AHM 530 Questions and Problems From Text

1. The provider contract that the Canyon health plan has with Dr.
Nicole Enberg
specifies that she cannot sue or file any claims against a Canyon plan member for
covered services, even if Canyon becomes insolvent or fails to meet its financial
obligations. The contract also specifies that Canyon will compensate her under a typical
discounted fee-for-service (DFFS) payment system.
During its recredentialing of Dr. Enberg, Canyon developed a report that helped the
health plan determine how well she met Canyon's standards. The report included
cumulative performance data for Dr. Enberg and encompassed all measurable aspects
of her performance. This report included such information as the number of hospital
admissions Dr. Enberg had and the number of referrals she made outside of Canyon's
provider network during a specified period. Canyon also used process measures,
structural measures, and outcomes measures to evaluate Dr. Enberg's performance.
The report that helped Canyon determine how well Dr. Enberg met the health plan's
standards is known as:
an encounter report
an external standards report
a provider profile
an access to care report
A: Incorrect. Capitated providers send a health plan encounter forms in order to
supply the health plan with information about members' healthcare visits,
diagnoses, treatments, and plans for follow-up care. Capitated providers do not
submit claims.
B: Incorrect. In applying performance measures, a health plan determines the

provider's actual performance on the particular activity and then compares that
performance to the standard or expected level of performance, specified in the
measure. Standards can be developed internally or externally. External standards
are based on outside information such as published industry-wide averages or the
best practices of recognized industry leaders.
C: Correct. A provider profile focuses on patterns of a provider's care rather than

on the provider's specific clinical decisions; it expresses those patterns as a rate
or measure of resource use during a defined period. A provider profile for a PCP
might also include an assessment of the average wait time to schedule routine
physical examinations, the percentage compliance with practice guidelines, and
the level of member satisfaction with the provider's service.
D: Incorrect. Health plans conduct access to care surveys to measure members'

ability to obtain satisfactory medical care on a timely basis.
2. The following statements are about the organization of network management

functions of health plans. Select the answer choice containing the correct response:
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Compared to a large health plan, a small health plan typically has more integration
among its network management activities and less specialization of roles.
It is usually more efficient to have a large health plan's provider relations
representatives located in the health plan's corporate headquarters rather than
based in regional locations that are close to the provider offices the
representatives cover.
An health plan's provider relations representatives are usually responsible for
conducting an initial orientation of providers and educating providers about health
plan developments, rather than recruiting and assisting with the selection of new
providers.
In general, a health plan that uses a centralized approach for some of its network
management activities should not use a decentralized approach for other network
management activities.
A : Correct. The organizational structure of the network management function

often varies according to the size and the geographic scope of the health plan.
The network management directors of small plans are more likely to be involved
in day-to-day network management activities, such as recruiting, contracting, and
providing performance feedback to providers. Larger health plans may have
separate network management staffs for different types of providers.
B : Incorrect. It is usually more efficient to have the field staff based in regional
locations that are close to the offices they cover, rather than in the health plan's
corporate headquarters. Regional locations make it possible for a representative
to call on providers in person and visit many offices in a given day.
C : Incorrect. Provider relations representatives are usually responsible for

recruiting and assisting with the selection of new providers, evaluating a
provider's medical practice set-up, and rendering provider services. They also
conduct initial orientation of the provider and staff, as well as educate providers
about health plan developments. In some health plans, provider relations
representatives also participate in profiling.
D : Incorrect. A health plan that has multiple offices within its service area may
decentralize some or all network management activities. In many cases, the health
plan uses a centralized approach for some activities while decentralizing other
functions.
3. The following activities are the responsibility of either the Nova Health Plan's risk
management department or its medical management department:
A. Protecting Nova's members against harm from medical care
B. Improving the overall health status of Nova members by coordinating care across
individual episodes of care and the different providers who treat the member
C. Protecting Nova against financial loss associated with the delivery of healthcare
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D. Establishing outreach programs to encourage the use of preventive health services
by Nova's members
Of these activities, the ones that are more likely to be the responsibility of Nova's risk
management department rather than its medical management department are activities:
A, B, and C
A, C, and D
A and C
B and D
A: Incorrect. Risk management includes all of the activities that a health plan takes
to protect the plan against financial loss associated with the delivery of healthcare
services and to protect its members against harm from medical care. Medical
management encompasses all of the activities that a health plan and its providers
engage in to maintain or improve quality service levels, meet budget projections
for medical services, and respond to accreditation and regulatory requirements.
Action B is likely to be a responsibility of Nova's medical management
department.
B: Incorrect. Risk management includes all of the activities that a health plan takes
Action D is likely to be a responsibility of Nova's medical management
department.
C: Correct. Risk management includes all of the activities that a health plan takes
D: Incorrect. Risk management includes all of the activities that a health plan
takes to protect the plan against financial loss associated with the delivery of
healthcare services and to protect its members against harm from medical care.
Medical management encompasses all of the activities that a health plan and its
providers engage in to maintain or improve quality service levels, meet budget
projections for medical services, and respond to accreditation and regulatory
requirements. Actions B and D are likely to be responsibilities of Nova's medical
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management department, while Actions A and C are likely to be responsibilities of
Nova's risk management department.
4. One true statement about the Employee Retirement Income Security Act of 1974
(ERISA) is that:
ERISA applies to all issuers of health insurance products, such as HMOs

pension plans and employee welfare plans are exempt from any regulation under
ERISA
ERISA requires self-funded plans to comply with all state mandates affecting
health insurance companies and health plans
the terms of ERISA generally take precedence over any state laws that regulate
employee welfare benefit plans
A: Incorrect. While ERISA does not apply to issuers of health insurance products,
most nongovernmental employer plans that include healthcare benefits for
employees (including those provided through health plans) fall under ERISA and
are therefore subject to its provisions.
B: Incorrect. ERISA is a federal statute designed to ensure the proper funding and
administrative management of pension and employee welfare plans.
C: Incorrect. State laws continue to regulate the business of insurance, and these
laws apply to employee welfare plans if the plans are insured. Self-funded plans
are generally exempt from state mandates otherwise affecting health insurance
companies and health plans.
D: Correct. From a health plan and network management perspective, the most
significant aspect of ERISA is its preemption provision, which means that the
terms of ERISA generally take precedence over any state laws that regulate
employee welfare benefit plans.
5. Not clear from Page 39
A: Incorrect. HIPAA specifies that a group health plan may not deny coverage or
discriminate against individuals based on their health status.
B: Incorrect. One provision of HIPAA is that it limits the exclusion period for pre-
existing conditions to a maximum of 12 months after enrollment (18 months for
late enrollees).
C: Correct. Creditable coverage includes previous coverage under a group health

plan, health insurance policy, or benefit program provided by the federal or state
government.
D: Incorrect. Congress amended HIPAA to include federal requirements relating to

mental health benefits and the minimum length of stay for maternity cases.
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However, these provisions do not mandate coverage of mental health or maternity
services; instead, they specify certain rules that a health plan must follow if it
offers such coverage
6. The Adobe Health Plan complies with all of the provisions of the Newborns' and
Mothers' Health Protection Act (NMHPA) of 1996. Kristen Netzger, an Adobe enrollee,
was hospitalized for a cesarean delivery. Amy Davis, also an Adobe enrollee, was
hospitalized for a normal delivery. From the following answer choices, select the
response that indicates the minimum length of time for which Adobe, under NMHPA,
most likely must provide benefits for the hospitalizations of Ms. Netzger and Ms. Davis.
Ms. Netzger = 48 hours

Ms. Davis = 48 hours
A: Incorrect. The NMHPA mandates that coverage for hospital stays for childbirth
cannot generally be less than 48 hours for normal deliveries or less than 96 hours
for cesarean births.
B: Incorrect. The NMHPA mandates that coverage for hospital stays for childbirth
C: Correct. The NMHPA mandates that coverage for hospital stays for childbirth
for cesarean births. Note that NMHPA does not mandate coverage of maternity
services. Instead, it specifies certain rules that a health plan must follow if it offers
such coverage.
D: Incorrect. The NMHPA mandates that coverage for hospital stays for childbirth
7. The following situations illustrate violations of federal antitrust laws:
Situation A Two HMOs split a large employer group by agreeing to let one HMO market
to some company employees and to let the second HMO market to different company
employees.
Situation B Members of a physician-hospital organization (PHO) that has significant

market share jointly agreed to exclude a physician from joining the PHO solely because
that physician has admitting privileges at a competing hospital.
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From the following answer choices, select the response that best identifies the types of
violations illustrated by these situations:
Situation A: horizontal division of territories; Situation B: group boycott

Situation A: horizontal division of territories; Situation B: exclusive arrangement
Situation A: exclusive arrangement; Situation B: group boycott
Situation A: exclusive arrangement; Situation B: tying arrangement
A: Correct. Horizontal division of territories involves competitors illegally agreeing

to divide territories or customers. In group boycotts, competitors with significant
market share agree to exclude other existing or potential competitors.
B: Incorrect. Horizontal division of territories involves competitors illegally
agreeing to divide territories or customers. Situation A is an example of horizontal
division of territories. Exclusive arrangements prohibit providers from
participating in more than one provider network. Exclusive arrangements, which
are common among HMOs, are generally permitted, but they could represent a
restraint of trade if the health plan has substantial market share. Situation B is not
an example of an exclusive arrangement.
C: Incorrect. Exclusive arrangements prohibit providers from participating in more
than one provider network. Exclusive arrangements, which are common among
HMOs, are generally permitted, but they could represent a restraint of trade if the
health plan has substantial market share. Situation A is not an example of an
exclusive arrangement. In group boycotts, competitors with significant market
share agree to exclude other existing or potential competitors. Situation B is an
example of a group boycott.
D; Incorrect. Exclusive arrangements prohibit providers from participating in more
than one provider network. Exclusive arrangements, which are common among
HMOs, are generally permitted, but they could represent a restraint of trade if the
health plan has substantial market share. Situation A is not an example of an
exclusive arrangement. Under a tying arrangement, the purchase of one product
or service is tied to the purchase of another product or service. For example, it is
unlawful for an integrated delivery system (IDS) to agree to provide specialty
services to a health plan only on condition that the health plan agree to contract
with the IDS for other services. Situation B is not an example of a tying
arrangement.
8. If a member of the Green Health Plan reasonably believes that a provider in Green's
provider network was acting as Green's employee or agent while providing negligent
care, then the member may have cause to bring action against the health plan. This
legal concept is known as vicarious liability. Steps that Green can take to reduce its
exposure to vicarious liability claims include:
placing restrictions on provider-member communication involving treatment

decisions.
implementing risk management and quality assurance programs for its provider
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network.
including in its provider agreements and marketing and membership literature a
statement that members of the Green provider network are not independent
contractors.
all of the above.
A Incorrect. Health plan provider agreements should avoid placing restrictions on

provider-member communication involving treatment decisions and should allow
for arbitration or other alternative dispute resolution procedures.
B Correct. Other steps that help a health plan reduce its exposure to vicarious
liability include maintaining adequate malpractice insurance and establishing
procedures to assess the qualifications and clinical competence of participating
providers.
C Incorrect. Health plan provider agreements should specifically state that the
practitioner or provider is an independent contractor, and the health plan's
marketing and membership literature should reemphasize this point.
D Incorrect. Two of the three answer choices above are incorrect.
9. The Tuba Health Plan recently underwent an accreditation process under a program
known as Accreditation '99, which includes selected Health Employer Data and
Information Set (HEDIS) measures. Under Accreditation '99, Tuba received a rating of
Excellent. The following statement(s) can correctly be made about this quality
assessment of Tuba's operations:
A. In arriving at its rating of Excellent for Tuba, the Accreditation '99 program most likely
focused on Tuba's demonstrated results and evaluated the processes that Tuba used to
achieve those results.
B. Tuba is required to report all HEDIS results to the NAIC.
Both A and B
A only
B only
Neither A nor B
A: Incorrect. Statement A is a correct statement. Statement B is incorrect because

health plans VOLUNTARILY report HEDIS results to the NCQA, not the NAIC.
B: Correct. Statement A is a correct statement. The NCQA has integrated its health
plan accreditation process with select HEDIS measures into a new program called
Accreditation '99. This new program emphasizes demonstrated results (or
performance) and evaluates the process health plans use to achieve those results.
Statement B is incorrect because health plans VOLUNTARILY report HEDIS
results to the NCQA, not the NAIC.
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C: Incorrect. Statement A is a correct statement. The NCQA has integrated its
health plan accreditation process with select HEDIS measures into a new program
called Accreditation '99. This new program emphasizes demonstrated results (or
Statement B is incorrect because health plans VOLUNTARILY report HEDIS
results to the NCQA, not the NAIC
D; Incorrect. Statement A is a correct statement. The NCQA has integrated its

health plan accreditation process with select HEDIS measures into a new program
called Accreditation '99. This new program emphasizes demonstrated results (or
Statement B is an incorrect statement.
10 Following statements are about accreditation of health plans:
The National Committee for Quality Assurance (NCQA) serves as the primary
accrediting agency for most health maintenance organizations (HMOs).
The Joint Commission on Accreditation of Healthcare Organizations (JCAHO) has
developed standards that can be used for the accreditation of hospitals, but not for
the accreditation of health plan provider networks or health plan plans.
States are required to adopt the model standards developed by the National
Association of Insurance Commissioners (NAIC), an organization of state
insurance regulators that develops standards to promote uniformity in insurance
regulations.
Accreditation is an evaluative process in which a health plan undergoes an
examination of its operating procedures to determine whether the procedures
meet designated criteria as defined by the federal government or by the state
governments.
A Correct. The NCQA serves as the primary accrediting agency for most HMOs
and similar health plans, managed behavioral health organizations (MBHOs), and
credentials verification organizations (CVOs).
B Incorrect. Best known for its accreditation of hospitals, JCAHO has also
developed standards for accrediting health plan provider networks and health
plan plans, psychiatric and long-term care facilities, substance abuse programs,
and home care organizations.
C Incorrect. The NAIC develops model standards to encourage uniformity in

insurance regulation. Although states are not required to adopt NAIC model
standards, the majority of states have enacted the original NAIC 1972 HMO Model
Act or have developed their own statutes based on the Model Act.
D Incorrect. Accreditation is an evaluative process in which a healthcare

organization undergoes an examination of its operating procedures to determine
whether the procedures meet designated criteria as defined by the ACCREDITING
BODY and to ensure that the organization meets a specified level of quality.
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11. Factors that are likely to indicate increased health plan market maturity include:
increased consolidation among health plans.

