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Managed Care

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An increasing amount of health care in the United States is administered though managed care plans. The phrase "managed care" evokes strong, often negative reactions from health care providers. Yet it is important to have an explicit understanding of managed care and particular types of potential ethical dilemmas that arise for health care providers in such systems.

What is "managed" care?

Managed care refers to a variety of techniques for influencing the clinical behavior of health care providers and/or patients, often by integrating the payment and delivery of health care. The overall aim of managed care is to place administrative control over cost of, quality of, or access to health care services in a specific population of covered enrollees.

What do "capitation" and other managed care systems involve?

Capitation involves paying physicians a fixed, prospective amount for each patient regardless of the cost of caring for the patient. Preferred provider organizations involve arrangements between physicians and purchasers in which physicians agree to offer discounts from their usual charges or fees in exchange for providing health care for a group of patients. Other examples of managed care include individual practice associations, health maintenance organizations, physician/hospital associations, and exclusive provider organizations.

Capitation is one example of managed care practices that seek to control costs of health care. Some managed care practices seek to impact the quality of care. For instance, clinical guidelines that aim to alter the clinical management of specific health concerns (e.g., treatment of hypertension) are also common managed care practices.

What ethical concerns does managed care raise?

Managed care is structured around a variety of incentives to encourage the practice of cost-effective medicine, and to minimize variation in clinical practice patterns. "Efficiency" here means providing a product, in this case health care, while minimizing resources used, most often dollars. Most often, efficiency is maximized by increasing productivity while fixing cost. Hence, managed care may create pressure to do more with less: less time per patient, less costly medicines, and fewer costly diagnostic tests and treatments.

Monetary incentives are often used to affect physician behavior, and may include rewarding physicians who practice medicine frugally by offering financial rewards, such as bonuses, for those who provide the most cost-efficient care. Those who perform too many procedures or are cost-inefficient in other ways may be penalized, often by withholding bonuses or portions of income. Nonmonetary inducements to limit care take the form of bringing peer pressure, or pressure from superiors, to bear on those who fail to take into account the financial well being of their employer. These monetary and nonmonetary incentives raise the ethical concern that physicians may compromise patient advocacy in order to achieve cost savings.

A related ethical concern pertains to the effect of managed care on physician-patient relationships. Many worry that managed care will undermine physician-patient relationships by eroding patients' trust in their physicians, reducing the amount of time physicians spend with patients, and restricting patients' access to physicians.

What specific impact does managed care have on relationships between doctors and patients?

Managed care can alter relationships between doctors and patients in a variety of ways. First, it may change the way in which such relationships begin and end. Health maintenance organizations, for example, pay only for care provided by their own physicians. Preferred provider groups restrict access to physicians by paying a smaller percentage of the cost of care when patients go outside the network. These restrictions limit patients' ability to establish a relationship with the physician of their choosing. Termination of physician-patient relationships can also occur without patients' choosing. For example, when employers shift health plans employees may have no choice but to sever ties with their physicians.

In addition, some forms of managed care create a financial incentive for doctors to spend less time with each patient. For instance, under preferred provider arrangements physicians may compensate for reduced fees-for-services by seeing more patients. This reduces the time available to discuss patients' problems, explore treatments options, and maintain a meaningful relationship with patients.

Finally, managed care arrangements often control patients' access to medical specialists, thereby restricting patients' freedom to choose providers and obtain the medical services they desire. This occurs, for example, in health maintenance organizations where primary care physicians function as "gatekeepers" who authorize patient referrals to medical specialists. Critics of managed care claim that this will lower the quality of care, while supporters believe that gatekeeping functions yield benefits such as reducing iatrogenic effects, promoting rigorous review of standards of care, and emphasizing low-technology, care oriented services.

What should physicians think about when evaluating managed care contracts?

As a physician, you may likely encounter health plans that employ managed care techniques. You should evaluate the nature of financial or other mechanisms that affect your practice and determine whether such mechanisms are consistent with providing competent and compassionate care to your patients.

For example, before signing contracts with insurers who restrict the amount you are allowed to charge, figure out if this amount will enable you to spend sufficient time with each patient. Before becoming the employee of a health maintenance organization, confirm that patients are not denied clinically effective health care services. Prior to accepting patients on a capitated basis, verify that you will be able to provide competent, high quality care under such an arrangement. Review contracts with health plans for clauses that limit or restrict your ability to discuss all potentially beneficial health care services with patients, even if they are not covered by the health plan (such clauses are often referred to as "gag" clauses). These kinds of inquiries can help to prevent serious ethical concerns from arising.

Existing arrangements with insurers should also be evaluated on an ongoing basis. For instance, after contracting with a preferred provider organization, you may decide that the financial pressure to take "short cuts" in providing high quality care is too great and the contract should not be renewed. You should also make full use of appeal mechanisms that exist for denied coverage. When coverage for a service you believe to be effective and clinically indicated is denied, your role as advocate for the patient obligates you to take every reasonable avenue to appeal the decision.

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Nancy S. Jecker, PhD
Professor, Medical History and Ethics
Professor, Philosophy and Law

With Clarence H. Braddock III, MD, MPH
Faculty, Departments of Medicine and Medical History and Ethics


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Last date modified: April 11, 2008