Leggo dem managed care blues: leadership beyond the era of managed cost. (Physician Anger).

PICK UP ANY WIDELY read health care services journal over the last ten years. Virtually regardless of the audience, you'll find one subject featured prominently. The subject is managed care:

"Contracting with Managed Care,"

"Teaching Physicians about Managed Care,"

"Maximizing Reimbursement under Managed Care,"

"Clinical Guidelines for Managed Care,"

"Compensation Methods in Managed Care,"

"Coping with Utilization Review in Managed Care"

"Declining Incomes under Managed Care,"

"Physician Grief about Managed Care,"

"Effective Practices for Managed Care,"

"Loss of Control under Managed Care,"

"Protecting Consumers from Managed Care,"

"Continuing Consolidation in Managed Care,"

"Organizational Failure in Managed Care."

These frequent articles chronicle the sturm and drang of the "managed care era." But whatever happened to those starry-eyed tales of patients saved, doctors loved, miracles performed, and the wonderful melodies of medicine? In many important ways, the definitive health care song of the '90s has been the blues...the managed care blues.

One goad thing about managed care

The managed care era of the '80s and '90s (truly a misnomer for an era focused largely on managing costs) has provoked many new problems for our organizations and profession. Managing the health of an enrolled population within a budget is quite different than managing an organization or caring for a patient in the open-ended, cost-plus, fee-for-service environment that prevailed following World War II.

In addition to the new challenges and adaptive problems it poses for our organizations and profession, however, managed care has also provided something very unique for us as physician leaders. The managed care era has given many physician executives a naturally occurring leadership theme, a central organizing principle, numerous key elements of a leadership agenda, in some cases, even a job.

Getting our organizations ready for global capitation, horizontally or vertically integrating, assuring adequate capital for managed care information needs, adopting more effective practice patterns, aligning the economic incentives of physicians and hospitals...these have been some of the most frequent physician leadership activities of the '90s. While managed care has caused great disruption to our organizations and to our old ways of doing things, it has also provided physician executives with a natural leadership raison d'etre. If the truth be told, the difficult threats and opportunities of the managed care era have in many ways been good for the field of physician leadership.

In the wake of the dragon

As the millennium approaches, the prophesied wave of pure managed care has lost much of its early momentum. We no longer envision Clintonesque pods of regional funding for all health care. Consumer protection legislation seems likely to restore some of the rights of our citizenry for access and choice. Capitation and risk sharing no longer appear as the certain conduits for all future provider revenues. Vertical integration has turned out to be much easier to diagram than actually implement and sustain. In a number of markets, managed care penetration has flattened out. Managed care itself no longer appears the terribly convincing, absolutely necessary, and often sufficient organizing principle it was only a few years ago.

So what does this mean for the future of physician leadership? Absent the compelling requirements for managed care readiness, how will we configure our organizations tomorrow? Absent the absolute imperative of global contracting, how will we create envelopes of common economic interest? Will we be able to keep our troops together tomorrow? How will we generate the common sense of direction that provides leadership with so much of its currency? What value will physician leadership itself have in tomorrow's health care environment? What will our leadership themes be in the wake of the managed care dragon?

Four unrelenting trends

Managed care, with all its pros and cons, is largely a response to certain unrelenting trends in our society. As leaders, our core functions comprise the stewardship of our organizations and colleagues in response to these trends. Even if the term managed care were forever expunged from the language (legislation is probably pending as we speak!), a number of these trends would remain firmly in place and, hence, create a starting point for physician leadership into the millennium. Here are a few such trends worth considering:

1. The open-ended funding of American health care is over, with or without managed care

The wonderful steep rate of increase in health care funding we enjoyed from the '50s to the '90s has finally flattened out. Trees just don't grow to the sky. As an industry and as leaders, this gives us several choices. We can either step up and become wise shepherds of the public purse or we can be sheep to be managed by whichever party next steps up to that responsibility--government, insurers, hospital executives, Wall Street. A decline in the current managed care industry will not change this fact one iota.

