Tools to improve efficiency

Hillman (1991) distinguished two basic mechanisms - rules and incentives - to shape physicians' practice patterns in managed care. According to the author clinical rules have assumed various names as managed care evolved: treatment protocols or algoritlmls, regulations, administrative constraints, practice guidelines or parameters, prospective utilization review, utilization management,

4. Efficiency

'cookbook' medicine, and simply 'controls'. Nevertheless all embody the same basic concept: direct instruction on how a physician should or should not act in specific clinical circumstances. In addition to rules regarding clinical decisions, other rules, including new legal and ethical constraints on referral behaviour, and ownership of medical facilities, have altered physicians' behaviour.

The use of incentives is seen as a more subtle approach to influencing physici-ans' clinical decisions. Incentives are generally financial in nature and expose physicians to some risk or reward for certain patterns of behaviour.

Other approaches to influencing physicians' clinical decision~ in managed care are also mentioned, such as feedback to physicians about their prescribing behaviour compared to a norm followed by education to change their prescrib-ing.

Weiner and de Lissovoy (1993) reviewed past and current trends in the United States market for nontraditional health benefit plans. They concluded that complete consensus on the use of the term 'managed care' does not exist.

Nevertheless they mentioned several methods used to manage the patient's care.

These include preadmission certification, mandatory second opinion before surgery, certification of treatment plans for discretionary nonemergency services, primary care physician gatekeepers and nonphysician case managers to monitor the care of particular patients.

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Enthoven (1994) described a normative model for the market structure for third-party purchasing of health care. In his model an important role is played by so-called accountable health plans. These are organizations that contract to pay for and deliver a uniform list of comprehensive health services, and to participate in a national system of uniform health outcomes reporting. The author mentioned that an accountable health plan can do a great deal to improve quality and cut costs. Among other things:

- It can seek to align the incentives of doctors, and others, and the interest of patients in high quality economical care. Its management can use judgment and various indicators of performance, to seek best to reward effectiveness and useful effort, how best to pay different types of doctors for different activities.

- It can gather data on diagnoses, treatments, outcomes and resource use, study 74

4.1 Tools /0 improve efficiency

variation in practice patterns, and inform and advise its doctors about cost-effective practices.

- It can match numbers and types of doctors to the needs of the emoled popula-tion, to assure good access to primary care, a rational referral process, and busy, proficient specialists.

- It can manage processes of care with a view to minimizing total system costs.

Miller and Luft (1994) performed an extensive literature analysis to compare the health care utilization, expenditure, quality of care, and satisfaction since 1980 of enrolees in managed care and indemnity plans. According to the authors, plans differ greatly in physician practice management features such as provider selection, information feedback techniques, utilization management procedures, provider reimbursement and risk-sharing methods, and physician organization.

Furthermore the extent of integration of the intermediary with delivery system providers varies greatly.

According to Armstrong (1997) there are quality and cost benefits to be gained by the application of disease management to an increasing list of predominantly chronic conditions. In the case of these specific, high-cost diseases, it seems reasonable to assume that the introduction of education, better preventive care and improved self medication might serve to reduce emergency treatment and hospital admission and so substantially reduce costs. Within the United States this appears to be the case with asthma and diabetes. Other conditions for which disease management principles are already being successfully applied, include congestive heart failure, depression, breast cancer, low back pain, arthritis, headache, gallstones and AIDS.

These studies show that health insurers can use many tools to improve the effi-ciency of care. To give an indication which tools are actually being used by managed care plans in the United States and to which extent, two studies are summarized that have addressed this question.

Langwell (1990) mentioned that health maintenance organizations combine utilization management, provider selection and financial 'incentives to control

4. Efficiency

provider behaviour. However, the many diverse types of these organizations and the mixture of these elements of managed care systems make it difficult to disentangle the effects of utilization management methods, provider selection and financial incentives to determine which specific mechanisms are most effective.

Commonly used utilization management methods by health maintenance organiza-tions include: primary care gatekeepers (93%); concurrent utilization review (94%); retrospective utilization review (89%); prior authorization for inpatient care (88 %).

Preferred provider organizations recruit and offer a network of preferred providers who are selected on the basis of practice style and willingness to follow the utilization management and review requirements of the organization.

Their utilization management activities include: preadmission certification (78%); concurrent utilization review (51 %); retrospective utilization review (55%); mandatory second surgical opinion (44%); discharge plamling (31 %).

Gold et al. (1995) conducted a national survey of the arrangements managed-care plans make with physicians in the United States. Of the 108 plans that responded, 29 were group-model or staff-model health maintenance organiz-ations, 50 were network or independent-practice-association health maintenance organizations, and 29 were preferred provider organizations. Respondents from all three types of plans said they emphasized careful selection of physicians, although the group or staff health maintenance organizations tended to have more demanding requirements, such as board certification. Sixty-one percent of the plans responded that physicians' previous patterns of costs or utilization of resources had little influence on their selection; 26 percent said these factors had a moderate influence; and 13 percent said they had a large influence.

Some risk sharing with physicians was typical in the health maintenance organiza-tions but rare in the preferred provider organizations. Fifty-six percent of the network or independent-practice-association health maintenance organiz-ations used capitation as the predominant method of paying primary care physicians, as compared with 34 percent of the group or staff health mainten-ance organizations and 7 percent of the preferred provider organizations.

Ninety-two percent of the network or independent -practice-association health 76

4.1 Tools to improve efficiency

maintenance organizations and 61 percent of the group or staff health mainten-ance organizations required their patients to select a primary care physician who lVas responsible for most referrals to specialists. About three quarters of the health maintenance organizations and 31 percent of the preferred provider organizations reported using studies of the outcomes of medical care as a part of their quality-improvement programs.

The authors concluded that managed-care plans, particularly health maintenance organizations, have complex systems for selecting, paying, and monitoring their physicians. Hybrid forms are common and the differences between several types of health maintenance organizations are less than is commonly assumed.

Summarizing an insurer can use many tools to improve the efficiency of care.

The most important tools seem to be:

- Utilization management techniques.

- Disease and (high-cost) case management techniques.

- Selective contracting with physicians and pharmacists.

- Financial incentives to share some risk with providers of care.

- Negotiating lower fees than those officially approved.

- Offering different insurance modalities.

An insurer can be expected to use several combinations of the tools mentioned above. Such a combination might focus on:

- All expenditures within the specified benefits package.

- Expenditures for specific types of care 61' specific groups of members.

The next section describes evidence on potential savings when tools to improve efficiency are applied.