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DEFINING MANAGED COMPETITION

It is important to first outline the framework of the new health care delivery system that has been proposed before the quality requirements of the system can be discussed. The Clinton plan and several of the other congressionally sponsored plans for health reform are modeled on the managed competition proposals of the Jackson Hole Group, some in combination with global expenditure budgets. Managed competition restructures the market for health services into competing prepaid health plans, giving providers built-in incentives to offer the standard package of benefits at the lowest premium price.

National Health Board – Under managed competition, the locus of health system design
and control would be with a National Health Board comprised of presidentially appointed
members. Its primary functions would be to determine
the standard benefit plan; to establish global and
statewide budgets (Clinton Plan); to set up rules of fair
play for competing health plans; and to oversee the
state Health Alliances. The National Health Board
would also be responsible for establishing a uniform
data reporting system that would serve as the basis for
measuring the performance of competing health plans
and the new system's impact on the quality of care.

"Managed competition restructures the market for health services into competing prepaid health plans, giving providers built-in incentives to offer the standard package of benefits at the lowest premium price."

State Flexibility - Generally speaking, the federal government can be expected to establish the rules of the game, with administrative and regulatory control of the health care delivery system concentrated at the state level. Recognizing that many states have already taken steps toward health care reform, the Administration has signaled its willingness to allow states to experiment and design alternative approaches. To that end, Medicare and Medicaid waivers will be encouraged and monitored, presumably creating variations and adaptations to local circumstances, including single payer systems.

Health Alliances - In every state, at least one Health Alliance would operate as a collective purchasing agent for small to medium (proposals range up to 5000 employees) employers, and would be organized as not-for-profit membership organizations governed by employers and consumers. Alliances would be subsidized by federal, state, employer (an employer mandate is proposed by Clinton) and individual contributions. In addition to small employers, Alliances would act on behalf of self-insured and uninsured individuals. The state-administered Medicaid program would also be folded into Alliances. Large employers would be permitted to opt out, acting as their own Corporate Alliance but under similar rules of operation.

Health Plans - Each year, Alliances in each state would organize rosters of integrated delivery systems, called Health Plans. Although all types of delivery systems would be allowed to participate (i.e., HMO, PPO, indemnity), it is expected that indemnity plans will quickly be phased out of operation because they will not be able to compete on premium price. Health plans would be required to report uniform price, quality and service

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information under the national data reporting system mandated by the National Health Board.

Each year, Alliances would administer open-enrollment periods allowing Alliance members to select the health plan of their choice. A health plan would not be able to prevent an Alliance member from enrolling, even if the individual was a poor medical risk.

Medicare - Under the managed competition proposals, Medicare would continue as a stand-alone program although beneficiaries would be allowed to opt out of Medicare by joining a local Health Alliance. Several proposals would add additional coverage for home and community-based long term care and coverage of prescription drugs.

The Context for Quality Management Under Managed Competition

"The IOM has identified three broad

The Institute of Medicine (IOM) has identified three broad categories of potential concerns with regard to health care quality: use of unnecessary or inappropriate care ("too much care"); underuse of needed and appropriate care ("too little care"); lapses in the technical and interpersonal aspects of care ("inferior care"). To these, one might add another category, service or consumer responsiveness.

categories of potential concerns with regard to health care quality: use of unnecessary or inappropriate care; underuse of needed and appropriate care; lapses in the technical and interpersonal aspects of care."

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One can reasonably assume that health plans would, by themselves, strive to improve service quality, i.e., waiting times, amenities, convenience, etc., in order to increase their enrollment. Similarly, the restructuring of incentives in the direction of managed competition will improve quality to the extent that it virtually eliminate quality concerns that directly result from overtreatment. No longer will there be any need for external utilization review or any real concern that patients will be encouraged toward inappropriate or marginally needed surgeries.

Apart from the natural motivation of professionals towards excellence, technical quality should not be affected by managed competition incentives. Technical quality is thought to be protected by the opportunity for patients to bring malpractice suits in the event of serious problems. While the threat of malpractice may indeed provide consumers with a degree of assurance of medical competence, it has long been recognized that the threat of malpractice can itself distort clinical judgement. Even in fully capitated managed care environments, in which financial incentives strongly discourage overtreatment, physicians point to a degree of unnecessary diagnostic testing that is conducted purely as a defense to potential malpractice suits.

Any concerns about technical quality will be greatly ameliorated by the increased dissemination, application, and use of practice guidelines which clearly define the best practices for treating specific medical conditions. The Clinton health reform plan would encourage pilot programs in which documented adherence to a practice guideline could confer protection to a provider against malpractice litigation. Widespread development of

and adherence to practice guidelines will work to minimize variations in practice that have been documented to currently exist between geographic regions. As such, health reform can be seen as making a concrete contribution to improving standards of care across the board.

As the IOM has pointed out, the most significant quality concern that a managed competition
model must address is the incentives for undertreatment. Managed competition purists
claim that by simulating conditions for a free market in health care services, quality will
emerge as a natural byproduct of informed consumer choice and competition between plans
for consumer favor as in other service industries. The flaw in this reasoning, however, is
that much of the health services enterprise remains a "black box" for consumers who must
trust that at any given time for a particular disease or condition, physicians and other health
professionals are using commonly accepted best practices and professional standards in their
treatment decisions. It is extremely difficult for a consumer to identify a treatment,
screening, or referral that may have been medically
indicated but withheld, or even to identify when a
treatment has been poorly performed.

