Managed Care: A Real Solution to Community Health?

Abstract

Miller and Luft's compilation of research presents a compelling case for the use of group practices and staff models to achieve lower cost and utilization with comparable service quality. Research on newer models has yet to show comparable results. In the second part of the article, the authors speculate on future trends that portend greater purchasing power of employers being focused through fewer but larger managed care firms. In their view, successful firms become larger and gain greater leverage over providers through focused volumes. These large firms will supposedly become smarter, gain economies of scale, and turn the industry into a much more efficient delivery system for medical care thereby avoiding a single-payer revenue-capped, government-imposed system. This line of reasoning requires us to believe that the evolution of managed care on a linear basis will eventually dominate the marketplace in a form that serves the cost and access objectives of the communities, employers, and individuals they serve. With the current infrastructure driving the behaviors of employers, insurers, and providers, we fail to see much reason to believe taking a linear approach will achieve the desired outcome for the community at large. Except for a few examples, none of the large managed care organizations can point to much more than price discounts, coinsurance, and some utilization controls for delivering good or better care at lower cost. And, that is a far cry from a health care organization driven by process improvement and outcome data using more than market power to lower cost without sacrificing quality. Few good examples exist of managed care organizations using their scale or processes to demonstrate best methods for taking care of patients more efficiently or effectively. It appears from the outside that most such firms have achieved success with moderate savings achieved through some worrisome micromanagement techniques and discounts to shadow-price the still higher cost-indemnity systems. If we sense that most of our existing managed care operations are having substantial difficulty in moving into the most desirable models, can we rely on the trends outlined by the authors? As the authors correctly note, the aggregation of our managed care organization into larger-scale organizations has the for doing many things. But, the gap between potential and actual raises many questions about the trends predicted in this article. Some comments on potential trends and current developments include: Centers of excellence. Without the dominance of one big player, it seems more likely that many networks will emerge in each market. In markets with three, four, five, or more networks, will their incentives drive each network to strive for completeness in all services, thus splitting the market and not concentrating it into centers of excellence? In markets where certificate of need (CON) might restrict services to fewer networks, will there be any incentive or requirements for the provider with the single specialized service to offer it to competing networks? Even a cursory examination of our current competitive practices suggests that multiple networks beget proliferation, not focused specialization. Hospital-sponsored managed care plans. The contradictions in the arrangements noted by the authors stem from a provider perspective that views hospitals as revenue centers rather than cost centers. Such perspectives are destructive, yet most of the managed care systems outside the fully integrated models do just this. Some exceptions exist. Henry Ford Health System in Detroit is a good example. Humana's failure to tie managed care and hospitals together along with others may be in the tactical execution rather than in any ultimate contradiction of the organizational concept. A host of failures and errors that teach us little as to how to redefine these self-defeating provider perspectives. …