Richard Dean Smith, MD

Managed care was characterized as a system that integrated financing and delivery of medical care: contracts with selected physicians and hospitals that provided medical care services to enrolled members for a set monthly premium; utilization and quality controls that contracting providers agreed to accept; financial incentives for patients to use providers and facilities associated with the plan; and assumption of financial risk by doctors. Thus, physicians' role was altered from agent for patients' welfare to a conflicting need for cost control—from advocacy to allocation. Managed care's central tenet was that doctors, hospitals, and patients couldn't be trusted to prescribe medical treatment: outside supervision was needed—not only to hold down costs, but also to decide what constituted appropriate care. Old incentives that supposedly encouraged excessive, unnecessary care would be replaced by rewarding thrift, and punishing "overtreatment."
Capitation payment, or set fee, was paid per person per month for whatever medical care they received during a defined period of time, usually one year, but sometimes six months when contracts were renewed and adjusted like other insurance plans. Capitation had a number of synonyms, such as "health maintenance organization" or "HMO," integrated systems, and numerous other variations that deal with managed care companies. Some were traditional insurance companies; others were money handling entities involved with health care. The public was tempted by the notion that managed care companies offered 'something for nothing' in that the patient paid a set fee and if costs went over that amount, doctors and hospitals paid the rest.
Proponents of managed care claimed that incentives encouraged providers to operate efficiently within the amount of time and money available in addition to providing high-quality care. Patients received a health plan, which covered specified health care services, regardless of number of visits or procedures performed. Proponents asserted that physicians also had an incentive to provide preventive services to decrease incidence and severity of illnesses, which would result in better care to consumers on the assumption that prevention lowers costs.
Americans were expected to abruptly adjust to a system that inverted traditional medical care ethics and recast doctors as double agents. Ideally, integration of hospitals, physicians, and all other providers would join to accomplish a shared goal, learn to create efficient governance, to align incentives, and to manage risks so the system could care for a population at a predetermined price while making necessary services available to all and preserving or improving quality of care.
Others said that managed care was the "blunt instrument" payers chose to change the culture of medicine. The issue of appropriateness—an underlying factor in use of technology and its inherently higher costs—was accompanied by attention to cost-effectiveness. The overriding issue of the managed care industry was its claim of effectiveness in controlling costs.
A pool of money was set aside by managed care companies for hospital inpatient services or referrals to specialists. If money remained in the pool at the end of the year, it was to be shared by the managed care company and its physicians, such as Kaiser Permanente's "unspent surplus" which at one time amounted to approximately 30 to 50 per cent of physicians' base salary. The surplus created an incentive not to refer patients for care, with the risk that primary care doctors handled complex cases and difficult problems that used to be referred to specialists. Managed care advocates declared the advantages of "preventive care, not unnecessary care." The slogan "runaway costs" became the emotional catalyst behind sanction of managed care without regard to causes of rising costs.
Managed care was promoted on cynicism toward patients and criticism of physicians.

Contents:

Preface
Chapter I. The Beginnings

1. Introduction
2. Background
3. Definition of managed care
4. Criticism of doctors and medicine

Chapter II. Expansion

1. Growth
2. Enthusiasm. Contagion
3. Exceptional return
4. The consulting industry
5. The press
6. Rhetoric of managed care
7. Fear

Chapter III. Enthusiasm. Contagion

1. Supportive
2. Basic concepts
3. Medical technology
4. Intellectual underpinnings
5. Contrary data
6. Quality
7. Competition—Madness
8. From miracle to myth

Chapter IV. Finances of the Managed Care Industry

Chapter V. Cautions

1. Resistance
2. Role of the managed care industry
3. Regulatory agencies
4. Mania feeds on itself

Chapter VI. The Bind

1. Captivity, the bind
2. Behavior of physicians
3. Beating the scheme
4. Some legal aspects
5. Money / Trust
6. Medical "inflation"

Chapter VII. Early Warnings

1. Early signs
2. Emerging criticism
3. Role of patients

Chapter VIII. Act V

1. Late signs
2. Re-capitulation
3. Historical parallels
4. Precipitating event
5. Collapse of the bubble
6. Current cultural trends

Chapter IX. After the Fall

1. Carrying on
2. Continuing problems
3. Role of business and industry
4. Coming to our senses