increased rate of growth in health plan premium levels.
a reduction in the market penetration of HMO and point-of-service (POS) products.
a reduction in the frequency of performance-based reimbursement of providers.
A: Correct. Increased health plan market maturity is indicated by a number of

factors, including increased consolidation among health plans, increased
formation of provider organizations, and increases in the level of outcomes
management.
B: Incorrect. Increase health plan market maturity is likely to be indicated by a

REDUCTION in the rate of growth in health plan premium levels.
C: Incorrect. Increased health plan market maturity is likely to be indicated by

INCREASED market penetration of HMO and POS products.
D: Incorrect. Increased health plan market maturity is likely to be indicated by

INCREASES in the frequency of performance-based reimbursement for providers.
12. The following statements describe two types of HMOs:
• The Elm HMO requires its members to select a PCP but allows the members to
go to any other provider on its panel without a referral from the PCP.
• The Treble HMO does not require its members to select a PCP. Treble allows its
members to go to any doctor, healthcare professional, or facility that is on its
panel without a referral from a primary care doctor. However, care outside of
Treble's network is not reimbursed unless the provider obtains advance approval
from the HMO.
Both HMOs use delegation to transfer certain functions to other organizations. Following
the guidelines established by the NCQA, Elm delegated its credentialing activities to the
Newnan Group, and the agreement between Elm and Newnan lists the responsibilities of
both parties under the agreement. Treble delegated utilization management (UM) to an
IPA. The IPA then transferred the authority for case management to the Quest Group,
an organization that specializes in case management.
Both HMOs also offer pharmacy benefits. Elm calculates its drug costs according to a
pricing system that requires establishing a purchasing profile for each pharmacy and
basing reimbursement on the profile. Treble and the Manor Pharmaceutical Group have
an arrangement that requires the use of a typical maximum allowable cost (MAC) pricing
system to calculate generic drug costs under Treble's pharmacy program. The following
statements describe generic drugs prescribed for Treble plan members who are covered
by Treble's pharmacy benefits:
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• The MAC list for Drug A specifies a cost of 12 cents per tablet, but Manor pays
14 cents per tablet for this drug.
• The MAC list for Drug B specifies a cost of 7 cents per tablet, but Manor pays 5
cents per tablet for this drug.
From the following answer choices, select the response that best identifies Elm and
Treble:
Elm: open access (OA) HMO

Treble: direct access HMO
Elm: open access (OA) HMO
Treble: gatekeeper HMO
Elm: direct access HMO
Treble: open access (OA) HMO
Elm: direct access HMO
Treble: gatekeeper HMO
A Incorrect. Open access HMOs do not require the member to select a PCP. Plan
members can go to any doctor, healthcare professional, or facility that is on the
HMO panel without a referral from a primary care doctor, but care received outside
the HMO network is not reimbursed unless the provider obtains advance approval
from the HMO. Elm is not best identified as an open access HMO. In a direct
access HMO, the member must select a PCP but is allowed to go to any other
provider on the HMO panel without a referral from the PCP. Treble is not best
identified as a direct access HMO.
B Incorrect. Open access HMOs do not require the member to select a PCP. Plan
members can go to any doctor, healthcare professional, or facility that is on the
HMO panel without a referral from a primary care doctor but care received outside
the HMO network is not reimbursed unless the provider obtains advance approval
from the HMO. Elm is not best identified as an open access HMO. A gatekeeper
HMO requires each HMO member to select a PCP to be the primary manager of the
member's care, as well as to begin each episode of care with the PCP. If the
patient self-refers to a specialty physician, another professional, or facility, the
HMO usually will not reimburse the provider or the member for the care. Treble is
not a gatekeeper HMO.
C Correct. In a direct access HMO, the member must select a PCP but is allowed
to go to any other provider on the HMO panel without a referral from the PCP.
Open access HMOs do not require the member to select a PCP. This type of plan
allows the member to go to any doctor, healthcare professional, or facility that is
on the HMO panel without a referral from a primary care doctor, but care received
outside the HMO network is not reimbursed unless the provider obtains advance
approval from the HMO.
D Incorrect. Elm is a direct access HMO. A gatekeeper HMO requires each HMO
member to select a PCP to be the primary manager of the member's care, as well
as to begin each episode of care with the PCP. If the patient self-refers to a
specialty physician, another professional, or facility, the HMO usually will not
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reimburse the provider or the member for the care. Treble is not a gatekeeper
HMO.
13. With regard to the laws and regulations on access and adequacy of provider
networks, it can correctly be stated that:
most access and adequacy guidelines relate to preferred provider organizations

(PPOs) or managed indemnity products
corporate practice of medicine laws require staff model HMOs to hire physicians
directly, even if the physicians do not own the HMO
any willing provider laws prevent a health plan from making exclusive or semi-
exclusive arrangements with a provider or a group of providers
the NAIC Managed Care Plan Network Adequacy Model Act requires states to use
provider-enrollee ratios as the sole measure of network adequacy
A Incorrect. Most of these access and adequacy guidelines relate to HMO and
point-of-service (POS) products, rather than to PPOs or managed indemnity
products
B Incorrect. Corporate practice of medicine laws generally restrict business

corporations from practicing medicine through licensed employees or prohibit
business corporations from obtaining profits from the provision of physician
professional services. Where they exist, these laws restrict the ability of staff
model HMOs to hire physicians directly, unless physicians own the HMO.
C Correct. Any willing provider laws require health plans to allow any provider
who is willing to meet the terms and conditions of the health plan's contract to
participate in the plan.
D Incorrect. This model act allows states the option of measuring network
adequacy by provider-enrollee ratios, geographic accessibility, appointment
waiting times, hours of operation, and the volume of technological and specialty
services available in the plan's service area.
14. The actual number of providers included in a provider network can be based on
staffing ratios. One true statement about staffing ratios is that, typically:
a small health plan needs fewer physicians per 1,000 than does a large plan.
a closely managed health plan requires fewer providers than does a loosely
managed plan.
physician-to-enrollee ratios can be used directly only by network-within-a-network
model HMOs.
Medicare products require fewer providers than do employer-sponsored plans of
the same size.
A Incorrect. A small health plan typically needs more physicians per 1,000
enrollees than does a large plan (one with more than 80,000 members) because
larger plans typically benefit from economies of scale and scheduling efficiencies.
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B Correct. Staffing ratios relate the number of providers in a plan's network to the
number of enrollees in the plan. In general, a closely managed health plan, such
as an HMO, requires fewer providers than does a loosely managed plan. The
specific ratio the health plan uses depends on the demographics and needs of the
patient population and on regulatory requirements.
C Incorrect. A network-within-a-network approach includes the providers from one

product's panel in the network of another panel. Physician-to-enrollee ratios can
be used directly only by staff or captive group model HMOs where all of the
resources of the health plan are dedicated to the service of the health plan's
members.
D Incorrect. Because Medicare and Medicaid populations utilize healthcare

services to a greater extent than the general population, Medicare and Medicaid
products require more providers than do employer-sponsored plans of the same
size.
15. Assume that the national average cost per covered employee for PPO rental
networks is $3 per member per month (PMPM) and that the average monthly healthcare
premium PMPM is $300. This information indicates that, if the number of health plan
members is 10,000, then the annual network rental cost to the health plan would be:
$30,000
$360,000
$9,000,000
$12,000,000
A: Incorrect. By multiplying the network rental cost per member by the estimated
number of plan members, the health plan can determine the overall cost of renting
the network. This answer choice was derived by multiplying $3 x 10,000, without
multiplying by 12 to get the ANNUAL network rental cost.
B: Correct. By multiplying the network rental cost per member by the estimated
the network. [$3 x 10,000 x 12 = $360,000]
C : Incorrect. By multiplying the network rental cost per member by the estimated
the network. This answer choice was derived by multiplying ($3 x 10,000) by $300,
the average monthly healthcare premium PMPM, rather than by 12, to get the
ANNUAL network rental cost.
D : Incorrect. By multiplying the network rental cost per member by the estimated
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the network. The annual network rental cost can correctly be calculated by
multiplying ($3 x 10,000) by 12.
16. The following statements are about the delegation of network management activities
from a health plan to another party. Three of the statements are true and one statement
is false. Select the answer choice containing the FALSE statement:
The NCQA requires a health plan to conduct all delegation oversight functions
rather than delegating the responsibility for oversight to another entity.
Credentialing and UM activities are the most frequently delegated functions,
whereas delegation is less common for quality management (QM) and preventive
health services.
One reason that a health plan may choose to delegate a function is because the
health plan's staff seeks external expertise for the delegated activity.
When the health plan delegates authority for a function, it transfers the power to
conduct the function on a day-to-day basis, as well as the ultimate accountability
for the function.
A Incorrect. This is a true statement. The NCQA allows health plans to delegate
authority for almost all functions. However, one important NCQA limitation on
delegation is that the health plan itself must conduct all delegation oversight
functions rather than delegating the responsibility for oversight to another entity.
B Incorrect. This is a true statement. Credentialing and utilization management

activities are the most frequently delegated functions. Member services and
medical records review functions are also commonly delegated. Delegation is less
common for quality management and preventive health services, possibly due to
the more complex processes required for these activities.
C Incorrect. This is a true statement. Other reasons why a health plan might
choose to delegate a function include that the health plan does not want to
dedicate internal resources to perform the delegated activity, as well as that the
health plan realizes its current information system cannot handle the demands of
a particular function.
D Correct. This is a false statement. Accountability is the process by which one

party is required to justify its actions and policies to another party. When a health
plan delegates authority for a function, it transfers the power to conduct the
function on a day-to-day basis, but not the ultimate accountability for the function.
17. The Enterprise Health Plan has indicated an interest in delegating its medical
records review activities to the Teal Group and has forwarded a typical letter of intent to
Teal. One true statement about this letter of intent is that it:
is a contract that creates a legally binding relationship between Enterprise and

Teal
cannot include a confidentiality clause
serves as a delegation agreement between Enterprise and Teal
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outlines the delegation oversight process
A Incorrect. A letter of intent is not a contract and does not create a legally
binding relationship
B : Incorrect. One typical component of a letter of intent is a confidentiality clause,

which commits the health plan and the delegate to maintain the confidentiality of
documents reviewed and exchanged in the process.
C: Incorrect. A delegation agreement, not a letter of intent, is the contractual

document that describes the delegated functions and the responsibilities of the
health plan and the delegate.
D: Correct. The letter of intent also establishes a mutual agreement about the
confidentiality of patient information and the policies and procedures of the health
plan and the potential delegate..
from the HMO.
One true statement about Treble's delegation of its UM activities is that:
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Treble is the delegate
Quest's performance is subject to the same standards as the IPA
the IPA and Treble share ultimate accountability for the performance of Quest
the IPA is the subdelegate
A Incorrect. The entity that contracts with the health plan to perform the specified
function is the delegate. In this situation, the IPA is the delegate.
B Correct. In this situation, Quest is a subdelegate. The performance of the
subdelegate is subject to the same standards as the original delegate, the IPA.
C Incorrect. Treble, not the IPA, is ultimately responsible for the performance of
Quest, the subdelegate.
D Incorrect. The delegate, the IPA, transferred some authority to Quest, the
subdelegate.
19. Dr. Robert Logan, an internist, spends the majority of his time in a hospital setting
where he serves as the physician-of-record for health plan patients who have been
'handed off' to him by PCPs. Dr. Logan's primary function is to coordinate diagnostic and
treatment activities for these patients in order to ensure that they receive appropriate
care while in the hospital. After discharge, a patient returns to the care of the original
PCP. In this role, Dr. Logan functions as:
a disease manager
Incorrect. Because he only focuses on inpatient care in this role, Dr. Logan's
role goes against the concept of disease management. Disease management
calls for coordinated intervention at the earliest appropriate stage of the
patient's disease or diseases. Dr. Logan typically provides coordinated
intervention, but only after the member's hospitalization.
an ancillary services provider
Incorrect. Health plans include ancillary service providers in the network.
Ancillary services is an umbrella term for a variety of healthcare services
that are offered in addition to primary, specialty, and inpatient facility care.
Ancillary services are typically provided by non-physicians and include both
diagnostic and therapeutic services such as laboratory tests, radiology,
physical therapy, and home healthcare.
a tiered network manager
Incorrect. A tiered network is a provider panel that the health plan has
subdivided into two or more layers (tiers) based on provider profiles for
quality, utilization, and cost-effectiveness. The providers deemed by the
health plan to be the highest quality and most cost-effective form the
preferred (first) tier of the network.
a hospitalist
Correct. Hospitalists, also known as inpatient specialists, are physicians
who spend at least one quarter of their time in a hospital setting where they
serve as the physicians-of-record for patients who have been 'handed off' to
them by PCPs. The patient returns to the original PCP after discharge from
the hospital.
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20. The Argyle Health Plan has contracted to obtain the services of the providers in the
Column Medical Group, a faculty practice plan (FPP). The following statement(s) can
correctly be made about this contract:
A. Column most likely contracted with the legal group representing the FPP rather than
with the individual physicians within the FPP.
B. Column most likely will provide only highly specialized care to Argyle's plan members.
Both A and B
Incorrect. Statement A is a correct statement. Statement B is incorrect
because FPPs generally provide routine care, tertiary care, and highly
specialized care.
A only
Correct. An FPP, also known as an academic health center, is a medical
group that is organized around a teaching program, primarily at a university
hospital.
B only
Incorrect. Statement A is a correct statement because health plans generally
contract with the legal group representing the FPP. Statement B is incorrect
specialized care.
Neither A nor B
Incorrect. Statement A is a correct statement because health plans generally
contract with the legal group representing the FPP. Statement B is incorrect
specialized care.
21. The Ventnor Health Plan requires the physicians in its provider network to be board
certified. Ventnor has received requests to become a part of the network from the
following specialists:
 Cheryl Stovall, who is currently in the process of completing a residency in her field
of specialization.
 Thomas Kalil, who has completed a residency in his field of specialization and has
passed a qualifying examination in that field within two years of completing his
residency.
 Roger Todd, who has completed a residency in his field of specialization but has not
passed a qualifying examination in that field.
Ventnor's requirement of board certification is met by:
Cheryl Stovall, Thomas Kalil, and Roger Todd.

