The new organization of the health care delivery system

The U.S. health care system is restructuring at a dizzying pace. In many parts of the country, managed care has moved into third-generation models emphasizing capitated payment for enrolled lives and, in the process, turning most providers and institutions into cost centers to be managed rather than generators of revenue. While the full impact of the new managed care models remains to be seen, most evidence to date suggests that it tends to reduce inpatient use, may be associated with greater use of physician services and preventive care, and appears to result in no net differences either positive or negative with regard to quality or outcomes of care in comparison with fee-for-service plans. Some patients, however, tend to be somewhat less satisfied with scheduling of appointments and the amount of time spent with providers. There is no persuasive evidence that managed care lowers the rate of growth in overall health care costs within a given market. Further, managed care performance varies considerably across the country, and the factors influencing managed care performance are not well understood. Organized delivery systems are a somewhat more recent phenomenon representing various forms of ownership and strategic alliances among hospitals, physicians, and insurers designed to provide more cost-effective care to defined populations by achieving desired levels of functional, physician-system, and clinical integration. Early evidence suggests that organized delivery systems that are more integrated have the potential to provide more accessible coordinated care across the continuum, and appear to be associated with higher levels of inpatient productivity, greater total system revenue, greater total system cash flow, and greater total system operating margin than less integrated delivery forms. Some key success factors for developing organized delivery systems have been identified. Important roles are played by organizational culture, information systems, internal incentives, total quality management, physician leadership, and the growth of group practices. This chapter describes the growth and evolution of managed care and organized delivery systems, the research evidence regarding managed care and organized delivery systems, and the likely future organization of the health system in light of recent trends and evidence. It also highlights some of the more important public policy implications of the new health care infrastructure.