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Understanding Managed Care (Part 1)

Published by the Coral Gables Gazette

Today’s managed health care is a classic self-fulfilling prophecy.   Basic philosophical changes made by doctors and hospitals in expectation of the fruition of "Hillary Health" facilitated the rapid ingress of managed care into our society.  It was most likely coming anyway, but we have experienced a revolution rather than an evolution.  This is the first of a multi-part article on managed care, its future, and the issues surrounding it.

For centuries, the function of traditional insurance companies has been to assume financial risks on the outcome of certain events or non-events.  Insurance companies make profit by collecting more premiums than they pay out in claims.  These are very simple business principles.  Because of the boom in medical technology, increased longevity in the population, and increasing ability of the medical profession to extend life by medical intervention, traditional medical insurance has become prohibitively expensive.  Medical insurance as an employment benefit has become so pandemic in our society that withdrawing it would be suicide to most employers.

Ingeniously, the insurance industry came up with a brand new product to offer to employers.  They found a way to no longer assume the risk of financial loss in the health care insurance industry; they shifted the risk to the health care providers and the hospitals, and guess what, the providers and hospitals accepted it without too much of a fight!

This product, managed care, might more appropriately be entitled, "managed costs".  The definition of managed care is: A method of delivering, supervising, and coordinating health care, often through HMO’s and other networks of physicians, dentists, and hospitals.  The theory supposes that costs are controlled by the elimination of "inappropriate services".  The managed care organizations control the providers pay, their ability to make covered referrals, and usually have rules as to how certain medical or dental problems are treated, what drugs may be used, what hospitals and laboratories may be used for what procedures, how long a patient may stay in the hospital, and unbelievably, how much a patient may be told about their treatment alternatives.

Using these strategies, managed care companies have greatly reduced the cost of health care.  The implementation of these strategies is governed by some variation of a principle that the insurance industry calls LEPAT- Least Expensive Professionally Acceptable Treatment.  This principle is not well advertised to the public or to the employers who purchase health care benefits for their workers. LEPAT implies that patients will only be covered for treatment consistent with the lowest acceptable standards of care.  Chances are, that before 1992, most readers were treated according to a different principle-BAT-Best Available Treatment.  Of course BAT was different according to the skill levels of the doctors involved, but free market forces applied, and if you didn’t like one doctor’s BAT then you changed and found a doctor with a philosophy acceptable to you. Patients and doctors sought their own levels.

Today, many patients, doctors, and hospitals are going through a kind of culture shock, as they recognize and experience the difference between lowest acceptable standards and best available treatment.  Only now is the public beginning to realize that, in effect, their access to the health care resources to which they have become accustomed is being managed, and that the means of seeking your own level is no longer there, or at least not with insurance coverage.

Next month we will take an in-depth look at how managed care functions, and how the relationship and motivators between doctors and patients have been indelibly changed.

©K. Randall Groh, DDS
Acting Chairperson
American Independent Dentist’s Association
1997

K. Randall Groh, DDS
Acting Chair
The American Independent Dentist’s Association
2745 Ponce De Leon Boulevard
Coral Gables, FL 33134
E-Mail feeforserv@aol.com
March 21, 1998

© K. Randall Groh, 1998

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Last Update03/22/98