Incorrect. Board certification is a status attained by physicians who have
completed a residency in their field of specialization and have passed a
qualifying examination in that field. Roger Todd is board ELIGIBLE because
he has completed the residency requirement but has not yet completed the
certification exam. Cheryl Stovall is neither board certified nor board
16
eligible.
Thomas Kalil and Roger Todd only.
certification exam.
Thomas Kalil only.
Correct. Board certification is a status attained by physicians who have
certification exam. Cheryl Stovall is neither board certified nor board
eligible. Thomas Kalil meets these requirements
none of these individuals.
qualifying examination in that field. Of the individuals named, Thomas Kalil
is the only one who meets these requirements.
22. Health plans typically conduct two types of reviews of a provider's medical records:
an evaluation of the provider's medical record keeping (MRK) practices and a medical
record review (MRR). One true statement about these types of reviews is that:
an MRK covers the content of specific patient records of a provider.

Incorrect. MRK refers to the policies, procedures, and documentation
standards the provider follows to create and maintain medical records. It
does not cover the content of specific patient records.
the NCQA requires an examination of MRK with all of a health plan's office
evaluations.
Correct. MRK refers to the policies, procedures, and documentation
standards the provider follows to create and maintain medical records. MRR
is a systematic review of the content of individual patient records to ensure
that the records are in conformity with accepted, professional medical
practice and appropriate health management.
an MRR includes a review of the policies, procedures, and documentation
standards the provider follows to create and maintain medical records.
Incorrect. MRR is a systematic review of the content of individual patient
records to ensure that the records are in conformity with accepted,
professional medical practice and appropriate health management. MRK
refers to the policies, procedures, and documentation standards the
provider follows to create and maintain medical records.
the NCQA requires MRR for both credentialing and recredentialing of providers in
a health plan's network.
Incorrect. A health plan that has multiple offices within its service area may
decentralize some or all network management activities. In many cases, the
health plan uses a centralized approach for some activities while
decentralizing other functions.
17
23. As part of the credentialing process, many health plans use the National Practitioner
Data Bank (NPDB) to learn information about prospective members of a provider
network. One true statement about the NPDB is that:
it is maintained by the individual states

Incorrect. The NPDB is maintained by the federal government.
it primarily includes information about any censures, reprimands, or
admonishments against any physicians who are licensed to practice medicine in
the United States
Incorrect. The NPDB guidelines specify actions that should NOT be reported
to the NPDB. These actions include censures or reprimands against
physicians
the information in the NPDB is available to the general public
Incorrect. The NPDB specifies the entities that are eligible to request
information from the data bank and the conditions under which requests are
allowed. In general, the same entities that report information to the NPDB are
eligible to request information. Such information is not available to the
general public.
it was established to identify and discipline medical practitioners who act
unprofessionally
Correct. The NPDB is a database maintained by the federal government that
contains information on physicians and other medical practitioners against
whom medical malpractice claims have been settled or other disciplinary
actions have been taken. The NPDB is designed to restrict the ability of
medical practitioners who act unprofessionally to move from state to state
without disclosure or discovery of damaging or incompetent performance.
24. A health plan that delegates designated credentialing activities to an NCQA-centered

or a Commission/URAC-centered credentials verification organization (CVO) is exempt
from the due-diligence oversight requirements specified in the NCQA credentialing
standards for all verification services for which the CVO has been certified:
True
Correct. CVOs are commonly used as credentialing delegates. Delegating
credentialing functions to a CVO offers a number of advantages to a health
plan. CVOs typically know the provider market and have experience in
gathering and verifying provider information. This is particularly valuable for
a health plan entering a new market. CVOs can also offer fast, cost-effective
services.
False
Incorrect. This is a true statement. The NCQA and the Commission/URAC
have certified a number of CVOs that have met their requirements for
performing certain activities of the credentialing function.
25. Question = "The following statements describe two types of
HMOs:<ul><li>The Elm HMO requires its members to select a PCP but
allows the members to go to any other provider on its panel without a
referral from the PCP.</li> <li>The Treble HMO does not require its
members to select a PCP. Treble allows its members to go to any doctor,
18
healthcare professional, or facility that is on its panel without a
referral from a primary care doctor. However, care outside of Treble's
network is not reimbursed unless the provider obtains advance approval
from the HMO.</li></ul>
26. The provider contract that Dr. Laura Cartier has with the Sailboat health plan
includes a section known as the recitals. Dr. Cartier's contract includes the following
statements:
A. A statement that identifies the purpose of the contract

B. A statement that defines in legal terms the parties to the contract
C. A statement that identifies the Sailboat products to be covered by the contract
Of these statements, the ones that are likely to be included in the recitals section of Dr.
Cartier's contract are statements:
A, B, and C
Correct. A contract between a health plan and a provider generally includes
a section called the recitals, which follows the introductory paragraph. The
recitals identify the purpose of the agreement. Typically, the recitals further
define the parties to the agreement and may also identify the products to be
covered by the agreement. Therefore, Statements A, B, and C are likely to be
included in the recitals section.
A and B only
Incorrect. The recitals section typically is the section in which the contract
states that the agreement is limited to a single product line, such as a
Medicare HMO product, so Statement C is likely to be included in the recitals
section. Statements A and B are also likely to be included in the recitals
section.
A and C only
Incorrect. The recitals section typically is the section that identifies the
parties to the contract, so Statement B is likely to be included in the recitals
section. Statements A and C are also likely to be included in the recitals
section.
B and C only
Incorrect. Statement A is likely to be included in the recitals section,
because this section typically identifies the purpose of the contract. For
example, this section could state that Sailboat wishes to secure the services
of Dr. Cartier and that she wishes to make those services available to
Sailboat's members. Statements B and C are also likely to be included in the
recitals section.
27. In 1996, the NAIC adopted a standard for health plan coverage of emergency
services. This standard is based on a concept known as the:
due process standard

Incorrect. The due process clause defines a provider's right to appeal the
health plan's termination decision and to defend its position. This clause
should be included in all contracts that allow termination with cause.
19
subrogation standard
Incorrect. Subrogation is a health plan's contractual right to recover from a
third party some portion of the benefits paid to a member by the health plan.
For example, if a third party is responsible for injuries to a plan member, the
health plan can file a claim for the resulting healthcare costs against the
third party. Also, if a plan member receives payment for healthcare costs as
a result of a legal action against a third party, the health plan may be entitled
to recover from the member all or part of the benefits the plan paid to the
member for the related illness or injury.
corrective action standard
Incorrect. A corrective action provision, also known as a cure provision,
specifies a time period (usually 30 to 90 days, depending upon the problem)
for the party who has breached the contract to remedy the problem and
avoid termination of the contract.
prudent layperson standard
Correct. According to the prudent layperson standard, an emergency is a
medical condition manifesting itself by acute symptoms of sufficient
severity (including severe pain) such that a prudent layperson, who
possesses an average knowledge of health and medicine, could reasonably
expect the absence of immediate medical attention to result in placing the
health of the individual in serious jeopardy.
28. The provider contract that Dr. Ted Dionne has with the Optimal Health Plan includes
an arrangement that requires Dr. Dionne to notify Optimal if he contracts with another
health plan at a rate that is lower than the rate offered to Optimal. Dr. Dionne must also
offer this lower rate to Optimal. This information indicates that the provider contract
includes a:
most-favored-nation arrangement
Correct. Generally, provider agreements are nonexclusive, which means that
the provider can contract with other plans. However, some provider
contracts contain an element of exclusivity. Exclusivity clauses may include
a most-favored-nation arrangement, which requires a provider to give a
health plan the provider's most favorable rate at all times, even if the rate is
lower than the price negotiated in the provider's contract.
warranty arrangement
Incorrect. A warranty is a statement guaranteed to be true in all respects,
and if the statement is untrue in any respect, the contract of which the
statement is a part can be declared void. Unlike a warranty, a representation
is a statement of facts that need be true only in those respects material to
the provider contract.
locum tenens arrangement
Incorrect. Locum tenens refers to a practitioner who is a temporary
substitute for another practitioner, that is, providing temporary coverage for
another practitioner's responsibilities. Temporary coverage typically extends
over a specified period of time and is not limited to taking emergency calls.
nesting arrangement
Incorrect. Nesting refers to the practice of including the providers of one
20
product's panel in the network of another panel.
29. The provider contract that Dr. Nick Mancini has with the Utopia Health Plan includes
a clause that requires Utopia to reimburse Dr. Mancini on a fee-for-service (FFS) basis
until 100 Utopia members have selected him as their primary care provider (PCP). At
that time, Utopia will begin reimbursing him under a capitated arrangement. This clause
in Dr. Mancini's provider contract is known as:
an antidisparagement clause
Incorrect. Antidisparagement clauses prohibit a provider from making
comments that could weaken a patient's confidence in a health plan. This
type of provision is meant to protect a health plan's business interests and
to require that a dissatisfied provider complain to the health plan rather than
to the patient.
a low-enrollment guarantee clause
Correct. To reduce concerns regarding the number of members assigned to
PCPs, health plans often include a low-enrollment guarantee clause in
capitated contracts. This clause can help to ease a provider into capitation,
although at greater risk to the health plan.
a retroactive enrollment changes clause
Incorrect. The health plan may include a clause in a purchaser's contract
relating to retroactive enrollment changes. Such a clause typically places a
time requirement on the purchaser's reporting of changes in a member's
eligibility status. Such a clause insulates both the provider and the health
plan from financial responsibility.
an eligibility guarantee clause
Incorrect. Some health plans use an eligibility guarantee clause in the
contract to protect providers who receive confirmation of a patient's
eligibility for services from the health plan. Providers are not financially
responsible for the services rendered if the patient is later found to be
ineligible.
30. The provider contract that Dr. Lorena Chau has with the Fiesta Health Plan includes
an evergreen clause. The purpose of this clause is to:
allow Fiesta to change or amend the contract without Dr. Chau's approval as long
as the modifications are made in order to comply with new legal and regulatory
requirements
Incorrect. Under a CHANGE IN LAW provision, health plans are allowed to
change or amend contracts without the approval of their providers as long
as the modifications are made in order to comply with new legal and
regulatory requirements that impact all health plans and providers.
prohibit Dr. Chau from encouraging her patients to switch from Fiesta to another
health plan
Incorrect. NONSOLICITATION clauses prohibit providers from encouraging
patients to switch from one health plan to another.
allow the terms of the contract to renew unchanged each year
Correct. Many provider contracts are automatically renewed through an
21
evergreen clause. If providers desire changes to the contract, they must be
aware of the renewal date and notify the health plan of their intent to
renegotiate the contract within the time contractually specified.
assure that Dr. Chau provides Fiesta members with healthcare services in a timely
manner appropriate to the member's medical condition
Incorrect. Access standards are guidelines defined by health plans to assure
that every member receives the benefits provided by his or her health plan in
a timely manner appropriate to the member's medical condition and
consistent with the reason for seeking care.
31. One true statement about the responsibilities of providers under typical provider
contracts is that most provider contracts:
include a clause which states that providers must maintain open communications
with patients regarding appropriate treatment plans, unless the services are not
covered by the member's health plan
Incorrect. Most health plans have placed in their contracts a clause which
clearly states that providers must maintain open communications with
patients regarding appropriate treatment plans, even if the services are not
covered by the member's health plan.
hold that the responsibility of the provider to deliver services is usually subject to
the provider's receipt of information regarding the eligibility of the member
Correct. Most provider contracts hold that the responsibility of the provider
to deliver services is usually subject to the provider's receipt of information
regarding the eligibility of the member identification cards. The provider is
also typically required to deliver services to the health plan's members with
the same quality, timeliness, duration, and scope as the provider would
deliver to other patients. In addition, the provider cannot discriminate
against members on the basis of age, sex, religion, or national origin.
contain a gag clause or a gag rule
Incorrect. The term gag clause or gag rule has been used to refer to any
statement in a health plan-provider contract that could be interpreted as
preventing a provider from discussing alternative treatment options with
patients. Health plans should make sure that nothing in provider contracts
can be interpreted as prohibiting providers from discussing all treatment
options with their patients.
include a clause that explicitly places the responsibility for medical care on the
health plan rather than on the provider of medical services
Incorrect. Many health plans now include in their contracts statements that
explicitly place responsibility for medical care on the providers rather than
on the health plan. Usually such statements indicate that the provider must
make all final decisions regarding the delivery of care and that the provider
is encouraged to discuss with the patient all treatment alternatives,
including treatments not covered by the plan.
32. The provider contracts that the Indigo Health Plan has with its providers include a
clause which states that Indigo's denial of payment for a certain medical procedure does
not constitute a medical opinion and is not intended to interfere with the provider-patient
relationship. This information indicates that Indigo's provider contracts include:
22
a business confidentiality clause.
Incorrect. Business confidentiality clauses require providers to maintain the
confidentiality of the health plan's proprietary information, such as financial
data, reimbursement structure, and utilization and quality management
programs, unless the health plan grants written permission for the provider
to release this information.
a scope of services clause.
Incorrect. A scope of services provision details exactly which services are
covered under a capitation payment and which services are reimbursed
under another payment method or require prior authorization. Generally, all
services included in the scope of services are covered by a PCP's monthly
capitation payment and may be provided as medically necessary and
without authorization to the health plan's members within the constraints of
their benefit plan.
an informed refusal clause.
Incorrect. Providers may wish to negotiate a provision that addresses a
possible situation in which a patient refuses treatment despite the
recommendations of the provider and the health plan. If the provider has
informed the patient of the consequences of refusing medical treatment, the
patient's choice is termed an informed refusal.
an exculpation clause.
Correct. Health plans now routinely include an exculpation clause, which is
intended to place the ultimate responsibility for a patient's medical care on
the provider.
33. The provider contract that Dr. Bijay Patel has with the Arbor Health Plan includes a
no-balance-billing clause. The purpose of this clause is to:
prohibit Dr. Patel from collecting payments from Arbor plan members for medical
services that he provided them, even if the services are explicitly excluded from
the benefit plan
Incorrect. A health plan usually allows providers to collect payment from the
member for services that are explicitly excluded from the benefit plan.
allow Dr. Patel to bill patients for services only if the services are considered to be
medically necessary
Incorrect. Typically, a health plan allows contracting providers to bill
patients for services considered not medically necessary if the provider
notifies the patient in advance that the service will not be covered by the
health plan.
establish the guidelines used to determine if Arbor is the primary payor of benefits
in a situation in which an Arbor plan member is covered by more than one health
plan
Incorrect. If an individual is covered by two or more health plans, then
coordination of benefits rules determine which health plan is the primary
payor.
require Dr. Patel to accept Arbor's payment as payment in full for medical services
that he provides to Arbor plan members
Correct. A major goal of health plan contracting is to obtain from providers a
commitment that they will accept the health plan's payment as payment in
full and will not bill members for anything other than contracted
23
copayments, coinsurance, and deductibles. In return for acceptance of the
health plan's payment as payment in full, providers receive a guarantee that
the health plan will pay them directly.
34. The provider contract that the Canyon health plan has with Dr. Nicole Enberg
The clause which specifies that Dr. Enberg cannot sue or file any claims against a
Canyon plan member for covered services is known as:
a termination with cause clause

