A glimpse into the future: Managed care’s impact

By Donald J. Lloyd, FACMPE
Executive Director/CEO
Murfreesboro (TN) Medical Clinic, P.A.

(Editor’s note: The challenges for practice administrators dealing with managed care are growing daily. We asked Donald J. Lloyd, FACMPE, a practice administrator who is a former president of the Medical Group Management Association, to provide his insights into what the future holds for practice leaders who work with managed care organizations, and what adjustments they need to make to deal with these issues.)

Managed care as we have known it is about to become history. That may seem a far-fetched idea to many, but one only needs to look at the signs a little closer to conclude that the end is near.

The cost of health care almost doubled in the period between 1970 and 1990, rising from 7.1% to 14.4% of our nation’s gross domestic product. This drove up health insurance premiums at an alarming rate, forcing employers to either pass more of the cost on to employees or raise the price of their goods and services.

At the same time, the Medicare and Medicaid budgets were being severely wounded. Suddenly, many more Americans were without health coverage at all. The resulting economic stress created a panic environment that led to a clever new way to manage the cost of care: Enter managed care. Many proponents of managed care were convinced that the entire health care delivery process could be improved while saving money.

For the most part, the concept was good, but we have seen that managed care too often has been corrupted by greed.

Early in the managed care cycle, costs declined, and we did see some innovation in health care delivery. However, consumers were forced into procedures and protocols that violated the sacred principle of choice. This was generally tolerated until the anecdotal stories of care denial, injury, and even death sparked an all-out campaign against managed care by patients, employers, and government.

Also, physicians and other provider groups have become better organized, and are now mounting a vigorous offensive against MCOs. To make matters worse, costs are rising again, and we now have even more uninsured citizens, casting further doubt on the effectiveness of managed care. Once the patients’ rights movement spread to the legislative arena, the demise of managed care was sealed. It’s only a matter of time — in 2001 or 2002, to be exact — until a new president and Congress will be forced by social and economic pressures to seize the issue. Exit managed care and enter a public utility.

The utility — let’s call it the Council on Public and Private Medicine — will include members of the provider community, employer coalitions, citizen groups, public health organizations, and health systems contractors. The council will be responsible for all health care policy, including establishment of standard clinical protocols, credentialing of providers, reimbursement systems administration, monitoring system compliance, measurement of outcomes, quality, and patient satisfaction, and general oversight and enforcement.

Virtually everyone will have insurance coverage, eliminating the present concern of more than 50 million uninsured Americans. Costs will be addressed through a global cap similar to the social security systems prevalent in Europe. That cap will set total health care spending at roughly 12% of the gross domestic product. Funding will come from a combination of employer and individual tax contributions.

Twenty-first century technology will allow patient histories to be encoded on identification cards, with back-up in the national data repository. For the first time in our history, individuals will be required to participate in their own health management. There will be economic penalties for those with unhealthy living habits. Behavior modification also will be a cornerstone of the program. Alternative medical therapies such as acupuncture, biofeedback, and herbal medicine will not only be accepted, but encouraged when appropriate. The focus of medicine will clearly shift from the treatment of disease to the management of health.

Employers and individuals will be able to select their coverage from one of the 10 or so national/regional health system contractors, composed of networks of insurance carrier consortiums or provider-sponsored organizations. Further, physicians, hospitals, and health system contractors will be rated based on training and certifications, professional liability risk, compliance with system rules, economic efficiency, and patient satisfaction ratings.

Accountability at all levels will be exacting. Finally, payments to providers will be determined within each network, and may be based on DRGs/APGs, capitation, or fee-for-service arrangements. Of course, anyone wishing to pay for private care will certainly be allowed to do so.

By now, most readers are probably asking themselves what all this has to do with physician payments. It is clear that the amount of money in the health care delivery system will continue to decline. Accordingly, it will become ever more crucial that those dollars are used wisely and efficiently. First, costs in the medical practice will have to be managed more aggressively than at any time in history. This means having information systems that track costs by patient, procedure, and diagnosis. This will be critical when negotiating reimbursements with health system contractors.

Second, managing patient health will not only improve the quality of life, but will preserve precious dollars. Finally, meeting the baby boom generation’s expectations of customer service may very well be the most significant determinant of practice revenue in the next century. Why? Because they will have a profound influence on which physicians and practices are allowed into the preferred networks. And it doesn’t matter how good you are at cost containment if you don’t have any patients.

The warning has now been issued. Prudent health care administrators will begin today to develop the tools necessary to compete for scarce dollars in the new world. If you think it is difficult today, just wait awhile. The aftermath of managed care will be even more rigorous!