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MCIC Press Release

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Phone: (732) 292-1100
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Email: info@themcic.com

Hot Off The Press

Soaring Healthcare Premiums Seen as Threat To Managed Care; More Savings Can Be Realized MCIC Leadership Survey Finds

Manasquan, NJ - Managed care is threatened by rising healthcare premium costs, according to an overwhelming majority of healthcare and managed care executives who responded to an exclusive survey by The Managed Care Information Center (MCIC). However, many also said there are more savings to be squeezed out of managed care.

One integrated delivery system's senior medical officer in care management said the "golden age of accountability" in curbing healthcare costs is about five years away.

"The low hanging fruit has been harvest," said one survey respondent. "Until we achieve aligned incentives, caregiver integration, health behavior changes and provider/payor partnerships, the status quo will reign. And that's not pretty for healthcare costs."

One healthcare lobbyist said the industry has never really achieved a state of "managed care, only managed costs."

Managed care organizations have the potential to fund multi-discipline, aggressive programs to address major cost drivers like obesity and other behaviors which add to healthcare costs, but haven't done that, the lobbyist said.

"I think that is primarily due to the short-sighted nature of many of the for-profit companies," the respondent said. "If they'd even look at the data, even in the immediate short-term, weight reduction saves costs. They (managed care plans) don't think it's worthwhile to invest in prevention programs when people change their plans frequently, trying to get to lower costs."

The survey was conducted among the MCIC's online community. Participants' titles ranged from senior medical officers in integrated delivery systems, to vice presidents in managed care organizations. Their duties included care management, contract and reimbursement analysis, and planning and development.

Ninety healthcare and managed care executives responded to the survey, which sought opinions on increasing premiums, the impact on managed care organizations and the possibility of employer backlash.

    The breakdown of respondents included:

  • Consulting Firms 28.9 percent.
  • Managed Care Organizations 22.2 percent.
  • Other Healthcare Provider 22.2 percent.
  • Physician Organization (IPA-PPMC-Phys Org- MSO) 13.3 percent.
  • Hospital-Medical Center 11.1 percent.

The vast majority of survey respondents (78.9 percent) believe that soaring healthcare premiums pose a danger to managed care. Only 20 percent said they were not a threat.

The healthcare cost factor is only a symptom, not the disease, according to Jim Wilton, CEO of a consulting firm.

"I believe the approach is wrong from inception," Wilton said in his survey response.

"The system needs to be care driven, rather than cost driven," Wilton said. "Only then can the priorities be properly designated and resources aligned. Data needs to be available and properly utilized through clinical integrations of a committee group of multi-specialty providers. Managing care is what physicians do. They must drive the system."

A president of a utilization review company noted that many health plans have already relaxed traditional managed care plan controls at the same time, and they have raised premiums.

"I predict it will be a matter of a few short years until they reinstate the controls that will again show savings," the respondent predicted.

A managed care contracts director for a physician organization said that most managed care companies raise their premiums based on an actuary's estimates.

"They usually place funds in a reserve," the director said. "If you look at the trends, with the new electronic medical records (EMR) products being introduced in the physician and hospital sites, healthcare billing and utilization rates are decreasing. But, with utilization decreasing, MCOs continue to raise premiums an average of 17 percent each year."

Almost three-quarters of the respondents (73.3 percent) believe that despite soaring healthcare costs, managed care plans can still find ways to wring more savings out of their systems costs. Only 25.6 percent felt there were no more savings to be realized.

"Managing smaller groups of providers with good information and peer pressure on outlier treatment patterns and some kind of health plan ownership, bonuses or risk are still effective means of controlling costs," he said. "Channeling members to certain hospitals and reduced administrative expenses with new administrative systems should continue to reduce costs once we get past HIPAA implementation."

Another respondent placed the blame for the hike in healthcare costs squarely on the public and the "legislative backlash" against HMO controls.

"Much of the legislative backlash was driven by a few people with valid concerns and many politicians with a poor understanding but a heavy personal agenda," said the respondent, who is a vice president of a managed care organization.

The respondent predicted a gradual return to managed care in conjunction with consumerism.

"Once the average American starts feeling the financial pain, he/she will be more willing to accept some of the cost controls of managed care," the respondent said.

Managed care organizations are doing "their best" to "wring" more savings out of healthcare costs, said an account renewal director for an MCO.

"At the same time, they need to do a better job explaining where all the costs come from e.g. hospitals, doctors, pharmacies, drug manufacturers, managed care administrators," said the account director.

An administrator at an outpatient clinic responded angrily, "Being a medical care provider and also a buyer of health insurance, I am sick and tired of hearing that my premiums are going up because of "increased healthcare care," each year, while the companies are lowering the reimbursement to our clinic for the healthcare we provide. "Where's the increase? In the wallets of the managed care plans, not ours!"

Responses To Managed Care Leadership Survey

Are Soaring Premiums a Danger Signal for Managed Care Plans?

Does "Out-of-Control" Health Costs Mean Managed Care Plans Cannot Wring More Savings Out of System Costs?

Will There Be an Employer Backlash to Health Plan Double Digit Premium Increases?

No ---20 %

No --- 73.3%

No --- 11.1%

Yes ---78.9%

Yes --- 25.6%

Yes --- 86.7%

1.1% left unanswered

1.1% left unanswered

2.2% left unanswered

Source: Managed Care Information Center, 2003

"Maybe the pressure needs to come from employers and possibly the government as well, to put the pressure on the health plans to move beyond giving lip service to health promotion/health enhancement into some truly creative program/benefits initiatives designed to motivate their members to TAKE CHARGE OF THEIR HEALTH!" said John Newport, a contract development director for a multi-specialty medical group.

According to an executive vice president from a third-party administrator, "Any managed care savings were long ago captured and unless employers make changes in benefits, there is no real cost savings being realized."

For additional information on The Managed Care Information Center, Write PO Box 456, Allenwood, NJ 08720; call toll-free (800) 516-4343, fax toll-free (888) 329-6242, or visit www.themcic.com.

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