The effect of normative social forces on managed care organizations: implications for strategic management

Drawing on institutional theory, this study examines how adherence to a number of "institutional" and "technical" environmental forces can influence the business success of managed care organizations (MCOs). The standards studied include: (1) institutional forces: socially accepted procedures for delivering care (access to quality care, availability of information, and delivery of care in a personal manner); and (2) technical forces: industry standards for cost control and efficient use of financial and medical resources. The most significant finding is that successful MCOs must conform to both institutional and technical forces to be successful. MCOs that conform to either one or the other type of standard were no more successful than those that conformed to neither. These findings have several important implications for MCO strategy. First, to be successful, MCO executives must understand the external environment in which they operate. They must anticipate and respond to shifts in that environment. Second, this understanding of the external environment must place equal emphasis on societal demands (e.g., for accessible care and information) and on technical demands (e.g., for cost-efficient care). These findings may well reflect that once managed care penetration reaches relatively high levels, marketshare can no longer be gained through cost-efficiency alone; rather, enrollee satisfaction based on societal demands becomes a key factor in maintaining and gaining marketshare. Institutional theory provides' some strategies for accomplishing these goals. Cost-containment strategies include implementing policies for cutting costs in areas that do not affect the quality of care, such as using generic drugs and reducing administrative excesses and redundancies. At the same time, MCOs must implement strategies aimed at improving conformity to prevailing societal perceptions of appropriate care, including providing patients more freedom to choose their physicians and encouraging and rewarding care providers for being friendly and personable. An MCO should work to inform the public of the organization's efforts to provide high-quality, low-cost medical care in a friendly, convenient manner.     

The future of managed care organization

This paper analyzes the transformation of the central organization in the managed care system: the multiproduct, multimarket health plan. It examines vertical disintegration, the shift from ownership to contractual linkages between plans and provider organizations, and horizontal integration--the consolidation of erstwhile indemnity carriers, Blue Cross plans, health maintenance organizations (HMOs), and specialty networks. Health care consumers differ widely in their preferences and willingness to pay for particular products and network characteristics, while providers differ widely in their willingness to adopt particular organization and financing structures. This heterogeneity creates an enduring role for health plans that are diversified into multiple networks, benefit products, distribution channels, and geographic regions. Diversification now is driving health plans toward being national, full-service corporations and away from being local, single-product organizations linked to particular providers and selling to particular consumer niches.     

The effect of governing board composition on rural hospitals' involvement in provider-sponsored managed care organizations

Rural hospitals are actively pursuing various strategic alternatives to confront the dramatic changes taking place in the delivery, organization, and financing of healthcare. One of these strategic alternatives is involvement in provider-sponsored managed care organizations. Studies have argued that this form of managed care would enhance public trust and might improve the performance of hospitals. The changing healthcare environment has also increased the importance of the competence and composition of hospital boards. This article examines the effect of the governing board's composition on rural hospitals' involvement in provider-sponsored managed care organizations. The study sample consisted of 140 rural hospitals in Iowa and Nebraska whose CEOs responded to a survey conducted by the Center for Health Services Research at the University of Iowa between June and December 1997. The principal finding was that the likelihood of a hospital owning any form of managed care organization increases with the number of community leaders and health professionals on the board. The number of business leaders had no effect on the likelihood of involvement in such an arrangement. Other factors that affected the likelihood of owning a managed care organization were the health status of the population and ownership type. Key recommendations to managers are to (1) revisit the hospital board's composition before actively pursuing a strategic action, (2) examine the compatibility of the type of strategic activity pursued with the background of board members and the interests of the populations they represent, and (3) use the governing board as a resource in determining which new strategic activities to undertake.     

