wharton's prescription for health care - Wharton Magazine

FEATUREleast, increasing at a slower rate, that insurers aren’t payingfor unnecessary procedures and treatments, and that wasteand inefficiency have been reduced.”Lynn C. Bongiorno, WG’95,manager, medical delivery systems,Oxford Health PlansLynn Bongiorno chose to work forOxford Health Plans because, shesays, “HMOs are driving where thehealth care dollars are being spent.”Oxford has 3,000 employees andclose to one million members in Connecticut,New Jersey and New York.The organization, based in Norwalk,Conn., recently expanded into NewHampshire and Pennsylvania. Bongiornois in charge of negotiatingcontracts with ancillary vendors suchas laboratories and home care companies.“I’m trying to change thewhole contracting system to bringcost, access and quality into the negotiation.It will allow us to make betterdecisions about what services to bringinto our network, in what geographicregion and at what price,” she says.“Ultimately we are trying to use analyticaltechniques to link the wholesystem back into quality.”From Bongiorno’s perspective, thetwo biggest issues in health care thesedays are the unchecked use of medicaltechnology and the inevitabilityof rationing care. “Technology is amajor culprit behind the cost increases,”she says. “The challenge is to figureout the appropriate use of technologyby applying statistical analysisto determine the best outcomes. Italso means working with doctors aspartners and trying to educate themregarding our results.”In the area of rationing, Bongiornosays, “HMOs are trying toaccomplish it in a logical and efficientway. You put together a list of protocolsso that clinical judgments canbe made about what to cover andwhat not to cover. When is somethingexperimental, when is it medicallyunnecessary, and so forth. Our goalis not to give directives to physicians,but to capture information and domore outcomes measurement so thatwe can then inform and educate doctorsabout the appropriateness ofcertain types of care.”Another target of health carereform, says Bongiorno, is the typicalhospital system which “isn’t yet runlike a business. Hospitals tend tohave too many people doing veryfinite tasks with an inordinate amountof equipment. They don’t crosstraintheir employees to do different jobsin ways that would create a morepatient-focused environment.“Until hospitals can run themselvesmore efficiently, we don’t wantto share risk with them,” says Bongiorno.“They are too expensive.”As part of its own health carereform efforts, Oxford three yearsago developed a concept called grouppractices without walls. It calls forthe establishment of private practicepartnerships in which doctors remainindependent and have their ownoffices, but also agree to share therisk with Oxford of providing care.“For every member who signs upwith a primary care physician in oneof these partnerships, we put an actuariallydetermined number of dollarsinto a fund. The physician keeps whatis left in the fund at the end of thequarter. We don’t police the physicians.They make all their owndecisions, and they operate independently,but they have the same incentiveswe do. They assume some ofthe risk.”Oxford now has about 120 ofthese physician practice partnerships,each with 25 to 50 doctors. Theywork “astonishingly well,” says Bongiorno.The managed care revolution is part of an ongoingrestructuring that has turned the whole health care deliverysystem on its head. Added to the recent increase inhorizontal mergers — between hospitals, managed care systemsand insurers, for example — has been an even morepronounced interest in vertical mergers, where a continuumof care is provided through the merger of, for example,a hospital system, a physician practice, a nursing home anda home health facility.“This is a new level of integration,” Danzon says. “What’sgood is that it’s being driven by pressures in the marketplace,not by the political system. The physician group that wantsto hold out as an independent practice is going to lose marketshare. The reason hospitals are buying physician practicesand setting up feeder networks is so that they can play in thisnew arena. You have to participate if you want to survive.”A key concept in health reform is the idea that risk oughtto be shared by those who provide the service. Many physiciansgroups are already operating under incentive systemswhere they promise to deliver whatever care is needed for apre-determined capitation fee per patient, notes June Kinney,associate director of the health care systems department since1981. “What’s new is that hospitals are beginning to have tocapitate care [beyond primary care] for specialized services,such as radiology, and for products, such as pharmaceuticals.”The new system raises many questions for those in chargeof running the enterprise. “Working out how to manage theplayers within those organizations, and how to design theinformation systems so that you can deliver high qualitycare at lower costs and also provide solid evidence on healthoutcomes ... is the major challenge facing the delivery systemnow,” says Danzon.Part of that challenge concerns capitalizing on thepromise of new technologies, not just sophisticated medicaladvances like gene therapy and tissue engineering, but informationtechnology. “Health care is basically an informationindustry,” says Kissick. “We collect, interpret, store, retrieve,analyze and apply information. We can do so much nowthat we couldn’t 25 years ago.”New and more sophisticated software has led to a growingindustry in technology assessment. Evaluating the cost vs. theeffectiveness of new techniques will most likely become anincreasingly important component in decisions about whatshould and should not be covered by health plans.“You frequently hear that health care is more like otherindustries,” notes Danzon. “I think that is true, but neverthelessthere will always be significant differences, partlybecause health care matters so much to people and becausequality is so intangible, but also because there will alwaysbe significant third party payments. When there is thirdparty payment, and consumers are not going out and payingwith their own money, then they will behave differently.“This means that management techniques and controlsin health care have to be quite different.”8W INTER 1996