Physicians, employers encourage managed care organizations to improve quality of care

By Maureen McInaney

Physicians are assuming a stronger stance in their negotiations with managed
care organizations, and employers and federal and state governments are
becoming more sophisticated about promoting and rewarding high quality care,
according to UCSF researchers who have summarized the evolution of managed care
in the United States.

“In an effort to improve consumer confidence, managed care organizations are
now being challenged to emphasize quality in addition to cost controls,” said
Adams Dudley, MD, MBA, UCSF assistant professor of medicine and co-author of
the paper called Managed Care in Transition.  The paper appears in the April 5
issue of the New England Journal of Medicine in a new series called Health
Policy 2001.

“For their part, physicians are demanding that capitation contracts provide
sufficient resources to allow them to focus on prevention, early diagnosis, and
coordinated care initiatives such as disease management programs - rather than
episodic provision of services,” he said. He explained that disease management
programs (multidisciplinary teams that coordinate care across services) are
intended to reduce errors, keep costs lower, and help providers deliver better
continuity of care for patients.

One of the primary strategies physicians now use to counterbalance the
purchasing power of managed care organizations is to affiliate with each other,
said the researchers. The number of physicians in solo practice has declined
significantly in the last two decades, while the proportion of young physicians
who enter practice as the employee of a medical group or an HMO has increased
from one-third to two-thirds, said Harold Luft, PhD, director of the UCSF
Institute for Health Policy Studies and co-author of the paper.  In addition,
physician-hospital organizations have been created either to accept global
capitation (a contract in which the insurance company sends one check for a set
per-member, per-month fee, regardless of the amount of service provided) or
ensure hospitals a steady stream of admissions. However, differences in
cultures between medical groups and hospitals have limited the growth of these
combined organizations, said to Luft.

Employers have also turned to collective action in the drive to improve quality
of care, said the researchers.  The Leapfrog Group is a national coalition that
includes more than 65 Fortune 500 companies. The group is trying to use its
leverage to foster community-wide improvement in the quality of care. The paper
cites Leapfrog’s involvement with the Michigan Health and Safety coalition,
which includes hospitals, health plans, medical groups, employers, unions, and
government agencies. “Leapfrog is collaborating with the Michigan Coalition to
improve the safety of hospitalized patients and to inform patients and
providers about issues involving safety,” said Dudley.  In addition, employers
are less tolerant of managed care organizations that enroll only healthy
patients and get rid of sick ones. Some employers are adjusting the premiums
they pay to plans, lowering them for plans that have only healthy enrollees and
raising them for plans willing to take on the sickest patients, he added.

Some employers are creating direct incentives to improve quality of care. The
Central Florida Health Care Coalition, for example, plans to rate the quality
of inpatient and outpatient care provided by physicians. The coalition will
allow its members to select any physician, but co-payments will be lower if
they select providers with high ratings for quality of care.

The UCSF researchers noted that health care is not being transformed in
isolation.  Health care organizations are using the Internet to disseminate
data to patients.  For example, the Medicare website can show patients
statistics about the quality of care provided by each of the managed care
organizations participating in the Medicare program in each patient’s zip code.
“Furthermore, the cost of an Internet-based system of medical records is
falling, making it possible to collect and audit data on quality and risk
adjustment less expensively. Thus, the cost of providing incentives for managed
care plans to improve the quality of care is falling as well,” said Dudley.

In addition to citing the above trends, the paper traces the development of
managed care from the 1960s to the present - highlighting not just changes in
the financing of health insurance, but also changes in the way medicine is