mang infoned deisions about trtment alternatives and then functions as a 
liaison between the patient, dotor, and insurr. Ths faciltates the development of a 
that not only is appropriate and cost effective, but also one that meets with the 
ttatment plan 
approval of the patient

Canes 
for ICM are idntifed through utlizaton review technques or through a 
patient advocate. 
identi 
Two strtegies ar used by brkers and employers to  suitable candidates for ICM. 
The proactive approach is broker intiate the retive is patient intite The proactive 
strategy flags suitable candidates for ICM durg prospetive or concurnt utiization review. 
proure, 
Cadidates for ICM may be identied by diagnosis,  cost or intensity of car. One 
broker told us that the proactive strategy enables them to identify 20-30 potential cases a week 
for their clients. 
The retive strtegy relies on the patient to voluntaly contat a "patient advocate" or 
coordating the heath 
adviser, employed by the broker or the employer, for assistace on 
plan benefits for a high-cost episo of car. The patent advocate or patient "hotle" alo 
progr 
functions as an integr par of some brokers' UR  by providig patients with 
progr, 
infonnation on alternative medcal ttatments. In some  ths system is also used to 
argig 
assist tennnaly il patients in mang deisions and  for the mecal car they 
nee at 
the end of their lie. 
Obstacles to ICM include insuffcient patient and provider eduation, and honest 
disagreement over treatment alternative.s. 
Most ICM progrs being conducte by brokers ar volunta, in that P3tients ar not 
reui  hea 
to use the identied alteatives. We oftn  that patient parcipation rates of 
such volunta progr ar exttmely low, and that educatig patients and physicis 
nee 
concerning avaiabilty of ICM and its benefits is a key obstale which  to be overcome 
exprt 
for a successful ICM progr. Many brokers, employers and  believe patients want 
and appreate help in assurg that they get the best mecal car possible, and that goo car 
ru 
wi not  them or their famy fiancialy. Neverteless, some of the employers we spoke 
with offere these maagement servces strctly on a volunta, patient-intiate basis, lest 
they appear too intrsive.

Another ICM obstale is honest disagrment over ttatment alternatives. National pratice 
reimburement incentives were 
guidelines, outcome assessment research and changes in 
mentioned by many of the  interviewed as elements that would playa key role in the 
peple we 
futue of ICM. Prtice guidelines and outcome assessment were considere to be key 
developments that would enable ICM to resolve disagrments over ttatment alternatives in 
the best interest of the patient.  The HCFA as Individual Case Manager 
The HCFA is capable of identifing service intensive patients, using the resources 
currently available, but lacks the authority to direct such patients into ICM. 
curnt 
The HCFA does not routiely conduct any ICM for Medcare beneficiaes because 
Medicare law prohibits steering patients to select providers. The nearst fonn of "individual 
progr 
case management" in the Medcare  is a provision which enables patients diagnosed 
as tenninaly il, or their representatives, to elect hospice car in lieu of more costly care under 
the regular Pan A benefit. 
progr 
The HCFA sta, with whom we spoke, felt that ICM in the Medcare  might not be as 
effective as in the private sector, beause of the dierences in the diagnoses associated with 
Medicare patients compar to those covere by private insurce. The HCFA also felt that 
curnt 
the  provisions of the statute clearly define what is covered and not covere by 
Medicare and that the statute may not be flexible enough to allow Medicar to use the most 
cost effective means for securg ICM servces. Some of the brokers with whom we spoke 
also indicated that the Medcar population is unique, and that some of the techniques and 
progr 
Medcar 
methods used by the private sector might not be as effective for the 
We leared in our discussions with HCFA that one PRO (Nebraska) is conductig a ICM pilot 
study. Accordig to HCFA, this project is focusing on high cost diagnoses. The obstales 
encountere thus far in this demonstration project ar: 
inabilty to taget beneficiares suitable for ICM, 
adssions, 
inabilty to target patients before hospita 
difficulty in approaching patients to encourage use of ICM, 
inabilty to document savings. 
Identification of suitable patients for managed care, as early as possible, appears to be the key 
to successful ICM. We examed HCFA BMAD files to determne if Medcar carers had 
identiy patients who might be suitable for ICM based on intensity of medcal
the abilty  tq 
services. In analyzig the BMAD sample, we found that about one percent of Medicar 
patients receive more than 51 medical servces annually. We believe that the data being 
maintaned by the carers can be used to identify patients receivig a high volume of medical 
services. Two questions must be asked with regar to these patients: 1) Are they suitable 
candidates for ICM? And 2) Is the car they are receiving appropriate?  The RCF A believes that patient advocate services would be best provided by outside 
organizations. 
In our discussions with HCFA, we outlined the "patient advocate" or "patient hotlne 
approach used by some employers and brokers. May companies use patient hotlines to 
dit 
detennine patient interest in ICM, and to  patients into specialize networks or to 
agr 
targete purhasing arangements. The peple we spoke to in HCFA  that long tenn 
effons are neeed in this area. However, they felt that a patient advocate approach to DR 
might be viewed as "too soft of a service" for Medcar to provide if it were volunta, or 
big brother" interferig in the practice of medcine if it were mandated. The HCFA feels that 
advocate services might be better provide by outside organiztions representig the elderly 
and disabled. 
stud 
Issuesfor further 
There appear to be suffcient potential for researhing the feasibilty of ICM for Medcar 
and other federa health car program, in light of the special populations these Federal 
progrs 
serve. What kinds of crteria wil best identiy potential candidates? Who should 
perfonn the review for potential candidates, and how can  done most effciently? Who 
ths be 
should be responsible for maaging the tratment of identified patients? How can appropriate 
patients be encourged to choose the ICM approach? How could a patient advocate function 
within a government program? 
progr 
Any ICM  should: 
emphasize a collaborative approach among patients, physicians and payers; 
use common, wrtten guidelines or protocols; 
include a proedur for  disagrment over treatment 
resolving honest 
alternatives; and, 
gather reliable data for tracking parcipation rates and cost effectiveness of the 
progr.  CONCLUSION

