Preparing for managed competition

Without the demands of managed competition or economic incentives to control costs, providers have little reason to invest in systematic data analysis about their patients. Information technologies in the hands of health care managers and physician executives primarily are tools for cost control, and, if cost control is not an important issue for them, they do not learn how to do it. The rules of the game have already changed for providers where managed care dominates the medical community and will change for the entire nation under managed competition. Managed competition gives providers strong incentives to identify the costs of care and unnecessary variations in those costs, to introduce new processes of care to reduce unnecessary administrative and clinical costs, to implement practice guidelines to reduce variations in outcomes of care, and to document statistics indicating excellent quality.     

Global theory and the nature of risk, Part 2. Towards a choice-based model of managed care

Orthodox managed care depends on top-down, command and control techniques to squeeze efficiency out of the system. But for every unit of economic good this approach produces, two or three bad units come as result. The key to moving to an environment where value and efficiency become self-sustaining is to structurally recognize the medicoeconomic reality of medicine: the episode of care. The episode forms a natural unit of analysis that not only renders costs and outcomes information translucent and accessible, but it also forms the natural conduit through which premium dollars can find their optimal value. By bifurcating probability risk from technical risk and allocating them in the ex ante and ex post markets, respectively, health care insurers and providers return to their rightful economic roles, and to their appropriate fiduciary duties. And patients regain some semblance of reasonable sovereignty in managing their own medical affairs.     

The rural health care enterprise: keeping up with the city slickers

As the managed care juggernaut rolls into rural America, numerous communities appear to be following the strategies adopted by their urban counterparts. But rural areas are different. There are several key dynamics that must be considered for rural communities to be successful in responding to the considerable challenges of the brutal market forces of managed care. The author presents practical suggestions for success in rural health care systems.     

Credentialing in managed care

Through the use of managed care techniques in recent years, the insurance industry has tried to bring the runaway costs of medical care under control. The result of this control effort is system access limitations, compared to the full choice indemnity plans of the past. This limited system access has now clearly moved HMOs and other managed care organizations into the category of "potentially liable health care entities," based on patient steerage, economic disincentives, and limited choices of the plan's participating providers and facilities. Just as hospitals have had to exercise rigorous care in the credentialing of members of their medical staffs, managed care organizations will have to ensure that the providers they use meet acceptable standards of competence.     

In-house recruiters: on the inside looking out

Few smaller hospitals or managed care companies have in-house physician recruiting departments. Their low hiring volume simply doesn't support such an operation. But most health systems and large managed care organizations say they literally couldn't afford to be without an internal system for the recruitment of physician executives and other health care professionals. They also claim they can find a better candidate faster than their counterparts on the outside. A number of them explain why.     

Dealing with the demands of change

If evidence of the changes occurring in and confronting the health care field were needed, it was provided in abundance at the College's Perspectives in Medical Management meeting in Chicago in May. The presentations and the discussions among members buttressed the feeling that the health care field is proceeding through a period of transformation. The evolving system will be anchored on managed care, with special emphasis on the word "managed." The accoutrements of managed care--case management, demand management, utilization management, clinical guidelines and protocols, capitation budgeting, and the like--dominated discussion. The "business" of health care is proceeding apace. Maintaining a balance between the financial and quality elements of health care delivery has never been more important. And the definition of that balance will be determined at the local and regional levels. Federal initiatives are temporarily in abeyance. The challenge for physician executives is to assume leadership in moving their organizations, and thus the health care system, toward a new design that corrects present deficiencies and positions both to respond more effectively to the health care market. While it is not possible to cover all of the more than 60 speakers who addressed the meeting, this report, through presentation of the ideas of some key presenters, is aimed at measuring at least the boundaries of the challenges that lie ahead.     

The role of the coordinator of care

Regardless of the specific outcome of the current health reform debate in Washington, it is likely that major changes to the health care system are in the offering. These changes, many of which are already in place or imminent in some locations, will have a major impact on the evolving relationships between physicians and hospitals. Most expect that these changes will accelerate the development of integrated health care delivery systems that will compete in the marketplace for a mixture of public and private health insurance dollars. In this system of "managed competition," health care dollars will flow to those systems that can ensure the best clinical outcomes while using the least economic resources. In this scenario, competing collaborative health networks that can manage the continuum of care will be central to the health care delivery system. The economic and political ties between physicians and hospitals will become more closely linked as government and private payers of health care services foster the development of these integrated, value-based health care delivery systems.     

