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Industry Can Benefit from Quality in Managed-Care Plans

Medical Device & Diagnostic Industry
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Originally published June 1996

An Interview with Paul M. Ellwood, Jr., MD

President and CEO, Jackson Hole Group

The health-care community is on the verge of an information revolution, one that will allow managed care to achieve the goal that its inventor, Paul M. Ellwood, Jr., first had in mind some 25 years ago. That goal is to give equal credence to cost and quality.

After 17 years of practice as a pediatric neurologist and physiatrist, Ellwood concluded that fee-for-service medicine was not in the best interest of patients, especially those beset by chronic illness. With Alain Enthoven and Jackson Hole Group, a health policy research group, Ellwood devised the concept of managed care, coining the terms health maintenance organization (HMO) and preferred provider organization (PPO). He later developed plans that led to the creation of the Agency for Health Care Policy and Research, and most recently crafted the methods and promoted the application of health accountability by health plans. Beginning this summer, the process of implementing the methodology for health plan accountability will begin.

In this interview with MD&DI, the inventor of managed care--who also serves as president and CEO of Jackson Hole Group and clinical professor of neurology, pediatrics, and physical medicine and rehabilitation at the University of Minnesota--explains the importance of getting information about both quality and cost into consumers' hands and how medical device companies can benefit by doing so.

What was your original concept of managed care?

Originally I had in mind that health plans would combine insurance and the delivery of health care, competing with each other on price and quality. They would have three basic characteristics. First, they would deliver comprehensive care, providing virtually anything anyone needed from drugs to devices and from doctor visits to hospital stays. Second, they would each serve a relatively large group, several million people, over an extended period of time. And, third, they would be responsible for these people for at least a year. That idea was very different from conventional medicine, where a typical transaction might involve a visit to a doctor or a stay in a hospital, where the responsibility for managing the overall disease process would be informally shared among many health professionals.

What did you hope to accomplish with this idea?

The purposes of managed competition or managed care were to improve the quality of health care and to reduce the rate at which health-care costs were increasing. The notion was proposed in the 1970s to the Nixon administration as a way to reform Medicare, with the idea that the private sector might follow suit. As it turned out, the Nixon health reforms didn't do any better than the Clinton health reforms. Instead, over the past few years, the impetus for change has come largely from the purchasers of health care, especially large purchasers who, faced with global competition, felt they had to do something about the cost of fringe benefits and every other facet of doing business.

Until now, the major emphasis has been on cost. Where does quality fit in?

When I first proposed the HMO idea, it was my expectation that the emerging HMO industry would be required to make available to the public evidence that they were producing the best possible health outcomes. This would have been more difficult to accomplish within the conventional practice of fee-for-service medicine because of the short, compartmentalized transactions that take place in that context. It is easier to do in managed-care plans because they have an extended, comprehensive responsibility for their enrollees' function and well-being.

For a variety of reasons, the idea of holding health plans accountable for their impact on people's health has not been implemented. Health care is becoming increasingly like a commodity. Virtually all the competition between health plans is about price.

Some physicians say managed care will not continue to grow in popularity because it is reducing the quality of the care they give their patients. What's your response to such statements?

There is absolutely no evidence of managed care having had a deleterious effect on quality. Quite the contrary. In the few studies that have compared quality in the two systems, managed care has done very well.

I am disappointed that we have not made more progress in reporting on quality. One reason for this is the fact that the old system of health care had no particular incentives or capacity to follow patients over an extended period of time.

How does this relate to the various types of follow-up that medical device manufacturers are required to perform, such as device tracking for implantables?

Device manufacturers have done a better job of following people who have been fitted with their devices than has the health system as a whole. When a pacemaker or heart valve is implanted, both FDA and the manufacturer have an interest in knowing how long it lasts and whether it is really continuing to work. To do that you have to follow the patient pretty carefully.

Might this kind of patient follow-up be expanded to permit quality assessments in the practice of medicine?

We are on the verge of exactly that. In September of last year, a new organization was founded called the Foundation for Accountability (Portland, OR). It is a not-for-profit corporation whose function will be to devise systems for measuring health-care quality and making the information available to the public. These systems will be uniform, which is essential if we are to avoid having dozens of quality accountability systems.

Their first task will be to discern the health of populations--to rank the ability of the HMOs to reduce the likelihood of ill health among the entire population they are serving. The standards will also allow for comparisons of the organizations' ability to improve the health-related quality of life for patients with such conditions as asthma, low back pain, cardiovascular disease, cancer of the breast, and diabetes. And the organizations will be compared in ways that consumers can understand.

Why is this effort important for medical device companies?

No one, especially a company that is competing on quality, wants to be in a commodity market. So everything about the future of the device business depends on moving managed-care competition from a price-only consideration to one that includes quality.

Can device companies assist in doing quality assessment, perhaps by developing databases that record the effects of equipment on patient health or by designing their devices to capture certain types of information?

Both ideas are valid. The device industry is developing very large databases, and we can expect more of that in the future--huge databases for comparing treatments and outcomes. And in the case of devices this information is often very good because many devices produce digital information that can go directly into a database. In the next year, I expect the whole business of computerized medical records--computerized information being provided to doctors and patients--to just take off.

The impetus for this will be the requirement that health plans be accountable for their quality. I think there will be a widespread application of outcomes accountability in the next year, and that will trigger an information revolution in health care. This consumer-oriented information about the quality of care can also be used by health-care organizations to follow up and improve on the effectiveness of health care and the various things that are used in conjunction with it.

How can device companies contribute to outcomes accountability?

There are several ways. One is to support the efforts of the Foundation for Accountability. As the foundation proposes measurement schemes for assessing the treatment of various diseases, device manufacturers should provide it with information about their experiences in tracking the related use of medical technologies. I have met with a number of device manufacturers about this and have been impressed with the state of the art of following patients in the device industry.

Manufacturers will also be involved through the clinical trials they conduct to evaluate their products. One result of the health-care information revolution is that the nation's health system is going to become a kind of massive, continuous clinical trial. So it will be much easier to go to these managed-care organizations and say we would like to test this device; it won't be necessary to install new information systems or teach doctors how to report on the effectiveness of devices, because the managed-care organizations will already have these capabilities in place. This will make it much easier for manufacturers to find clinical sites for their device testing, and will speed the rate at which devices can be evaluated and reduce the cost of doing so.

What results should manufacturers expect to see as a result of their participation in this information revolution?

I went into the development of managed care because I realized how little we knew about the status of our patients and how poorly structured the health system was for taking care of people with chronic illnesses. It ought to be feasible to simultaneously improve quality and reduce costs, but that is not universally true.

There will be circumstances in which the more expensive drug, device, or procedure works better and, under those circumstances, that is what should be used. And that is what will be used when the public has the information that enables them to judge health-care plans on some basis other than cost.

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