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Administrative Services Organization (ASO)
A Community Managed Care Model
by Mike Fadden
In the course of the past twelve months, each of the five DRIS Initiative sites has selected as their DRIS Initiative venture to develop managed care administrative services uniquely matched to the circumstances of their communities. Whether called an ASO (Administrative Services Organization), a CHO (Community Health Organization) or a Health Plan, these ventures all fall under the broad category of an ASO.
Overview of What an ASO Is and Is Not
An ASO is not an insurance plan. It is not a Health Maintenance Organization (HMO). An HMO contracts with a payor to administer and provide covered healthcare services to the payor's covered population for a fixed payment per month. An ASO doesn't have its own Knox-Keene License from the Department of Corporations to sell insurance. To sell insurance products, an ASO requires an insurance partner, licensed by the state to do so.
An ASO is a managed care administrative entity which typically performs some or all of the following functions:
Administrative
- General Administrative
- Planning
- Marketing
- Human Resources Management
- Financing & Accounting
- Asset Management (Reserves)
- Financial Report/Analysis
- Actuarial Forecasting
- Actuarial Analysis
- Risk Sharing Development
- Payroll, Payables, etc.
- Regulatory Compliance
- Information Systems
- Operations Management
- Network Administration
- Risk Sharing Management
- Contract Negotiations
- Contract Management
- Provider Services
- Insurance/Plan Administration
- Benefit Design
- Payor Negotiations
- Payor Contract Management
- Stop Loss/Reinsurance Management
- Member Services
- Enrollment /Disenrollment
- Orientation
- Information & Referral
- Education
- Complaints /Grievances
- Claims Administration
- Claims Processing
- Claims Repricing
- Claims Adjudication
- Payment Processing
- Data Support for Other Functions
- Data Reporting & Analysis
- Medical Cost Analysis
- Utilization Management
- Quality Management
- Provider Profiling
- Payor Reporting
- HEDIS/NCQA Reporting
Medical Management
- Utilization Management
- Prospective Review/Authorization
- Concurrent Review/Authorization
- Retrospective Review
- Formulary/Drug Utilization Review
- Protocol Development/Compliance
- Provider Profiling
- Case Management
- Screening & Referral
- Behavioral Health
- Small Case
- Large Case/Out-of-Area
- Adult Health
- Small Case
- Large Case/Out-of-Area
- Quality Management
- Guidelines Development/Compliance
- Access
- Clinical Process/Protocols
- Member Services
- Provider Services
- Payor Services
- Clinical Outcomes
- Internal Reporting & Assessment
- Provider Profiling
- Case Profiling
- Quality Improvement Process
- External Reporting
- Medicare
- HEDIS
- NCQA
- Credentialing/Recredentialing
- Application Process
- Credentials Review/Assessment
- Provider Profiling Assessment
- Corrective/Remedial Action Plan
Based on local needs, a community ASO may also perform other functions which may or may not be related to managed care such as:
- Physician Services Management
- Physician Billing
- Physician Practice Management
- Physician Office Staffing
- Centralized Registration/Reception
- Centralized Transcription Services
- Physician Recruitment
- Advise Nurse System Management
- Community Services
- Community Health Assessment
- Community Health Improvement Programs
- Integrated Prevention Pathways
- Children's Health Insurance Program (CHIP) - in California, the Healthy Families Program
- Health Promotion Campaigns
- Wellness & Prevention Services
- Organization and Ownership
An ASO may be organized in more than one manner. It may exist as: (1) a freestanding entity; (2) a department or division of a health plan; (3) a part of a provider-owned risk bearing entity; or (4) a part of an integrated health system. There are few rules regarding who can participate in the ownership of an ASO. They can be privately or community owned. The owner/directors may be individuals, corporations, providers, or a community. However, it is important to remember that it is the interests of the owners which will be served by the ASO venture. Therefore, ownership, and thus governance, becomes an important consideration for the DRIS Initiative participants in forming their Community ASOs.
Operations
While the ownership of the ASO may be the community, it is not necessary that the ASO be operated by the community. The ASO market is extremely competitive. In order to provide the functions described above to potential purchasers at a competitive price, it may be necessary to contract, at least initially, for some of these functions until the community can gain the necessary expertise to perform these functions on its own.
Customers
Typical customers who are interested in purchasing ASO services are self-insured employers and provider-owned risk bearing entities such as: Physician Hospital Organizations (PHOs); Independent Practice Associations (IPAs); and Hospital Networks.
Risk
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| Indian Wells Valley Community Health Council-Executive Committee Meeting Ridgecrest, July 1998 |
An ASO, like any venture, assumes financial risk for operating the business. Operating revenues must exceed operating costs to stay viable on an ongoing basis. The owners of the business, depending on the legal structure of the ASO corporation, are accountable for the gains and losses of the ASO. The owners set the business policies and hire or contract for day-to-day management.
While a health plan assumes all the medical cost risk in exchange for a monthly fixed payment or premium, it may also “off-load” some or most of this risk to provider-owned entities. In this case, the health plan will typically take its “piece of the pie” by paying the provider-owned entity a percentage of the premium in exchange for the entity assuming all the medical cost risk. Ultimately, the entity that assumes most or all of this risk must assume the responsibility for managing the risk, whether it be the health plan, a provider-owned organization or a self-insured employer. These entities, in turn, can contract with an ASO to help them manage their medical cost risk.
In contracting to manage risk, the ASO may assume little or no medical cost risk on its own. In the case where the ASO sells administrative services to a self-insured employer, the fiduciary responsibility and risk for the covered services provided to employees and their dependents is assumed by the employer. An ASO which is a department or division within a health plan or provider-owned risk bearing entity shares risk with the risk bearing entity. Freestanding ASOs usually do not assume financial risk for providing covered services to a defined population. They typically charge for their services based on a percentage of the risk bearing entity's premium revenue, a fee per member per month or, in the case of self-insured employers, a fee per employee per month.
Community Benefits
For the DRIS Initiative sites, the principal goal of developing a community owned ASO is to retain and/or regain local control of care, dollars and jobs. An ASO developed for a rural integrated health system can also be the administrative body through which prevention and early intervention programs may be coordinated in an effort to attain measurable community health improvement.
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Administrative Services Organization (ASO) Community Managed Care Model |
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