Managed care in Utah: alternatives and value.
Defining Managed Care
In its broadest definition, managed care is an arrangement in which medical services are provided by a limited network of caregivers who work to contain costs. Such health-care systems provide controls on the amount and type of care patients receive through the watchful management of cases and utilization review. In turn, patients receive discounts for using network providers.
Managed care is a means of providing cost-effective, appropriate, and quality health care. It was originally brought to consumers through Health Maintenance Organizations (HMOs), staffed clinics, practice groups like FHP, and Preferred Provider Organizations (PPOs) such as Premier Medical Network which link hospitals and doctors willing to provide discounted medical care. Utah bucks national trends with a higher percentage enrollment in PPOs (53%) than HMOs (47%). But today, managed-care systems go by many other names as well. Experts attribute the success of managed-care organizations to their ability to meet changing market demand for new options with a host of evolving products.
Take Blue Cross and Blue Shield of Utah, for instance, which covers a larger segment of the Utah health insurance market than any other private insurance company. Aside from its indemnity plans, Blue Cross has Value Care, its PPO; Healthwise, its HMO; and it is introducing a hybrid point-of-service plan, a sort of open-ended HMO. "Nationally, HMOs are having a tough time competing with the benefits that companies can get from other types of networks," said Teresa Ellis, assistant vice president of medical affairs for Blue Cross Blue and Shield of Utah. Like many other forecasters, Ellis contends employers will have to reduce their expectations if health-care reform is to be achieved without regulation. Employers who want the "managed" part of managed care to be invisible to their employees are in part to blame, according to Ellis.
Weighing the Benefits
Because of their restrictive nature, some see HMOs as an unpopular alternative to fee-for-service programs. Erni Armstrong, business manager of Williams & Rockwood, a Salt Lake City advertising agency, explained why her company ruled out enrolling with FHP, Utah's largest HMO. "Why should employees have to deal with medical residents and waiting for hours to be seen, when we can show substantial savings by using a PPO plan?"
Choice and cost are the two primary considerations in managed care. Theoretically, the more providers and benefits involved, the less control there is over costs. PPOs such as Premier Medical Network, which includes 18 hospitals and about 700 doctors statewide, offer a great deal of freedom of choice. You can even choose to go outside the network for care, but incentives are provided to stay within it. With more than 250 companies enrolled, Premier is the fastest-growing PPO in Utah.
"We've looked into a lot of plans, and our primary concern was hospital coverage," said Anne Zeigler, vice president of Zeigler Engineering. So a plan such as Premier Medical Network, which is owned by HealthTrust, Holy Cross, and St. Benedict's hospitals and their physicians, seemed ideal.
"Nationally, we've seen the programs that restrict choice as being far more effective in controlling costs. The concept really ought to be saving money. But what baffles us is why the HMOs are saving us a little bit--not significant amounts," said Quinn McKay, executive director of the Utah Health Cost Management Foundation. The UHCMF is a coalition representing 20 companies which advocates health-care cost controls from an employer standpoint.
Affordable Health-Care Coverage for Small Employers
Policymakers are only now beginning to pay attention to the problems of the small group health-care market. Nearly two-thirds of the nation's uninsured employees work in companies with fewer than 100 workers. Nationwide surveys indicate that fewer than half of U.S. companies employing fewer than 10 people provide insurance coverage for their workers. (According to a recent Utah Business survey, about 94 percent of all Utah businesses provide health insurance.) And small employers who do provide coverage for their workers must routinely spend 40 percent more for their insurance plans than do their big-business counterparts. "Without a universal system of health care or the opportunity to join a larger coalition, the outlook is not very bright," remarked McKay.
"For the small employer, the difficulty often is in finding one reasonable option," concurred Bob Huefner, a professor of political science at the University of Utah. Huefner expects to see more efforts to pool small groups to make more choices available to small employers, either through private or public mandates.
Power in Numbers
To encourage their cooperative purchasing power, the UHCMF is organizing just such an employer coalition. The goal is for the small business community to gain leverage in the managed-care marketplace. "Without this kind of employer purchasing group, small employers aren't in a position to negotiate. But if they will band together they can go directly to the hospital and ask for discounts," said McKay.
