A delegated entity in healthcare is an organization, such as a specialized vendor or large provider group, that a health plan authorizes to perform specific administrative or clinical functions on its behalf. The health plan (e.g., an HMO or PPO) transfers responsibility for certain duties to this third-party organization through a formal agreement. This arrangement allows the health plan to manage operations more efficiently and leverage the delegate’s specialized expertise. Delegated entities are widespread in managed care systems, allowing health plans to scale operations without building every functional department internally.
The Contractual Basis for Delegation
Delegation is a formalized, legally binding contractual relationship that transfers specific tasks from the health plan to the delegated entity. This formal contract, often called a Delegation Agreement, meticulously defines the scope of work, performance standards, and the required reporting frequency. The primary drivers for this delegation are often efficiency, the need for specialized skills, and managing operating costs by outsourcing labor-intensive processes.
The relationship is frequently established through risk-sharing contracts, particularly in managed care, and often involves a Business Associate Agreement to ensure the proper handling of protected health information. Although the delegated entity is granted the authority to perform the function, the overarching health plan retains the ultimate responsibility and accountability to its members and regulatory bodies. If a delegated entity makes an error, the health plan is still the entity that must answer to state and federal regulators.
This model allows the health plan to focus on core strategy while relying on the delegate’s specialized infrastructure and personnel. The contract specifies remedies, including the revocation of delegation authority, if the delegate fails to meet the defined performance metrics.
Specific Functions Handled by Delegated Entities
Delegated entities manage a wide spectrum of activities, which can generally be categorized into administrative and clinical functions, all aimed at streamlining the healthcare delivery system. Key functions often delegated include:
- Credentialing and Provider Enrollment: This administrative duty involves the rigorous vetting of healthcare providers. The entity verifies qualifications, such as state licensure, board certifications, and work history, to ensure providers meet network standards before treating members.
- Claims Processing and Payment: The entity handles the adjudication and payment of medical bills submitted by providers. This requires systems to accurately interpret contract terms, calculate appropriate payments, and process claims in a timely manner.
- Utilization Management (UM): This clinical function involves reviewing the necessity and appropriateness of medical services before or during treatment. Activities include prior authorizations for high-cost procedures and concurrent reviews to assess the need for continued inpatient hospital stays.
- Risk Management and Quality Improvement: This involves monitoring patient outcomes and specific population health metrics. This includes tracking quality measures, identifying gaps in care, and implementing initiatives to improve the overall health of the plan’s member base.
Oversight and Accountability Requirements
Given the sensitive nature of the functions and data involved, delegated entities operate under stringent oversight and accountability requirements imposed by the delegating health plan and external regulatory bodies. The health plan is required to conduct mandatory, often annual, oversight audits of the delegated entity’s operations. These audits assess compliance with the terms of the delegation agreement and verify adherence to established policies and procedures.
Compliance with federal and state regulations is a non-negotiable requirement for all delegated entities. This includes strict adherence to rules like the Health Insurance Portability and Accountability Act (HIPAA) for safeguarding patient data, as well as various state insurance laws. Organizations like the Centers for Medicare and Medicaid Services (CMS) and state Departments of Insurance heavily influence the compliance standards, especially for government-sponsored health plans.
Accreditation organizations, such as the National Committee for Quality Assurance (NCQA), also play a significant role by setting standards for how health plans manage delegated responsibilities. The delegation agreement must outline the process for performance monitoring and specify remedies, including the requirement for the delegate to implement corrective action plans (CAPs) if deficiencies are found during an audit. This multi-layered oversight structure ensures that the delegate maintains the same quality and compliance standards as the original health plan.