Important points in managed care contracts

Health care is increasingly managed through some contractual relationship. Such contracts vary and the contracting entities may be clinics, universities, health maintenance organizations, individual practitioner organizations, preferred provider organizations, corporate health plans, or other structures. It is estimated that within 10 years more than 70 percent of all health care will be provided through some type of managed care plan.     

Rolling back third-party intrusions in the practice of medicine

Formerly vaunted projections about the triumph of managed care over the provider-controlled health services industry now appear overly optimistic as consumer and provider opposition stiffens. Popular dislike of managed care and purchaser disenchantment over its failure to deliver on promises to control health insurance spending have created a strategic opening for rolling back third-party interference in medical practice. Employer frustration over rising premiums, compounded by workers' antagonism toward benefits restrictions and worry over the loss of government protection against managed care litigation, signals a radical overhaul in the way health insurance is offered. For many employers, substituting defined contribution for defined benefit plans and transferring ownership rights and responsibilities to employees is an attractive solution. Along with the growth of consumer-friendly health plans and a relaxation of onerous managed care practices, physicians can look forward to a restored doctor-patient relationship. This article identifies the forces pushing health care purchasers to adopt defined contribution plans and discusses the implications of such a movement on the physician-patient relationship.     

Partnerships in health care: creating a strong value chain

The health care climate is one of stormy relations between various entities. Employers, managed care organizations, hospitals, and physicians battle over premiums, inpatient rates, fee schedules, and percent of premium dollars. Patients are angry at health plans over problems with access, choice, and quality of care. Employers dicker with managed care organizations over prices, benefits, and access. Hospitals struggle to maintain operations, as occupancy rates decline and the shift to ambulatory care continues. Physicians strive to assure their patients get quality care while they try to maintain stable incomes. Businesses, faced with similar challenges in the competitive marketplace, have formed partnerships for mutual benefit. Successful partnerships are based upon trust and the concept of "win-win." Communication, ongoing evaluation, long-term relations, and shared values are also essential. In Japan, the keiretsu contains the elements of a bonafide partnership. Examples in U.S. businesses abound. In health care, partnerships will improve quality and access. When health care purchasers and providers link together, these partnerships create a new value chain that has patients as the focal point.     

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.     

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.     

From managing access to managing care: the impact of primary care on health care delivery organizations.

Professional "revenge of the nerds" is currently taking place, as managed care evolves generalist physicians into new professional prominence. Primary care physicians are finding themselves at the center of health care market reform as health plans, insurers, and other financing organizations turn to them as the key to cost control. In short supply, they are prospering financially from the demand. As the source of patients, they are gaining in prestige from specialists and hospitals who once demeaned them. But these newfound roles are only the initial steps in the transformation of the primary care practitioner. The change that the generalists are experiencing is essentially managing access to care, not truly managing care itself. There are large and crucial differences between managing access to care and actually managing care. These differences are, in many ways, a higher calling for primary care practitioners as they refocus attention on patient outcomes, which will in itself result in a lower resource utilization above and beyond the crude controlling of access. What those differences are, what new roles they require, and what impact they will have on organizations that either house or contract with primary care physicians will be the focus of this article.     

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.     

Physician career development: toward building a model

Virtually no managed care organization provides a comprehensive and integrated program for physician career development. That's the principal finding of a survey we carried out in Spring 1994 in which we interviewed several individuals who have proven instrumental in the creation of career development programs at their managed care organizations. We started our research with the hypothesis that career development programs for physicians--frequently the most highly paid category of employees and the ones often most directly involved in the delivery of health care--should parallel the mission of the organization. In many of the organizations we surveyed, the mission included clinical excellence, managerial competence, research, teaching, community service, and building shareholder equity. While each organization offered some component of career development--usually clinical improvement and management development--very few offered programs that fostered the continued professional development of physicians in other aspects of their missions. In most cases, even in organizations with stronger career development agendas, the programs were passive and were rarely linked to the overall "corporate" goal of the managed care institution. This critical disconnect makes it extremely difficult for health care organizations to develop a workable system of accountability for their career development programs.     

Trends in managed care organizations: implications for the physician executive.

The rapid change in the managed health care industry is placing substantial demands on the managerial and leadership skills of physician executives. These changes are forcing a reevaluation of the fundamental principles of managed care organizations, specifically in terms of patient satisfaction, cost containment, and quality health care. Additionally, the physician executive will be confronted with substantial issues concerning future staffing needs. This article assesses the health care industry's environment to suggest where managed care is going and how physician executives should position themselves to optimize their position in the marketplace.     

Newspapers foretell health care's future.

This article is based on a two-months snapshot (November 1998 to January 1999) of newspaper articles addressing various health care issues. Newspaper contents reflect the changing market share of competing societal concerns. Health care issues, particularly cost and choice, now preoccupy the American people. Health care trends percolate bottom-up through the pages of newspapers, not top-down from Washington, D.C, policymakers, or health care executives. By reviewing these articles, the author provides a big picture view of the prevailing and emerging health care trends. From the new thrust of consumerism and the public backlash against managed care organizations to the demise of HMOs and PPMCs, these observations signify not only the concerns that are bubbling to the surface but also the direction that health care is headed. Consumers are in the driver's seat and physician executives need to provide them with evidence of the value they desire--and understand what they perceive as value.     