The impact of managed care and practice size on primary care physicians' perceived ability to refer

OBJECTIVES: To identify the determinants of primary care physicians' perceived ability to refer patients, to compare perceived ability to refer between solo/two-physician practices and group practices, and to determine the impact of managed care on perceived ability to refer. METHODS: Multivariate analysis using a dataset derived from the Community Tracking Study Physician Survey, 1996-1997. The variables used to explain physicians' perceived ability to refer included physician and practice characteristics as well as aspects of the financial arrangements of managed care. The sample was stratified by practice size. A likelihood ratio test was performed to determine whether there were differences in practice characteristics and managed care financial arrangements that could explain variations in perceived ability to refer between physicians in solo/two-physician and group practices. RESULTS: Perceived ability to refer did not vary much between physicians in solo/two-physician practices and those in group practices. However, the determinants of perceived ability to refer did vary by practice size. The effects of physicians' characteristics were more pronounced among physicians in group practice, whereas the effects of financial arrangements were significant for physicians in solo/two-physician practices. The most significant determinant of perceived ability to refer was primary care physicians' satisfaction in their communication with specialists. CONCLUSION: Group practices are more immune than solo/two-physician practices to external financial arrangements from managed care contracts, possibly through their ability to take advantage of economies of scale and to diversify their sources of funds.     

Advanced pricing strategies for hospitals in contracting with managed care organizations

This article provides both a conceptual overview of pricing health care services and two pricing strategy examples. The overview addresses the underlying concepts of pricing, the factors that influence it, and the risk continuum of pricing approaches. The pricing strategy examples highlight some of the issues and considerations involved in pricing services in a changing health care market. Because the payors of health care will continue to shift economic risk to the providers of health care, the examples emphasize the importance of managing risk.     

US physicians' perceptions of the effect of practice guidelines and ability to provide high-quality care

OBJECTIVES: In the USA, health care organizations frequently disseminate practice guidelines to physicians, but physicians often resist implementing guidelines when they perceive no improvements in quality of care will result. Greater involvement with a single health care organization may a inverted exclamation market physicians' perceptions of guidelines. We examined the relationship between the perceived effect of guidelines on practice and perceived quality of care for US primary care physicians (PCPs) and specialists with varying levels of financial involvement with a single managed care organization. METHODS: Data were from the 1996-1997 Community Tracking Study, a nationally representative, cross-sectional survey of 12,528 physicians. Data were adjusted for possible confounders using ordinal logistic regression. RESULTS: Almost half the physicians described a moderate to very large perceived effect of guidelines (46% of PCPs, 46% of specialists). Physicians' financial involvement with a single organization was modest: PCPs received on average 24% of their revenue from their largest contract, while specialists averaged 18%. For specialists, increasing perceived effect of guidelines was associated with increasingly negative perceptions of quality of care [beta= -0.16, 95% confidence interval (-0.22, -0.10)]. Similar results were obtained for PCPs with low levels of financial involvement with a single organization. However, this negative association disappeared for PCPs with higher levels of financial involvement. CONCLUSIONS: PCPs with substantial financial involvement with a single organization who perceive greater effects of guidelines on practice have less negative perceptions of their ability to provide high-quality care. Although our data cannot confirm a causal relationship, financial involvement with a single organization may be one factor linking practice guidelines to high-quality care.     

The role of performance measures for improving quality in managed care organizations

OBJECTIVES: To understand how managed care plans use performance measures for quality improvement and to identify the strengths and weaknesses of currently used standardized performance measures such as the Health Plan Employer Data and Information Set (HEDIS) and the Consumer Assessment of Health Plans (CAHPS) survey. DATA SOURCES/STUDY SETTING: Representatives (chief executive officers, medical directors, and quality-improvement directors) from 24 health plans in four states were surveyed. The overall response rate was 58.3 percent, with a mean of 1.8 respondents per plan. STUDY DESIGN: This exploratory qualitative research used a purposive sample of respondents. Two study authors conducted separate one-hour tape-recorded telephone interviews with multiple respondents from each health plan. PRINCIPAL FINDINGS: All managed care organizations interviewed use performance measures for quality improvement but the degree and sophistication of use varies. Many of our respondent plans use performance measures to target quality-improvement initiatives, evaluate current performance, establish goals for quality improvement, identify the root cause of problems, and monitor performance. CONCLUSION: Performance measures are used for quality improvement in addition to informing external constituents, but additional research is needed to understand how the benefits of measurement can be maximized.     

