AHIP Coverage (January/February 2005)
PULL QUOTES - “The 1990s began with the hope--even the rarest and most fragile variety, bipartisan hope--that managed care would improve American health care. The decade ended with managed care being the punch line of a thousand jokes and a punching bag for politicians, left and right.”
“The authors of the various chapters are first-rate, including major figures in research, delivery, purchasing, and policy. The audience for this book should be correspondingly large. Depending on the reader’s perspective, different themes might leap out of the book.”
“Engaged as I currently am in advising Congress on Medicare policy, I read Toward a 21st Century Health System with an eye toward possible lessons for the future of Medicare. Of course, some proponents of managed care in general, or PGPs in particular, want the government to fund more money for private plans, so they can entice seniors to leave the familiarity of traditional Medicare.”
By Glenn M. Hackbarth
“Depending on the moment, the nation’s health care system seems to be moving toward either non-managed competition or managed non-competition, but in any event away from managed competition….It is now hard to remember that the institutional framework of managed competition once was promoted by policy analysts and American presidents from Richard Nixon to Bill Clinton.” -- James C. Robinson, “The Limits of Prepaid Group Practice,” from chapter 10 of the book.
Alain C. Enthoven, who edited this volume along with Laura A. Tollen, is one of the spiritual fathers of “managed competition,” both as a way to stem the increase in health care costs and to improve quality. Competition, it may be argued, is the natural state in the U.S. economy. To gain customers, firms compete on one dimension or another. The issue is whether they are competing on the proper things: quality, efficiency, service, and innovation. Or is the competition superficial, such as providing the latest gadgets with little or no improvement in results, or even destructive, such as avoiding high-risk patients? Managed competition, as articulated by Enthoven, is a web of policies and institutions designed to harness the forces of competition for the good of the people.
Prepaid group practices (PGPs) embody several core concepts of managed competition: integration of financing and delivery; organization and integration of care; and accountability for performance. Although managed competition would not have prohibited other forms of managed care, such as IPA-type HMOs, Enthoven envisioned PGPs as the engines driving the system toward improvement.
Toward a 21st Century Health System: The Contributions and Promise of Prepaid Group Practice is careful and balanced, yet strong emotions swirl within me as I read it. Pride and hope, frustration and regret. For more than 20 years, I have lived the PGP story, as a government official (with the Centers for Medicare & Medicaid Services and now the Medicare Payment Advisory Commission (MedPAC), as a health plan executive (with Harvard Community Health Plan), and as a PGP executive (with Harvard Vanguard Medical Associates). Enthoven’s unflagging commitment, and relentless logic, are as inspiring to me today as when I first met him more than two decades ago. Robinson’s assessment excerpted above is heart wrenching, precisely because there is so much truth in it.
The 1990s began with the hope--even the rarest and most fragile variety, bipartisan hope--that managed care would improve American health care. The decade ended with managed care being the punch line of a thousand jokes and a punching bag for politicians, left and right. True, the most informed critics distinguished between PGPs and other forms of managed care. Alas, the uninformed were far more numerous.
By committing a colossal strategic error, employers and health plan executives helped precipitate the flaming crash of managed care. I say this with no malice, since I was one of them, serving as an executive at Harvard Community Health Plan. Trying to accelerate the movement away from unconstrained, fragmented fee-for-service, many employers ceased offering managed care as a choice for employees, coupled with incentives to choose the lower-cost alternative. Instead, they made managed care a requirement, regardless of an employee’s preference for a less restrictive alternative. Employers also wanted to administer fewer plans, and many managed care organizations rushed to develop “sole source” offerings in response. In some cases, like HCHP, plans with a PGP heritage merged with IPA-type plans in order to have an appealingly comprehensive network for their sole-source offering.
