Managed Care Trends/Issues Analysis

Sep 18, 2020 in Medicine Essay

Managed Care Trends Essay Sample


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Managed care has experienced tremendous changes in the past decade. The three main trends that have been significantly revolutionized managed care include increased shift towards more flexible managed care, popularity of physician groups and for-profit managed care organisations. These developments are projected to have a significant impact on health care expenditures and general operation of managed care organisations. This paper explores the three trends and argues that they will increase health care costs and reduce health outcomes.

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More Flexible Managed Care Arrangements

The employed population has shown a recent trend towards increased adoption and preference for more flexible managed care plans such as Preferred Provider Organizations (PPOs) and Point-of-Service (POS). These arrangements offer consumers a broad choice of health care providers from which they choose their most preferred organisations. This is a shift from the closed-network Health Maintenance Organizations (HMO). The enrollment in PPOs, for example, grew from 26% to 30% between 2010 and 2014 in employer-sponsored packages (Dugan, 2014). On the other hand, membership in HMOs, a more restrictive group of staff-model, dropped from 42% to 22% in the same period (Dugan, 2014). In a quick move to respond to customers needs and retain the market, HMOs have begun to offer POS and PPO alternatives. Other flexible arrangements that are gaining popularity are open-access plans where patients do not need an approval from the primary care physician to see specialists (Lippmann, Diwadkar, Zhou, & Menefee, 2015). The shift towards more flexible care arrangements, though at an additional cost, enables consumers to enjoy a wider choice of health care providers. The trend has caused great dissatisfaction of consumers towards the traditional HMOs which restrict consumers to their choice of providers and specialists.

Provider-Owned Health Plans and Physician-Owned Provider Groups

Health systems are progressively transforming to become clinically integrated networks due to the need to control reimbursement and reimbursement streams and systems. In the era of health insurance exchange, providers are developing a great interest in owning a health plan or create partnerships with providers who have it. The provider-owned health plans are projected to expand and offer a stiff direct competition to the large health plans. Though the provider-owned health plans, established recently, have experienced a myriad of challenges in penetrating the market, new entrants are expected to come with better approaches to creating a niche.

Physicians are also showing increased interests in venturing the managed care market. As such, they are establishing managed care entities called Physical Practice Management organisations (PPM). These organisations have risen to become the important negotiators in the health care market (Dugan, 2014). PPM organisations are for-profit organisations that operate on the basis of physician entrepreneurship. They are run by the physician-managers who develop contracting arrangements between hospitals and medical practices. The other type of provider organisations is Physician Hospital Organisations (PHOs). These are nonprofit organisations, whose main motive is the community service. The physicians in these organisations provide patient care through contracting hospitals directly (Shmueli, Stam, Wasem, &Trottmann, 2015). The growth of these two types of physician-owned organisations reduces the bargaining power of managed care organisations, driving down physician payments.

Growth of For-Profit Health Care Industry

For-profit health care systems began sprouting in the 1980s and showed a vast growth in the 1990s. The continued growth of these entities is planned to have a great impact on managed care. Currently, for-profit HMOs managed care organisations are 78% of all managed care organisations in the United States. Their dominance is projected to grow to 85% of all managed care organisations by 2030 (Shmuelet al., 2015). The proportion of the for-profit organisations is higher among loosely integrated managed care arrangements, such as PPOs, where for-profit entities are at 80% (Lippmann et al., 2015).

However, for-profit organisations raise a great number of concerns about the quality of health care delivery. The aim of these organisations is to maximise profits, and they serve both patients and shareholders. The profit maximisation motive may override the need to offer the quality health care, and this will erode the benefits of managed care. The non-profit and government owned health care institutions have a solid commitment to providing community benefits even for people who are not able to pay for the services. The services that will be missing from the for-profit organisations include care for the uninsured, special needs programs, medical research, and communitywide health screening and education. Nonprofit care organisations have also established greater trust and goodwill in the communities where they offer services. It is important to note that the difference in health care quality between for-profit and nonprofit health care organisations have not been proven empirically. Though, the objective to meet community needs and promote health care, in the long run, is less likely to be realised in the investor-owned managed care organisations.

Impact of Managed Care Trends on Health Care System

The recent trends discussed above are intended to have a wide range of positive and negative impacts for the entire health care system. One of the positive impacts is that the increased availability of more flexible health arrangements increases an access to specialists and boosts the provider choice. This is particularly beneficial for the population with special health care needs. On the negative side, the increased for-profit organisations will raise health care costs for the consumers and employers due to their profit maximisation motive. The raised costs may decrease the affordability of health care services by families in the lower income bracket, who already incur high costs of caring after the elderly and dependents with chronic illnesses (Lippmann et al., 2015). The high health care costs may also decline the health complications covered by the employment-based health insurance plans.

Managed care organisations receive their profits from the difference between the collected health insurance premiums and payments made to providers for health care delivery. The growth in popularity of the PHOs and PPMs will raise the health care costs. The physicians will most likely frustrate the negotiations for lower rates for the benefit of their provider-owned organisations. The profit-driven managed care entities may also augment premiums to compensate for the increased costs. The investor-owned managed care entities will face pressure to maximise shareholders profits which will override the need to raise affordability, accessibility, and quality of health care. Consequently, for-profit managed care entities will show less responsiveness to address critical, yet non-profitable health care needs in the community as compared to government-owned and nonprofit entities (Shmueliet al., 2015). As the health care system shifts more to the for-profit managed care entities, the government should direct stronger support to community-based health promotion services.


It is imperative to note that the for-profit managed care entities cannot disappear due to ones wish. To prevent adverse effects on the current trends in managed care, the health care system should increase the regulation of the health care market to promote the aspects that work and restrict the aspects that result in undesirable effects. Specifically, a research should be performed to identify how the current trends in managed care influence the cost of health care delivery, quality of health care, and overall health care outcomes. The regulators of the health care industry should carefully evaluate elements in managed care such as the providers payment methods, physicians practice standards, providers networks and control over the service utilisation to improve care outcomes. The evaluation and research on the current aspects should be sufficiently funded to devise the accurate and objective recommendations. The study into these trends should aim to increase enrollment in more affordable and flexible health plans, prevent conflict of interest among physician-owned managed care entities, and ensure an ethical practice in the investor-owned managed care entities.

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