Managed Care Trends/Issues Analysis

18.09.2020 in Medicine Essay
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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 an increased shift towards more flexible managed care, the popularity of physician groups, and for-profit managed care organizations. These developments are projected to have a significant impact on health care expenditures and the general operation of managed care organizations. 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 organizations. 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 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 the 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 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 an increased interest in venturing into the managed care market. As such, they are establishing managed care entities called Physical Practice Management organizations (PPM). These organizations have risen to become the important negotiators in the health care market (Dugan, 2014). PPM organizations are for-profit organizations 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 organization is Physician-Hospital Organisations (PHOs). These are nonprofit organizations, whose main motive is 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 organizations reduces the bargaining power of managed care organizations, 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 organizations are 78% of all managed care organizations 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 organizations 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 organizations raise a great number of concerns about the quality of health care delivery. The aim of these organizations is to maximize profits, and they serve both patients and shareholders. The profit maximization motive may override the need to offer 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 organizations include care for the uninsured, special needs programs, medical research, and community-wide health screening and education. Nonprofit care organizations have also established greater trust and goodwill in the communities where they offer services. It is important to note that the difference in healthcare quality between for-profit and nonprofit healthcare organizations 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 realized in the investor-owned managed care organizations.

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 access to specialists and boosts provider choice. This is particularly beneficial for the population with special health care needs. On the negative side, the increased for-profit organizations will raise health care costs for the consumers and employers due to their profit maximization 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 organizations 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 health care costs. The physicians will most likely frustrate the negotiations for lower rates for the benefit of their provider-owned organizations. 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 maximize 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 one’s 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, 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 provider’s payment methods, physicians’ practice standards, providers’ networks, and control over the service utilization to improve care outcomes. The evaluation and research on the current aspects should be sufficiently funded to devise 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 ethical practice in the investor-owned managed care entities.

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