The effect of financial incentives on physicians' behaviour in health maintenance organizations

Examines the relationship between the presence of financial incentives and their effect on physician behavior in health maintenance organizations (HMOs). By reviewing the scope and dimensions of both HMOs and financial incentives, a foundation is laid for the review of the current empirical evidence. Further analysis and conceptual development is given to this topic by stating the limitations of existing research--in the confounding variables, in the complexity of incentives, and in the unanswered questions of quality of care--and by proposing innovative ways of studying the ?other aspects of physician behavior' not previously considered. Questions and implications are raised for future research and practice.     

The impact of competition on the importance of conforming to social norms: strategies for managed care organizations

PURPOSE: This study focuses around the central question of whether or not the relative importance of conformity to institutional norms varies as markets become more competitive. DESIGN/METHODOLOGY/APPROACH: Using data gathered for 187 managed health care plans in the U.S., this study uses hierarchical regression analysis involving blocked variables. FINDINGS: This study finds that conformity to technical environmental requirements has a significant impact on performance at all levels of competition. However, the importance of conformity to institutional norms increases as markets becomes more competitive. PRACTICAL IMPLICATIONS: From the perspective of MCOs, this means that managers need to carefully monitor the prevailing technical and institutional environmental forces and match their responses according to the competitiveness of their individual markets. From a societal perspective, this study suggests that improved health care delivery is likely to result from increased competition in the managed care market. ORIGINALITY/VALUE: Prior research has shown that conformity to social norms is important for MCO performance. However, this is the first study to examine the whether the importance of conformity to social norms varies as a function of market competition.     

Database system to identify biological risk in managed care organizations: implications for clinical care

The investigators constructed an index measure of cardiovascular risk and scored 1.991 adults as having high, average, or low cardiovascular risk. High cardiovascular risk was positively associated with hospital admissions (odds ratio [OR] = 3.9, p < 0.0001), total hospital days (OR = 4.0, p < 0.001), primary care clinic visits (OR = 7.3, p < 0.0001), and subspecialty clinic visits (OR = 2.3, p = 0.0003), compared to low cardiovascular risk, after controlling in multivariate analyses for gender and age. The index can provide estimates of utilization, costs, and potential preventability of adverse cardiovascular events, can be used to identify groups of patients in need of various systematic interventions, and can provide population-based ways to evaluate the results of interventions.     

Advances in migraine management: implications for managed care organizations

Migraine headache is a disabling disease that poses a significant societal burden. Stratified care and early intervention are current strategies for migraine management. It has been shown that early treatment with triptans in select patients can improve treatment outcomes. Triptans are selective 5-HT receptor agonists that are specific and effective treatments in the management of migraine, and they meet the acute treatment goal of rapid relief with minimal side effects. Triptans are associated with improved quality of life. Factors such as speed of onset, need for a second triptan dose, and patient satisfaction should be considered in the selection of a specific triptan treatment. Appropriate treatment can decrease costs. The patient's migraine history and response to prior therapy should be considered when selecting acute treatment. Cost-effectiveness models can be used to understand the effect of treatment choices on health care budgets. The direct cost per migraine episode, driven primarily by the need for rescue medications, is important to include in economic models. All aspects of effectiveness (efficacy, tolerability, and cost) should be considered to reduce overall managed care expenditures for migraine treatment. The improved clinical profiles of the triptans provide substantial value to managed care organizations.     

The relationship between primary care physicians' adherence to guidelines for the treatment of diabetes and patient satisfaction: findings from a pilot study

BACKGROUND: Adherence to clinical guidelines improves health care outcomes, reduces expenditure and prevents the complication of unnecessary interventions. It is uncertain what effect the adherence to guidelines for treating diabetes has on patient satisfaction. Some authors have reported that the use of guidelines does not affect patient satisfaction with care, and have concluded that satisfaction is related to a physician's interpersonal skills, rather than to the quality of care. Others have reported that structured intervention programmes improve patient satisfaction with care. OBJECTIVE: The purpose of our study was to explore the association between adherence to clinical guidelines and satisfaction with care among diabetics. METHODS: The study population included 135 randomly sampled diabetes patients listed with 12 primary care physicians at two health plans in Israel, which together insure >80% of the population. Telephone interviews were conducted with the patients between August and November 2000, using structured questionnaires. Patients were asked to report on the extent to which their primary care physician treated them as indicated by the clinical guidelines of these health plans. They were also asked to rate their satisfaction with their primary care physician and the treatment of their disease. Bi-variate analysis was conducted using the chi-square statistical significance test. Multivariate analysis was conducted using logistic regression models. RESULTS: Adherence to guidelines for diabetes was associated with patient satisfaction with care, independently of the patient's ethnicity (first language), age, gender, education, medication (insulin versus other) and health plan affiliation. CONCLUSION: Patients who report being treated as recommended in practice guidelines were more likely to be satisfied with their care. This finding may encourage primary care physicians to adhere to clinical practice guidelines.     

