HealthLawProf Blog

Editor: Katharine Van Tassel
Concordia University School of Law

Friday, February 29, 2008

The Return of Managed Care

On Wednesday, the Boston Globe ran an editorial by two physicians arguing that the State of Massachusetts, facing a budget deficit in its subsidy for universal health insurance, needs to revisit managed care.  Drs. Joseph L. Dorsey and Donald M. Berwick, write  

The closest you can come to heresy in today's healthcare policy debate is to suggest that managed care can help and that capitation is the best way to pay for it. No presidential candidate even whispers the terms. What a shame.

Massachusetts faces a $147-million shortfall this fiscal year in its subsidy for the universal insurance coverage that it courageously mandated two years ago. That raises a question: What system of payment will best support innovations that can make care less expensive and better at the same time? The easier solution - make care less expensive and worse at the same time - is neither necessary nor worthy of us.

The answer to the question is that healthcare should be managed in the same way, and for the same reasons, that school systems and air traffic are managed. Managed healthcare was a great idea when it first emerged, before the term got hijacked by insurance companies that claimed to manage care but in many cases only managed money. . . .

The financing system that allowed all that to happen is today as dirty a word as managed care, namely "capitation." That means bundled, prospective payment to an organization for the care of a defined population. In the case of HCHP, that population was our patients, enrolled through their employment-based health insurance, Medicare, or Medicaid. Our job was not to produce transactions. It was to take care of people, and that is what we did. Capitation gave us the flexibility to use our budget with creativity limited only by our imaginations and habits.

The innovations that managed care and capitation made possible were good for almost everyone. For example, with extended hours of service, off-hours telephonic access, and outreach, HCHP's population had a rate of emergency department visits less than half the statewide average. Thousands of people avoided needless hospital visits; they got more appropriate, less expensive, better coordinated care in office settings. Of course, our care systems were far from perfect, but our extensive investments in quality measurement enabled us to identify defects, and capitation gave us the resources to act swiftly and prudently to fix them. . . .

So, America, we have a question. Would you like to think again about managed care and its financing mechanism, capitation? Details matter - a strong focus on patient satisfaction, compensation and incentives, sound leadership, transparent and sophisticated measurement and information - but done right, managed care works. We lived it. Maybe, properly defined and designed, these may not be dirty words after all.

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