Why Medical Management Will Re-Emerge

Several years ago I had dinner with a woman who had served in the late 1990s as the national Chief Medical Officer of a major health plan. At the time, she said, she had developed a strategic initiative that called for abandoning the plan’s utilization review and medical management efforts, which had produced heartburn and a backlash among both physicians and patients. Instead, the idea was to retrospectively analyze utilization to identify unnecessary care.

This was at the height of anti-managed care fervor. A popular movie at the time, As Good As It Gets, cast Helen Hunt as the mother of a sick kid. When someone mentioned an HMO, Ms. Hunt’s character let fly a flurry of expletives. America’s theater audiences exploded in applause.

Apparently, the health plan’s senior management team bought into cutting back on medical management but saw no need for retrospective review. After all, if the health plan abandoned actions against inappropriate services, utilization and cost would explode. Fully insured health plans make a percentage of total expenditures, so more services, appropriate or not, meant the plan’s profits would increase.

And that’s how it played out. Virtually all health plans followed suit, dismantling the aggressive medical management that had been managed care’s core mechanism in driving appropriateness. In the years following 1998, health plan premium inflation grew significantly, for a short period reaching 5.5 times general inflation, but averaging 4 times general inflation through today. Medical management became all but a lost, or at least a scarce, discipline in American health care, which is its status now.

The industry responded by making hay. Health care costs have been the most worrisome and unpredictable of all business line items. They have also become the single largest driver of our national budget woes and the bane of competitiveness in global markets. Nobel economist and commentator Paul Krugman noted this on CNBC last month. “If we could suddenly have French health care costs instead of American health care costs, our [national] budget problems would be solved forever.”

It is important to distinguish the term “medical management” as distinct from what physicians do. It refers to the development of mechanisms that ensure the right care at the right time in the right context, driving appropriateness and reducing avoidable risk. (These ideals have been largely thwarted by fee-for-service reimbursement, a lack of transparency and the subjugation of primary care over the past several decades.)

But it also is more than clinical management. Health care businesses now depend on delivering excessive services, often with egregious pricing, to maintain the revenues they have come to expect. Each industry sector has developed many ways to game care and cost.

So managing the processes requires knowing where health care waste is buried, and going after it.  It demands an interdisciplinary fluency in risk, analytics, medical/surgical and drug claims data, evidence-based guidelines, clinical decision support, appropriate cost, and purchasing and negotiation.

There are endless examples.

  • Care for the sickest patients has become the fastest growing area of health care cost. A recent PwC study found that, over the past decade, the percentage of California cases that exceeded $1 million increased seven-fold. Often, this results from misdiagnosis, lack of expertise and/or misaligned incentives. Centers of Excellence consistently produce better outcomes for these patients at lower cost. So do organizations that use salaried physicians rather than paying a percentage of what the physicians have prescribed.
  • Health plans typically have relied on the broadest possible network of doctors and other providers, even though there often can be a six-fold difference in episodic cost to obtain the same outcome. Turning a blind eye to performance opens choice, but it also amps up cost and removes quality and efficiency from the marketplace.
  • Plans often purchase stakes in Pharmacy Benefit Management (PBMs) firms, jack up generic drug pricing by 200+% over cost. They use the margins as a revenue stream, and tell their customers that they’re managing cost.
  • In the wake of the plummeting service volumes associated with the recession, hospitals charges for high frequency procedures have risen spectacularly. This primarily affects people without coverage, and is comparable to “gouging” for ice or gas after a hurricane. But it is difficult to spot, because most people have no frame of reference on unit pricing.
  • Itemized charges for hospital stays are often replete with unnecessary products/services that are likely to go unchallenged. My firm regularly sees bills in excess of half a million dollars that health plans have auto-adjudicated and paid, but that should have been significantly less costly.
  • Health plan case management and disease management programs are often provided as a default option (and at considerable cost). But in practice many don’t actively recruit members into the program, or produce savings. We have seen clients pay $100,000/month for disease management, with fewer than 20 patients actively enrolled.
  • The prices of high value items can be highly variable within markets, but they can also be excessive. Advanced images like MRIs may be available on a volume basis, with a reading, for less than $500. But health plan clients have routinely and unwittingly paid $1,750-$3,200 for the same image. The same principal holds with dialysis, which in commercial settings can be charged and paid at 4-6 times Medicare rates. Market principles simply haven’t applied in many cases.