"Consumer empowerment, however, in no
way relieves the system of its responsibility
to implement an ongoing monitoring
mechanism capable of identifying patterns
of undertreatment and poor technical care."

Clearly, the issue of patient perception of quality
must be separated by not divorced from the issue of
quality standards for medical practice. Certainly the
Administration and other health reform architects are
to be commended for their emphasis on an informed
consumer. Patients must be educated to the understanding that when it comes to health
services "more" is not synonymous with "better." The proposed consumer "report cards"
in health reform plans will flag some important indicators of quality and differences among
providers. Consumers should also be provided with direct user-friendly access to resource
information to guide their decision-making about the pros and cons of various elective
procedures.

Consumer empowerment, however, in no way relieves the system of its responsibility to implement an ongoing monitoring mechanism capable of identifying patterns of undertreatment and poor technical care. Using existing population-based data analysis capabilities, broad patterns of care must be analyzed to monitor risk-adjusted rates of practice utilization and health outcome. Particular attention must be focused on low utilization rates for specific diagnostic and treatment interventions as potential markers for undertreatment. High rates of unexpected poor outcomes must be monitored as potential markers for plan deficiencies in the technical provision of care.

Additionally, capability is emerging to monitor rates of adherence to practice guidelines for treating specific conditions. Not only does practice guideline monitoring have potential to improve technical quality and malpractice driven overtreatment, it is a powerful tool against undertreatment. Subtle deviations from acceptable procedures that may be undetectable at the level of the individual case can become apparent when large amounts of data are examined. Aberrant plans or providers thus identified can be provided with appropriate feedback on which to change behavior.

It is critical, however, that monitoring and oversight activities be designed to facilitate and not impede the momentum that has finally started to build around the continuous quality improvement movement. Plans need access to quality standards and comparative performance and compliance data so as to appropriately target their own internal quality improvement activities. Such data can also foster collaboration among competing plans and the conduct of community-based quality improvement initiatives. Penalties or sanctions should only be imposed after the information has been provided and ample opportunity for improvement has been extended. The encouragement of a "safe" environment for quality improvement also suggests that enforcement authority be separated from the data analysis and monitoring function.

Ultimately, the quality of a health system and the performance of a health plan should be

"This report recommends that a comprehensive, National Quality Management Program be established for the purpose of preserving and improving the quality of health care for all Americans under health reform."

outcome

measured largely on the degree to which it improves the health status of its population. Sensitive, risk-adjusted, population-based measurements will allow us to give credit to health system efforts at prevention, education, and early diagnosis in addition to its capabilities in treating illness. Unfortunately, these outcome measurement instruments are still their infancy. Until that time, a national system of quality assurance and improvement must take advantage of existing process measurements, and must encourage the continuous evolution of consensus regarding practice guidelines so that consumers can be assured that they are receiving the right treatment, performed the right way, leading to the right outcome.

A NATIONAL QUALITY MANAGEMENT PROGRAM

This report recommends that a comprehensive, National Quality Management Program be established for the purpose of preserving and improving the quality of health care for all Americans under health reform.

The program must be fashioned after the model of continuous quality improvement, that is, it must ensure that its "customers" i.e. consumers, providers, and health professionals, will in fact be able to help shape it to suit their needs. Local providers and consumers must provide essential input about such issues as variations in patterns of care and the monitoring and evaluation of local and regional epidemiologies. Quality review and monitoring data should be used to support medical professionals in refining and improving clinical practice based upon emerging new standards of care.

Accomplishing these objectives requires a program of national design with flexible, strong local applications; one that can take health care information from all sources and use it to empower health professionals and consumers to define the outcomes they would like to achieve, while assisting them in working toward those goals. The program would assure all purchasers and consumers that health care services are being monitored for quality and

would coordinate principles of epidemiologic surveillance, quality improvement, health services research and interactive education directed at both the medical community and the public.

Such a plan would stand in dramatic contrast to present oversight activities, which are perceived as evaluating individual clinical decisions rather than patterns of care; relying on subjective reviewer judgments; lacking statistical and clinical probability measures; and, employing punitive measures to enforce compliance with undefined standards. A nationally coordinated public/private enterprise of this kind would supersede the multitude of external review activities presently financed by purchasers of care and reduce and redirect the high level of expenditures that existing efforts require.

Functions

The model proposed is built upon four interlocking sets of functions that can be broadly characterized as: consumer protection, quality improvement, informed consumer choice, and national database development. Each of these elements is essential to the overall performance of the system and to continued consumer confidence that their interests are being protected.

Consumer Protection

"A nationally coordinated public/private enterprise of this kind would supersede the multitude of external review activities presently financed by purchasers of care and reduce and redirect the high level of expenditures that existing efforts require."

As discussed, consumer protection under managed competition must include effective safeguards against undertreatment, must empower the consumer with rights of redress, and must ensure the fiscal and professional integrity of the system's components. Federal legislation enacting health reform must require:

Ongoing monitoring and feedback of clinical behavior and practice patterns with the goal of holding competing health plans and providers accountable for improved clinical performance;

Authority by which regulatory bodies can monetarily penalize, sanction or terminate health plans and providers for consistently poor care;

An independent patient complaint and appeals mechanism capable of swiftly addressing consumer concerns regarding access or denial by a plan of specific treatments;

Independent ombudsman that can operate as an unrestricted consumer advocate;

Accreditation and licensure of health plans, institutional providers, and health professionals. Plan certification must be based on detailed information concerning