Managed care information needs: a summary perspective

The key to survival in managed care is management of financial risk. You need to know what is in your contract and what you are obligated to do for which population during which period. Information systems can be an enormous help in managing managed care contracts and the financial risks they entail, but poorly selected and configured information systems will do little good for the organization that licenses them. The most important activity of a physician executive who is moving his or her organization into managed care contracting is to lead the process to define the functional requirements for information the organization will need to manage managed care contracts successfully.     

Strategic issues requiring public accountability: food for thought

Although the exact outline of U.S. health reform has become fuzzy because of political events, it seems clear that major changes in the manner in which health care is delivered and financed are under way. The initiative for the most part has been assumed by state government and by the health care field itself, as managed care becomes ever more entrenched and the health care system becomes ever more integrated. An expected outcome of these changes will be demands for greater public accountability on the part of health care providers and organizations. In this article, the author discusses some of the issues--professional compensation, documenting community service, ensuring public input into planning efforts, economic credentialing and quality of care, and managing ethics under managed competition--that will have to be addressed at the local level as these shifts take place.     

The new academic health center hybrids: part business, part academic

Academic health centers have flourished since the 1960s and even managed to survive the shift toward prospective payment. But in their current quest to expand the number of managed care patients and compete with the private sector, they often must price services below cost and reduce the number of faculty members and other personnel. Unless their prices are competitive, managed care companies will not do business with them. AHCs that cannot compete find they are overbedded, underused, and in turmoil. This article explores what successful AHCs are doing to stay healthy in the managed care era.     

Wanted--seasoned veterans. Diamonds in the rough need not apply

Health care organizations looking for physician executives prefer seasoned veterans--doctors who have already done the job. They want job-specific experience. Most organizations do not provide training grounds and orderly career ladders for aspiring physician executives. The Permanente Medical Groups, Family Health Plans, and some very large group practices are exceptions, but, for the most part, rising medical directors in these organizations stay with them. Most hospitals are not large enough to have associate or assistant medical directors or an environment that could provide a training ground for rising physician executives. On the other hand, hospitals, larger group practices, health insurance companies, and managed care organizations provide ample opportunities for nonphysician managers to train, gain experience, and climb the ladders. How can the novice physician executive break into the world of management and begin establishing management credentials? The author provides some key steps that can lead to success.     

Physician-sponsored networks. Will physicians take back medicine?

Until about the late 1980s, American physicians and their allies, hospitals and the health care manufacturing industries, dominated all facets of the health system--the clinical, the economic, and the political. The bulk of these providers' revenue flowed to them from a highly fragmented insurance system whose governing principle was to provide each insured patient free choice of doctor and hospital. Two distinct, concurrent shifts threaten to erode the medical profession's traditional dominance. The first is a rapid, general shift of control from the supply side of the health sector to its demand side. The second is a shift away from government control, over which organized medicine held much sway in the past, toward private regulators--the executives of the managed care industry. Is the trend towards greater dependence of practicing physicians on non-physician executives inevitable, or can physicians retain--and, in part, regain--their hitherto autonomous position in the health system?     

Strategic positioning. Part 1: The sources of value under managed care

Part 1 of this series organizes and discusses the sources of value against a background of an evolving managed care market. Part 2 will present, in more detail, the marketing and financial challenges to organizational positioning and performance across the four stages of managed care. What are the basic principles or tenets of value and how do they apply to the health care industry? Why is strategic positioning so important to health care organizations struggling in a managed care environment and what are the sources of value? Service motivated employees and the systems that educate them represent a stronger competitive advantage than having assets and technology that are available to anyone. As the health care marketplace evolves, organizations must develop a strategic position that will provide such value and for which the customer will be willing to pay.     

What's ahead on quality: the managed care perspective

Without question, the most important processes occurring in managed care that can be expected to affect quality are accreditation and the effort to obtain and compare uniform information on quality of care across health care organizations, in short, to create "report cards." For both processes, 1993 was an extremely productive year, and 1994 promises to be even more so. These two processes fit hand-in-glove--one is designed to determine that managed care organizations are equipped to serve the public and to implement better health care programs, while the other is designed to help them understand and improve their own performance. Although, in the short run, managed care organizations may view both these efforts as additional costs, in the long run, both should lead to a better industry and to better care for the public.     

