The Case for Managed Care: Part 3 of 3

The Case for Managed Care: Part 3 of 3
September 1, 2001


In Part Two, questions were raised about the way the U.S. health care system is organized. Fee-for-service and the independence of physicians and hospitals were shown to be linked with the high cost of health care. Managed care offered promise as a viable alternative structure for the delivery of health care services. Bottom line: The organizational structure of managed care does create incentives to control costs.


Medicine as Art

Before we continue, it is crucial to understand that much of medicine is an art. While science underpins the discipline of medicine, there are multiple ways to treat almost every disease or health care problem.

These alternative methods vary significantly in cost. In many situations, there is a costly way to treat a patient, and a less expensive way to treat the same patient for the same condition. Both approaches may be equally effective.

The choice of an approach depends upon a physician’s education, his or her past success with a specific approach, access to information about alternative treatment approaches, and the way physicians in that geographic area generally practice. And, of course, how much a physician gets paid for a specific treatment might affect the decision of which treatment to use.

That treatment approaches, even for the same condition, vary widely across the U.S. has been underscored by national research projects. The major published work in this field is the multi-volume Dartmouth Atlas of Health Care, produced by a working group headed by Dr. John E. Wennberg at Dartmouth Medical School. In a news release describing the next publication in the Atlas series, Wennberg and his colleagues note:

“The Atlas project has consistently revealed that there is little coherence in American Medicine. The care you receive is more likely to be a function of where you live and the doctor you consult, rather than the result of commonly-shared information about what works and what informed patients actually want.”

According to Atlas project research, the frequency of cardiac bypass surgery for Medicare patients varies from 2.7 to 9.5 procedures per 1000 enrollees, depending on where the patient lives. The mastectomy variation is from 1.1 to 4.0 procedures per 1000 female Medicare enrollees. Which number is the “right” number of procedures?

No one can know . . . but we do know that high utilization rates can be lowered. High utilization rates result in higher health care spending. The Dartmouth research demonstrates that if less costly approaches to care were utilized, our nation could save enormous amounts of money.


How to Achieve Optimal Utilization

The Dartmouth numbers help us focus on the real question: How can the health care delivery system be structured so that it consistently delivers the least expensive care most appropriate for each patient?

To answer that question, I believe we must seek out health care delivery systems that do two things: First, they take into account financial incentives; and second, they enhance opportunities for physicians to learn about and implement less costly approaches for the care of their patients.

Managed care—especially HMOs that employ physicians full time—win hands down. With regard to incentives, the managed care organization loses money whenever an inappropriate or unnecessary high-cost treatment is provided. By contrast, providing any service in a fee-for-service delivery system adds income to the organization or physician.

The question of physician education is a little more complicated, but the managed care environment is more likely to encourage physicians to learn about and utilize less costly, but similarly effective treatments. Education is costly and takes time out of a physician’s workday. Reading about and researching new techniques and approaches to patient care can be difficult for a physician in solo practice. Even combining a few physicians into a group practice does not solve the education problem.

Managed care organizations are able to create departments whose sole purpose is to maintain currency with respect to new and more effective patient care approaches. Then, this information can be disseminated to physicians and other personnel working for or contracting with the managed care organization. The time from publication of research results to implementation of new procedures can be reduced considerably through a managed care organization.

Several years ago, Dr. Paul Ellwood Jr.—commonly acknowledged as the “father of modern managed care”—said, “I misjudged the degree of intellectual stimulation that might accrue from being able to follow large numbers of patients and feed the information back to doctors.” Ellwood was also dismayed to find “. . . that doctors are remarkably uncurious about how their patients turn out.”

The pressures that exist in a solo or small group practice leave physicians little time to be “curious.” The information they need to keep current with new, less costly treatment approaches is not easy to obtain. I believe the managed care organization provides the best structure to obtain, digest, and disseminate information that will positively affect the choice of treatment method and the cost of patient care.


Quality of Care

That leaves us with a very important question: Is there a difference in the quality of care rendered between fee-for-service health care and managed care?

The jury is still “out” on this question, as no research definitively answers it. However, there is much that we do know.

For example, managed care has been around in some form for over 50 years. That it is still around helps answer the question. Study after study concludes that patients are generally satisfied with their managed care plans. State of Arizona employees, in a survey that covered all plans offered, including indemnity, gave top marks to one of the HMOs—the one, in fact, that I am enrolled in.

Personally, I have found that a staff-model HMO, where almost all of the physicians are employed by the insuring organization, can provide effective and efficient care. The plan provides me with prescription drugs and direct access, without referral, to a list of services including vision and hearing tests, flu shots, education, etc. I still like managed care for my care after 10 years of participation in Illinois and Arizona.

Outrageous patient mistreatment or lack of treatment, which quite appropriately attract negative publicity, is abhorrent. As is true of any form of health care delivery, bad actors and organizations exist in managed care . . . for a while. They will be weeded out by lawsuit and by patient and employer choice. Provided we have sufficient information about the health plans available to us, and opportunities to choose, we can be wise purchasers of care.

Finally, let us remember that too much care can be a problem. Some of the injuries and deaths attributable to the health care system itself can be avoided by choosing less care or less invasive forms of care. Danger exists with every surgery, every unnecessary day in the hospital, and every unneeded medication.

The right care at the right time should be our health system goal. What form of health care delivery would you choose to reach that objective?


Stuart A. Wesbury Jr., Ph.D. is professor emeritus in the School of Health Administration and Policy at Arizona State University’s College of Business. With Joseph L. Bast and Richard C. Rue, Wesbury is the coauthor of Why We Spend Too Much on Health Care (1993). His email address is stu.wesbury@asu.edu.