Incorrect. A termination with cause contract provision requires the health
plan to give the provider a reason for the termination action. Termination
with cause gives each party the right to end the contract if either party
breaches the terms of the contract.
a hold-harmless clause
Correct. Health plans typically require providers to sign agreements that
include a hold-harmless clause.
an indemnification clause
Incorrect. An indemnification clause requires the provider to reimburse a
health plan for costs, expenses and liabilities incurred by the health plan as
a result of a provider's actions.
a corrective action clause
Incorrect. A corrective action provision, also called a cure provision,
specifies a time period for the party who has breached the contract to
remedy the problem and avoid termination of the contract.
35. Dr. Leona Koenig removed the appendix of a plan member of the Helium health
plan. In order to increase the level of reimbursement that she would receive from
Helium, Dr. Koenig submitted to the health plan separate charges for the preoperative
physical examination, the surgical procedure, and postoperative care. All of these
charges should have been included in the code for the surgical procedure itself. Dr.
Koenig's submission is a misuse of the coding system used by health plans and is an
example of:
upcoding
24
Incorrect. Upcoding is a type of false billing in which a provider submits a
code for a procedure with a higher level of reimbursement than the
procedure actually performed. For example, a provider might submit the
code for a comprehensive office visit, when the services provided actually
represent an intermediate level of service.
a wrap-around
Incorrect. Silent PPOs are sometimes called wrap-around PPOs. A silent
PPO is an arrangement in which an entity that negotiates discounts with
providers sells access to those discounts to other unrelated health plans to
use when paying for services provided to the unrelated health plan's
members.
churning
Incorrect. Churning occurs when a provider sees a plan member more often
than necessary or provides more diagnostic or therapeutic services than
necessary in order to increase revenue. For example, a provider might direct
a member to schedule monthly visits for cholesterol check-ups when
quarterly visits would suffice.
unbundling
Correct. Unbundling is a type of false billing in which a provider submits
separate charges for the different components of a service rather than one
charge for the service as a whole in order to increase the level of
reimbursement
The following information applies to two procedures that Dr. Enberg provided to Canyon
plan members:
Dr. Enberg's Charge FFS for This Procedure

Procedure A $150 $160
Procedure B $120 $110
Under the DFFS system, the amount that Dr. Enberg is entitled to receive from Canyon
is
25
$150 for Procedure A and $110 for Procedure B
Correct. Under a DFFS payment system, the health plan calculates the
payment based on whichever amount is lower, the billed charge or the DFFS.
The billed charge of $150 is less for Procedure A and the DFFS of $110 is
lower for Procedure B.
Incorrect. Under a DFFS payment system, the health plan calculates the
Therefore, this answer choice is correct for Procedure A, but incorrect for
Procedure B.
Therefore, this answer choice is incorrect for Procedure A, but correct for
Procedure B.
Therefore, this answer choice is incorrect for both Procedure A and
Procedure B.
37. The following statements are about fee-for-service (FFS) payment systems. Select
the answer choice containing the correct statement:
A discounted fee-for-service (DFFS) system is usually easier for a health plan to

administer than is a fee schedule system.
Incorrect. A fee schedule system is simpler for a health plan to administer
than a DFFS system because, under a fee schedule system, the payment for
each service is the same for all providers in the network.
A case rate payment system offers providers an incentive to take an active role in
managing cost and utilization.
Correct. A case rate is a single fee that the health plan pays the provider for
all services associated with an entire course of treatment. A case rate
system transfers risk to the provider for the intensity of services delivered.
Providers can increase their net income from a case rate by improving the
efficiency of treatment and maintaining quality of care.
One reason that health plans use a relative value scale (RVS) payment system is
that RVS values for cognitive services have traditionally been higher than the
values for procedural services.
Incorrect. The RVS system has an important drawback. In practice, RVS unit
values for procedural services, such as surgeries or diagnostic tests, have
generally been higher than the unit values for cognitive services, such as
office visits or research on medical conditions. Because many of the
services provided by PCPs are cognitive, PCPs typically have not fared well
financially under a straight RVS system.
One reason that health plans use a resource-based relative value scale (RBRVS)
is that this system includes weighted unit values for all types of procedures.
Incorrect. The RBRVS was originally developed by the Centers for Medicaid
and Medicare Services (CMS) for Medicare use. Because RBRVS was
26
developed around the needs of the senior population, this system does not
include weighted unit values for all types of procedures, such as childhood
immunizations. Further, RBRVS does not include any codes for anesthesia.
38. One difference between a fee-for-service (FFS) reimbursement arrangement and

capitation is that the FFS arrangement:
is a prospective payment system, whereas capitation is a retrospective payment

system
Incorrect. An FFS system is a retrospective payment system, or one that
pays after the service has been provided. Capitation is a prospective
payment system.
has a potential to induce providers to underutilize medical resources, whereas
capitation does not have this potential disadvantage
Incorrect. Under capitation, the level of payment per patient remains the
same regardless of the actual services delivered. Because the level of
payment remains the same, capitation has the potential to induce providers
to underutilize medical resources.
bases the amount of reimbursement on the actual medical services delivered,
whereas reimbursement under capitation is independent of the actual volume and
cost of services provided
Correct. Unlike an FFS system, capitation eliminates a provider's incentive
to provide unnecessary services. Capitation also encourages providers to
practice preventive medicine in order to improve plan members' health
status and decrease the need for more intensive medical services in the
future. In addition, the use of capitation allows the health plan to transfer a
greater proportion of risk to providers than does the use of FFS or salary
systems.
is most often used by health plans to reimburse healthcare facilities, whereas
capitation is most often used by health plans to reimburse specialty care providers
Incorrect. Specialty care providers most often receive deferred FFS
payments, although the use of capitation is growing in some specialty fields.
Health plans sometimes reimburse healthcare facilities on a DFFS, diagnosis
related group (DRG), or capitation basis, but per diem rates are most
common.
39. Partial capitation is one common approach to capitation. One typical characteristic of
partial capitation is that it:
includes only primary care services

Correct. Partial capitation is the most common type of capitation. This
arrangement generally covers office visits, minor procedures performed in
the office, provider visits to hospitalized members, supplies, and case
management. It usually excludes laboratory testing of blood, immunizations,
and drugs.
covers such services as immunizations and laboratory tests
Incorrect. This arrangement generally covers office visits, minor procedures
performed in the office, provider visits to hospitalized members, supplies,
and case management. It usually excludes laboratory testing of blood,
27
immunizations, and drugs.
can be used only if the provider's panel size is less than 50 providers
Incorrect. Generally, capitation is a suitable arrangement for PCPs when a
provider's panel size approaches 100 members
covers such services as cardiology and orthopedics
Incorrect. Partial capitation includes only primary care services. Cardiology,
orthopedics, and eye care the most commonly capitated specialties are
outside the realm of primary care.
40. Under the compensation arrangement that the Falcon Health Plan has with some of
its providers, Falcon holds back 10% of the negotiated payments to these providers in
order to offset or pay for any claims that exceed the budgeted costs for referral or
hospital services. If the providers keep costs within the budgeted amount, Falcon
distributes to them the entire amount of money held back. This way of motivating
providers to control costs while providing high-quality, appropriate care is known as a:
risk pool arrangement

Incorrect. A risk pool is a fund that is established at the beginning of a
contract period to cover claims for specified services, such as specialty
care. Any claims approved for payment are paid out of the appropriate risk
pool. At the end of the period, the health plan may use remaining funds in
one pool to cover overruns in another pool. After all pools are reconciled,
the health plan distributes any remainder to the providers who funded the
pools.
withhold arrangement
Correct. Under this arrangement, Falcon retains part of the financial risk
because it is responsible for making up any deficit if cost overruns exceed
the amount of money held back.
cost-shifting arrangement
Incorrect. One practice that has potential for fraud and abuse of the workers'
compensation program is cost-shifting. Because workers' compensation
provides reimbursement for lost wages, employees may be tempted to
represent illnesses or injuries that are not work-related or that are not
covered by group health plans as work-related in order to receive medical
benefits and reimbursement of lost wages through workers' comp.
bonus pool arrangement
Incorrect. A bonus pool, a type of risk pool, pays providers over and above
their usual reimbursement at the end of a financial period based on the
performance of the plan as a whole, a group of providers within the plan, or
the individual provider. A bonus pool is essentially the opposite of a
withhold because a bonus pool contains no risk of loss for the provider. A
bonus pool is funded by savings generated from actual costs for a specified
set of services.
41. A provider group purchased from an insurer individual stop-loss coverage for primary
and specialty care services with an $8,000 attachment point and 10% coinsurance. If the
group's accrued cost for the primary and specialty care treatment of one patient is
$10,000, then the amount that the insurer would be responsible for reimbursing the
provider group for these costs is:
28
$200
Incorrect. Under individual stop-loss coverage, the provider group assumes
sole responsibility for all medical costs up to a specific dollar amount,
known as the attachment point. The portion of costs that the provider group
pays in excess of the attachment point is the coinsurance. In this situation,
the provider group pays the first $8,000 of treatment for this patient. The
provider group pays 10% of the amount over $8,000 and the insurer pays
90% of the amount over $8,000. This answer choice was derived by
multiplying the amount over $8,000 by the provider group's coinsurance
percentage (10%) rather than the insurer's coinsurance percentage (90%).
$1,000
90% of the amount over $8,000.
$1,800
Correct. Individual stop-loss coverage protects providers from losses
associated with healthcare for an individual member during a given time
period, usually one year. The provider group assumes sole responsibility for
all medical costs up to a specific dollar amount, known as the attachment
point. The portion of costs that the provider group pays in excess of the
attachment point is the coinsurance. In this situation, the provider group
pays the first $8,000 of treatment for this patient. The provider group pays
10% of the amount over $8,000 and the insurer pays 90% of the amount over
$8,000. [$10,000 - $8,000 = $2,000 $2,000 x .9 = $1,800]
$9,000
90% of the amount over $8,000.
42. The Foxfire Health Plan, which has 20,000 members, contracts with dermatologists
on a contact capitation basis. The contact capitation arrangement has the following
features:
• Foxfire distributes the money in the contact capitation fund once each quarter
and the distribution is based on the point totals accumulated by each
dermatologist.
• Foxfire's per member per month (PMPM) capitation for dermatology services is
$1.
• The dermatologist receives 1 point for each new referral that is not classified as a
complicated referral and 1.5 points for each new referral that is classified as
complicated.
29
During the first quarter, Foxfire's PCPs made 450 referrals to dermatologists and 100 of
these referrals were classified as complicated. One dermatologist, Dr. Shareef Rashad,
received 42 of these referrals; 6 of his referrals were classified as complicated.
Statements that can correctly be made about Foxfire's contact capitation arrangement
include:
that the value of each referral point for the first quarter was $120
Correct. The value of each referral point equals the fund value divided by the
total number of referral points. The fund value is 20,000 x $1 x 3 months =
$60,000. The total number of points is [(350 x 1) + (100 x 1.5)] = 500.
Therefore, the value of each referral point is $60,000 500, or $120.
that the value of Foxfire's contact capitation fund for dermatologists for the first
quarter was $20,000
Incorrect. The value of Foxfire's contact capitation fund for dermatologists
for the first quarter is equal to the number of members (20,000) times the
PMPM fee ($1) times the number of months in the period (3). The value
therefore is equal to 20,000 x $1 x 3 = $60,000.
that the payment that Foxfire owed Dr. Rashad for the first quarter was $6,120
Incorrect. The payment owed to Dr. Rashad for the first quarter equals the
provider's total number of points times the value of each referral point. Dr.
Rashad's total number of points equals (36 x 1) + (6 x 1.5), or 45 points. The
value of each referral point is determined by dividing the fund value of
$60,000 for the first quarter (20,000 x $1 x 3 = $60,000) by the total number of
points. The total number of points is [(350 x 1) + (100 x 1.5)] = 500. Therefore,
the payment owed to Dr. Rashad for the first quarter is [45 x ($60,000 500)],
or $5,400.
all of the above
Incorrect. Two of the three statements above are incorrect.
43. The following statement(s) can correctly be made about contracting and
reimbursement of specialty care physicians (SCPs):
A. Typically, a health plan should attempt to control utilization of SCPs before attempting
to place these providers under a capitation arrangement.
B. Forms of specialty physician reimbursement used by health plans include a retainer