The tools and skills needed to identify and address these kinds of problems are complex, and the job itself is heavy lifting. That said, we now have far better data and information management tools than were available a decade and a half ago.

And the need has re-emerged. The health care marketplace is at an inflection point. While it is unclear whether we’ll transition away from fee-for-service and toward some form of risk – the full force of the health care lobby is intently focused on defeating this now in Congress – there are other signs that the old paradigm is failing.

With or without the development of Accountable Care, the industry will be forced, for the first time in decades, to compete for market share based on performance. Hospital admissions are down and Medicare’s annual allocation is on track to drop by $40 billion/year. Commercial plans will likely reduce reimbursements as well. Health plans enrollments have plummeted as individuals and groups have been priced out of the market by rampant cost growth, driving up the uninsured (self-pay) population. Employers and other purchasers, finally exhausted by the burden of what they perceive as a relentlessly rapacious industry, are moving toward more market-based approaches that go around conventional players. (The popularity of onsite clinics exemplifies this.)

As true markets finally emerge in health care, demonstrating better care at lower cost will finally develop beyond an admirable goal to become the basis for competition. Success will depend on managing all aspects of clinical and financial risk. And that will require reconstituting a discipline that has been mostly dormant for a decade and a half.

Brian Klepper, PhD, is an independent health care analyst, Chief Development Officer for WeCare TLC Onsite Clinics and the editor of Care & Cost. His website, Replace the RUC, provides extensive background on the issue.

22 replies »

  1. I was wanting I might obtain an article this way with all the data I needed to acquire my personal school assignment carried out…. Many thanks.

  2. Brian,
    You and I had a dinner a few years ago..I was the CMO of United, a “major health plan,” and we talked about the decision to eliminate the onerous aspects of medical necessity review in 1999…which then created a sea change in the industry. I suspect that that the unnamed individual you reference in your blog is me.

    Assuming I am correct, then your blog misrepresents the overall strategy and processes at United, and I feel compelled to offer some few clarifications.

    As you point out in your blog, the term “medical management” encompasses many different processes. However, it will not “re-emerge,” because it never went away. Yes, traditional UR/pre-cert was eliminated in UHC to stop interfering with access to needed services and the MD-Pt relationship. And, 1500+ clinicians were re-trained on adding value with care-focused (rather than denial focused) aspects of medical management. This included notification for benefit determination, admission counseling, readmission management, and chronic/complex condition management. No, Senior Management did not decide that there was “no need for retrospective review” and in fact, there were both automated and manual retrospective review processes to help assure that benefits were properly administered and patterns of fraud/abuse were identified. But, once again…practicing physicians..not administrative MDs…decided on the medical appropriateness of services for individual patients. However, a national process of physician performance reporting was implemented to address aberrant practice patterns.

    Sadly, the article in the WSJ reveals that what IS re-emerging at United and other commercial payors is the intrusive, “mother may I” procedures of the 1990’s. Besides eroding trust and causing tremendous dissatisfaction, this specific intervention had no ROI and added no value. It didn’t work before and it won’t work again.

  3. Sandra_Raup —

    Thanks for the information about how things work in the UK. It’s very helpful. In an ideal world, doctors would offer the patient and family a clear, honest and objective prognosis along with potential treatment options, the chance of success and the likely side effects, if any, and their impact on the quality of the patient’s life. I can understand, though, that if the prognosis is grim, it’s a difficult and uncomfortable conversation. It’s easier to just offer the intervention, especially if taxpayers or insurers are paying, and only respond to questions that the patient or family bring up. If a lot of money is spent for care that is futile or close to it, it’s not the doctor’s problem and the hospital will earn revenue. That’s the problem with our open ended entitlement when nobody looks after the interests of the payer which is, in the case of Medicare and Medicaid patients, the taxpayer.

  4. “expensive heroic measures”

    I don’t know why every time the above is discussed, the conversation turns to “heroic – yes or no” and to the humanity of letting people die or the wisdom of accepting death, instead of “expensive – yes or no” and the morality of extracting profit from human pain and suffering.

