Managed care continues to receive serious attention as a solution to America’s growing health care crisis. It takes the best features from a variety of health care financing and delivery programs of the past (ranging from traditional indemnity to HMOs) and marries them to contemporary concepts in an effort to provide cost-effective, quality health care.  Trustees must, however, be made aware of the information gathering commitment necessary for a managed care program to be effective.

There is considerable debate today as to whether or not managed care can control a welfare fund’s health care cost trend or whether it only produces a one-time reduction as the inefficiencies of the system are corrected. To answer such questions about managed care, performance results must be measured and analyzed. Technology is fundamental to gathering information and analyzing performance to understand the impact managed care has on health care costs. Technology also affords the leverage necessary to make timely corrections to keep the desired results on track.

Many of the programs that operate under a managed care system cannot function without timely, accurate and meaningful information. Establishing eligibility for benefits, making provider reimbursements and processing pre-authorization of service necessitate an automated solution. Claims processors cannot provide cost-effective service if they have to cross-reference paper files or multiple electronic systems. Accurate and timely application of a managed care program cannot be assured without efficient technology that integrates multiple systems and their databases.

The most powerful tool in changing the practice patterns of the physician community is not the stick of reimbursement penalties but the carrot of information. Physician practice patterns follow an established “protocol” (i.e., a plan of medical treatment corresponding to a particular diagnosis for a given class of patient), with the goal of restoring the patient to good health. Physicians are eager to learn what works best to achieve this goal, and what works best can most rapidly be shown with consolidated statistics that are the universally shared experience of physicians.

he real promise of managed care is the health and well-being of the patient. Health care and its delivery can be described as a continuum of care events, as follows:

  • Origin (an otherwise healthy individual is shown to be predisposed to developing certain illnesses or injuries)
  • Entry Level (a decision is made that care is needed)
  • Intensive (care is provided)
  • Resolution (care is concluded)

Managed care controls the transition from one event to the next; restoring the patient back to his or her baseline, back to health and back to a productive life. The management programs that can accomplish this cannot be expected to work in the absence of an integrated technological platform grounded in accurate information.

Outcome measurements must integrate data across the continuum with the patient as the unit of aggregation. This requires a database that builds episodes utilizing claims data, utilization data, provider data, clinical data, patient history and normative data encompassing epidemiological, industry and regional norms. Only through such an historical information process can outcome measures be developed and fully utilized.

Quality care ultimately is a function of patient satisfaction as defined by outcome. Outcome can be integrated with cost to better understand the price of quality as well as the factors necessary to produce it. It is at this point that information may have its greatest value for designing managed care programs for cost-effective health care delivery. If we can understand what the acceptable protocol is for a given class of patient at a given point in the continuum, we can then determine the cost associated with various degrees of “quality” and the probability of achieving a favorable result. Without a significant investment in technology to gather this information, managed care design and success can only come about by chance.

The patient, then, is the focus of managed care. Information is the critical tool through which the continuum can be managed, provider protocol and treatment patterns made most efficient and medical consumption patterns modified. The end result of this process should be a reduced medical cost trend.

The technology commitment to achieve timely, accurate and meaningful information is not trivial. Not only is this a commitment to invest in hardware and professional manpower, but it is also a significant commitment to change the claims adjudication and information gathering process. Claims will need to be recorded in a manner that captures all relevant statistics with a high degree of accuracy. This will increase the administrative expenses associated with providing health care in the present environment where administrative expenses are perceived by many to be the real villain in increasing health care costs.

The significance of increasing the accuracy of the collected data and transforming that data into useful information while reducing the cost and improving the timeliness of the process has not been ignored by government and industry. President-elect Obama’s health care plan proposes a significant investment in electronic health information technology systems. The proposal includes an estimated $10 billion per year over five years for the broad adoption of standards-based electronic information systems, including electronic health records.

Success in the health care market can no longer be measured using only cost and utilization statistics by provider and type of service. While these measures are important, they only serve to evaluate a provider’s ability to price managed health care benefits. They do not speak to quality measures or show the real return on investment. Patient-based modeling shows what is being done correctly or incorrectly, by whom and why.

In conclusion, trustees seeking to implement a managed care program should look toward those networks and administrators that have a firm commitment to technology. Information reports should be high on the list of products that are featured in the product offering, with a firm emphasis on data quality. Trustees should examine not only Fund-based reports, but also the reports that will be provided to the medical directors and financial officers of the managed care network. Networks that demonstrate patient-based information models as well as pricing/financial models stand out as the best way to control the increasing cost of providing health care.

[James Conlon is Principal and Consulting Actuary at Milliman, Inc., an employee benefits consulting firm.  He is the Fund’s national health care consultant.]