Beyond competition

Area of Science:

• Health Services Research
• Health Economics
• Quality Improvement

Background:

• Managed care organizations (MCOs) often lack clear differentiation in organizational characteristics.
• Provider networks within competing health plans tend to be nearly identical due to employee demand for broad choice.
• In markets with numerous undifferentiated networks, existing quality improvement strategies may be overly intrusive and ineffective.

Purpose of the Study:

• To propose alternative strategies for quality improvement in managed care.
• To address the challenges posed by undifferentiated provider networks.
• To recommend market-compatible methods for protecting consumers and incentivizing quality care.

Main Methods:

• Conceptual analysis of managed care market dynamics.
• Review of current quality improvement approaches.
• Economic analysis of financial incentives and risk adjustment.

Main Results:

• Current quality improvement methods can be intrusive in undifferentiated markets.
• Delegating quality improvement to provider groups and fostering collaboration are suggested.
• Capitation for cost containment is inevitable, necessitating careful management of financial incentives.

Conclusions:

• Health plans should shift quality improvement responsibilities to provider groups.
• Market-compatible consumer protections, including expansive disclosure and risk adjustment for premiums and capitation, are essential.
• These measures can effectively reward high-quality care within managed care settings.