MANAGED CARE ORGANISATIONS
Order Instructions:
As your third assignment toward completion of the Session Long Project you are asked to review the paper by A. Mains, A. Coustasse, K. Lykens: Physician Incentives: Managed Care and Ethics and answer the questions below.
1.Consider this idea from the paper: “Medicine is a moral enterprise. Because MCOs are involved in the delivery of medical care, they too, are moral entities. However, MCOs are also businesses.”
2.Explain the idea that the authors sought to convey.
3.Discuss the physician’s dual function under an MCO model of care.
4.What concerns do you have about the physician- patient relationship under MCOs?
Module Overview
Basically, managed care and managed care organizations (MCOs) was championed as a powerful force for containing healthcare costs. We will see that this is not necessarily the case. We will also see that managed care brings up a range of structural issues related to price fixing and market power.
In the United States after World War II, healthcare was based on an indemnity model or fee for service. In this case health insurers simply paid the bills for services ordered by physicians. These traditional plans provided few incentives for cost containment medical decisions.
Responding to the lack of cost containment measures in the indemnity model, private insurers began to “manage care” by exerting influence on the decisions made by physicians. Managed care is the process of structuring or restructuring the healthcare system in terms of financing, purchasing, delivering, measuring, and documenting a broad range of healthcare services and products.
Sometimes this process of restructuring took the form of bureaucratic rules, e.g. requiring physicians to seek administrative approval before proceeding with certain procedures. In other cases, financial incentives were used to shape physician behavior. By the mid 1990’s, “managed care” had become the dominant form of private sector health insurance.1
Today managed care organization (MCO) is a general term used to describe any number of health insurance arrangements that are intended to reduce unnecessary healthcare costs through a variety of mechanisms, including: economic incentives for physicians and patients to select less costly forms of care; programs for reviewing the medical necessity of specific services; increased beneficiary cost sharing; controls on inpatient admissions and lengths of stay; and the intensive management of high-cost healthcare cases.
Managed care organizations are structured with an imperative to consider both the impact on costs and also the impact on doctors’ decisions whether to join their networks.
These considerations by MCOs to both contain costs and attract physicians are influenced by the values and practices that physicians bring to healthcare. Physicians want to earn a living but not at the risk of endangering the lives they are meant to serve. These healthcare values held by physicians pose a strategic dilemma for managed care organizations needing to contain costs and attract physicians to assemble provider networks.
Low cost MCOs with contract restrictions on spending are seen as highly restrictive. On the other hand, MCOs with large physician networks write cost containment rules into contracts that are not overly burdensome.
It is interesting to think about how MCOs balance competing interests and ethical issues in cost containment, physician ideals, and quality of care.
There are a wide variety of managed care models that integrate financing and management with the delivery of healthcare services to an enrolled population.
Health Maintenance Organizations: HMOs are organized healthcare systems that are responsible for both the financing and the delivery of a broad range of comprehensive health services to an enrolled population. HMOs act both as insurer and provider of healthcare services. They charge employers a fixed premium for each subscriber. An independent practice association (IPA)-model HMO provides medical care to its subscribers through contracts it establishes with independent physicians. In a staff-model HMO, the physicians would normally be full-time employees of the HMO. Individuals who subscribe to an HMO are often limited to the panel of physicians who have contracted with the HMO to provide services to its subscribers.
Preferred provider organizations (PPOs) are entities through which employer health benefit plans and health insurance carriers contract to purchase healthcare services for covered beneficiaries from a selected group of participating providers. Most states have specific PPO laws that directly regulate such entities.
Exclusive provider organizations (EPOs) limit their beneficiaries to participating providers for any healthcare services. EPOs use a gatekeeper approach to authorize non–primary care services. The primary difference between an HMO and an EPO is that the former is regulated under HMO laws and regulations, whereas the latter is regulated under insurance laws and regulations.
These integrated health delivery organizations raise a variety of issues with the Department of Justice and the Federal Trade Commission. The issues include price fixing and antitrust problems based on market power.
Depending on how the groups are organized- horizontal versus vertical- and who is integrated- competing physician groups or a multi provider network a MCO may violate several antitrust laws.
Whenever an MCO possesses significant market power or deals with a group that has significant market power, antitrust implications should be considered. To determine market power, it is necessary first to identify the market in which the entity exercises power. For antitrust purposes, the relevant market has two components: (1) a product component and (2) a geographic component.
Price fixing is considered a per se violation of the antitrust laws. Per Se Violations conclusively violate antitrust laws and means there is no further investigation of its effects on the competitiveness of the market because its intentions are so obvious. A Per Se Violation would almost always limit competition and decrease productivity. Activities that fall under per se violations are acts such as horizontal price fixing and horizontal market division.
Price fixing occurs when two or more competitors come together to decide on a price that will be charged for services or goods. The per se rule applies to restraints in trade that are so inimical to competition and so unjustified that they are presumed to be unreasonable and, therefore, are illegal.