    I would submit that if that’s what we want to do, then all the talk about patient-centered, patient-engagement, patient-empowerment and consumer-driven, is just a bunch of purposely deceptive nonsense.
    However, if we are serious about all the patient-whatever labeling then it is up to the patient at his/her sole discretion to make these decisions. The doctors’ job is to truthfully inform and advice the patient and the MBAs job is to make the expensive less so.

    There should be no one with legislated authority to allow or disallow death.

  5. “I’ve also never seen any data or analysis that addresses the culture of physician independence and autonomy in the U.S. vs. elsewhere. The tone of Dr. Dawson’s comment, for example, seems to suggest that insurers should just accept whatever doctors decide to do without question and pay the bill promptly and leave them alone. Doctors also earn significantly more money than their counterparts abroad and that applies, for the most part. to both PCP’s and specialists. Finally, there is the difference in the real and perceived litigation environment which impacts the impossible to quantify issue of defensive medicine”

    Nice spin on my “tone”. What could be more unrealistic than expecting and insurance company to actually reimburse a physician or hospital for services rendered. Anybody reading this knows that managed acre companies and insurance companies reimbursement ranges from modest to trivial and hospital reimbursement is based strictly on an admission or discharge DRG. The ONLY reason that case managers are aggressively getting patients out of the hospital is because the managed care companies now own the hospitals. It is apparently more cost effective for them to move these people right onto the wards after they have acquired the hospital.

    Say what you will- these techniques clearly result in a business orientation to medicine that prioritizes profits over clinical decision making. Physician autonomy is only useful if you can advocate for appropriate patient care and now you can be overruled by someone with no medical training.

  6. “Rather than looking at an unneeded day spent in the hospital as a potential correctable defect in the way health care is being delivered, both in terms of quality of care and inefficiency, Dr. Dawson chooses to create a false dichotomy of either managed care or no clinical decision making. If such a mindset pervades the medical community, no wonder we are having such a problem reducing preventable and excessive hospitalizations”

    Neat rhetorical device. Unfortunately it is not a “false dichotomy” when you are face to face with one of these case managers who is backed by administrators and is telling you to discharge the patient when you know they are not stable for discharge. Hopefully you and none of your relatives will ever be on the receiving end of that “false dichotomy.” Go ahead and call that an appeal to emotion.

    Why don’t you look at the potentially correctable defect of managed care guidelines are basically arbitrary and designed to maximize profit?

  7. From Dr. Dawson’s vantage point “managed care strategies …are basically financial decisions that are devoid of any clinical decision making.” To him, “the clearest example is ’case managers’ telling physicians when to discharge patients from the hospital.” Rather than looking at an unneeded day spent in the hospital as a potential correctable defect in the way health care is being delivered, both in terms of quality of care and inefficiency, Dr. Dawson chooses to create a false dichotomy of either managed care or no clinical decision making. If such a mindset pervades the medical community, no wonder we are having such a problem reducing preventable and excessive hospitalizations. These problems are the topic of two articles that should be considered: Hospital bed utilisation in the NHS, Kaiser Permanente, and the US Medicare programme: analysis of routine data, BMJ. 2003 November 29; 327(7426): 1257), and Something is amiss in Denmark: A comparison of preventable hospitalisations and readmissions for chronic medical conditions in the Danish Healthcare system and Kaiser Permanente, BMC Health Serv Res. 2011; 11: 347.

  8. Barry,

    I’d like to address that issue if I may. That’s exactly what happens, at least in the UK. There is a limited budget for various types of interventions, and physicians determine who will most benefit from them. This is less about specific rules (“no one under 50…”) but more about clinicians’ judgment. If you as a patient think you should get treatment X, you have administrative remedies at the NHS trust level to challenge a decision, but the legislation creating the NHS gives it the authority to determine what’s paid for, both on a global level (what’s available for physicians to offer) and on an individual level (if an intervention is denied). It’s not an open-ended entitlement. A patient can still sue a doctor or hospital for negligence, but not for denying care. As one UK physician told me in response to a question, “Everyone who needs dialysis receives it. If you instead are asking if we allow patients to die of renal failure, then the answer to that question is ‘Yes’ “. Contrast that to the US where nearly everyone in the US in renal failure is offered dialysis, whether it is deemed to benefit them or not. Some physicians in the US think the UK approach is more humane, while others do not.

  9. “This stuff works, but fits very poorly with our ideas that health care is mostly heroic intervention in catastrophic conditions.”

