MANAGEMENT ANALYSIS 1

Health Prevention Initiatives, Cost Containment Strategies, Quality Improvement,

and Population Health Focus As they relate to Managed Care
Marsha Patterson
Managed Care
EHC 3303
Judy Liu
May 11th, 2016

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Managed care can be described as a system that influences and integrates the payment
and delivery of health care. This system is designed to create administrative control of access to
healthcare services as well as the cost and quality of healthcare. Managed care organizations
(MCOs) include a collection of contracted providers, some form of benefits to its subscribers
who need to utilize care from noncontracted providers, and some form of authorization or
precertification system. (Peter R. Kongstvedt, 2007) Managed care is a collection of systems
that work with different groups of people including buyers, sellers, the community in general,
and the government. Managed care can affect a healthcare organizations relationship with
buyers, sellers, their community, and the government.
Managed care can affect a healthcare organizations relationship with buyers in many
ways. Buyers constitute the Medical Care Practitioners who utilize the medical equipment
supplied by vendors. The relationship between the buyers and the vendors is affected by the
buying power as dictated by the healthcare organization with whom with practitioners are
contracted. According to Lee H. Perlman, president of GNYHA Ventures, providers want to
pay the right vendor, the right price, for the right outcome. (Perlman, 2016) Medicare and
Medicaid for example, have recently made a move from payment for volume to payment for
value. (Perlman, 2016) This regulatory decision means that these organizations have started to
purchase medical equipment by using a better informed and a more data-driven decision making
process. One such example is Medicares new use of bundled payments. Skilled nursing
facilities with a minimum rating of at least 3 stars, can qualify for waivers in order to house
patients who have had a short hospital stay for hip or knee replacement surgeries. Patient data
available today, along with new technology, are major factors in determining the outcomes of the

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patients. Many hospitals and other organizations have also developed value analysis committees
whose job it is to review the purchasing decisions of the organization and also to identify the
products that have resulted in better patient outcomes. This value-based approach weeds out
products that are not having a positive outcome for the patients allowing the committee to
identify areas where the purchasing budget should not be spent, as well as areas where the
purchasing budget will result in more useful product purchases. This new way of thinking also
forces the sellers to adjust their way of thinking as well.
Managed care can affect a healthcare organizations relationship with sellers in many
ways as well. Sellers, in the healthcare industry, constitute those companies that provide the
necessary medical equipment and tools utilized by the healthcare providers. This could include
medical suppliers, the medical device industry, and medical manufacturers. Managed care has a
direct effect on the relationship between the users of medical technology, the providers, and the
sellers of medical technology, the suppliers, because the managed care organization will dictate
the terms and process of procuring medical devices, tools, and equipment. This means that the
managed care organization will determine the budget for new devices, including how often there
are purchased, where they are purchased, cost-ceilings, types of devices, and every other aspect
of the purchasing decision. The new value-based approach that organizations are utilizing to
purchase medical equipment and products, as discussed above, also has an effect on the sellers.
Medical suppliers are also utilizing the mass amounts of patient data to provide evidence to the
buyers of the value of their product. The sellers that are successful today are the manufacturers
who are utilizing the value analysis system of hospitals and organizations. By evaluating the
actual performance of their products and collecting data on the outcomes from actual patients,
they are able to offer the purchasing organizations proof of the benefits of their products over the

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other brands. This gives the sellers that utilize patient data to improve their products and make
them more cost-effective to organizations a competitive advantage in the market. The successful
sellers have created and adhered to their own system in order to improve both quality and cost of
their products as well. They have created an evidence-based process that measures the outcome,
balance, and process of healthcare analytics in order to produce the highest quality at the lowest
cost. Outcome measures consider the high-cost of equipment that the organizations are looking
at. These are not only financial, but include mortality and readmission rates, and surgical site
infection rates. Balanced measures consider whether improvement in one area is affecting
performance in another. Lastly, process measures are the steps that lead to an outcome, whether
positively or negatively. One example that can be considered for each step of this process is
Labor and Delivery. The process will consider the cost, or final outcome, for the process from
start to finish, weighing the effectiveness of the medical supplies utilized by the physician
against the patient data at the end of the process, such as health and wellness of mother and child
after delivery. The process will then consider the length of stay (LOS) in the hospital and
determine the balance between saving the hospital money buy discharging at the earliest possibly
making the patient feel comfortable with the discharge time not rushed out the door. Thirdly, it
will measure the time effectiveness of the process when the patient is ready to be discharged,
how long does it actually take to process and get the patient out the door from signing discharge
papers to the patient actually leaving. (Burton, 2016)
New technology as well as the availability of patient data has changed the face of both
selling and purchasing medical supplies today. Cost effectiveness is no longer based on the
quantity of a product that can be procured for the least amount of money. Healthcare
organizations are looking for value, and with it, proof of product capability and durability. The

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only constant from each perspective, is the outcome for the patient. The focus of both buyers
and sellers continues to be the patient outcome. New technology and patient data have actually
made healthcare a measurable and tangible item. The relationship between buyer and seller has
reached a different level of cooperation on both sides since the healthcare inputs of the sellers
can now be measured against the patient outcomes of the buyers. The buyers sharing of patient
data on the outcome of medical products and devices gives the sellers the opportunity to produce
a higher quality product. This process can greatly affect the direct relationship between the
physician and the patient as well. The physician is at the mercy of the medical supplies and
equipment provided him or her from his or her MCO, as well as the rules set forth by the MCO
that the physician is contracted to adhere.
Managed care can affect the meaningful doctor-patient relationship that can be created in
healthcare. Managed care has the ability to both initiate and terminate doctor-patient
relationships, reduce the amount of time physicians spend with their patients, and restrict the
patients access to specialized physicians.
Doctor-patient relationships can be created or terminated based on the characteristics of
the managed care organization. This can happen because managed care organizations will
implement certain restrictions and rules on their members in order to ensure that the member is
utilizing the care of the prearranged pool of physicians. Health maintenance organizations
(HMOs) for example, will only pay for care provided by their own in-network physicians.
Utilizing the care of an out-of-network physician, or a specialist without prior and proper
authorization, will result in the patient paying out of pocket for the entire cost. Preferred
provider groups (PPOs) are another example of health maintenance organizations that will only
cover a small percentage of the cost of care if their members go outside their network for care.