The sole-source strategy had unforeseen consequences. By forcing people into managed care, employers and health plans helped evoke the now storied “backlash.” As if that weren’t bad enough, sole-source arrangements made it more difficult for PGPs to flourish and for new PGPs to be started. That was true even when a PGP was included in the sole-source offering; sole source often eliminated whatever price advantage the PGP might have had on its own. Of course, sole source was not the only mistake of the 1990s. Compounding the problem were capitation contracts that shifted excessive risk onto providers, overly aggressive efforts to shorten hospital stays, and inappropriate restrictions on referrals to specialists. Providers wanting to launch a counter-revolution had ample ammunition, as did politicians seeking to advance their careers and lawyers seeking big paydays.
My colleagues at HCHP and I were warned that sole source might prove to be a mistake; likewise on merging a PGP with an IPA in the same market. We were warned, in fact, by Kaiser-Permanente, one of the sponsors of this book. HCHP ignored those warnings and abandoned the choice-based PGP model because our growth had slowed. Our PGP, frankly, was not producing sufficient improvements in quality and cost to shelter us from employers inclined to drop plans or freeze their enrollment. And our patient satisfaction was often lower than plans with large networks. Mergers and sole source looked like a panacea, an enticing bypass around the difficult, painstaking work of measuring and improving performance.
This abridged history of the backlash is inevitably a bit of a caricature, and in fact, events unfolded differently in different markets and for different plans. I believe, however, that the main points are valid and have relevance for the future. Perhaps the most important implication is that the downward spiral of managed care was not inevitable. Strategic miscalculation--coupled with greed in some quarters--brought us to this point, not a once-and-for-all rejection of organized delivery by the American people. History cannot be rewound and begun anew, but there will be new opportunities for the development and expansion of PGPs if we are focused, patient, and heed the lessons of the past.
Toward a 21st Century Health System is an excellent resource for those wanting to explore the role PGPs might play in the future. It’s not formally divided into parts, but the preface lays out the basic framework: The first three chapters explore both the theory and the evidence that PGPs perform better than the fee-for-service system in terms of efficiency, quality, and safety. The next five chapters summarize the contributions of PGPs in specific areas, including national health policy, technology assessment, pharmacy benefit management, workforce policy, and research. The final four chapters, as well as the foreword, examine why PGPs have not thrived everywhere and what might be done to change that. Finally, an epilogue addresses the role of PGPs in developing and applying advanced clinical information systems.
The authors of the various chapters are first-rate, including major figures in research, delivery, purchasing, and policy. The audience for this book should be correspondingly large. Depending on the reader’s perspective, different themes might leap out of the book. For me, three are predominant.
First, by virtue of their organization and prepayment, PGPs have unique potential to perform on the Institute of Medicine’s six quality aims: safety, effectiveness, efficiency, patient-centeredness, timeliness, and equity. Actual performance, however, may not always match potential, in part because PGPs are complex and challenging to manage. Given my own experience as a non-physician CEO of a PGP, I was especially interested in the chapter on “Physician Leadership,” written by Crosson, Weiland, and Berenson. As important as lay leaders might be, physician leadership is an indispensable ingredient for a successful PGP. And it is not easy to find. As observed by the authors of the chapter, excellent clinicians are not necessarily excellent leaders: “A whole new set of skills and perspectives is needed—behaviors such as delegating rather than doing, collaborating rather than acting independently, planning rather than acting, and acting proactively rather than reactively. The notion physicians make poor followers does not imply that they make good leaders.”
How well PGPs perform relative to the rest of the health care system is actually more of a mystery than it should be. As Chuang, Luft, and Dudley explain in their chapter on “The Clinical and Economic Performance of Prepaid Group Practice,” there is remarkably little research on PGPs per se. Most research does not distinguish between PGPs and other types of HMOs. This is depressing. It is no wonder that the media and politicians fail to distinguish among HMOs when launching their broadsides against managed care. Compounding the problem is that our tools for measuring performance have been limited, although they are now improving.
