Managed care is the best way to reform healthcare

Paying for poor outcomes is unhealthy for patients and just poor business.

Editor’s Note: Welcome to Medical Economics' blog section which features contributions from members of the medical community. These blogs are an opportunity for bloggers to engage with readers about a topic that is top of mind, whether it is practice management, experiences with patients, the industry, medicine in general, or healthcare reform. The series continues with this blog by Jeffrey Gene Kaplan, MD, MS, a senior pediatrician and retired physician executive. The views expressed in these blogs are those of their respective contributors and do not represent the views of Medical Economics or UBM Medica.

I have a friend who has been battling cancer for over eight years. Fortunately, his wife, a teacher, has excellent healthcare insurance, but this does not make the care affordable, guarantee access or quality. In fact, there seems to be little relationship between coverage and getting the care one needs.

Jeffrey Gene Kaplan, MD, MSMy friend and his wife have to contend with large and frequent co-pays and out-of-pocket expenses, such as transportation costs, the spouse's missed work and other “opportunity” costs.

More from Dr. Kaplan: Who is ruining the healthcare system?

Can some or all these problems be fixed using The Managed Care Method?

A fellow medical director and I wrote about that question in 1994, paraphrased as follows¹:

Managed care is no panacea because it is not universal, as, for example Single Payer would be. Furthermore, it lacks a centralized, sharable database on accountability-who gets what, where and when how well did the psychological, medical or surgical intervention do. In other words, managed care tells little about the continuity of care, less about clinical efficacy, and nothing about the prediction of illness.

Previous blog: Change doesn't have to be a bad thing for doctors

In order to shift the current payment system from procedure volume and fee for service to the managed care method of rewarding quality and cost-utility, consumers should have choices about which health care provider to use, but they should also be required to pay significantly more if they choose a practitioner who is inefficient, ineffective or one with a poor track record.

Next: Reducing unwarranted variation to improve quality of care

Improving the quality of care by reducing unwarranted variation

To learn about that variation, one must define what is of value and how to emulate the best practices. One must also be careful to avoid having a 'silo' mentality meaning having a longitudinal picture and acuity adjusting all process and outcome information.

Simply put, all I am taking about is being able to make 'apples to apples' comparisons and to learn what works and what does not (and pay better when we are doing well by the patient, by the way).

Finally, the game changer of all of this is to measure and manage/manage and measure.

As Dr. Sneider and I said in our 1994 paper²: “To accomplish these objectives, proper data must be collected from the beginning. If not, in the end we will not know if we had done well, except by measurement of costs against budget. This, however, is precisely the trap managed care programs, government planners, and regulators should assiduously avoid.”

The strategic agenda for real reform lies in creating a value-based health care delivery system. As stipulated by Porter and Lee in 2013, health care will be organized and paid for differently in the near future. Six critical steps in reform are necessary:

1. Separate primary from preventive care; reorganize care around patient medical or surgical conditions, forming what they call “Integrated Practice Units” (essentially team work);

2. Measure to manage the outcomes from the patient’s perspective and costs of the longitudinal view, the “cycle” of care of every patient;

3. Convert from fee-for-service or prospective payments to bundled payments for episodes of care. [See “Bundled Payment Incentives: Risk or Reward? ”]

4. Health Care Delivery Systems must be collaborative; thus, they should be well-integrated and interdependent arrangements.

5. Take into consideration all, meaning not just local care.

6. Use information technology to integrate, bring together disparate elements of care and understand what happens to “whom,” “where” and “when,” and what works or does not, and communicate to improve efficiency and effectiveness.

The Harvard Business Review transformational piece referenced above dismisses the business procedures of: prior authorizations, bureaucratic hurdles, efficiency goals and looking at outcomes like mortality or survival rates for prostate cancer, for instance.

Next: Realigning incentives in real reform

Instead, the authors speak about “integrated health care systems” and “outcomes” as patients see them. I call this “measuring and managing“-- determining how the patient is doing, feeling and functioning. It is noteworthy to see health care as a patient-centric activity where collaboration and sharing information is vital, where fractionalization or piecework is discouraged and where care is always viewed over time, regardless of setting.

Realigning incentives in real reform

Given this paradigm shift let me say that I agree with Porter and Lee: “Models that fail to develop collaboration are out.” Given that, Integrated Practice Units and payment bundling are in.

Incentive alignment is critical. Capitation does not cut it simply because under it, the incentives are to do less. Also, capitation frustrates because a lot goes on that the provider cannot control. And, we all know the problems of fee for service, private practice, etc. It fractionalizes care and leads to unnecessary services and over-utilization.

Paying for poor outcomes is unhealthy for patients and just poor business.