We want to use this as a learning tool, and we want to influence physician practice patterns to become more conservative and more cost-effective, while maintaining optimum quality. We’re not denying claims, we’re just saying, “you stick out like a sore thumb.”
The speaker was Fred Clayton, President and CEO of Preferred Health Network, Inc. (PHNI). He was referring to Patterns of Treatment, a new software program that PHNI had acquired to help it address cost containment and quality of care issues. Using “Patterns,” as it was called, PHNI had completed several studies of physicians’ practices and had shared the results with them. Mr. Clayton’s task now was to determine how best to use Patterns to achieve his goal of “…appropriate care for our enrollees—not too much, not too little.”
BACKGROUND
Preferred Health Network was located in Phoenix, Arizona. It was an IPA-model practice management company that was in the business of providing managed health care to employer groups. PHNI developed, maintained, and marketed a network of community-based physicians, hospitals, and other related services providers throughout the state of Arizona.
The basic product offered by PHNI was its network of local community providers. PHNI was not an insurer and did not process claims from providers. Instead, PHNI’s providers submitted their claims directly to the claims administrator selected by an employer group. The claims administrator then provided data to PHNI on a post-payment basis for retrospective review and analysis.
PHNI was a for-profit, stock corporation owned by eight Arizona hospitals and several area physicians. It was governed by a nine-member Board of Directors consisting of six consumers/purchasers, two physicians and one hospital chief executive officer. Its mission was “to make high quality health care available to employers at a cost-competitive rate; and to return value to our investors in the form of market share and in quantifiable and non-quantifiable returns on investment.”
PHNI’s 3,000+ providers (including physicians, DOs, DCs, and others) were located throughout Arizona, mainly in metropolitan areas. The enrollees served by these physicians had grown rapidly, from only 25,000 some six years ago to the current level of over 300,000. They belonged to more than 4,000 employer groups. . . .
Assignment
- Assess the concept and design of Patterns. In what ways is it a useful tool? How could it be made more useful? What are its limitations?
- How do you think the three physicians receiving the reports in Exhibit 3, 4, and 5 will feel about the information? What questions might they have about it? Do you think it will affect the way they practice medicine?
- What is your assessment of the way PHNI is using Patterns of Treatment? Should Patterns be used for claims rejection? For eliminating physicians from the Network?
- As the CEO of a practice management company like PHNI, how do you see the overall challenge of utilization control? How do you balance the objectives of keeping utilization down but quality high, while keeping employer groups, enrollees, and member physicians satisfied?