A second major theme of the book is that PGPs have an impact on the health care system that is greater than their sheer numbers, or the data on comparative performance, would suggest. PGPs serve as “engines of continual innovation,” an expression applied by Shortell and Schmittdiel in their chapter “Prepaid Groups and Organized Delivery Systems: Promise, Performance, and Potential.” If improvements made by PGPs are then adopted by other providers, as seems to happen, PGP performance may not appear to be outstanding. Yet the benefits for society are multiplied. PGPs are now serving as “engines” in the development and application of sophisticated clinical information systems. As organized and closed systems, PGPs are better positioned to implement such systems, apply them aggressively, and reap the clinical and financial rewards. Along with some far-sighted non-PGP providers, they are setting a standard for clinical information that others will eventually be compelled to follow.
A third theme is that the attachment of Americans to fee-for-service payment, free choice of provider, and specialized, often small, providers may not be as strong as it seems on the surface. The choices made by consumers are, of course, influenced by the choices offered, the information provided (or not provided, as in the case of quality), and the costs attached to those choices. As Darling describes in her chapter on “The Relationship Between Prepaid Group Practice and the Employer Community,” some employers have gone to great lengths to offer a fair and meaningful choice among alternative methods of financing and delivery. These enlightened purchasers have been very supportive of PGPs, including Harvard Community Health Plan and Harvard Vanguard Medical Associates. Yet, as discussed above, other employers continue to pursue policies (perhaps unwittingly) that are inimical to the interests of PGPs – and the country. Our health care system would improve markedly if employers would read, and implement, Enthoven’s chapter entitled “Open the Markets and Level the Playing Field.”
Engaged as I currently am in advising Congress on Medicare policy, I read Toward a 21st Century Health System with an eye toward possible lessons for the future of Medicare. Of course, some proponents of managed care in general, or PGPs in particular, want the government to fund more money for private plans, so they can entice seniors to leave the familiarity of traditional Medicare. They have been quite successful in their lobbying: The Medicare Modernization Act substantially increased payments to private plans participating in Medicare Advantage, so much so that the government now pays more on behalf of beneficiaries enrolling in private plans than on behalf of beneficiaries remaining in traditional fee-for-service Medicare.
MedPAC has long advocated giving Medicare beneficiaries the option of enrolling in a private health plan, but the commissioners believe the government should not attempt to steer beneficiaries into private plans. Instead, the government should be neutral. Neutrality, as we define it, would not preclude the government from paying more for individual private plans achieving demonstrable improvements in quality.
For reasons discussed above, I believe it is vital that managed care remain a choice for Medicare beneficiaries, not a requirement. Moreover, increasing payment to private plans until they are eager to serve Medicare beneficiaries will not, by itself, spur the innovation and effective management that Medicare needs so badly. Indeed, I fear it will be counterproductive: Through overly generous payments, Medicare is ratifying a loose, ineffective form of managed care that is little better than what traditional Medicare might achieve on its own.
Choice is not meaningful, however, unless a price tag is attached to each of the options. Given the many competing uses of public funds--from national security and education to public health and Medicare itself--we cannot afford a system that pays more on behalf of beneficiaries choosing a demonstrably less efficient alternative, regardless of whether that alternative is traditional Medicare or a private health plan. Enthoven argues it is “increasingly likely that one way or another, the federal government is going to have to sever its financial commitment to traditional fee-for-service Medicare and instead make premium support payments that help beneficiaries join one or another competitive health insurance and delivery organization.” The level of the premium support payments would be determined by head-to-head competition between traditional Medicare and private plans. MMA provides for a demonstration of that idea, which is one way to establish the neutrality sought by MedPAC.
It is impossible to predict whether “premium support” will be embraced as an organizing principle for Medicare. Few ideas are more controversial in Washington, and difficult technical challenges must be overcome. One thing is certain, however: The impending debate would benefit if all participants read and considered this book, as we move Toward a 21st Century Health System.
Glenn M. Hackbarth is chairman of the Medicare Payment Advisory Commission.
