Constrained Innovation in Managing Care for High-Risk Seniors in Medicare + Choice Risk Plans. A. Participating Managed Care Organizations


The four MCOs that participated in this study are:

  • Keystone Health Plan East (referred to herein as Keystone East): an IPA-model plan that, at the time of our case study, contracted directly with individual physicians to care for about 80 percent of its Medicare enrollees and had capitated contracts with large provider organizations to care for the other 20 percent.

  • Regence HMO Oregon(referred to herein as HMO Oregon): an IPA-model plan that relied on capitated contracts with large provider organizations to care for a substantial proportion of its Medicare beneficiaries.

  • Kaiser Permanente--Colorado (referred to herein as Kaiser Colorado): a group model HMO in which the HMO (the Kaiser Foundation Health Plan) contracts for physician services with the Colorado Permanente Medical Group, which has about 450 physicians who serve Kaiser Colorado members exclusively and who participate in all aspects of health plan management.5

  • Aspen Medical Group (referred to herein as Aspen): a large nonprofit multispecialty medical group in the St. Paul/Minneapolis area, which serves 13,000 Medicare + Choice beneficiaries who enrolled in Medica Health Plan and then selected Aspen as their primary care clinic. At the time of our visit, about 60 percent of the Medicare beneficiaries seen at Aspen were enrolled in managed care.

These four organizations represent a diverse mix in terms of their size, recent growth, geographic location, and other characteristics (Table II.1). In our case study, the major distinction among the four MCOs is the group nature of Kaiser Colorado and Aspen compared with the IPA/network organization at Keystone East and HMO Oregon. It is also important to note the much larger scale and recent growth rate for Keystone East and the very low growth rates at Aspen and HMO Oregon. Differential growth sets up different dynamics and opportunities in these organizations. For example, at the time of our site visit to Keystone East, the MCO was devoting substantial energies, including staff hiring and updating their data systems, in order to integrate almost 200,000 new members. The longer experience with Medicare managed care at the two group models, Aspen and Kaiser Colorado, is also an important difference among the four case-study MCOs.

TABLE II.1. Managed Care Organizations Studied
    Aspen Medical  
Health Plan
Kaiser Health
  Plan of Colorado  
  Keystone Health  
Plan East
  Regence HMO  
Headquarters Location St. Paul, MN Denver, CO Philadelphia, PA Portland, OR
Date of Site Visit October 1998 January 1998 October 1997 December 1997
Organization Type Capitated Medical Group Group IPA/Network
(with 20 percent of enrollees in groups)
(with 75 percent of enrollees in groups)
Total Enrollment at the Time of Our Visit 90,000 339,000 800,000 440,000
Capitated Medicare Enrollment at the Time of Our Visit 13,000 38,400 102,400 17,600
Growth in Medicare Enrollments During the Year Prior to Our Visit Close to zero 9.8 percent 23 percent 0.4 percent
For-Profit Status Nonprofit Nonprofit For-profit Nonprofit
Medicare Risk Plan Established 1976a 1986 1993 1994
Organization Established 1974 1980 1987 1976
NOTE: All MCO data were collected from the MCOs.
  1. Aspen began its Medicare risk plan under a demonstration that predated the 1982 enactment of the legislation authorizing Medicare managed care, the Tax Equity and Fiscal Responsibility Act (TEFRA) of 1982.

The four MCOs operated in market areas with differing characteristics (Table II.2). The major distinction is between the area in and around Philadelphia (served by Keystone East) and the areas served by the other organizations. The Philadelphia area is notable for its high provider supply and utilization patterns and its higher Medicare + Choice payment rates. The number of inpatient days per 1,000 residents in Philadelphia is at least twice that for the other areas and almost three times the rate for the Portland area. The Medicare payment level for 1998 was $718 for the city of Philadelphia, which is 40 to 70 percent more than the highest rate for the other catchment areas.

The other major distinction is the managed care penetration rate: the percentage of people who are enrolled in managed care. Among our four organizations, HMO Oregon operates in the area with the greatest managed care penetration, almost half the population and half the Medicare beneficiaries were enrolled in managed care. (Because many people do not have insurance, the penetration rate among all insured people is much higher than 50 percent.) Kaiser and Aspen also operate in areas with high managed care penetration. Keystone’s market has the lowest managed care penetration among Medicare beneficiaries, although managed care was growing quickly there during the late 1990s and was well above the average rate for the nation as a whole.

It is important to note that the four case-study MCOs implemented several services for high- risk seniors before those services were mandated by the Centers for Medicare & Medicaid Services (CMS; formerly known as the Health Care Financing Administration). For example, all four screened new members before it was mandated. In addition, they were identifying and assessing high-risk seniors before the regulation requiring Medicare + Choice plans to identify each person with a serious or complex medical condition, assess the condition, and develop a treatment plan that allows direct access to specialists.6 That regulation also requires that plans have in place programs for coordination of plan services with community and social services. The regulations do not, however, outline the responsibility of MCOs to address the non-acute care needs of the enrolled beneficiaries, nor do they define “serious and complex medical conditions.”

View full report


"constrai.pdf" (pdf, 32.58Kb)

Note: Documents in PDF format require the Adobe Acrobat Reader®. If you experience problems with PDF documents, please download the latest version of the Reader®