2. With constraints on health care resources extending well into the millennium, continued competition for those resources seems certain

Fame and fortune in health care must increasingly flow, as it does in the rest of our economy, to those organizations and individuals that provide distinctive value and service to their customers. Success is no longer assured by past history, by early entry, or by size alone. Witness mighty Microsoft and now-struggling Boeing. We will increasingly compete based on how well we care for, serve, and meet the needs of our various customers. Winners and losers in health care will be determined more by what our customers think of us, and less by what we think of ourselves.

3. Pluralism is alive and well in America

It may take a village to do a lot of things, but in the American village we are no more likely to accept one-size-fits-all health care than we are to drive the same cars. I like my truck, you like yours. Fee-for-service, discounted fee-for-service, capitation, private pay, governmentally sponsored care, resource bundles of every size and shape, wholesale, retail, cash and credit cards are all much more likely to figure in your organization's future revenues than any of the single schemes periodically offered by various politicians. Dealing perpetually with such multiple revenue streams is highly likely in all our futures.

4. Patients (a.k.a. customers) place high value on their own personal well-being, and will continually adjust to assure themselves of what they believe is appropriate health care access, quality, and service

Some of the most clarion messages of the managed care era concern the value Americans place on access to the health care they want. Late '90s "products" like POS, open access, mega networks, and national "centers of excellence" all provide strong testimony to this message. The recent spate of legislation aimed at protecting consumer access demonstrates its public appeal. Success in tomorrows health care organization will be much less dependent on the rigid structures we've created to control cost alone and much more on the flexibility we must develop to respond to our customers ever changing needs for access and perceived quality. The increasing mobility and information hunger of our population further magnifies this trend.

Taken together these four trends characterize a world extending beyond the oft-recited features of today's managed care environment. In most ways, such unrelenting trends comprise a world like that of other competitive service industries (banking, airlines, communications), albeit one whose services have an extraordinary affective value. In this kind of a world, one can begin to imagine the health care organization that will remain successful and the kind of physician leadership such an organization will require.

In search of tomorrow's vision

Tomorrow's competitive service environment will clearly necessitate a well-defined portfolio of superb quality, easily recognized, consistently delivered services--a band of "distinctive competencies." With their increasing mobility, progressive access to information, jealously preserved choices, and voting power, tomorrow's health care customers have no reason to accept mediocre care or service from average do-everything-for-everybody providers. Do you and your family accept this now? Neither will your patients tomorrow, Nor will your organization thrive without focusing its energies on key service lines and differential advantages.

One hallmark of successful leadership in the future will be the ability to create and sustain a coherent vision of a highly differentiated and ever-changing service enterprise, an answer to the question, "What are we all doing here...now?" The overly simplistic answers of the past decade, "getting ready for managed care" or "contracting with managed care" will no longer suffice. The most successful physician leaders in the years ahead will possess the clarity to identify key differential advantages, the will and wisdom to support them, and the ability to blend them into a coherent vision that keeps people working together in a common direction.

Power to the people

In a well-differentiated and competitive environment, organizations will become progressively dependent on their ability to attract, retain, and support top-notch health care professionals and teams. It is these professionals, working together, who create the distinctive services and competencies our customers actually see and value. Unflinching support of top teams and top talent has not always been easy for physician leaders in the '90s. In the competitive and service-oriented 21st century, however, it will become a key factor separating long-term winners from also-rans.

Closely related to this focus on talent are the touchy subjects of provider power and control. A good deal of despair in the managed care decade has been expended on this subject. How frequently have we heard our colleagues lament their loss of control in the managed care decade? How often have we heard organizational executives decry the lack of physician accountability for cost-effectiveness or organizational outcomes? Who has not heard or personally experienced the difficulties of employed physicians?

Since our society's need for wise resource management stretches unabated Into the millennium and since victimization has never been a great frame-of-mind for enhancing quality and service, the leadership mandate in the years ahead seems clear enough. As physician leaders, we must help our colleagues willingly shoulder the societal problem and with it reestablish control over our own professional destinies. From a leadership perspective, this means that success in the 21st century will require the recapture of a good deal of self-direction, accountability, and self-control by the medical profession. The late '90s upsurge in unionization and the current reformatting of hospital acquired groups are early signals in this direction.