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The restrictions set forth by managed care organizations restrict the patients ability to establish a
doctor-patient relationship with a physician of their choosing. There is also the possibility that
the member may be forced to end a doctor-patient relationship because of the rules of his or her
managed care organization. This could be the case if an employer makes a change in the health
plans it offers to its employees. Sometimes these shifts or complete changes in health plans
modify the pool of primary care physicians (PCMs) from which the member is allowed to
choose. This could mean that the primary care physician that a member has established a longterm relationship over the past several years is no longer within the members preferred provider
network; thus, terminating the doctor-patient relationship. A new doctor-patient relationship will
be created when the member assesses the new, approved list of primary care managers and
selects a new physician. (Nancy S. Jecker, 2008)
Another example of how managed care can affect the doctor-patient relationship is when
a managed care organization creates physician incentives to limit the amount of time doctors
actually spend with a patient during an appointment. In some Preferred Provider Organizations
(PPO) for example, providers contract with the PPO on a fee-for-service basis where the
physician is paid directly from the PPO for services rendered to the members. In order to
compensate for the reduced fee-for-service contract, physicians will see more patients, which
limits the amount of time each patient has with the physician to discuss their illness, possible
treatment plans, and to develop a proper physician-patient relationship.
Lastly, the arrangements that exist between the primary care provider and the managed
care organization can limit the access that the subscriber has to specialists. In an HMO for
example, where the primary care physician functions as the gatekeeper, (the patients point of
contact and entrance into healthcare), the PCM has the power to authorize and refer patients to

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specialists or not. While some believe that this power can create a situation where patients are
not receiving the care they need by being referred to a specialist, others still believe that the
gatekeeper function is one necessary to limit the overuse of costly and often unnecessary
referrals.
The relationship between doctor and patient is sacred to especially the patient. The
patients physician is the person they trust with their lives and in many cases the lives of their
family. The patient must feel that they can rely on their doctor to make medical suggestions that
are in their best interest and not the interest of the physician, his organization, or any other
motives. A patients decision on whether or not to stay with a certain organization will be greatly
influenced by the relationship he has with his physician. Managed care is a term that can
produce a negative response in a patient because more often than not they are seeing managed
care as the organization that will tie their physicians hands, not allowing him to provide the best
care for them (the patient), but instead provide what is best for the organization. (Susan Dorr
Goold, 1999)
The relationships between sellers (medical suppliers), buyers (hospitals and Managed
Care Organizations), practitioners (Primary Care Physicians), and patients, are an interconnected
web. The medical technology and patient data available to each of these parties is instrumental
in the evolution of these relationships. It is perhaps appropriate than that this relationship starts
with the bond between physician and patient. Here, the physician utilizes the medical devices
and equipment provided to him to provide the best care for his patient. The use of these tools in
turn creates valuable patient data based on their performance, which in turn is analyzed by the
manufacturers of these devices in a constant effort to improve them in both quality and cost.
Finally, decision-making boards of hospitals and MCOs determine which suppliers have

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presented the best products, based on quality, performance, and longevity, to procure for use by
their physicians. The system is continuously changing but the one constant at each level of the
process, from selling to use by the patient remains the same the outcome for the patient.

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Works Cited
Burton, T. (2016). Why Process Measures are often more important than
Outcome Measures in Healthcare. (Health Catalyst) Retrieved 5 19, 2016,
from Health Catalyst: https://www.healthcatalyst.com/process-vs-outcomemeasures-healthcare
Campbell, K. (2016, 1 25). The Impact of Obamacare on the Doctor Patient
Relationship. (U.S. News and World Report) Retrieved 5 20, 2016, from U.S.
News - Health: http://www.ncbi.nlm.nih.gov/pmc/articles/PMC1496871/
Nancy S. Jecker, P. (2008, 4 11). Managed Care. (University of Washington)
Retrieved 5 15, 2016, from Ethics in Medicine:
https://depts.washington.edu/bioethx/topics/manag.html
Perlman, L. H. (2016, 2 23). New Relationship Between Buyers and Sellers in
Healthcare. (Greater New York Hospital Association) Retrieved 5 19, 2016,
from GNYHA Ventures: http://www.gnyhaventures.com/new-relationshipbetween-buyers-and-sellers-in-healthcare/
Peter R. Kongstvedt, M. F. (2007). Essentials of Managed Health Care (6th
ed.). (M. Gartside, Ed.) Burlington, MA, USA: Michael Brown.
Susan Dorr Goold, M. L. (1999, 1). The Doctor-Patient Relationship. (National
Center for Biotechnology Information) Retrieved 5 20, 2016, from NCBI:
http://www.ncbi.nlm.nih.gov/pmc/articles/PMC1496871/