The intent of this report was to stimulate discussion as to whether any of the approaches used 
in the private setor for controllng mecal costs might be relevant to the public setor. The 
undertg, 
not to endors anyone method or  such 
purse was  nee  prtice. Befor any 
adtional studies ar  which will provide mor indepth informtion on eah method 
rey  progr 
Some of the method use by broker may be mo  adpte to public seto 
wi nee  cafu 
than others. The DHHS  to give  consideration to the legilative obstales and 
adnistrtive imaints which curntly prvent the trsfer of these private setor cost 
contrl mehanisms to the public sector. The DHH' succss in integrtig these kinds of 
progrs  ma. 
depends on whether the necessar legislative changes can be 
Overal, may private sector mechanisms for contrllng health car costs appear to have 
progr  adstere 
potenti for Medcar, Medcaid and other DHHS  includig those 
the Public Health Servce. Eah component should study the mechansms use by the private 
prgr. 
setor to determe whether any ca or shoul be adpte to their  , "  , "  pp. 
BIBLIOGRAPHY

Alter Medcar PRO Review, Says GAO,  December 25, 1989, Vol. 
Medicine and Health,

43, No. 50, p. 3. 
Aging Panel Holds Hearng on Drg Prces, 
This Week in Washington,  July 21, 1989. 
Aquilna, David, "Data Demands: a Dauntig Hurdle,  Managed Healthcare, 
Februar 
12, 1990, Vol. 2. 
Bachman, Sar S., et al., "Preferr Prvider Organizations: Options for Medcar," 
Spring 1989, pp. 24-34. 
Inquiry, 
Bacon, Kenneth H., "Fins Haven t Cut Health Costs by Using Pror-Review Progrs, 
Report Finds,  October 19, 1989, p. B4. 
The Wall Street Journal, 
Bacon, Kenneth H.  White House Loks at Ways to Control Qualty, Costs of Health Car 
for Elderly,  November 24, 1989, p. A3. 
The Wall Street Journal,

Bigger May Not be Bettr for Purhasing Groups that Overwhelm Customers,  Modern 
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Healthcare, 
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Discounts for Prvate Payers put Docs in ' Gry' Legal Ara,  Volume 4 
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Whitmore, Julie, "Despite Minor Downtur, Moo Reviewer s Signs Goo,  Crain 
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Wiener, Janet Ochs, " Medicine and 
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