Chapter 15

In response to high health care costs, new forms of managed care organizations (MCOs), incentive arrangements, and organizational monitoring and reporting structures have appeared on a continuing basis. Concomitantly, health services researchers have developed a wide array of quality assessment, provider profiling, and risk adjustment tools, patients have become increasingly informed and participative in medical decision-making, and technological changes have provided new possibilities for treating patients and managing providers. The commingling of these trends is rationalizing the organization of health care and the practice of medicine.

We examine the role of managed care in this transformation. The effects of MCOs are intertwined with a shift in health care from hospital to ambulatory settings, the development of health services research (e.g., quality measurement, guidelines, risk adjustment), societal and employer efforts to contain health care costs, technological change, and the redefinition of individuals as consumers rather than patients. While such trends are transforming health care delivery in many countries, MCOs operating within a market ideology of managed competition is the form that health care restructuring takes in the United States. We describe the various types of managed care organizations and the structures they use to manage health care.

The flux in organizational forms and structures have created the opportunity for the invention of new, and possibly better, ways of organizing health care. But, the flux has imposed significant costs on patients and providers. The continuity of the patient-provider relationship, which is key to developing relational trust and high quality health care, is threatened by changes in relationships among patient, employer or health purchaser, MCO, and providers. At their best, MCOs organize and improve health care in a stable, reliable and less costly manner. Patients in need of services are identified and treated, preventive health care programs are implemented, and quality improvement is pursued. Health care costs and the rate of their increase are decreased. At their worst, MCOs earn profits by skimming favorable risks, by taking advantage of market imperfections, and disrupt the patient-physician relationship. In the middle are a large number of MCOs muddling along.