What Managed Care Needs Most Is Someone Who Truly Manages

The future of American medicine lies in managed health care. Broadly defined, about 70% of the U.S. population is enrolled in some type of managed care, a percentage that increases daily.

Managed care holds the promise of providing more organized health care to patients while simultaneously reducing costs to the individual, the employers who pay for the bulk of the care and the nation as a whole.

To some extent, managed care has lived up to its promise. Last year, for the first time in more than a decade, there was a net decrease in the amount that employers paid for employees’ health care--a direct result of rising managed care enrollment.

Unfortunately, managed care has fallen short of its potential as a means of improving patient care or creating cost savings. The reason? True managed care rarely exists in this country. Rather, the majority of Americans are enrolled in what can best be called “gatekeeper care.”

Managed care programs vary substantially. In the staff model HMO, one company--Kaiser Permanente, for example--owns all the facilities used and employs the physicians and support staff. A small percentage of the population is enrolled in this sort of tightly structured plan. The vast majority of managed care patients, however, are enrolled in less centralized organizations--networks of hospitals and physicians called independent practice associations or still looser networks called preferred provider organizations.

With these organizations, the patient enters the system through their primary-care physician. This doctor serves as a gatekeeper, regulating if and when specialty consultation and treatment is made available. Referrals are to specialists who have contracts with the group. Pre-negotiated discounts and fewer overall referrals lead to savings. Continuity of care is provided by the primary doctor. But the system is only integrated to the extent that there are restrictions on when and to whom referrals can be made.

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The distinction between true managed care and gatekeeper care lies at the referral step.

Under the current gatekeeper system, the managed care organization provides incentives to the primary-care physician to not refer patients to expensive specialists. Often this takes the form of “risk sharing,” whereby the primary-care physician earns less income the more referrals or treatments he or she provides. Sometimes the primary physician must seek approval from the managed care organization before offering referral or treatment.

The permission-granter might be another primary physician who serves as the medical director of the organization. But often, the physician must gain approval from a nurse working off a checklist.

The system is stacked with negative and positive incentives, all aimed at the gatekeeper--and all designed to keep the gate closed.

These incentives can have bizarre results.

A colleague of mine is a neurosurgeon who participates as a provider in many managed care plans. He often receives managed care referrals that have been inappropriately delayed or poorly diagnosed or treated.

For example, he notes several occasions when patients saw their primary-care doctor with back pain that might have indicated a herniated disc. The gatekeepers--compensated under a scheme where they lost income with each test or referral--attempted to diagnose the back pain with a CT scan, which costs one-third as much as an MRI. Unfortunately, a CT is useless in this type of case. The patients wound up seeing the neurosurgeon anyway--and getting MRIs. But the delay allowed time for the disease to progress, making the patients that much more likely to require expensive surgery.

Fundamentally, the problem is that there is no true manager within the gatekeeper system. The primary-care physician is not a manager, for he or she often lacks the authority and sometimes the knowledge to allow their patients to proceed upward through the system. The person charged with approving treatments and referrals is not a manager, because this person does not know the specifics of the case and generally lacks the needed medical knowledge. All this leads to problems in patient care, efficiency and physician and patient satisfaction.

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The solution is to create a true manager within the organization. The manager’s mission will be to integrate the system medically as well as structurally. The manager will function as in any other industry, overseeing the organization, spotting problems early, smoothing processes and supervising personnel.

The manager can create incentives for appropriate referrals to specialists, rather than simply penalizing the gatekeeper for any referrals. He or she can field suggestions from primary physicians, specialists, support staff and patients, fostering innovation within the organization. The manager will ensure that the organization maintains a staff of generalists and specialists able to function in the new vertically integrated medical structure.

The combined effect of these improvements? Lower costs.

The manager need not be a physician. The important thing is that the manager be someone with the skills necessary to integrate the layers of the vertical organization. Physicians generally decry interference by non-physicians in medical matters. But their experience has been with administrators and bureaucrats. The new-style managed health manager will not be interfering in medical matters, but rather will be smoothing the processes surrounding the provision of medical treatment.

The current gatekeeper model of managed care is flawed. The structure is designed monolithically to delay or block referrals to specialists. This saves money in the short run, but provides neither the least expensive nor best care in the long run.

Primary-care doctors, specialists and patients chafe under its rigid constraints. The addition of a manager will allow for integration of a diffuse organization. The system will run more smoothly. Patients will get better care. Provider morale will improve. In the long run, health care will cost less.

It is time for the health care industry to absorb a lesson that every other industry learned long ago: Organizations function better with a good manager.