    Pat S. –

    I certainly agree with you about the management of CHF and it appears that approach is starting to be embraced more widely.

    The heroic interventions (surgery / dialysis / ICU care / aggressive cancer treatment, etc.) coupled with higher prices per service, test, procedure or drug vs. other developed countries are the two biggest reasons, I think, why our healthcare system is so much more expensive as a percentage of GDP.

    My question for you with respect to the heroic interventions is does this relate to doctors following the perceived standard of care for their specialty, is it an attempt to satisfy real or perceived patient expectations and patients belief that more care is better care even when it isn’t, is it money driven, or is it a result of how doctors are trained?

    If you take a patient, especially a sick elderly patient probably near the end of life, I wonder how the conversation about or presentation of medical options between the doctor, the patient and the family differs between the U.S. vs. in Western Europe, Canada, Japan or Australia. Do doctors in other countries just not present the heroic intervention as an option? Are patients and families less likely to opt for it if it’s offered because they’re more accepting of death? In the end, how do we change both the patient and the physician culture in a way that reduces the number of these very expensive heroic interventions that are likely futile or have a very low probability of success at best?

  10. Almost all foreign systems use more doctor visits, more hospital admissions, and longer hospital stays than the US. However, the cost of the hospital stays and doctor visits are substantially lower than ours.

    Part of this is because payment to doctors is lower in most other countries than here, but the big difference is that a lot less is done to the patient as part of doctor visits and hospital stays — less surgery, fewer lab and imaging tests, fewer other procedures. That drives the cost down considerably, since the patients are mostly just visiting the doctor or resting in bed.

    I like to refer to that approach as “high intensity low tech care.” The classic example — managing congestive heart failure with a doctor’s exam and a scale — has been successfully used in the US by Kaiser and by the Essentia system in Minnesota, Wisconsin, and North Dakota (results were published under their former name, SMDC.) Congestive failure is the most costly disease to manage in the US, accounting for the largest number of primary admissions, the largest number of readmissions in both medical and surgical cases, and the largest number of ICU days. Essentia — which used nurse practitioners, telephones, and scales that could transmit data via phone — took patients with at least 3 admissions in the previous 12 months and reduced hospital admissions by 75%, ER visits by 80%, ICU days by 80%, substantially improved patient well being, and saved enough money to buy Miami.

    The ideas were more or less lifted whole from British management patterns, which use very frequent office visits with doctors and nurses as their basic tool.

    This stuff works, but fits very poorly with our ideas that health care is mostly heroic intervention in catastrophic conditions.

  11. Barry,
    One thing that I really liked about that interview is Dr. Zeltner’s unwavering conviction that the Swiss health care system is a good system. They may not have the data to prove it and it may be a bit on the expensive side, but he seemed rather happy what what they achieved so far and confident that they will achieve more in the future.

    Contrast that with our “leaders” who are stepping all over each other to tell us that our system id broken, fragmented and killing people on a daily basis; that our doctors are a greedy bunch of untrustworthy, arrogant and incompetent Luddites who need supervision; that all of us are irresponsible, equally greedy and cannot be trusted to make our own decisions. And this is why someone must intervene and manage doctors and patients into submission to corporate interests.

    The truth is that for those who can afford it, US health care is as good and probably much better than Swiss health care. What is broken in this country is not health care. It is our social system. Our health care woes are just one of several symptoms, lack of education, increasing poverty and unequal opportunity being the other symptoms. We will never achieve an equitable, long lasting solution to the health care problem if we refuse to address, and even acknowledge, the underlying cause.

  12. Agree, Pat, entirely. There are statistics on dialysis outcomes, but at least the ones I have seen do not distinguish between acute renal failure (such as that associated with sepsis, hypovolemia, or multisystem organ failure) and chronic renal failure where kidneys are irreversibly damaged. The UK has much better dialysis outcomes based on length of survival on dialysis or to transplantation. I took from the difference in survival – with the US having many more patients with survival measured in hours, days and a few weeks that we offer dialysis when patients have little chance of survival. That would be consistent, I think, with lower utilization of ICU days. They do, however, have higher utilization of hospitalization than we do (at least they did a few years ago when I was looking at this). There are different wait times for outpatients and hospitalized patients for diagnostic procedures, so physicians occasionally admit patients just to shorten the wait for tests they think are important to get done sooner rather than later. I think they have greater wound infection rates, which seems consistent with more people in the same ward. Hopefully that has gotten better as I know that was a high priority in the recent past.

