Insurance Contracting Strategy Essay

reimbursement evaluation and proactive search of strong reimbursement for future volume. Analysis of the first element is crucial because it helps in ensuring that reimbursement documented in existing contracts is being effectively recorded. The information obtained during this stage can be used at any time of renegotiations or contribute to the development of effective alternative approaches. The assessment of the second element helps to determine how insurance contracts compare and to ensure reimbursement expectations are established within competitive market ranges. The third element can be used for defense in validating the need for higher reimbursement than the current offer. Second Students' Response:

As the use of managed care plans have increased in the past few years, there is an increased need for appropriate insurance contracting strategy. The existing managed care plans are primarily based on demand management through co-payments. While these strategies have been relatively effective in providing coverage, they can contribute to deficient treatment in relation to ideal treatment. Since there is need for ideal provision of treatment at reduced costs, the current strategies in managed care plans can be deemed ineffective. This is primarily because a simple demand-managed health insurance contract is not generally optimal. Moreover, contracting strategies that provide treatment randomly are not realistic.

Consequently, the most suitable insurance contracting strategy is supply management, which potentially complements and may even substitute demand management as a technique to control moral hazard. Through supply management initiative, the treatment decision is mutually determined by the physician and patient (Ma & Riordan, 2002, p.98). The physician in turn acts as a controlling agent on behalf of the insurance firms through approving...


However, patients also act as controlling agents for physicians so that they do not prescribe costly medications, frequent treatments, private nurses, and other elements that may increase the overall costs of care. Therefore, supply management initiative in managed care plans ensures that treatment is a collective decision that capitalizes on the evaluated benefits to the physician and patient. This is considered as a lessened form of a negotiation model with the weights being a reflection of the negotiation strengths of both the physician and patient. Notably, the negotiation process in this contracting strategy takes place after the consumer has become ill though before he/she is aware of the severity of the disease. In essence, the collective decision balances the bonus payment of the physician against the treatment reimbursements of the patient.

Sources Used in Documents:


Devers, K.J., Brewster, L.R. & Casalino, L.P. (2003, February). Changes in Hospital

Competitive Strategy: A New Medical Arms Race? Health Services Research, 38(1), 447-469. Retrieved from

Jones, C.L. & Mills, T.L. (2006, November-December). Negotiating a Contract with a Health

Plan, Family Practice Management, 13(10), 49-55. Retrieved from
Ma, C.A. & Riordan, M.H. (2002). Health Insurance, Moral Hazard, and Managed Care. Journal of Economics & Management Strategy, 11(1), 81-107. Retrieved from
2014, from

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