and a bundled case rate.
Both A and B
Correct. Statement A is a correct statement. If a health plan attempts to
place SCPs under a capitation arrangement without first attempting to
control their utilization rates, the health plan risks being locked into the
higher rates that the SCPs have been paid. Statement B is also a correct
statement. Under a retainer, a health plan pays a set amount monthly to an
SCP and then reconciles the payments at periodic intervals. Under bundled
case rates, a health plan's reimbursement combines both the institutional
charges and the professional charges for care into a single payment. For
example, a health plan may negotiate for cardiac bypass surgery a bundled
30
case rate that covers the charges from the hospital, the surgeon, and the
anesthesiologist, as well as all preoperative and postoperative care.
A only
Incorrect. Statement A is correct. Statement B is also a correct statement.
Under a retainer, a health plan pays a set amount monthly to an SCP and
then reconciles the payments at periodic intervals. Under bundled case
rates, a health plan's reimbursement combines both the institutional charges
and the professional charges for care into a single payment.
B only
Incorrect. Statement A is a correct statement. If a health plan attempts to
control their utilization rates, the health plan risks being locked into the
statement.
Neither A nor B
Incorrect. Statement A is a correct statement. If a health plan attempts to
control their utilization rates, the health plans risk being locked into the
statement. Under a retainer, a health plan pays a set amount monthly to an
SCP and then reconciles the payments at periodic intervals. Under bundled
case rates, a health plan's reimbursement combines both the institutional
charges and the professional charges for care into a single payment.
44. The Zephyr Health Plan identifies members for whom subacute care might be an
appropriate treatment option. The following individuals are members of Zephyr:
• Selena Tovar, an oncology patient who requires radiation oncology services,

chemotherapy, and rehabilitation.
• Dwight Borg, who is in excellent health except that he currently has sinusitis.
• Timothy O'Shea, who is beginning his recovery from brain injuries caused by a
stroke.
Subacute care most likely could be an appropriate option for:
Ms. Tovar, Mr. Borg, and Mr. O'Shea

Incorrect. Subacute care is comprehensive inpatient care designed for an
individual who has had an acute illness, injury, or exacerbation of a disease
process. It requires the coordinated services of an interdisciplinary team.
Subacute care would not be appropriate for Mr. Borg's medical condition.
Ms. Tovar and Mr. O'Shea only
Correct. Subacute care is comprehensive inpatient care designed for an
Ms. Tovar and Mr. O'Shea's conditions could warrant the use of subacute
care.
Mr. O'Shea only
31
Mr. O'Shea's condition could warrant the use of subacute care. However, Ms.
Tovar's condition also could warrant the use of subacute care.
Mr. Borg only
Mr. Borg's condition would not warrant the use of subacute care, but the
conditions of Ms. Tovar and Mr. O'Shea could warrant subacute care.
45. Although ambulatory payment classifications (APCs) bear some resemblance to

diagnosis-related groups (DRGs), there are significant differences between APCs and
DRGs. One of these differences is that APCs:
typically allow for the assignment of multiple classifications for an outpatient visit
Correct. APCs are designed to explain to the payor the amount and type of
medical resources used during an outpatient visit to a healthcare facility.
DRGs are used to determine payment for inpatient hospital services based
on a patient's principal diagnosis, secondary diagnosis, surgical
procedures, age, gender, and presence of complications.
always apply to a patient's entire hospital stay
Incorrect. The primary variable for DRG classification is the patient's
diagnosis, and the DRG classification applies to an entire hospital stay for
the patient. For APCs, the critical variable is the procedure or other
treatment that is performed during a single visit.
typically serve as a payment system for inpatient services
Incorrect. DRGs were designed as a payment system for inpatient services,
while APCs are used for care delivered in outpatient settings
typically include reimbursements for professional fees
Incorrect. Both APCs and DRGs provide a method to calculate the
appropriate reimbursement for a facility and neither system includes
reimbursement for professional fees.
46. The following statement(s) can correctly be made about financial arrangements
between health plans and emergency departments of hospitals:
A. These arrangements typically include payments for services rendered in the

emergency department by a health plan's primary or specialty care providers.
B. Most of these arrangements are structured through the health plan's contract with the
hospital.
Both A and B
Incorrect. Statement A is incorrect because payments for services rendered
in the emergency department by a health plan's participating primary or
specialty care providers are typically covered in the applicable contracts
32
between the health plan and these providers. Statement B is a correct
statement.
A only
between the health plan and these providers. Statement B is correct. Most
financial arrangements between health plans and emergency departments
are structured through the health plan's contract with the hospital.
B only
Correct. Statement A is incorrect because payments for services rendered in
the emergency department by a health plan's participating primary or
Neither A nor B
47. The Pine Health Plan has incorporated pharmacy benefits management into its
operations to form a unified benefit. Potential advantages that Pine can receive from this
action include:
the fact that unified benefits improve the quality of patient care and the value of
pharmacy services to Pine's plan members
Incorrect. This is a potential advantage of uniform pharmacy benefits.
However, this is not the only correct answer choice.
the fact that control over the formulary and network contracting can give Pine
control over patient access to prescription drugs and to pharmacies
the fact that managing pharmacy benefits in-house gives Pine a better chance to
meet customer needs by integrating pharmacy services into the plan's total
benefits package
all of the above
Correct. Pharmacy benefits management (PBM) can be integrated into a
health plan's total healthcare package to form a unified pharmacy benefit, or
it can be carved out through a separate contract with an independent PBM
company. When PBM is incorporated into a health plan's operations as a
unified benefit, the health plan assumes responsibility for establishing
33
networks and managing their operations.
48. Reimbursement for prescription drugs and services in a third-party prescription drug
plan typically follows one of two approaches: a reimbursement approach or a service
approach. One true statement about these approaches is that:
payments under the reimbursement method typically are not subject to any
copayment or deductible requirements
Incorrect. Typically, payments under a reimbursement approach is subject
to any copayment, deductible, and coinsurance requirements.
payments under the reimbursement approach are typically based on a structured
reimbursement schedule rather than on usual, customary, and reasonable (UCR)
charges
Incorrect. Payments under a reimbursement approach is most often based
on UCR charges.
most major medical plans follow a service approach
Incorrect. Most major medical plans still follow a reimbursement approach.
most current health plan prescription drug plans are service plans
Correct. Early pharmacy networks followed a reimbursement approach,
under which a covered individual purchased prescription drugs directly from
a pharmacy and then was reimbursed by the plan. Under a service approach,
plan members obtain prescription drugs from participating network
pharmacies by presenting proper identification and paying a specified
copayment. The pharmacy then bills the plan directly for the remaining cost
of the prescription. The majority of current health plan prescription drug
plans are service plans.
from the HMO.
34
To calculate its drug costs, Elm uses a pricing system known as:
estimated acquisition cost (EAC)

Correct. EAC-based reimbursement to small pharmacies that lack enough
leverage to secure volume discounts or rebates is typically close to the
average wholesale price (AWP). For large pharmacies whose volume and
purchasing power allows them to secure manufacturer discounts, the EAC
results in lower drug costs than does the AWP.
package rate cost (PRC)
Incorrect. A package rate, also called a case rate, is the single fee that a
health plan pays a medical provider for all services associated with the
entire course of treatment.
actual acquisition cost (AAC)
Incorrect. AAC is equal to the initial price of a prescription drug minus any
and all discounts, including volume discounts, free goods, and any other
mechanisms used to reduce price. It is the most accurate method of
calculating drug costs and provides the lowest level of cost, but it is also the
most complicated method.
wholesale acquisition cost (WAC)
Incorrect. WAC is based on published prices charged by wholesalers and
therefore represents what pharmacies are actually charged for prescription
drugs.
50. In health plan pharmacy networks, service costs consist of two components: costs
for services associated with dispensing prescription drugs and costs for cognitive
services. Cognitive services typically include:
making generic substitutions of drugs

Incorrect. Making generic substitutions of drugs is an example of a
dispensing service. Dispensing services are typically specified by the health
plan.
counseling patients about prescriptions
Correct. Cognitive services, also known as professional services, are
identified by the pharmacist as being medically necessary for the patient.
These services also include reviewing drug profiles to prevent or monitor
adverse drug interactions, implementing quality improvement programs,
documenting pharmaceutical care in patient records, and monitoring
35
program compliance.
providing patient monitoring
Incorrect. Providing patient monitoring is an example of a dispensing
service. Dispensing services are typically specified by the health plan.
switching prescription drugs to preferred drugs

Incorrect. Switching prescription drugs to preferred drugs is an example of a
dispensing service. Dispensing services are typically specified by the health
plan.
51. A health plan has several options for delivering pharmacy services to its subscribers.
Each option has potential advantages to a health plan. An advantage to a health plan of
using:
performance-based open networks is that they tend to increase participation in the

pharmacy network.
Incorrect. Performance-based networks are similar to other open networks
in terms of requirements for participation and patient access.
Reimbursement, however, is based on a pharmacy's performance on
specified criteria such as generic substitutions, formulary compliance, and
average cost of prescriptions. Performance-based systems give health plans
greater control over costs, but they tend to reduce participation.
closed networks is that they improve the health plan's ability to set standards and
implement cost-control programs for pharmacy services.
Correct. In closed networks, selected pharmacies agree to supply services
to plan members at discounted rates in exchange for guaranteed sales
volume. For health plans, the advantages of using closed panels instead of
open panels include that closed panels reduce costs by directing members
to specified providers and that closed panels make it easier for health plans
to set standards, monitor performance, and implement cost-control
programs. For many plan members, restricted access is a major
disadvantage of closed panels.
customized networks is that they typically are inexpensive to operate.