  13. Outcomes in comparative studies are based on disease states — renal failure, heart failure, coronary artery disease, etc — not on admissions to ICU or patients on dialysis. It is those outcomes for disease states that are often better in Britain (and many other countries) than in the US.

    Britain does not put as many people on dialysis as is typical in the US. That is because there are some patients with renal failure, especially among the elderly, who potentially do better without dialysis than with. Dialysis is extremely stressful to patients, and deaths related to dialysis are not uncommon. Some people do better without than with, and the better results for renal failure in the UK appear to be largely due to being more careful in choosing who gets dialysis and to more intense outpatient management of non-dialysis renal failure patients.

    The same thing could be said of aggressive treatments for almost everything. If surgery or other high tech treatments have significant rates of complication and death (and they almost all do,) many patients do better without the treatment than with. The fact that not using the high tech treatment as much also saves a boatload of money is a happy accident.

    Looking for and implementing those type of happy accidents is one of the main tasks in front of both private and public insurers if we are going to salvage our health care system. We are very lucky that there are so many available to us.

  14. Margalit –

    Dr. Zeltner highlighted the importance of price differences between our two countries noting that the U.S. pays at least 30% more for brand name drugs and physician salaries are, on average, 30%-40% higher in the U.S. as well. If all prices in the U.S. are roundly 35% higher, it would imply that the Swiss would spend 16.2% of GDP on healthcare if they paid U.S. prices per service, test, procedure or drug vs. the 12% of GDP that they actually spend.

    It’s also important to note that Switzerland only has 7 million people vs. 315 million in the U.S. and the U.S. has a more diverse population as well. Even in Switzerland, though, bringing about reform was not easy and there is considerably more work to do. Dr. Zeltner noted that the U.S. Medicare and Medicaid programs, coupled with the heavy involvement of employers in paying for health insurance for their employees, makes our reform challenge even more complex.

    I’m a fan of the Swiss healthcare system overall. One approach that I would like to see the U.S. try is to have insurers negotiate payments as a group vs. doctors and hospitals also negotiating as a group. Of course, all parties would need the Congress to provide anti-trust exemptions to allow such an approach. Zeltner also tells us that about 45% of the Swiss population receives a subsidy to purchase health insurance. If we had their system, I suspect the U.S. percentage would be at least as high and probably somewhat higher while many of those who would purchase it on their own without subsidies would have to pay upwards of 15% of pretax income for health insurance plus co-pays and deductibles.

    Dr. Zeltner admits that they don’t have very good information about the quality of their outcomes in Switzerland. I would like to see a comparison of typical practice patterns in the treatment of various chronic conditions between the two countries. Are there any substantive differences in the standard of care? If so, to what extent are the differences caused by a combination of patient expectations and the litigation environment, both of which could drive the specialty societies in the U.S. to recommend more testing and more frequent checkups than would be considered perfectly acceptable in other countries?

  15. Barry,

    There have been comparative health analyses done but they are complex because of the number of variables that are not the same. For example, when I visited the UK in 2003, patients were cared for in multi-person wards in a facility that looked like the ones we had in the 1950’s. In the US, hospital rooms are usually private these days with amenities similar to what you’d find in a highly rated hotel. The number of personnel to care for that kind of real estate is obviously greater. In addition, they offer fewer high tech options, such as dialysis and intensive care, to patients who would be offered it (in spite of a perceived low chance of success). That makes their outcomes so much better – everyone who receives these interventions are much better candidates. So there are many factors to consider, making analysis (especially the broad stroke, single issue stuff so common here) more difficult.

  16. Barry,
    I would like to address this with a few quotes from a Health Affairs interview with one of the architects of the Swiss Health Care system http://content.healthaffairs.org/content/29/8/1442.full (I know you read it):

    “Most Swiss physicians in ambulatory care are self-employed……… They’re paid on a fee-for-service basis.”

    “First, whatever a doctor prescribes, the health insurance plan deems appropriate and therefore covered.”