How do hospitals feel about the movement? "For small groups the risks are so great that one significant illness may force everyone else in a company out of health insurance. So they've got to do risk pooling. The problem is agreeing on an ideal health-benefit plan to suit all employers," commented Daniel J. Wolterman, president and chief executive officer of Holy Cross Health Services of Utah.
"Businesses see managed care as a mechanism to cap the escalating costs of health care. For them, managed care is a necessity," said Jone Koford, chief executive officer of Pioneer Valley Hospital in West Valley City. The need to offer discounts to such groups is a fact of life in the Utah marketplace. Hospitals can't afford to lose any business. With an average occupancy rate of 54 percent in Salt Lake County, hospitals are looking to increase business. "Hospitals have to participate in managed-care arrangements. It's being demanded by insurance companies and employers. So if you can deliver care more efficiently, then patients who would have gone elsewhere will come to you," said Koford.
Everyone from benefits managers and insurance agents to human resource directors agree that for small employers to improve their situation, particularly those which are self-insured, they must become smarter buyers. Said Wolterman, "Another advantage of an employer coalition is that it gives the small business community the opportunity to educate themselves on the very complex issues of what is driving health costs. Their perceptions are usually very inaccurate."
Small companies tend to spend a great deal of time and administrative fees hopping from plan to plan in search of savings. In the insurance industry, it is not unusual to see turnover in insurers' small group portfolios of 30 percent to 50 percent per year. Don Sparks, vice president, employee benefits, of insurance brokerage firm Fred A. Moreton & Co., said that is because oftentimes a broker or agent switches plans to gain a hefty first-year commission. First-year commissions are higher than commissions on renewals because insurance companies are willing to pay brokers more money for new business.
In this sense employers must accept partial blame for escalating health-care costs as they annually encourage their brokers to search for new savings. According to Sparks, some companies ask for bids on health insurance every year.
"Buying health care is like any other commodity, and when I need information I've got to be careful that I don't get information from my friends in the medical profession," remarked Eldon R. Mitchell, regional vice president of FHP. To control costs for its 127,000 participants, FHP endeavors to provide medical care in the most cost-effective venue. The HMO encourages home health care, delivery of babies in freestanding birthing suites, and reduced hospital stays.
"The basic HMO strategy is to manage costs well enough so you can afford to give consumers better benefits at the same or lower cost. The idea is that we're looking for less expensive places for care to be given," said Mitchell, which is why FHP plans to open its own 117-bed hospital by the spring of 1993.
Fred Rico, president of Pioneer Credit Union and Fred Gottschall, owner of Gottschall Engraving Co., both noted initial reticence among their employees about switching to FHP three years ago. "The quality of the health care has been good," said Gottschall, and both employers feel secure in the savings they receive in return.
"PPOs such as ours are finding innovative ways to respond to employers' concerns by containing costs, shortening hospital stays, and offering new products," said Premier Medical Network's director of sales and marketing, Kevin Potts.
Managed care's greatest advantage today may be in capping the amount caregivers are paid. With a PPO, fees are contracted; with an HMO, the doctors are on salary. "That's where managed care can provide a small employer a greater level of control than an indemnity plan," according to Gordon Hillier, of Intermountain Benefits Administrators.
Employers have discovered that there is no single strategy to containing costs. "In Utah, I'll bet that 80 to 85 percent of the small groups are enrolling in managed care," said David Anderson, regional manager of Old Northwest Agents. But they must ask what the financial incentives are for the players to provide the company with high-quality, cost-effective care? The managed-care organization should document its value. And on a larger scale, employers should consider how the plan enables patients, insurers, providers, and employers to work together to make the system of health care more accessible to all.
PHOTO : Teresa Elis, assistant vice president of medical affairs for Blue Cross and Blue Shield of Utah
PHOTO : Don Sparks, vice president, Fred A. Moreton & Co.
Anne Donohoe is a writer specializing in health-care communications at Snedaker Communications Group in Salt Lake City.
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|Title Annotation:||cost-contained medical services provided by limited network of caregivers forecast to predominant system of health care delivery in Utah and U.S.|
|Date:||Mar 1, 1992|
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