Incorrect. Customized networks are networks designed to meet the needs of
a specific population. Usually, these networks take the form of company
pharmacies that are owned by large employers and operated at workplace
sites. Typically, customized networks are expensive to operate.
open networks is that they tend to improve the health plan's ability to control
pharmaceutical costs.
Incorrect. Open networks allow any pharmacy willing to accept the terms of
a provider contract to participate. The main advantage of open networks is
that they provide convenient patient access to pharmacies. The major
disadvantage for health plans is that their control over costs is limited to
setting reimbursement levels.
36
from the HMO.
The following statements can correctly be made about the reimbursement for Drugs A
and B under the MAC pricing system:
Treble most likely is obligated to reimburse Manor 14 cents per tablet for Drug A.
Incorrect. Most MAC formulas specify that, if the cost to the pharmacy is
higher than the MAC for a particular drug, the health plan will reimburse only
the cost specified by the MAC. For Drug A, the cost specified by the MAC is
2 cents lower per tablet than the cost to the pharmacy.
Manor most likely is allowed to bill the subscriber 2 cents per tablet for Drug A.
Incorrect. Most MAC formulas specify that, if the cost to the pharmacy is
higher than the MAC, then the pharmacy cannot bill the subscriber for the
extra amount. For Drug A, the cost to the pharmacy is 2 cents higher per
tablet than the MAC for Drug A, and Manor most likely cannot bill the
subscriber for the difference.
Treble most likely is obligated to reimburse Manor 5 cents per tablet for Drug B.
Correct. Most MAC formulas specify that, if the cost to the pharmacy is
lower than the MAC, then the pharmacy cannot charge the health plan the
higher price. Because the pharmacy pays only 5 cents per tablet for Drug B,
it most likely cannot charge the 7 cents per tablet allowed by the MAC.
All of the above statements are correct.
Incorrect. Two of the three statements above are incorrect.
37
53. The Walnut Health Plan provides a number of specialty services for its members.
Walnut offers coverage of alternative healthcare, including coverage of treatment
methods such as homeopathy and naturopathy. Walnut also offers home healthcare
services, and it contracts with home healthcare providers on a non-risk basis to the
health plan. The following statements are about the specialty services offered by Walnut.
Select the answer choice containing the correct statement:
Homeopathy treats diseases by using small doses of substances which, in healthy

people, are capable of producing symptoms like those of the disease being
treated.
Correct. An increasing number of health plans offer coverage of alternative
healthcare, that is, healthcare services not offered by traditional medical
providers. An alternative therapy such as homeopathy is usually an
additional benefit available to members through a PCP referral to an
alternative healthcare provider.
Naturopathy is an approach to healthcare that uses electronic monitoring devices
to teach a patient to develop conscious control of involuntary bodily functions,
such as heart rate.
Incorrect. Naturopathy incorporates a variety of therapies to support and
maintain the body's ability to heal itself. Naturopathy emphasizes prevention
and natural treatments, such as herbal medicine. Biofeedback is an
alternative healthcare treatment method that uses electronic monitoring
devices to teach a patient to develop conscious control of involuntary
functions such as heart rate.
Under a non-risk contract, Walnut most likely transfers the responsibility for
arranging home healthcare to the home healthcare provider organizations.
Incorrect. In non-risk contracts, home healthcare services are generally
coordinated and approved through the health services department of the
health plan. When health plans contract with provider organizations on a
risk basis, they may transfer the responsibility for arranging home care and
related services to the provider organization.
Federal law allows Walnut to contract with a home healthcare provider
organization only if the provider organization has received accreditation by the
Utilization Review Accreditation Commission (URAC).
Incorrect. URAC promotes consistent standards in the application of
utilization procedures. When evaluating a home healthcare agency, a health
plan considers the provider's standing with state and federal regulatory
bodies and checks for accreditation by the Joint Commission on
Accreditation of Healthcare Organizations (JCAHO). If the agency is not
accredited, the health plan must establish its own standards for home
healthcare and evaluate the agency according to those standards.
54. The following statements are about network management for behavioral healthcare
(BH). Three of these statements are true and one statement is false. Select the answer
choice containing the FALSE statement.
Two measures of BH quality are patient satisfaction and clinical outcomes

assessments.
Incorrect. This is a true statement. Two important measures of BH quality
are patient satisfaction and clinical outcomes assessments, including the
38
rate of relapse and the incidence of adverse events, such as self-destructive
behaviors or criminal acts. Other quality indicators that may prove useful in
the selection of BH providers are quality assessments performed by
accrediting agencies and the provider's reputation among local healthcare
professionals and consumers.
For a health plan, one argument in favor of contracting with a managed behavioral
healthcare organization (MBHO) is that the health plan's members can gain faster
access to BH care.
Incorrect. This is a true statement. There are varying opinions on carving out
BH benefits. Proponents of carving out BH believe that a contract with an
MBHO results in faster access to care and more specialized services for
members. However, a BH carve-out potentially can decrease continuity of
care due to lack of care coordination between the BH provider and the
member's PCP.
In their contracts with health plans, managed behavioral healthcare organizations
(MBHOs) usually receive delegated authority for network development and
management.
Incorrect. This is a true statement. MBHOs usually receive delegated
authority for network development and management, utilization
management functions, and quality management functions. By receiving this
delegated authority, MBHOs accept a great deal of financial risk for BH
services.
Health plans generally compensate managed behavioral healthcare organizations
(MBHOs) on an FFS basis.
Correct. This is a false statement. Health plans generally compensate
MBHOs on a capitation basis, paying either a flat rate per member per month
(PMPM) or a percent of total monthly premiums.
55. With regard to the compensation of dental care providers in a managed dental care
system, it is correct to state that, typically:
dental PPOs compensate dentists on a capitated basis

Incorrect. Dental PPOs usually pay dentists on a discounted fee-for-services
(DFFS) or fee schedule basis. On average, a provider in a dental PPO
receives from 75% to 85% of the full FFS rate
group model dental HMOs (DHMOs) compensate general dental practitioners on a
salaried basis
Incorrect. Group model DHMOs usually capitate general dental practitioners
independent practice association (IPA)-model dental HMOs (DHMOs) capitate
general dental practitioners
Correct. The capitation rate for general dental practitioners is usually
between 60% and 70% of the FFS equivalent for generalists in the local area.
staff model dental HMOs (DHMOs) compensate dentists on an FFS basis
Incorrect. Staff model DHMO dentists are usually salaried.
56. The vision benefits offered by the Omni Health Plan include clinical eye care only.
The following statements describe vision care received by Omni plan members:
39
• Brian Pollard received treatment for a torn retina he suffered as a result of an
accident
• Angelica Herrera received a general eye examination to test her vision
• Megan Holtz received medical services for glaucoma
Of these medical services, the ones that most likely would be covered by Omni's vision
coverage would be the services received by:
Mr. Pollard, Ms. Herrera, and Ms. Holtz

Incorrect. Clinical eye care encompasses medical and surgical services for
eye diseases, such as glaucoma and eye injuries. The services received by
Mr. Pollard and Ms. Holtz are considered to be clinical eye care. However,
the services received by Ms. Herrera would be considered routine eye care
and would not be covered.
Mr. Pollard and Ms. Herrera only
Mr. Pollard are considered to be clinical eye care. The same is true of the
services received by Ms. Holtz. However, the services received by Ms.
Herrera would be considered routine eye care and would not be covered.
Mr. Pollard and Ms. Holtz only
Correct. Clinical eye care encompasses medical and surgical services for
eye diseases, such as glaucoma and eye injuries. In other cases, vision
benefits also offer partial or full coverage of routine eye care, which includes
general eye examinations to test vision, prescribe corrective lenses, and
screen for eye disease. Ms. Herrera's general eye examination would most
likely be covered by a vision benefits package that includes routine eye care.
Ms. Herrera and Ms. Holtz only
Ms. Holtz are considered to be clinical eye care. The same is true of the
services received by Mr. Pollard. However, the services received by Ms.
Herrera would be considered routine eye care and would not be covered.
57. The Crimson Health Plan, a competitive medical plan (CMP), has entered into a
Medicare risk contract. One true statement about Crimson is that, as a:
CMP, Crimson is regulated by the federal government under the terms of the Tax
Equity and Fiscal Responsibility Act (TEFRA)
Incorrect. A CMP is a STATE-regulated prepaid health plan that meets
TEFRA requirements for Medicare contracting.
CMP, Crimson is not allowed to charge a Medicare enrollee a premium for any
additional benefits it provides over and above Medicare benefits
Incorrect. A CMP cannot charge the enrollee a fee greater than the actuarial
value of the Medicare deductible and coinsurance for the basic Medicare-
covered benefits. However, the CMP can charge the enrollee a premium for
any additional benefits over and above Medicare benefits.
provider under a Medicare risk contract, Crimson receives for its services a
capitated payment equivalent to 85% of the AAPCC
40
Incorrect. TEFRA risk HMOs and CMPs enroll Medicare beneficiaries and
provide for their Medicare-covered primary and acute care services in return
for a capitated payment equivalent to 95% of the AAPCC. AAPCC is the FFS
amount that CMS would expect to pay for a Medicare beneficiary who lives
in a particular county, adjusted for age, sex, institutional status, and other
factors.
provider under a Medicare risk contract, Crimson is required to deliver to members
all Medicare-covered services, without regard to the cost of those services
Correct. A Medicare risk contract, a contract payment methodology between
CMS and a health plan (HMO or CMP), requires the delivery of at least all
Medicare-covered services to members as medically necessary in return for
a monthly capitation payment from CMS and sometimes an additional fee
paid by the enrollee for supplemental services. The health plan is then liable
for those contractually offered services without regard to cost.
58. The Bruin Health Plan is a Social Health Maintenance Organization (SHMO). As an
SHMO, Bruin:
must provide Medicare participants with standard HMO benefits, as well as with
limited long-term care benefits
Correct. SHMOs provide Medicare participants with standard HMO benefits,
such as hospital, physician, skilled nursing facility, and home health
services, together with limited long-term care benefits, such as social
benefits for frail elderly who reside at home.
does not need as great a variety of provider types or as complex a reimbursement
method as does a traditional HMO
Incorrect. The breadth of services provided by SHMOs requires a greater
variety of provider types, as well as more complex reimbursement
mechanisms, than do standard HMOs. health plans that offer SHMOs must
be able to establish and maintain a network of providers, such as social
workers and home healthcare providers, that can support the requirements
and intent of an SHMO.
receives a payment that is based on reasonable costs and reasonable charges
Incorrect. SHMOs receive a capitated payment that is comparable to 100% of
the Adjusted Average Per Capita Cost (AAPCC).
most likely provides fewer supportive services than does a traditional HMO,
because one of Bruin's goals is to minimize the use of community-based care
Incorrect. SHMOs provide a greater number and variety of supportive
services than do traditional HMOs because one of the goals of SHMOs is to
avoid institutionalization of participants through the use of community-
based care.
59. The Omnibus Budget Reconciliation Act of 1986 (OBRA 1986) established the
Programs of All-Inclusive Care for the Elderly (PACE). One characteristic of the PACE
programs is that:
they are available to United States citizens only after they reach age 65.
Incorrect. PACE provides an alternative to intensive institutional care for
persons aged 55 and over who live in a PACE service area, are certified as
41
eligible for a nursing-facility level of care, and meet the eligibility
requirements for the program within their state of residence.
they have an upper dollar limit.
Incorrect. Although benefits under social health maintenance organizations
(SHMOs) have an upper dollar limit, benefits under PACE programs do not
have an upper limit.
they receive a monthly capitation that is set at 100% of the Adjusted Average Per
Capita Cost (AAPCC).
Incorrect. The monthly capitation payment for a PACE program is set at
239% of the AAPCC in order to account for the frailty of the PACE population
and their accompanying need for more intensive services than healthier
Medicare recipients.
PACE providers receive capitated payments only through the PACE agreement.
Correct. PACE providers receive capitated payments only through the PACE
agreement and must make available all items and services covered under
both Title XVIII (Medicare) and Title XIX (Medicaid) without limitations on
amount, duration, or scope of service, and without requiring any
deductibles, copayments, or other cost-sharing.
60. Edward Patillo has established a Medicare+Choice medical savings account (MSA).
This MSA will allow Mr. Patillo to:
carry over any money remaining in his MSA at the end of the benefit year to the
next benefit year
Correct. MSAs are designed to be health insurance arrangements that give
consumers a financial incentive to control their own healthcare costs by
combining a high-deductible health insurance policy with an individual
savings account. Any money remaining in an MSA at the end of the benefit
year is carried over to the next benefit year.
make withdrawals at any time from the MSA, but only for medical expenses
Incorrect. Mr. Patillo can make tax-free withdrawals from the MSA to meet
qualified medical expenses that are not paid by the high-deductible health
insurance policy. He may also make withdrawals from the MSA for non-
medical expenses, but those amounts are taxed as income.
obtain payment at 100% of the Medicare allowable payment for all Medicare-
covered services he receives, without having to pay any deductibles or out-of-
pocket expenses
Incorrect. After Mr. Patillo pays the deductible and out-of-pocket expenses
up to the established annual maximum, Medicare-covered services are paid
at 100% of the Medicare allowable payment.
make withdrawals from the MSA to meet qualified medical expenses that are not
paid by his high-deductible health insurance policy, but these withdrawals are
taxed as income to Mr. Patillo
Incorrect. Mr. Patillo may make tax-free withdrawals from the MSA to meet
qualified medical expenses that are not paid by the high-deductible health
insurance policy. He may also make withdrawals from the MSA for non-
medical expenses, but those amounts are taxed as income.
42
61. The following statement(s) can correctly be made about the Balanced Budget Act
(BBA) of 1997:
A. The BBA requires Medicare+Choice organizations to be licensed as non-risk-bearing