    “Every insurer will reimburse the patient’s bill from every doctor on a nationwide basis…. from 2012 on, you will be able go to any hospital in Switzerland, and insurers must deal with all of them”

    “We don’t have electronic health records in Switzerland. We want to have them by 2015 for everyone, but we are not there yet”

    So how do they do it? How do they do it without shoving both doctors and patients in little boxes? And why can’t we do the same?

  17. Margalit –

    I’ll offer several thoughts on this.

    First, we need to consider that most healthcare costs are accounted for by hospital inpatient and outpatient care, expensive imaging and prescription drugs. The experts also tell us that 75% of costs relate to the management of chronic diseases like CHF, COPD, ESRD, heart disease, asthma, diabetes and mental illness among others.

    I have never seen a good study that shows the number of employees per licensed bed at academic medical centers and community hospitals in the U.S. vs. their counterparts in other developed countries. I suspect that U.S. hospitals have significantly more employees per bed and I’m not just talking about billing clerks.

    I’ve also never seen any data or analysis that addresses the culture of physician independence and autonomy in the U.S. vs. elsewhere. The tone of Dr. Dawson’s comment, for example, seems to suggest that insurers should just accept whatever doctors decide to do without question and pay the bill promptly and leave them alone. Doctors also earn significantly more money than their counterparts abroad and that applies, for the most part. to both PCP’s and specialists. Finally, there is the difference in the real and perceived litigation environment which impacts the impossible to quantify issue of defensive medicine.

    As for insurers, it’s hard for them to push prices down against large hospital systems with significant local or regional market power when every employer thinks they need to have them in their insurance network. Tiered insurance products are beginning to gain traction in addressing that. Moreover, if hospitals and doctors are so great at managing care, why don’t they just form ACO’s and perform the insurance function themselves by offering employers a fixed price to care for a population of patients and contracting with other providers outside their system for services that they either can’t perform themselves or for care that is delivered elsewhere under emergency conditions or outside the patients home area, while traveling, for example.

    You didn’t mention prescription drugs. Other countries pay less for brand name drugs because they use price controls backed up by a willingness to keep a drug off the formulary if a satisfactory price agreement can’t be reached. Generics, by contrast, are actually cheaper in the U.S.

    Finally, while I would like to see the U.S. get to universal coverage, it would raise healthcare costs in the short run. I think some of our higher costs are accounted for by inefficiencies like the absence of the widespread use of interoperable electronic medical records and somewhat higher administrative costs. I don’t think insurance company profits are a material factor at all, especially since a large chunk of the market is controlled by non-profit insurers. I think the much bigger issue is a combination of much higher hospital costs and the culture of physician autonomy and independence in the U.S. which is driven, at least in part, by patient expectations. Importantly, both the PPACA and the Massachusetts healthcare reform effort did very little to attack healthcare costs because nobody was prepared to take on the hospital and physician lobbies.

    Japan, by contrast, only spends 8% of GDP on healthcare but it’s common for patients to wait several hours in a PCP’s waiting room for a visit with the doctor that usually lasts all of three to five minutes. I don’t think Americans would accept that. Imaging in Japan costs one-tenth of what it does here but the equipment isn’t quite as good. The Japanese think it’s good enough but we probably wouldn’t accept it. Japanese people, despite their long life expectancies, have the worst access in the world to sophisticated procedures like heart, liver and kidney transplants. They apparently accept it while we wouldn’t. I’m reminded of the adage that we can healthcare good, fast or cheap. Pick any two.

  18. I don’t understand why we continue to compare ourselves to other developed countries and their much lower costs of health care and in the next sentence come up with solutions that ignore the realities both here and there.

    There are 3 basic differences between what we do here and what “they” do there:
    1) They provide health care to all
    2) They have no profit drivers at the financial intermediary level
    3) They pay less per every single unit of service

    Why can’t we do the same for starters?
    What are the skills that make managed care companies better than physicians at managing medical care?
    Why aren’t the paragons of managed care able (willing?) to drive their consumer prices down?
    …and what Dr. Dawson said…..

