Managed Care

Managed Care Practices

It is useful to describe common practices that may be bundled together in various organizational forms. Gatekeeping is a role assigned to primary care physicians that aims to limit use of high cost specialty services by requiring patients to get referrals from their primary care physician, who provides it only when judged warranted. Utilization review is an administrative practice that aims to limit use of unwarranted treatments by hiring third parties to evaluate them. Capitation is a payment practice in which the physician receives a set payment based on the number of patients under care, and in turn assumes the financial risk of providing for those patients' care, a strategy that aims to make physicians cost conscious. This strategy aims to reverse an incentive system that rewards physicians for multiple procedures, some of which might be unnecessary or inefficient. Instead, the healthier a patient remains, the greater the savings for the physician. In theory, the physician could retain the entire payment for the patient who needs no care, although in fact some of the capitation payment may be used to pay for insurance that physicians in capitated plans generally hold to limit their liability for patients with very high medical expenses. Case management is a practice in which a role is assigned to someone—typically a nonphysician, managed care employee—whose job it is to limit losses due to fragmentation of care and inadequate services.

Background and Development

Despite experiments outside the United States, the managed care story is overwhelmingly an American one, reflecting the distinctive challenges posed by U.S. employer-based insurance, extensive development and use of high cost technologies, and the relative absence of direct government influence on costs. Early elements of managed care can be found in the 20th century in prepaid group plans, such as the one established for workers in Kaiser Industries in 1945, or the Health Insurance Plan of New York, initially created for city workers in New York City in the 1940s.

...