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Health Care: Manage Care Enrollment Scenario

Scenario Summary - Managed Care Plan Enrollment

Atlanta Georgia has a very diverse work force consisting of men and women of various ages, ethnic groups, skills and education. Many people live and work in one of approximately 14 counties that make up the Atlanta region. It is not uncommon for an employee to drive close to 100 miles one way to get to work. The employer base is diverse as well, consisting of large and small employers ranging from entrepreneurs, health care services, local, state and federal government offices, information technology, higher education, landscaping, personal services, banking as well as the fast food industry. Now that we have some background information learn more about the ABC Insurance Company located in Atlanta.

The ABC Insurance Company has been very aggressive and quite successful in recruiting companies, organizations, and individuals to join its Managed Care Plans. Their ranges of services and rates have been extremely competitive. Their employer base is spread out among the 14 counties, which has been attractive to many employers. The ABC Insurance Company has been quite successful in selling their managed care insurance program to employers and organizations. So what was the issue?

Verde Greene Hospital has an excellent reputation for quality in maternity care, cardiac rehabilitation, orthopedic medicine, and it is the only hospital in town to have received the Magnet Award for Excellence in Nursing. A sizable number of employer groups as well as employees, who have insurance coverage with ABC Insurance Company, want Verde Greene Hospital to be included in the network as a participating hospital.

When the ABC insurance company approached Verde Greene Hospital to recruit them as a participating provider in their Managed Care Plan, Verde Greene Hospital was very delighted to be asked. In fact, the Hospital's overall response was quite positive. However there was one contractual stipulation that Verde Greene Hospital needed prior to signing any contracts and becoming a participating provider. Specifically, Verde Greene wanted to be the exclusive provider of maternity and cardiac care for all patients in the ABC Insurance Company network. No exclusivity, no deal.

Because so many employers had pressured ABC Insurance Company to contract with Verde Greene Hospital, the insurance company agreed to the stipulations, and had agreed to enroll Verde Greene as a participating provider of care and an exclusive provider of cardiac and maternity services. This contract is legally binding for both parties, and they are scheduled to sign this contract in ten days.

It appears that the exclusivity clause in the contract may have created several unanticipated problems such as:

This would mean that a patient, who may need cardiac or maternity care, may need to drive 50 miles and pass 4 or 5 good hospitals in the plan in order to get the care they needed at Verde Greene Hospital.
A number of Obstetrics and Gynecology as well as Cardiologists who reside in one of the 14 counties do not have privileges at Verde Greene Hospital, and have threatened to dis-enroll from the plan if Verde Greene Hospital is the only hospital contracted to see their patients. Even if these physicians were given hospital privileges, this would mean more staff meetings and Emergency Department duty, at a hospital that is too far away. These physicians have threatened to dis-enroll from the plan. The existing staff physicians at Verde Greene Hospital objected to the loss of available hospital space and time, as well as, the possibility of the loss of existing patients to the new physicians. These physicians threatened to dis-enroll from the plan.
The other hospitals in the managed care plan objected to the loss of patients and threatened to dis-enroll from the plan, and to sue for restraint of trade.

Your Assignment

What should the ABC Insurance Company do? Why? How?
What should Verde Greene Hospital do? Why?
What should the employers do? Why? How?
What should the patients do? Why? How?

Solution Preview

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At the center of this argument is the exclusive contract between ABC Insurance Co. and the Verde Greene Hospital, and if such contract interferes with free competition violating the antitrust act that preserves free and unfettered competition as a rule of trade.
Before 1975, the health care system was exempt of this law, but in 1975 the Supreme Court decided that physicians and health care providers were liable under the federal antitrust laws due to the nature of their business. To understand the implications of this contract, it is necessary to analyze the reason and intend of such contract under the Sherman Antitrust Act. Section 1 of the Act prohibits contracts, combinations, and conspiracies in restraint of trade. Section 2 prohibits monopolization, attempted monopolization, and conspiracies in restraint of trade.
To be in violation of the act, two or more entities must have reached an agreement that can expressed, implied, or tacit have an anticompetitive purpose. This is called the reason of the agreement. Verde Greene Hospital wanted to be the exclusive provider of maternity and cardiac care for all patients in the ABC Insurance Company network. It is expressed that the reason for the contract is to be the sole provider of cardiology and obstetric services in an area of 14 counties restricting the commerce in the other counties.
The second part of the act deals with the rule of reason. This part analyzes the agreement regarding intend. Did the hospital intend to restrict competition? Was their reason justifiable? How is the competition affected?
For example, if ...

Solution Summary

The solution includes an analysis of a complex scenario in which a Manage Care Organization (MCO) wants to recruit a prestigious hospital in the area as part of its participant providers. Problems in the negotiations arise when the hospital request for exclusivity on two speciality services conflicts with the obligation the MCO has to protect the best interest of the people participating in the manage care. A detailed discussion of possible violations of the antitrust act by such a contrast and the power of other interested parties in this contract is included. Solution contains 1 reference.