Behind the Curve: A Critical Assessment of How Little is Known about Arrangements between Managed Care Plans and Physicians

Abstract

Extraordinary growth in managed care arrangements over the past decade has been both widely praised and criticized. Proponents and critics agree that the nature of medical practice is being profoundly altered by this growth, even if they cannot articulate the direction and consequences of this change. We explore the roots of this uncertainty by examining the available evidence on critical features of the arrangements managed care plans currently have with affiliated physicians. Our approach is to review and synthesize the literature in several key substantive areas from a broad range of sources. We found that existing knowledge is dated, derived form a limited subset of plans, inattentive to important structural differences between plans, and responsive to a very narrow set of issues poorly reflecting the range of medical practice and change introduced by managed care. We highlight key questions of interest and the knowledge gaps critical to address so that policy and management decisions can both reflect and be informed on these issues that define the arrangements managed care plans make with physicians and ultimately influence medical practice.

How Do Doctors Behave When Some (But Not All) of Their Patients are in Managed Care?

“…In this model, we assume that HMOs seek to pay marginal costs for excess physician capacity (Gold 1995a The size of the HIvIO population is assumed to have no effect on the production HMOs also pay lower rates than indemnity plans, then an increase in the lIMO share of a practice will lead to a reduction in physician income. If abstention from demand inducement (or ethical behavior) is a normal good, this increase in HMO share will lead to an increase in demand inducement from fee-for-service patients.…”

The Changing US Health Care System: Challenges for Responsible Public Policy

“…By managed care, we mean network-based arrangements associated with health benefit products, such as health maintenance organizations (HMOs), preferred provider organizations (PPOs), and point-of-service (POS) hybrid arrangements, including the providersponsored organizations set up to contract or compete with entities offering these products. Managed care integrates, to different degrees, the functions of health insurance and health care delivery (Shortell and Hull 1996;Gold, Nelson, Lake, et al 1995;Weiner and deLissovoy 1993).…”

“…In contrast, only about 34 percent of PPOs offered a "gatekeeper" PPO product. About half the network IPA HMOs and two-thirds of the group-staff HMOs required preauthorization of specialist services in 1994 (Gold, Nelson, Lake, et al 1995). Also at that time, over half the HMOs (21 percent of PPOs) said they had taken specific steps to expand the scope of primary care practice, although most characterized any expansion as moderate rather than great (Gold, Nelson, Lake, et al 1995).…”

“…Additional financial incentives in the form of withholds or bonuses (distributed on the basis of multiple measures and distribution formulas among a shared risk pool, whose size varies from one physician to all physicians in a plan) 3. Alternative mechanisms to limit the amount of risk through stoploss arrangements or to adjust it by enrollee characteristics (often a relatively rudimentary adjustment based on age, sex, or similar variables) (Gold, Nelson, Lake, et al 1995) The form of all three features changes as they are translated through various intermediate contracting entities to individual physician pracThe Changing US System and Public Policy tice groups, and ultimately to an individual physician. Moreover, health plans do not use the same arrangements uniformly across their providers.…”

“…In 1994, all but 10 percent of network IPAs used either capitation or bonuses and withheld payments (withholds), sometimes both (Gold, Nelson, Lake, et al 1995). Common performance indicators employed by half or more of HMOs using withholds or bonuses include measures of use and cost, quality of care, and patient complaints, as well as consumer surveys (Gold, Nelson, Lake, et al 1995). About half the network IPAs used capitation to pay their primary care physicians (InterStudy 1997a;1997b;Gold, Nelson, Lake, et al 1995).…”