Aaron, Henry J. and Reischauer, Robert D., (1995) “The Medicare Reform Debate: What is the Next Step?” Health Affiars. 14:4. p.8-30
Required Reading
D.A. Mains, A. Coustasse, K. Lykens: Physician Incentives: Managed Care and Ethics. The Internet Journal of Law, Healthcare and Ethics. 2004 Volume 2 Number 1. DOI: 10.5580/24ae – See more at: http://ispub.com/IJLHE/2/1/12416
Managed Care and Physician Incentives: The Effects of Competition on the Cost and Quality of Care. David J. Cooper and James B. Rebitzer. March 2004. http://myweb.fsu.edu/djcooper/research/managedcare.pdf
Government Agencies Soften Stance on What Constitutes Price Fixing. David A. Ettinger and Mark L. Lasser (March, 2008) http://corporate.findlaw.com/litigation-disputes/government-agencies-soften-stance-on-what-constitutes-price.html
Diagnosing Physician-Hospital Organizations. Susan A. Creighton. Federal Trade Commission Remarks Before American Health Lawyers Association, Program on Legal Issues Affecting Academic Medical Centers and Other Teaching Institutions. January 22, 2004. Washington, DC. Retrieved from: http://www.ftc.gov/public-statements/2004/01/diagnosing-physician-hospital-organizations
Statement of department of justice and federal trade commission enforcement policy on multiprovider networks; Federal Trade Commission; Competition in The Healthcare Market place; Statements of Health Care Antitrust Enforcement Policy; Statement 9. (July 8, 2009). Retrieved from: http://www.law.uh.edu/faculty/jmantel/health-law/Statement9AntitrustEnforcementPolicy.pdf
The above policy has been updated (Statement 9 on Multi-provider Network), Read the updates below:
Revised Statements on Multi-provider networks: http://corporate.findlaw.com/law-library/revised-policy-statements-on-health-care-antitrust-enforcement.html
Optional Reading
Competition in the healthcare marketplace. http://www.ftc.gov/bc/healthcare/antitrust/index.htm
Improving Health Care: A Dose of Competition: A Report by the Federal Trade Commission and the Department of Justice (July 2004). http://www.ftc.gov/reports/healthcare/healthcarerptexecsum.pdf
QuickCounsel Antitrust: U.S. Laws and Regulations. Elizabeth Killingsworth, Esq. http://www.acc.com/legalresources/quickcounsel/auslar.cfm
SAMPLE ANSWER
MANAGED CARE ORGANISATIONS
“Medicine is a moral enterprise. Because MCOs are involved in the delivery of medical care, they too are moral entities. However, MCOs are also businesses.”
MCOs are moral entities because they aim at deliver quality, safe and effective medical care. They are responsible of doing what is right and best for the service users while ensuring equitable distribution of the scarce health resources. However, the managed care control changes the patient physician relationship to a business-consumer relationship. This implies that the main goal of MCOs is to ensure that physicians adopts the principle of distributive ethic; which is basically providing the most safe and best quality of care to the greatest number of patients as possible using the allotted budget or incurring losses (Mains, Coustasse, & Lykens, 2004).
Under this moral obligation, the MCOs are guided by the utilitarianism- which basically entails performing the best action that maximizes utility. However, the MCOs are economic tenets that aim at reducing costs for service users and aims at generating profit simultaneously. Therefore, when making decisions regarding MCOs, providers should consider the economic effects when maintaining aggregating costs of care so as to avoid loses in either the MCOs or the physicians. This involves establishing control, incentives, bonuses, and withholds as well as other quality assurance initiatives that will ensure that physician practices are safe, quality and profit generating (Cooper and Rebitzer, 2004).
Physician dual function
In managed care, the physicians have dual functions namely a) patient fiduciary and b) Financial advocates. The physician play the unrestricted role of patient advocates by ensuring that the managed care model puts into consideration to patient’s autonomy, respects it, and exercise the ethical principle of beneficence. This implies that the physicians are patient’s advocates in voicing their concerns whenever the managed care model prioritizes its benefits over the patient’s interests, or any other good that is beyond establishing effective physician-patient relationship. This is an important role because the MCOs require expects the physicians to choose the society wellbeing over individual patient’s interest (Mains, Coustasse, & Lykens, 2004).
Therefore, when enrolling in these organizations, it is important for the physicians to understand that their first role is to be patient advocates. Under patient fiduciary role, the physicians are legally responsible for advising patients about all possible alternative care or technological advancement that can be used to manage their illness. The physicians are expected to remain prudent steward when advising and deciding the limits of patient care. This entails balancing between medical merits and financial risks. Trust, honesty and caring are foundation of establishing effective physician-patient fiduciary relationship (Cooper and Rebitzer, 2004).
Concerns about physician-patient relationship
Managed care is associated with moral and professional ethical dilemmas. For instance, MCOs focus on financial incentives and social optimal outcomes instead of single patient well-being. This brings forth the concept of “countervailing agency” which is basically the physician’s role to choose between individual patient’s interests and the society wellbeing. If a patient does not receive care as by MCOs, the physicians can be sued for malpractice. This puts the physicians at dilemma of delivering care based on MCOs expectations and risk for liability (Mains, Coustasse, & Lykens, 2004).
In addition, the MCOs emphasize on utilitarianism approach when solving the healthcare expenditure. Despite its advantages, this approach raises concerns of its validity and morality in physician- patient relationship. The professional sovereignty vs. physician financial incentives complex interaction results into a conflict of interest. It is important for the managers in healthcare system to choose a strategy that helps them identify how to favor the interests of the patients and the society. This calls for reforms to re-define the moral mission for MCOs to fulfill their goals and to preserve efficient physician-patient relationship ( Improving Health Care, 2004).
References
Cooper, D.J., and Rebitzer, J.B. (2004). Managed Care and Physician Incentives The Effects of Competition on the Cost and Quality of Care. Retrieved from http://myweb.fsu.edu/djcooper/research/managedcare.pdf
Mains, D.A., Coustasse, A., & Lykens, C.K. (2004). Physician Incentives: Managed Care and Ethics. The Internet Journal of Law, Healthcare and Ethics. Volume 2 Number 1. DOI: 10.5580/24ae – Retrieved from http://ispub.com/IJLHE/2/1/12416
Improving Health Care (2004). A Dose of Competition: A Report by the Federal Trade Commission and the Department of Justice. Retrieved from http://www.ftc.gov/reports/healthcare/healthcarerptexecsum.pdf
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