Reforming the South African health care system

South Africa's success in reforming its health care delivery system will depend very largely on its success in reforming its shattered political and economic structure. In this article, the author describes the social, political, and economic factors that dominate the South African scene and suggests the alternative courses that are available to bring the country out of its apartheid past. Both South Africa and its internal and external critics will have to approach the task with patient understanding and flexibility to achieve lasting and satisfactory results.     

Purchasers and the impact of managed care on physicians

In much the same way that demands by managed care organizations are shaping the way physicians practice, health care purchasers impact how managed care organizations operate. Corporations purchase managed health care through their employee benefits programs, and understanding the language, objectives, and limitations of these purchasers is essential to grasping the forces influencing managed care organizations and the modern practice of medicine. The emergence of value-based purchasing as a strategic corporate approach to health benefits programs will dictate the forces on physicians, hospitals, and managed care organizations for years to come. These forces have already led to price reductions, health plan accreditation, employee-directed report cards, outcomes management, and organized systems of care, and they will determine the broad outlines of the emerging U.S. health care system.     

The future of American health care in the "post-reform" era

"As the debate over health care reform rages in Washington, the market is reforming itself. For any given market, it's a question of 'How soon will it hit?', not 'Will it hit?'" Health care reform and market restructuring are ushering in a new era of integrated health care. Although the future is not fully clear, there are at least three competing models for the creation of regional and statewide health systems that will integrate the financing and delivery of services to large enrolled populations of consumers: Payer-driven networks. Provider-sponsored systems. Partnership models. Whatever the future scenario, physician executives will play a larger, more dominant role. Research on integrated health systems has identified three critical success factors for future success: physician-hospital integration, clinical integration and information integration. For managed care to be successful, there must be clinical leadership. The essence of managing care is clinical efficiency, based on "critical-path" treatment protocols and real-time patient care management, supported by integrated information systems.     

Diagnosis-related group system. Can we still earn a living caring for sick people?

Medicare and Medicaid patients are starting to enroll in managed care organizations, as government tries to lower costs of caring for the elderly, disabled, and poor. Because they are the most likely to be sick, taking care of them imposes serious risks on hospitals and medical groups. The federal government uses the diagnosis-related group (DRG) system to reimburse hospitals. The system depends on physicians documenting diagnoses and complications. Physicians see illness as unpredictable, and so feel that detailed documentation of severity is futile. The government and health plans nevertheless follow case mix index and create hospital and physician profiles, relying on the existing imperfect system. For providers to be recognized for the value they add to the care of the sick, physicians must learn to use the DRG system to best advantage, or risk being driven out of business.     

Transition to capitation. Aligning incentives for success

Horror stories abound about providers that have failed to modify their incentive systems and have exhausted their annual capitation budget in the first six months of the plan year. Aligning the business strategy and financial incentives in advance is the best way to ensure that your integrated delivery system's transition to capitation is a success story. Rarely are physicians or hospitals with experience limited to the fee-for-service arena prepared to jump into a managed care or capitated compensation system. The transition can be eased by implementing a "shadow" capitation or similar arrangement that will test physician performance under a risk arrangement in advance. The information can be used to restructure the compensation system to ensure that the behaviors being encouraged will promote successful care and fiscal management.     

A multi-criteria approach for managing inter-enterprise collaborative relationships

Collaboration amongst enterprises is a common strategy used to increase competitiveness. Thus, enterprises that are collaborating need to define and use performance measurement/management frameworks composed of performance elements (objectives, performance indicators, etc.) that facilitate the management of their activity, as well as monitor their strategy and processes. There are many factors, e.g. trust, interoperability of Information Systems, etc. that need to be managed properly in order to support collaborative success. However, such factors and performance are not usually managed together. Furthermore, these factors and performance elements are interrelated but these influences are commonly overlooked. This paper aims to present an approach based on the Analytic Network Process (ANP) to manage collaborative relationships under an integrated approach by considering not only the inter-enterprise performance elements, but also the factors that influence collaboration. The approach is then applied to a collaborative enterprise network belonging to the renewable energy sector. With this innovative approach, enterprises will obtain significant information for the decision-making process, regarding which are the factors and performance elements that have the greatest impact on their competitiveness, and therefore should be prioritized.