Bringing the physician back in: communication predictors of physicians' satisfaction with managed care

Data from a survey of physicians in a west coast city (n = 356) are used to measure physicians' extra-occupational sources of dissatisfaction. Data revealed a significant relationship between physicians' satisfaction and their managed care experience, their communication with managed care organizations, and views of managed care practice. Results suggest that managed care currently plays a large and significant role in predicting physicians' satisfaction. The importance of communication between physicians and managed care organizations is illustrated in the strength of the relationships between communication variables and managed care decisions. Furthermore, in assessing the strength of the relationship, regression analysis reveals that communication with managed care accounts for the largest percentage of variance in physicians' satisfaction. The results of this study suggest that communication with managed care organizations affects physicians' satisfaction with every facet of the organizational environment, including leading physicians who report problematic communication with managed care organizations to say that they would be less likely to choose the same career path again.     

Employee violence in health care: guidelines for health care organizations

Workplace violence is increasing, and health care environments are not immune to this escalating public health problem. In order to prevent or diminish the risk of a violent episode in the health care setting committed by employees, former employees, or family/significant others, health care managers need to be cognizant of certain factors associated with violence in the workplace. These variables include employee characteristics and behavior patterns, coworker indicators, organizational policies and procedures, mentally impaired employees, and so forth. Prevention strategies, use of employee assistance programs, managerial responses in escalating situations, impact of the Americans with Disabilities Act, and postviolence interventions must also be considered as part of progressive health care system administration, relative to the phenomenon of workplace violence.     

The ethics of managed care. An initial look at physicians' perspectives

The need for medical care in the United States had exceeded the financial resources required to pay for that care. To address this problem, managed care health insurance programs have become commonplace. With managed care programs, however, physicians are facing increasing ethical pressures. This article reviews the ethical dilemmas physicians face under a managed care system and conducts a national random sample of general practitioners and surgeons regarding four major ethical dilemmas: under treatment of patients due to overt pressures or financial incentives, breaches of patient confidentiality by the physician that are required by the managed care plan, lack of disclosure to the patient of the financial incentives or overt pressures under which the physician functions, and overuse of practice guidelines. The results of this survey suggest that physicians are more likely to compromise patients' confidentiality and not discuss financial arrangements with patients than they are to compromise actual patient care. Those physicians with more than 30 percent of their patient load coming from managed care are more likely to have faced the scenarios presented by the survey. There is, however, no statistically significant difference in the physicians' responses to these scenarios based on the percentage of the physicians' patient load coming from managed care.     

Examining the existence of the underwriting cycle in managed care organizations

This article examines the existence of the underwriting or profitability cycle in the health insurance industry. Researchers have reported that a six-year cycle exists for health care insurers. That is, three years of profits then are followed by three years of losses. This article suggests that insurers react more quickly to losses and adjust their cost structures almost immediately. Health insurers react to both expected changes and current increases in the payoff ratio.     

Evidence-based guidelines in the organization of medical care

Organizational as well as managerial aspects can influence the outcome of patient care, in the establishment of a stroke service unit for instance. Critics wonder whether organisational aspects should be excluded from evidence-based guidelines as strong evidence is often lacking and managers are not included in the working party. It can be argued that it is neither the outcome nor the strength of the published evidence that determines whether a guideline is evidence-based but the method of guideline development. This includes a systematic search and critical appraisal of the literature as well as a rigorous external review in order to achieve consensus on statements including those pertaining to organization of care, for which evidence is poor or lacking.