A successful physician leader in the years ahead will work with colleagues and other health professionals to create new organizational structures that allow both the requisite accountability and the kind of self-governance most professionals seek. In many cases, this self-governance will include both equity ownership and substantial economic accountability for the enterprise.

The politics of partnership

Even a well-differentiated, well-staffed, accountable, and self-governed health care organization will not be able to stand alone in the years ahead. Think of the myriad connections required in other competitive industries that have walked this path before us: banks and their information vendors, manufacturers and their supplIers, retailers and their distributors.

If anything, the 21st century will increasingly force us to recognize our interdependence with others.

The required partnerships will take multiple forms: "centers of excellence" for the services we don't provide ourselves, information vendors, educational institutions, community services, researchers, recruiters, maybe even government. The successful physician executive must develop an increasing ability to network and negotiate with people outside the organization. Political skill in the truest and most honorable sense will become another hallmark of leadership success.

Performance in all its dimensions

The current pressure on economic efficiency, productivity, access, and outcome will not likely remit in the decade ahead, any more than it has in other competitive service industries. America Online must still keep its lines open; Amazon.com must keep its costs down; United Airlines daily adjusts its flight schedules. The issue in health care will thus become consistency, our ability to deliver, day-in and day-out, high levels of performance in all its many dimensions.

Leadership in a high performance environment requires both respect for the professionals and teams delivering the services, as well as the fanatic pursuit of meaningful targets and metrics. Hitting last year's average will no longer suffice as a definition of tomorrow's optimal performance. Neither will sloppy statistics, imprecise instruments, or clumsy data do as appropriate measures. Financial information systems will need to be capable of dealing with multiple revenue streams and expense patterns. Quality and access information will need to adapt to the ever-changing performance bar. The successful physician leader will focus on removing the barriers and providing the support needed to maximize performance at all levels.

Leadership beyond the blues

Taken together, these relentless trends and increasingly clear keys to success create some new opportunities for tomorrow's health care leaders--in particular, for physician executives.

A brief summary Getting ready for managed care is no longer a sufficient organizing principle. Our organizations need new contexts and reasons to stick together. Mindful of the now-permanent industry conditions of service competition and resource constraint, we will need to build tomorrow's health care organizations around distinctive service competencies, talented professionals, and teams. Organizational structures must reflect new requirements for physician ownership, accountability, and self-governance. Outside partnerships, carefully crafted, will help to provide a full spectrum of service and value in a highly differentiated world. And, finally, consistent performance in all its dimensions will require both precise targets and metrics, as well as a steady respect and support for professionals.

In the '90s the role of the physician executive crystallized at a number of America's health care organizations. Managed care provided some of the impetus and much of the leadership agenda. In the 21st century, however, our industry will need a new brand of leader, one capable of balancing the needs of the professionals with the business and accountability requirements of a permanently competitive and resource-constrained service industry.

In many ways, the leader best suited to this coming era is the well-trained physician executive, Who better to understand the service and quality requirements of our customers? Who better to create the required structures for professional accountability and self-governance? Who better to guide the external partnerships and multilevel performance required? Who better to move us beyond managed cost?

The managed care era has been a time of the blues for the medical profession and for many medical organizations. Physician leaders have played a variety of important roles, albeit often in the back of the band, and sometimes drowned out by the cacophony of managed care itself. As the millennium dawns, it provides much new promise for physicians and for physician leaders. Perhaps it's time to stop crooning the managed care blues and begin leading the song of tomorrow.

Howard L. Kirz, MD, MBA, is a retired physician executive and Principal of The Clearwater Group, a West Coast consulting firm that pro vides wide-ranging business and leadership support to medical groups and integrated health care organizations. He is a Past President of the American College of Physician Executives and editor of the new book Thriving in Capitation available from ACPE. Dr. Kirz can be reached by calling 206/624-5757 or via email at [e-mail].