By KIP SULLIVAN, JD
A mere two decades ago, the headlines were filled with stories about the “HMO backlash.” HMOs (which in the popular media meant most insurance companies) were the subject of cartoons, the butt of jokes by comedians, and the target of numerous critical stories in the media. They were even the bad guys in some movies and novels. Some defenders of the insurance industry claimed the cause of the backlash was the negative publicity and doctors whispering falsehoods about managed care into the ears of their patients. That was nonsense. The industry had itself to blame.
The primary cause of the backlash was the heavy-handed use of utilization review in all its forms –prior, concurrent, and retrospective. There were other irritants, including limitations on choice of doctor and hospital, the occasional killing or injuring of patients by forcing them to seek treatment from in-network hospitals, and attempts by insurance companies to get doctors not to tell patients about all available treatments. But utilization review was far and away the most visible irritant.
The insurance industry understood this and, in the early 2000s, with the encouragement of the health policy establishment, rolled out an ostensibly kinder and gentler version of managed care, a version I and a few others call Managed Care 2.0. What distinguished Managed Care 2.0 from Managed Care 1.0 was less reliance on utilization review and greater reliance on methods of controlling doctors and hospitals that patients and reporters couldn’t see. “Pay for performance” was the first of these methods out of the chute. By 2004 the phrase had become so ubiquitous in the health policy literature it had its own acronym – P4P. By the late 2000s, the invisible “accountable care organization” and “medical home” had replaced the HMO as the entities that were expected to achieve what HMOs had failed to achieve, and “value-based payment” had supplanted “managed care” as the managed care movement’s favorite label for MC 2.0.
The idea that payment should be linked to the value lies at the heart of most of the transactions we participate in on a daily basis. Yet, value based payment in healthcare has seemingly run into very rocky waters as of late. It is at this precarious time that stakeholders representing large employers and other purchasers of health care’ took to the Harvard Business Review to
