Rational of Reimbursement Systems

Rational of Reimbursement Systems

Introduction

"Managed care was to be the solution to the health care cost crises, a solution that would bring the out-of-control monster under control" (Goff, 1999, p. 25). Mosby's Medical, Nursing, & Allied Health Dictionary defines managed care as "a health care system in which there is administrative control over primary health care services in a medical group practice. Redundant facilities and services are eliminated and costs are reduced. Health education and preventive medicine are emphasized" (1998). Health maintenance organizations (HMO) are traditionally thought of as the original managed care system although most insurance companies now employ many of the concepts of managed care. Managed care concepts have been adopted because to a large degree they work. "Managing, or at least controlling, the process of care delivery has consistently proven to be more cost-effective than the traditional "unmanaged care" approach, which has led America to the most sophisticated and most expensive health care system in the world..." (Goff, 1999, p. 28). Even with the proven successes of managed care, there are problems. These problems range from having a negative impact on the economy to the denial of services to patients.

Strengths

The first managed care plans were started in the 1940s, with the development of several health maintenance organizations like Kaiser Permanente in California and the Group Health Cooperative of Puget Sound. Their purpose was to provide comprehensive health care for a set monthly fee instead of the current fee-for-service model (Cooper & Taylor, 1994, para. 27). In an effort to control the escalating costs of health care, the Health Maintenance Organization Act was passed in 1973. This act introduced utilization review and precertification to the health services vernacular (Liberman & Rotarius, 1999, p. 50). In the 1990s, HMOs experienced phenomenal growth. "Managed care proposed to control costs behind the scenes, through volume discounts from physicians, gatekeeper restraints of specialty consultations, drug formularies, prior authorization of tests and admissions and retrospective denial of payment for unnecessary services" (Robinson, 2001, para. 9). HMOs demonstrated cost savings and quality outcomes by emphasizing preventative care and conservative use of treatments. The focus of health care is on health and wellness not on sickness. "Financed on a fixed premium, the physicians and hospitals were freed from the economics of generating revenue by providing care to the sick and allowed to derive greater profits by keeping people healthy" (Goff, 1999, p. 26). Besides providing preventative health care, the operating methods introduced by HMOs were business concepts that were well proven to reduce costs. The use of limited provider networks encouraged monitoring and collaboration amongst physicians to deliver medical care more economically and with patient satisfaction. "Specific care management and disease-state management concepts were also introduced...This individual disease or patient oversight sought to bring the right care to the right patient at the right place and at the right time" (Goff, 1999, p. 27).

Weaknesses

"Managed care embodies an effort by employers, insurers, and some physician organizations for establish priorities, balance competing goals, and decide who should get what from the US health care system. After a turbulent decade of trial and error, that experiment can be characterized as a partial economic success and total political failure" (Robinson, 2001, para. 30). The strategy of offering consumers comprehensive benefits while restricting access through utilization review obfuscates the workings of the system and undermines the trust between patients and physicians. Many of the essential principles of managed care have eroded in an effort to satisfy the need for continued growth. Members of HMOs did not like the limitations placed upon them. They wanted more physicians and specialists to choose from within the HMO. This caused an erosion of cost containment because it became increasing more expensive to monitor a large network of physicians. Promotion of continuous quality improvement went by the wayside because development of protocols and treatment plans became too costly. Many patients felt that they were denied necessary services. In order to keep the costs of health care down, HMOs contracted with health care providers. "Such agreements incorporate cost-saving measures that tie providers' compensation to the "efficiency" in utilizing health care resources,