entities under federal law.
B. The Centers for Medicaid and Medicare Services (CMS) is responsible for
implementing the BBA.
Both A and B
Incorrect. Statement A is incorrect because the BBA requires
Medicare+Choice organizations to be licensed as risk-bearing entities under
state law. Statement B is a correct statement
A only
Incorrect. Statement A is incorrect because the BBA requires
state law. Statement B is correct. CMS is responsible for implementing the
various laws, such as the BBA, that have an impact on Medicare.
B only
Correct. Statement A is incorrect because the BBA requires
state law. Statement B is correct. CMS is responsible for implementing the
various laws, such as the BBA, that have an impact on Medicare.
Neither A nor B
Incorrect. Statement A is an incorrect statement. Statement B is a correct
statement. CMS is responsible for implementing the various laws, such as
the BBA, that have an impact on Medicare.
62. Dr. Michelle Kubiak has contracted with the Gem Health Plan, a Medicare+Choice
health plan, to provide medical services to Gem's enrollees. Gem pays Dr. Kubiak $40
per enrollee per month for providing primary care. Gem also pays her an additional $10
per enrollee per month if the cost of referral services falls below a targeted level. This
information indicates that, according to the substantial financial risk formula, Dr. Kubiak's
referral risk under this contract is equal to:
20%, and therefore this arrangement puts her at substantial financial risk
Incorrect. According to CMS regulations, substantial financial risk exists
when the amount for which a physician is at risk for referral services is more
than 25% of the maximum potential total compensation that the physician
could receive. Referral risk is calculated by dividing the amount at risk for
referral services by the maximum potential payments. For Dr. Kubiak, the
calculation is [$10 ($40 + $10) = .20 or 20%] Because her referral risk does
not exceed 25%, this compensation arrangement does not put her at
substantial financial risk.
20%, and therefore this arrangement does not put her at substantial financial risk
Correct. According to CMS regulations, substantial financial risk exists
43
calculation is [$10 ($40 + $10) = .20 or 20%]. Because her referral risk does
not exceed 25%, this compensation arrangement does not put her at
substantial financial risk.
25%, and therefore this arrangement puts her at substantial financial risk
calculation is [$10 ($40 + $10) = .20 or 20%] The 25% referral risk in this
answer choice was calculated by dividing the $10 per employee per month
by the $40 per enrollee per month. However, the $10 should be divided by
$50 (or $10 + $40), the maximum potential payment Dr. Kubiak could receive
per enrollee per month.
25%, and therefore this arrangement does not put her at substantial financial risk
calculation is [$10 ($40 + $10) = .20 or 20%] The 25% referral risk in this
answer choice was calculated by dividing the $10 per employee per month
by the $40 per enrollee per month. However, the $10 should be divided by
$50 (or $10 + $40), the maximum potential payment Dr. Kubiak could receive
per enrollee per month.
63. One true statement about the Medicaid program in the United States is that:
the federal financial participation (FFP) in a state's Medicaid program ranges from
20% to 40% of the state's total Medicaid costs
Incorrect. The FFP in a state's Medicaid program ranges from 50% to 80% of
the state's total costs, with poorer states (based on per capita income)
receiving a higher percentage of reimbursement.
Medicaid regulations mandate specific minimum benefits, under the Early and
Periodic Screening, Diagnosis, and Treatment (EPSDT) program, for all Medicaid
recipients younger than age 30
Incorrect. Federal Medicaid regulations mandate specific minimum benefits
for Medicaid recipients younger than 21 under the EPSDT program. EPSDT
provides for health screening, vision, hearing, and dental services at
intervals that meet recognized standards of medical and dental practices
and at other intervals as necessary to determine the existence of physical or
mental illnesses or conditions.
the individual states have responsibility for administering the Medicaid program
Correct. The individual states administer the Medicaid program and make
claim payments, using state funds and some matching funds from the
federal government.
non-disabled adults and children in low-income families account for the majority of
direct Medicaid spending
Incorrect. Although nearly 75% of Medicaid beneficiaries are non-disabled
44
adults and children in low-income families, this group accounts for only
about one-third of direct Medicaid spending. The elderly and disabled
individuals who make up the other 25% of Medicaid beneficiaries are
responsible for the other two-thirds of total direct spending.
64. The following statements are about waivers and the Medicaid program. Select the
answer choice containing the correct statement:
The Balanced Budget Act (BBA) of 1997 eliminated the need for states to make
formal applications for waivers.
Correct. Prior to the passage of the BBA, states were required to apply for
special waivers to make health plan enrollment mandatory for Medicaid
recipients or to offer more comprehensive services to certain categories of
the recipients. The BBA eliminated the need for formal application for
waivers.
Section 1115 waivers allow states to bypass the Medicaid program's usual
requirement of giving recipients complete freedom of choice in selecting providers.
Incorrect. The 1915(b) waiver is called the 'freedom of choice' waiver
because it allows states to bypass (or waive) the Medicaid program's usual
requirement of giving recipients complete freedom of choice in selecting
providers.
Title XVIII waivers allow states to mandate certain categories of Medicaid
recipients to enroll in health plan plans.
Incorrect. Section 1915(b) waivers allow states to mandate certain categories
of Medicaid recipients to enroll in health plan plans. Title XVIII of the Social
Security Act enacted the Medicare program.
Section 1915(b) waivers allow states to establish demonstration projects in order
to test new approaches to benefits and services provided by Medicaid.
Incorrect. Section 1115 waivers allow states to establish demonstration
projects in order to test new approaches to benefits, services, eligibility,
program payments, and service delivery.
65. The following statements are about Medicaid health plan entities. Select the answer
choice containing the correct statement:
To keep Medicaid enrollment costs as low as possible, states typically prohibit the
use of third-party entities known as enrollment brokers to handle the recruitment
and enrollment of Medicaid recipients in health plan plans
Incorrect. Many states use enrollment brokers to handle the recruitment and
enrollment of Medicaid recipients in health plan programs. The enrollment
brokers must present the various options available to the Medicaid enrollee,
but these brokers add an extra layer of communication between the enrollee
and the health plan and provider.
Primary care case managers (PCCMs) are individuals who contract with a state's
Medicaid agency to provide primary care services mainly to urban areas.
Incorrect. While PCCMs have been particularly popular in rural areas with
low health plan penetrations, they tend to be a transitional type of health
plan entity, with minimal health plan controls, and are decreasing in
numbers as health plan and health plans become more common.
45
Typically, Medicaid beneficiaries must be given a choice between at least two
health plan entities.
Correct. If a state mandates Medicaid health plan enrollment, federal
regulations require that Medicaid beneficiaries be given a choice between at
least two health plan entities. However, for Medicaid beneficiaries living in
rural areas that have minimal health plan development, the state is allowed
to offer only one option for health plan.
Medicaid health plan entities are responsible for providing primary coverage for all
dually-eligible beneficiaries.
Incorrect. Individuals who are covered by both Medicare and Medicaid are
referred to as being dually-eligible. Medicare is the primary coverage for
dually-eligible individuals.
66. The two basic approaches that Medicaid uses to contract with health plans are open
contracting and selective contracting. One true statement about these approaches to
contracting is that:
open contracting requires health plans to meet minimum performance standards

outlined in a state's request for proposal (RFP)
Incorrect. SELECTIVE contracting requires health plans to meet minimum
performance standards outlined in a state's request for proposal (RFP) and
to bid competitively for Medicaid contracts.
open contracting makes it possible for the Medicaid agency to offer enrollment
volume guarantees
Incorrect. Under open contracting, the Medicaid agency cannot offer
enrollment volume guarantees because enrollment is spread among a large
number of plans. An health plan needs to have a certain number of enrollees
in order to operate efficiently and profitably; therefore, the Medicaid agency
can attract more interest from health plans if it is able to offer enrollment
guarantees.
selective contracting requires any health plan that meets the state's performance
standards and the federal Medicaid requirements to enter into a Medicaid contract
Incorrect. OPEN contracting allows, but does not require, any health plan
that meets the state's performance standards and the federal Medicaid
requirements, and is willing to accept Medicaid's reimbursement levels, to
enter into a Medicaid contract.
selective contracting requires health plans to bid competitively for Medicaid
contracts
Correct. Selective contracting requires health plans to meet minimum
performance standards outlined in a state's request for proposal (RFP) and
to bid competitively for Medicaid contracts.
67. The Medicaid program subsidizes indigent care through payments to

disproportionate share hospitals (DSHs). The Preamble Hospital is a DSH. As a DSH,
Preamble most likely:
receives financial assistance from the federal government but not a state
46
government.
Incorrect. Medicaid payments to DSHs provide supplemental assistance to
these hospitals that serve the uninsured. The federal government matches
state funds designated for DSH payments.
is at a higher risk of operating at a loss than are most other hospitals.
Correct. DSHs are qualified hospitals that provide inpatient services to a
disproportionately large share of Medicaid patients and uninsured patients
and, therefore, are at higher risk of operating at a loss.
receives no payments directly from Medicaid for services rendered but rather
receives a portion of the capitation payment that Medicaid makes to the health
plans with which Preamble contracts.
Incorrect. DSH payments are usually made directly to the hospital, rather
than being included in the capitation payment made to the health plan. In
this way, the Medicaid agency continues to subsidize DSHs so that they can
afford to serve the Medicaid and uninsured populations
is eligible for capitation rates that are significantly higher than the FFS average for
all covered Medicaid services.
Incorrect. Federal regulations require that Medicaid capitation rates be no
higher than the Medicaid FFS average for all covered services and that the
rates be actuarially sound.
68. One characteristic of the workers' compensation program is that:
workers' compensation coverage is available to all employees, regardless of their

eligibility for health insurance coverage
Correct. Workers' compensation, which is available to all employees, is a
state-mandated insurance program which provides benefits for medical
expenses that are incurred and wages that are lost by workers who suffer a
work-related injury or illness.
indemnity benefits currently account for less than 10% of all workers'
compensation benefits
Incorrect. Workers' compensation includes an indemnity component, which
replaces any wages an employee loses as a result of a work-related illness
or injury. Indemnity benefits currently account for almost half of all workers'
comp expenses. In the future, these benefits are likely to account for an
even greater percentage of total costs.
workers' compensation programs in most states require eligible employees to
obtain medical treatment only from members of a provider network
Incorrect. Most states place limits on an employer's or workers'
compensation program's ability to require employees to obtain medical
treatment only from members of a provider network.
workers' compensation programs include deductibles and coinsurance
requirements
Incorrect. Workers' compensation is first-dollar coverage, which means that
employees cannot be required to contribute to the costs of their own care
through deductibles, coinsurance, copayments, or disability waiting periods.
47
69. The employees of the Trilogy Company are covered by a typical workers'
compensation program. Under this coverage, Trilogy employees are bound by the
exclusive remedy doctrine, which most likely:
allows Trilogy to deny benefits for an employee's on-the-job injury or illness, but
only if Trilogy is not at fault for the injury or illness.
Incorrect. When an employee seeks treatment for a work-related illness or
injury, an employer cannot deny liability under the workers' compensation
program, even if the employer is not at fault.
allows Trilogy to place limits on the amount of coverage payable for a given claim
under the workers' compensation program.
Incorrect. Workers' compensation is last dollar coverage in that health plans
cannot place limits on the benefits they will pay for a given claim.
requires the employees to accept workers' compensation as their only
compensation in cases of work-related injury or illness.
Correct. When an employee seeks treatment for a work-related illness or
injury, an employer cannot deny liability under the workers' compensation
program, even if the employer is not at fault. In return for this coverage,
employees are bound by the exclusive remedy doctrine.
provides the employees with 24-hour coverage.
Incorrect. Twenty-four-hour coverage is the integration of workers'
compensation coverage, both the medical and the disability components,
with non-workers' compensation healthcare and disability coverage.
70. The following statements are about workers' compensation provider networks. Select
the answer choice containing the correct statement:
In order to supply a provider network to furnish healthcare to workers'

compensation beneficiaries, a health plan typically uses the network that has
already been created for the group health plan.
Incorrect. For a health plan, supplying a network of providers to furnish
healthcare to workers' compensation beneficiaries is not simply a matter of
reapplying a network that has already been created for a group health plan.
Some providers who are suitable for the health plan's other networks may
not offer the specialized services required to treat workers' compensation
patients. Other providers may not understand the clinical practice guidelines
for occupational illnesses or injuries. Also, the providers in a workers'
compensation network need a different set of experiences and skills and a
different approach to practicing medicine than do providers in other
networks.
Typically, case managers for workers' compensation programs are physical
therapists.
Incorrect. Case managers for workers' compensation are generally
registered nurses or physicians with experience in occupational medicine or
in disability management. A case manager coordinates the care furnished to
the employee by various types of providers.
Most states prohibit the use of fee schedules in order to curb the rising workers'
compensation healthcare costs.
Incorrect. Many states try to curb rising workers' compensation healthcare
costs by instituting fee schedules, which list the maximum amounts that
48
providers can charge for specific healthcare services rendered under the
state's workers' compensation program. Fee schedules allow health plans to
regulate increases in medical care by limiting how much medical fees can
increase each year. They also ensure that the fees paid to various providers
for workers' compensation benefits are consistent.
Networks serving workers' compensation patients typically include higher
concentrations of specialists than do other provider networks.
Correct. In workers' compensation, musculoskeletal injuries account for
almost two-thirds of medical expenses. In addition, minor injuries account
for about 20% of workers' compensation claims but only 1% of other groups'
medical expenses. In order to meet these patient needs, a network serving
workers' compensation patients typically includes a higher concentration of
specialists than other networks include.
71. The Aztec Health Plan has a variety of organizational committees related to quality
and utilization management. These committees include the medical advisory committee,
the credentialing committee, the utilization management committee, and the quality
management committee. Of these committees, the one that most likely is responsible for
providing oversight of Aztec's inpatient concurrent review process is the:
medical advisory committee

