Managed care has been defined by Edward F.X. Hughes, MD, MPH, professor of Health Services Management at Northwestern University, as “the process of the application of standard business practices to the delivery of health care in the traditions of the American free enterprise system.” As Hughes points out, managed care is a process and not a collection of things. Rather, it is change itself. This change is inexorable.
Managed care is a uniquely American invention, and like many other American inventions, Hughes believes it will ultimately grow to dominate the world because there really is no alternative to managed care to rationalize the cost and quality of care. In his view the sine qua non, the process of managed care is the presence of management in the health field as it has never before existed.
Management, according to Hughes, is empowered to make decisions regarding the appropriate mix of production factors to achieve the desired health outcomes of a defined population for which the management is now accountable. The essence of managed care is management’s choosing from a mix of possible inputs to achieve the highest quality of care for the defined population at the least possible cost.
Era of Corporate Medicine Now Dawning
U.S. health care ended the twentieth century as it began, still primarily a cottage industry, according to a recent Governance Committee publication. Physician practices and hospitals remain largely unorganized, principally charitable or private endeav-ors. However, the new era of corporate medicine is dawning and the enormous opportunity in health care is only now beginning to catch Wall Street’s eye.
As the Governance Committee report reveals, the migration of HMOs from local, nonprofit corporations to national scale and public ownership is already nearly complete — the payer community has been overwhelmingly transformed in less than a decade. Investor capital is now creating the first truly national physician enterprises, fashioning medical practice on a scale wholly unknown in the past.
The first reports suggest, according to Governance Committee data, that Wall Street driven enterprises are setting new standards of competition in every market sector in which they compete and are outperforming industry norms by every conceivable measure. Competing to the new standard must be within the reach of local, nonprofit systems of physicians and hospitals if they are to survive. The success of investor-owned enterprises is principally a story of discipline and resolve, not scale or Wall Street capital.
HMO Enrollment Soars
The most recent numbers from InterStudy, an HMO research group based in Minneapolis, reveal that HMO enrollment soared 15 percent, to 58.4 million during 1995. Neurosurgeons saw big jumps in revenues from HMOs over the last two years. Across all specialties, according to 1996 data from Medical Economics, doctors have gotten the message. The percentage of Midwestern physicians participating in HMOs and PPOs now exceeds that of their western colleagues and eastern and southern doctors aren’t far behind.
Medical Economics reports that 83 percent of neurosurgeons surveyed participate in HMOs and 81 percent in PPOs. Interestingly, their data shows that neurosurgeons’ median gross income from HMOs reached $115,860 in 1995. The surveyed neurosurgeons also reported that 30 percent of their active patients were HMO enrollees and 10 percent were PPO members. It was also clear from the study that practice size correlated with managed care participation, with the percentage of HMO/PPO contracts higher in groups of four or more physicians. Like hospitals, specialists are on the endangered species list wherever managed care makes inroads, according to recent comments in Integrated Healthcare Report (IHR). Only a small percentage of existing specialists in these markets are needed to serve the members. HMOs and primary care contracting groups put these specialists under intense scrutiny. If their utilization and cost profiles are too high, they may be deselected. But the good performers, according to IHR, are increasingly being singled out and grouped up for specialty network participation. Those who aren’t included in these networks are bypassed and lose patients. Too often, neurosurgeons in these markets are blindsided because they don’t plan for the future.
Future Trends
Increasing managed care penetration followed by capitation, or other compen-sation plans, deselection and ultimately declining physician incomes is a cycle that will continue to play out as long as neurosurgical services are undifferentiated and there is a surplus of neurosurgeons. When the dust settles after the year 2000, there may be fewer neurosurgeons left standing, but those who are will be those who recognize the opportunities and start to reposition themselves today. In future columns, we will look at recent trends, changes, tips, and different ways managed care influences neurosurgical practice including cost containment, group contracting, physician-hospital organizations, and capitation.
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HMOs’ Insidious Intrusion
The following letter to the editor appeared in the February 28, 1997, issue of the Wall Street Journal. It was written by Harvey F. Wachsman, MD, neurosurgeon and attorney, in response to a front-page feature story in that publication which described how HMOs are asking nurses, in a cost-cutting move, to assume some duties previously performed by physicians. His point is that HMOs are finding new ways to cut costs at the patient’s expense.
“Nurses taking over the duties of doctors (Nurses to Take Doctor Duties, Oxford Says,” Feb. 7) is the latest example of a health care provider being squeezed by a profit-minded HMO into a position where it must reduce the quality of patient care in order to save money. That this practice is taking place at Columbia Presbyterian Medical Center is particularly disturbing, because it shows that not even one of the nation’s most prestigious institutions is immune from the HMOs’ economic pressure.
“Advocates say that nurses will spend more time with patients than doctors do. But it was the HMOs that interfered with physicians’ practices and forced them to spend less time with patients in the first place. They say that patients will be able to choose between seeing a doctor or a nurse. But with Columbia Presbyterian leading the way, it can’t be long before this becomes such a common practice that patients have no real choice at all.
“First, HMOs restricted doctors’ ability to practice as they saw fit, limiting their ability to order tests, admit patients to the hospital, and refer patients to specialists. Apparently, these companies, whose executives are reaping lofty salaries in the face of huge profits, are not content with merely controlling the way physicians practice medicine. They are now trying to take patient care out of their hands completely and turn it over to nurses, who lack the training and expertise doctors possess.
“As a neurosurgeon and attorney, I have already seen numerous cases of people whose lives have been destroyed because of ill-advised HMO policies. Everyone who is concerned about the future of health care in America — doctors, lawyers, patients, potential patients — should draw the line in the sand and let our public officials know that we need new laws to protect the public and our healthcare system against the insidious intrusion of HMOs.”