Recommendations of the Texas Comptroller

Improve the Quality of Care and Reduce Costs of Complex
Medicaid Cases

Summary

“Case management” is an umbrella term for a suite of methods through which all of the complex services and payment options for patients with chronic, catastrophic, or long-term illnesses are coordinated by a single person. Patients with catastrophic health problems, such as organ transplants or multiple trauma, represent only a small number of the total Medicaid patient load, but they account for a very large portion of the program’s expense. Case management could help the state quickly find the most appropriate services and payment options for such patients.

Background

“Case management” includes the identification of patients with special needs, assessments of the severity of the illness, coordination of available services, monitoring of medical services, planning for overall care, and the evaluation of services delivered.

Catastrophic case management (CCM) addresses the small number of patients who account for a large percentage of health care spending. These are severe cases that require multiple, specialized providers and involve major medical costs. Cases are defined as “catastrophic” or “major” based on the diagnosis or predictably high costs, generally due to multiple and complex services associated with the illness.

The sooner a case manager is assigned to a patient, the more likely the patient will receive the most appropriate and cost-effective services, and the less likely the patient will miss out on financial and medical services available to them. The state-federal Medicaid program has a significant number of cases involving chronic or catastrophic illnesses or traumatic injuries. Often, such patients lack the information and even the physical strength to maneuver through the health care system.

CCM provides not only medical support, but other services as well. Case managers routinely make arrangements with medical facilities, sort out travel and lodging options, contact support groups, and educate patients and their families about the nature of their illness or injury. The intent of CCM is to offer better care at lower costs and shorten waiting times for some procedures. It can produce considerable cost savings, averaging as much as 62 percent.[1] Without CCM, patients experience more complications, relapses and readmissions to the hospital.

CCM in the Private Sector

CCM is used in the private sector to assess important issues and resolve injury claims quickly and efficiently. Accurate and early case assessments by rehabilitation professionals, who have detailed knowledge of local, regional, and national resources and medical networks, are critical to the overall care of a patient with a catastrophic injury. Adjusting to a disability is a complicated experience that affects the injured person, the family, employers, and co-workers.

CCM is a growing business in the healthcare industry. Private CCM companies provide vocational rehabilitation services, life-care planning, medical case management, disability compliance, medical record review, long-term care assessments, and employer assistance. In the private sector, a health maintenance organization (HMO) often contracts to act as case manager for a health insurance company’s catastrophic care cases. Rehabilitation companies also compete in the marketplace for CCM referrals, to provide quality services at the lowest possible cost.

CCM in the Texas Employee Retirement System

In 1987, Texas’ Employee Retirement System (ERS) adopted “large case management,” its own version of CCM. Registered nurses work with the attending physician, the patient, and his or her family to develop a long-term treatment plan to achieve the most efficient use of medical resources and the best patient outcome. ERS officials estimate that charges to both the state and its employees in fiscal 1997 would have been about $1.4 million more without case management.

According to ERS, under large case management, the insurer becomes involved in attempts to direct the patient to the most cost-effective form of treatment. Registered nurses with discharge planning and specialized clinical experience review and monitor catastrophic claims. Reviewers may recommend alternatives to lengthy hospitalization such as home care, hospice care, rehabilitative services, or skilled nursing facilities. Occasionally, large case management may involve extra services not generally covered in order to achieve the most cost-effective outcome.[2]

California’s Program

California’s Medi-Cal Medical Case Management Program (MCMP) is a collaborative effort between Medicaid patients’ physicians, hospitals, and the state’s Medicaid program to coordinate quality care and assure continuity of care for people with serious medical conditions. The Medi-Cal MCMP has successfully controlled costs and increased access to health care for people suffering from chronic or catastrophic illness and those who require intensive services.[3] MCMP links patients with the necessary services, coordinates alternative services in home settings, and arranges for community resources. This results in high-quality, cost-effective healthcare that reduces the incidence of hospital readmissions.

To qualify, patients cannot participate in any other case management program and must have a medical condition that requires multiple hospitalizations or complex medical treatments. Physicians have final approval of any treatment plan and the ultimate decision concerning the patient’s care. Medi-Cal uses staff nurses located at every hospital throughout the state to identify patients for case management.

Medi-Cal MCMP has saved the state money every year since its inception in fiscal 1993. In fiscal 1997, Medi-Cal MCMP produced total net savings of almost $25 million, even after allowing for alternative care costs of about $11 million.[4]

California’s County Medical Services MCMP uses the same personnel, policies, and procedures as the Medi-Cal MCMP. Its case managers reviewed 200 cases for potential case management in fiscal 1999. Almost 70 percent (139) of these cases were placed under case management, producing a net savings of $2.4 million. The net savings consist of inpatient costs avoided minus the cost of alternative outpatient services and administrative overhead. The program avoided $13.02 in net costs and realized $12.02 in net savings for every administrative dollar spent.[5]

Texas Medicaid Program

Texas spent over $11 billion on Medicaid in 1999.[6] Acute care services for Medicaid recipients are administered by the Texas Department of Health (TDH), which does not currently have a large case management program.

Recommendation

State law should be amended to require the Texas Department of Health (TDH) to implement catastrophic case management (CCM) in complex Medicaid cases.

CCM would guarantee the quality and cost-effectiveness of the healthcare services Texas provides to its most complex cases.

Fiscal Impact

TDH’s budget should be reduced by $4.1 million in general revenue funds for the 2002-03 biennium to achieve savings from CCM. General revenue savings for five years would total $18.1 million.

The state could incur some administrative costs if TDH outsourced this function and needed to hire a contract manager. Savings could result from avoiding the rehospitalization of catastrophically ill persons. Any additional costs for alternative, more appropriate care are included in the net savings.

[1] Edward Veek and Linda Homel, “Stop-Loss and Case Management Are a Perfect Marriage of Concepts,” Managed Healthcare (April 1998), pp. 49-50; Linda Koco, “Firm Brings Out Catastrophic Care Carveout,” National Underwriter (December 1, 1997), p. 27; “Reengineering How Health Care Is Delivered,” National Underwriter (May 26, 1997), p. 9; and Carol Goldberg, “Major Players in Health Care,” LI Business News (September 2, 1996), p. 1.

[2] Employees Retirement System of Texas, Effectiveness and Efficiency of Cost Containment Practices: Fiscal Year Ending August 31, 1997 (Austin, Texas, December 1997), p. 4.

[3] California Department of Health Services, Medical Case Management Program: A Successful Partnership (Sacramento, California, September 1995), p. 9.

[4] California Department of Health Services, “Reconciliation of MCM Data Since Program Inception,” (Sacramento, California, July 1998). (Spreadsheet.)

[5] California Department of Health Services, Medical Case Management Program April 2000 Report (Sacramento, California, May 2000) (http://www.dhs.ca.gov/cmsp/mcm.htm). (Internet document.)

[6] Texas Department of Human Services, Medicaid Expenditure Information Report submitted to the Health Care Financing Administration, August 24, 2000.

e-Texas is an initiative of Carole Keeton Rylander, Texas Comptroller of Public Accounts
Post Office Box 13528, Capitol Station
Austin, Texas

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