Incorrect. The medical advisory committee typically formulates clinical
monitoring activities and develops clinical and preventive health practice
guidelines and medical care standards for members of the health plan's
provider network.
credentialing committee
Incorrect. The credentialing committee typically establishes and updates the
health plan's credentialing processes and criteria, subject to the board of
director's approval, and reviews the credentials of new applicants and
contracted providers during the credentialing and recredentialing
processes.
utilization management committee
Correct. The utilization management (UM) committee typically reviews and
updates the health plan's UM program description and develops utilization
review protocols. The committee usually is also responsible for reviewing
utilization patterns of the plan's providers and reviewing medical
appropriateness for utilization decisions that are under appeal.
quality management committee
Incorrect. The quality management (QM) committee typically has the
responsibility for overseeing the health plan's quality improvement activities
in both the clinical and service areas. This committee also reviews and
updates the health plan's QM program for approval by the board of directors
and recommends policy decisions to the board.
72. In order to evaluate and manage the performance of individual providers in its
provider network, the Quorum Health Plan implemented a program that focuses on
identifying the best and worst outcomes and utilization patterns of its providers. This
program is also designed to develop and implement strategies such as treatment
protocols and practice guidelines to improve the performance of Quorum's providers.
This information indicates that Quorum implemented a program known as:
49
an integrated delivery system (IDS)
Incorrect. An IDS is a type of health plan which is a combination of two or
more health plans, group practices, clinics, and hospitals that links the
delivery, financing, and administration functions of medical care.
a coordinated care program
Incorrect. A coordinated care program is one type of organization that can
contract with CMS to provide covered services to Medicare beneficiaries
under Medicare+Choice. A coordinated care program is offered by a health
plan such as an HMO with or without a point-of-service (POS) option, a
preferred provider organization (PPO), a provider-sponsored organization
(PSO), or a managed healthcare plan offered by a religious fraternal
organization.
ostensible agency
Incorrect. Under the theory of ostensible agency, also known as apparent
agency, if a plan member reasonably believes that a provider is acting as the
health plan's employee or agent while providing negligent care, the member
may have cause to bring action against the health plan.
continuous quality improvement (CQI)
Correct. CQI in healthcare is a structural organizational process which
involves personnel in planning and executing a continuous stream of
improvements in systems in order to provide quality healthcare that meets
or exceeds customer expectations.
Canyon used a process measure to evaluate the performance of Dr. Enberg when it
evaluated whether:
Dr. Enberg's young patients receive appropriate immunizations at the right ages
Correct. Process measures evaluate the healthcare services offered by a
provider to the health plan and its members. Process measures apply to
such areas as the availability and use of preventive health screenings or
childhood immunizations.
Dr. Enberg conforms to standards for prescribing controlled substances
Incorrect. This is an example of a structural measure. Structural measures
evaluate the quality of a provider's staff, equipment, and facilities. Aspects
50
of a provider's practice that are appropriate for structural measurements
include the provider's procedures for controlling infection and the provider's
compliance with regulatory or accreditation requirements in such areas as
licensing and medical record keeping practices.
the condition of one of Dr. Enberg's patients improved after the patient received
medical treatment from Dr. Enberg
Incorrect. This is an example of an outcomes measure. Outcomes measures
evaluate a patient's condition after a clinical treatment. One example of an
outcomes measure is the five-year patient survival rate following a specific
treatment plan for a particular illness or a particular patient population.
Dr. Enberg's procedures are adequate for ensuring patients' access to medical
care
Incorrect. This is an example of a structural measure. Structural measures
evaluate the quality of a provider's staff, equipment, and facilities. Aspects
of a provider's practice that are appropriate for structural measurements
include the provider's procedures for controlling infection and the provider's
compliance with regulatory or accreditation requirements in such areas as
licensing and medical record keeping practices.
74. When evaluating the success of providers in meeting standards, a health plan must
make adjustments for case mix or severity. One true statement about case mix/severity
adjustments is that they:
typically are more important in measuring the performance of PCPs than they are
in measuring the performance of specialists
Incorrect. Case mix/severity adjustments are particularly important in
measuring a specialist's performance. Because specialists treat patients
with existing medical conditions referred by PCPs, a specialist's patient
base is fundamentally different from the general patient population.
help compensate for any unusual factors that may exist in a provider's patient
population or in a particular patient
Correct. An adjustment for case mix or severity is a statistical adjustment
that is made for an individual provider's patient population in order to
compensate for utilization and clinical variances created by such factors as
the age and sex of a patient and the patient's health status. Case
mix/severity adjustments allow for a more equitable comparison of data
between providers for both inpatient and outpatient care.
tend to increase the number of providers who are considered to be outliers
Incorrect. Case mix/severity adjustments help reduce the number of
providers who might otherwise be considered outliers. An outlier is a
provider who is using medical resources at a much higher or lower rate or in
a manner noticeably different than the provider's peers
allow for a more equitable comparison of data between providers of outpatient
care but not providers of inpatient care
Incorrect. Case mix/severity adjustments allow for a more equitable
comparison of data between providers for both inpatient and outpatient
care.
51
Problem 1
The national average cost per covered employee for PPO rental networks is $2.52
PMPM. This cost translates into roughly 1% of the health plan premium cost, assuming a
premium of $250 per employee per month. By multiplying the network rental cost per
member by the estimated number of plan members, the health plan can determine the
overall cost of renting the network. Figure 2B-8 illustrates how the network rental cost is
calculated.
Problem 2
If the provider charges $100 for a procedure, but the discounted FFS is $90 (90% of the
provider's usual fee), the health plan will base its payment on the DFFS, which is lower
than the provider's billed charge. Conversely, if the provider charges only $80 for the
procedure, the provider will receive payment based on the submitted charge, because it
is lower than the DFFS.
Problem 3
1. Patient A is a member of Health Plan B, which allows access to any provider.

2. Patient A receives treatment that costs $1,000 from Provider C, who is not
affiliated with Health Plan B.
3. Provider C submits a claim for the full amount of charges ($1,000) to Health Plan
B.
4. Health Plan B contacts a discount broker, typically a PPO or a third party
administrator (TPA), that has access to a list of the provider's discounted
reimbursement arrangements with various health plans. Discount brokers
typically purchase lists of contracted providers and their reimbursement rates
from area PPOs.
5. The discount broker finds that Provider C has a contract with PPO D (the silent
PPO in this situation) for a 20% discount off standard charges, and informs Health
Plan B of this arrangement.
52
6. Health Plan B applies the 20% discount to the $1,000 claim and remits the
resulting $800 to Provider C, along with an explanation of benefits (EOB) that
cites Provider C's arrangement with PPO D. Unless Provider C rechecks Patient
A's records for verification of health plan coverage, Provider C will not realize
that Patient A was not a member of PPO D and that Patient A's charges were not
subject to PPO D's discount.
7. Health Plan B pays an access fee to the discount broker and retains the remainder
of the discounted fee.
Problem 4
A health plan has a conversion factor of $10 per unit. A service that is assigned a unit
value of 10.0 will be reimbursed at $100 (10.0 units x $10 = $100), while a service with a
unit value of 15.0 will be reimbursed at $150 (15.0 units x $10 = $150).
Problem 5
Stop-Loss Insurance
A provider group purchases individual stop-loss coverage for primary and specialty care
services with a $5,000 attachment point and 10% coinsurance. If the accrued cost for
the primary and specialty care treatment of a patient is $8,000, the provider group
assumes responsibility for the first $5,000 (the attachment point) plus 10% of the
remaining $3,000 (the coinsurance) for a total of $5,300. The insurer would reimburse
the provider group for the remaining $2,700.23
A provider group with 5,000 plan members purchases aggregate stop-loss coverage for
its hospital risk pool with a threshold of 115% of projected costs and a 10% coinsurance
provision. The provider group funds a hospital risk pool at $40 PMPM. The estimated
risk pool (projected costs for hospital care) for the year would total $2,400,000 ($40 x
5,000 members x 12 months). The stop-loss insurer would reimburse the provider group
for 90% of hospital costs in excess of $2,760,000 (1.15 x $2,400,000). If actual hospital
costs are $3,000,000, the insurer reimburses the provider group for $216,000 (0.90 x
[$3,000,000 - $2,760,000]).24
Problem 6
Discounted Fee-for-Service
the UCR charge for a particular procedure is $100. Under a 20% discount arrangement,
a specialist who submits a claim for $100 for that procedure would receive $80 from the
health plan. Under a volume-based system, the specialist might receive $90 per
procedure for 0 to 10 procedures performed during a specific period, $80 per procedure
for 11 to 20 procedures, and $70 per procedure for 21 to 30 procedures.
53
Problem 7
Capitation Systems
Patients utilize PCP services an average of three times per year at an average cost of
$48. The PMPM capitation payment the PCP would receive each month for each plan
member would be $12.00 [(3 × $48) ÷ 12]. A PCP serving 2,000 plan members would
receive $24,000 in reimbursement each month.
Average utilization of cardiology services might be as low as 0.2 per year. Even if the
average cost of cardiology services is $72.00, the PMPM capitation rate for the
cardiologist would only be $1.20 [(0.2 × $72) ÷ 12]. The cardiologist would have to be
capitated for approximately 20,000 patients to receive an amount comparable to the
amount received by the PCP.
Problem 8
54
Problem 9
Discounted Fee-for-Service Payments
A health plan might negotiate a 10% discount for 0 to 100 total bed days, a 20%
discount for 101 to 200 bed days, and increasing discounts for additional bed days up to
a specified maximum.
Problem 10
If a health plan’s total medical expenses for a certain time period are $450,000 and total
revenues for the same period are $500,000, the medical loss ratio for that period is 0.90
or 90% ($450,000 ÷ $500,000).
55
Problem 11
A pharmacy that receives a 15% discount under its contract with a drug
manufacturer can purchase a drug with an AWP of $25.00 for only $21.25 ($25.00 –
$3.75). The difference between the AWP and the actual purchase price belongs to
the pharmacy.
Problem 12
The MAC list may specify a cost of 8 cents per tablet for a particular drug. If the
pharmacy purchases that drug for 10 cents per tablet, the health plan will reimburse only
8 cents of the cost and the pharmacy may not bill the subscriber for the remaining 2 cents.
If the pharmacy purchases the drug for 6 cents per tablet, it can charge the health plan
only 6 cents, and not the 8 cents specified on the MAC list. MAC pricing is used
primarily for multisource and generic products.
56
Problem 13
57

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1. The provider contract that the Canyon health plan has with Dr.

B: Incorrect. In applying performance measures, a health plan determines the

C: Correct. A provider profile focuses on patterns of a provider's care rather than

D: Incorrect. Health plans conduct access to care surveys to measure members'

2. The following statements are about the organization of network management

A : Correct. The organizational structure of the network management function

C : Incorrect. Provider relations representatives are usually responsible for

A. Protecting Nova's members against harm from medical care

ERISA applies to all issuers of health insurance products, such as HMOs

5. Not clear from Page 39

C: Correct. Creditable coverage includes previous coverage under a group health

D: Incorrect. Congress amended HIPAA to include federal requirements relating to

Ms. Netzger = 48 hours

7. The following situations illustrate violations of federal antitrust laws:

Situation B Members of a physician-hospital organization (PHO) that has significant

Situation A: horizontal division of territories; Situation B: group boycott

A: Correct. Horizontal division of territories involves competitors illegally agreeing

placing restrictions on provider-member communication involving treatment

A Incorrect. Health plan provider agreements should avoid placing restrictions on

B. Tuba is required to report all HEDIS results to the NAIC.

A: Incorrect. Statement A is a correct statement. Statement B is incorrect because

D; Incorrect. Statement A is a correct statement. The NCQA has integrated its

10 Following statements are about accreditation of health plans:

C Incorrect. The NAIC develops model standards to encourage uniformity in

D Incorrect. Accreditation is an evaluative process in which a healthcare

increased consolidation among health plans.

A: Correct. Increased health plan market maturity is indicated by a number of

B: Incorrect. Increase health plan market maturity is likely to be indicated by a

C: Incorrect. Increased health plan market maturity is likely to be indicated by

D: Incorrect. Increased health plan market maturity is likely to be indicated by

12. The following statements describe two types of HMOs:

Elm: open access (OA) HMO

most access and adequacy guidelines relate to preferred provider organizations

B Incorrect. Corporate practice of medicine laws generally restrict business

C Incorrect. A network-within-a-network approach includes the providers from one

D Incorrect. Because Medicare and Medicaid populations utilize healthcare

B Incorrect. This is a true statement. Credentialing and utilization management

D Correct. This is a false statement. Accountability is the process by which one

is a contract that creates a legally binding relationship between Enterprise and

B : Incorrect. One typical component of a letter of intent is a confidentiality clause,

C: Incorrect. A delegation agreement, not a letter of intent, is the contractual

18. The following statements describe two types of HMOs:

One true statement about Treble's delegation of its UM activities is that:

Ventnor's requirement of board certification is met by:

Cheryl Stovall, Thomas Kalil, and Roger Todd.

an MRK covers the content of specific patient records of a provider.

it is maintained by the individual states

24. A health plan that delegates designated credentialing activities to an NCQA-centered

A. A statement that identifies the purpose of the contract

due process standard

a termination with cause clause

Dr. Enberg's Charge FFS for This Procedure

A discounted fee-for-service (DFFS) system is usually easier for a health plan to

38. One difference between a fee-for-service (FFS) reimbursement arrangement and

is a prospective payment system, whereas capitation is a retrospective payment

includes only primary care services

risk pool arrangement

B. Forms of specialty physician reimbursement used by health plans include a retainer

• Selena Tovar, an oncology patient who requires radiation oncology services,

Subacute care most likely could be an appropriate option for:

Ms. Tovar, Mr. Borg, and Mr. O'Shea

45. Although ambulatory payment classifications (APCs) bear some resemblance to

A. These arrangements typically include payments for services rendered in the