Analyze a New Managed Care Contract

Based on the information provided below, provide an analysis of the pros and cons of entering into a contract with a national managed care organization new to your service area.

ACS Health Insurance Company, a national organization that insures approximately 10% of all Americans, is starting to provide coverage to individuals in your service area. ACS is very aggressive and has been successful in every market it enters. ACS will provide commercial, Medicare, and Medicaid products to individuals and companies in your service area. ACS has offered you a five-year contract with the following terms:

Commercial and Managed Care Payors:

  • Year 1 payments: 5% below your best payor, equal to your average payment rates.
  • An increase in Year 2 of 3% based on Consumer Price Index (CPI)
  • No increase in payment rate in Years 3-5.
  • By Year 3, ASC payment rates will be below your average payment rates; and by Year 5, it will be 10%.
  • Capitation payment for outpatient Radiology and Therapy services equal to average capitated payment from other payors.

Medicare:

  • Year 1 Medicare rates + 2%
  • Year 2 Medicare rates + 1%
  • Year 3 Medicare rates
  • Year 4 Medicare rates less 2%
  • Year 5 Medicare rates less 5%

Medicaid:

  • All years’ rates equal to rates published by the state’s Office of Medical Assistance

If history holds, ACS will gain market share at 2% per year, equaling 10% by Year 5. You are in a very competitive market with five competing hospitals in your primary and secondary service area.

Using this information, provide an analysis of the pros and cons of entering into a contract with a national managed care organization new to your service area.

Length: 5-7 pages, not including title and reference pages.

References: Include a minimum of five (5) scholarly resources. You may use an example from your work as long as you can also reference the example to the articles.

Your assignment should demonstrate thoughtful consideration of the ideas and concepts presented in the course by providing new thoughts and insights relating directly to this topic. Your response should reflect scholarly writing and current APA standards.