  19. Pat S. –

    According to Paul Starr in his book, “The Social Transformation of American Medicine,” Kennedy turned down Nixon’s offer at the behest of organized labor. Their thinking was that with Nixon weakened by Watergate, Democrats would make significant gains in the 1974 election and would then be in a position to push through a single payer healthcare system over Nixon’s veto. Of course, Nixon resigned in August, 1974. Even though Democrats did indeed make significant gains in the election that year, a serious recession had set in and there was no longer any money for new entitlement programs. Liberals pushed too hard and wound up with nothing. Now, almost 40 years later, we have the PPACA passed in 2010 which promises significant coverage expansion but, like the Massachusetts approach it was modeled after, precious little in the way of credible cost control initiatives. If we want to control costs, insurers probably need to push ahead with new payment models, pay for performance contracts, tiered networks and the like with or without CMS to provide political cover and employers, especially the large self-funded employers, need to back them up.

  20. I don’t know what planet everyone else is one but the managed care cartel has used progressive utilization review in any setting where I have worked and the rules are as arbitrary as ever. The idea that managed care strategies have to do with “waste” or “inefficiency” always strikes me as humorous because they are basically financial decisions that are devoid of any clinical decision making. Financial and business decisions have long supplanted medical decision making and the clearest example is “case managers” telling physicians when to discharge patients from hospitals.

    The financial decision making by PBMs is even worse than the prior authorization process that wastes hundreds of thousands of physician hours. Now that there are more generics, many medications are simply denied on the basis that they are expensive, even in the case of a medication where there is no generic.

    As far as I can tell there has never been any significant pushback against managed care. It is another political myth enacted by the major parties. The only myth grater than “Managed care saves money” is “Managed care will provide quality services for less money. The PPACA is the logical extension of the government granting even more power to health care companies and it is a parallel manner to the way they have with the financial services industry. The outcome is very predictable based on that model.

  21. Brian, I don’t think third party type utilization management ever completely disappeared. It became focused on pharmaceuticals and later in high technology imaging, spawning two industries that have moved those respective markets.

    The resurgence in health costs in the late 1990’s wasn’t due to relaxed UR. Rather, high tech imaging, specialty pharma and the early phase of cardiac stenting, were big cost drivers. There was a very modest resurgence of hospital admissions, the main focus of UR activity, and then in 2003, without a lot of external help, hospital admissions began a decade long deceleration, finally reaching “negative growth” in 2009.

    What really needs to happen is not a resurgence of a forty year old idea, or external controls on physician practice decisions. Rather, we need to begin paying for protocol driven care in episodes or bundles, and shift the risk of excessive episode expense, including readmissions, infections and avoidable complications, onto clinicians and the hospitals with whom they work.

    We shouldn’t be telling people how to practice medicine, but placing them at manageable risk, and giving them the data and incentives to make better clinical decisions.

  22. Much of the 90’s anti-managed care pushback was unfair and unwarranted. In “As Good as it Gets” Helen Hunt’s son had asthma, and was supposedly being forced by her HMO to be managed only by treating acute episodes in the ER. No HMO in the world would take that approach, since the use of relatively inexpensive maintenance drugs — eventually ordered by the Park Avenue consultant who entered the case — is so much cheaper and more effective and so well understood that it would be stupid to do anything else. Attacks on insurer refusal to pay for bone marrow transplant therapy for breast cancer proved — too late for the insurers — to be wrong, as the therapy was discredited by the science that emerged. There are many other examples.

    However, as the managed care movement spread there were mistakes made, with patients prevented from getting some effective management and with too much emphasis on cost savings and too little on scientific evidence, especially in some quickly assembled ad hoc HMO’s in the Sunbelt. That played into the hands of stakeholders pushing back against the movement.

    Today, there is no question that well run managed care of the Kaiser, Group Health, InterMountain Health, and so on variety can and does save money and improve outcomes. Adopting these sorts of policies throughout the industry and in government programs is our best hope for a fair and effective way to control and roll back costs and evert a future being envisioned by some politicians in which large numbers of low income and middle class people, both working and retired, are excluded from health care access due to large out of pocket expenses beyond their capabilities of paying.

    In his posthumously published autobiography, Ted Kennedy stated that the biggest mistake of his political career was to turn down Nixon’s offer to structure a national health care program around enrollment of all Americans in closed panel HMO’s. Nixon had become enamored with Kaiser as a “business oriented” solution to the health care problem. Had Nixon had his way, US health care might well be on a plane with the rest of the developed world in terms of excellence of quality and control of costs. It is not too late to fix that mistake.

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