Hospital role on decline.

The era of hospital dominance of the health care field has ended. The new day will belong to insurers and payers. Health maintenance organizations will become the primary actor on the health care scene. If PPOs are added to HMOs, and by 1990 most PPOs will look like HMOs, 70 percent of the U.S. population will be enrolled in such plans. By that time, at least 10 percent of the nation's hospitals will have disappeared.     

Strategic positioning. Part 2: Positioning challenges in an evolving health care marketplace

Why is strategic positioning so important to health care organizations struggling in a managed care environment and what are the sources of value? In Part 1 of this article, entitled "The Sources of Value under Managed Care," the authors presented four sources of value relative to the evolution of the market from fee-for-service to managed care. These value sources are: (1) assets, (2) price/performance, (3) distribution, and, ultimately, (4) capabilities and brand equity. In this article, the authors further elaborate on the sources of value as the market moves beyond the historical fee-for-service position to a managed care marketplace. Part 2 presents the marketing and financial challenges to organizational positioning and performance across the four stages of managed care.     

The consumer choice model: a humane reconstruction of the U.S. health care system

"Consumer choice," "defined contribution health programs," "voucher systems," and "health marts" are variations on a theme: employees buying their own health care. This new approach to health care purchasing, which is designed to minimize the role of employers, is being proposed by an array of economists and by both Republican and Democratic legislators as the best way to address the nation's health care ills. Although enabling national legislation is unlikely to pass soon, the debate will nevertheless change the face of health care in America. The prospect is reminiscent of the debate over "Clinton Care" in 1993--although legislation was never passed, managed care rapidly came to dominate the U.S. health care system. As this reform takes hold, beneficiaries will make their own health plan selections but will have more responsibility and may bear more cost. Providers will have to adapt to new, customer-driven requirements for performance, accountability, and communications but will also find opportunities in a marketplace that they will have a major role in shaping. Physicians, health plans, and insurers should understand how these proposals will transform their role in health care.     

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.     

Is leadership born or made?

Is leadership born or made? By profiling three colleagues who made the transition from clinician to top-flight executive in a health care organization, the author provides case studies from which to discuss leadership issues. An evolutionary pattern has developed with respect to physicians changing careers: The first model was the medical director, followed by the vice president for medical affairs, and finally the move to managing the health care system, group practice, or managed care organization. Are physician executives fundamentally different from clinicians in terms of leadership characteristics? What are the essential qualities needed to lead health care organizations? These questions are explored in-depth.     

The evolving role of the primary care physician

In today's climate of health care reform, the title of this article might more appropriately be "Is the Role of the Primary Care Physician Evolving or Going the Way of the Dinosaur?" According to Koop, primary care is in trouble. Whereas only 29 percent of U.S. physicians are primary care physicians, in Great Britain, 72 percent of physicians are primary care physicians and in Europe and Canada the average is 50 percent. Many U.S. primary care physicians are in the later stages of their careers and nearing retirement age. Unless the supply increases, this number will dwindle further. However, in 1992, only 14 percent of U.S. medical school graduates were headed for primary care careers. Even if the supply of primary care graduates were increased to 50 percent of the graduating medical school class, it would be well into the next century before the ratio of primary care physicians to specialists would be equal. Primary care is at a critical juncture and the next few years will decide the fate of the primary care physician. Given the state of primary care today, I believe that a fundamental look at the assumptions regarding the role of primary care physicians is in order. The current health reform movement has placed a major responsibility on primary care to solve many of the problems in health care delivery today, such as cost, utilization, and prevention. Many health care organizations are planning strategies involving primary care providers, and physician executives can play a key role in these decisions.     

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.     

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.     

Managed care liability.

Debate is heating up concerning proposals that patients have the right to sue their managed care plans for damages from wrongful denial of benefits or delays in care. Some states have recently passed legislation to address this issue and it is expected to be an area of intense legislative debate during this year. As managed care entities increasingly enter the realm of medical decision-making, the additional burden of this responsibility is taking shape. Whether managed care plans should be treated like providers of care and be held accountable for decisions that impact patient outcomes, or be viewed only as insurers is a policy question of immense proportion.     

Leading beyond the bottom line

Do physician executives approach managing and leading health care organizations like a CEO of a Fortune 100 company? Or does their training as physicians first give them a unique perspective, leading them to view organizational issues differently? The authors suggest that to be a physician executive is to be the practitioner, teacher, coach, and mentor for a new philosophy of leadership and management called Leading Beyond the Bottom Line. While the financial health of an organization is critical to its survival and its ability to fulfill its purpose, the trap is to focus on maximizing the bottom line. This new philosophy leads an organization to attend in equal measure to the (1) welfare of its patients, (2) its financial health, (3) the well-being of its employees, and (4) the building of its community. "The Optimal Organization" is one in which these four objectives are seen not only as related, but interconnected, and the goal is to maximize all of them. The legitimate role of the physician executive is to manage in search of Pareto Optimum, or the maximum benefit for all four organizational objectives. Clearly, this is a tougher job than maximizing profits or just optimizing profits and patient care.