Hospital and Medical Service Plans

SIC 6324

Industry report:

The hospital and medical service industry, also commonly referred to as the managed care industry, is comprised of establishments providing hospital, medical, and other health services to enrollees or members of a prearranged plan or agreement. Many of these establishments also provide traditional health insurance vehicles. Managed care plans typically arrange to provide medical services for members in exchange for subscription fees paid to the plan sponsor. Members receive services from physicians or hospitals that also have a contract with the sponsor. Thus, managed care plans integrate the financing and delivery of appropriate health care services to covered individuals.

Industry Snapshot

The managed care industry first became popular in the 1980s and experienced explosive growth in the 1990s. By the mid-2000s it had effectively replaced traditional indemnity insurance; in 2006, approximately 75 percent of all commercial medical insurance plans were managed care, accounting for about 159 million Americans. Although originally developed as a means to cut medical costs, managed care plan premiums skyrocketed during the 2000s, leading to widespread concern that medical care expenditures were spiraling out of control.

Between 2000 and 2006, premiums rates rose 87 percent, and this increase continued into the late 2000s and early 2010s. While consumers and employers complained of high premium prices, managed health care organizations worked to strike a delicate balance between their own rising costs, namely in drug and hospitalization coverage, and a productive bottom line.

Organization and Structure

Managed health care plans, or prepaid plans, exist in various forms, yet all plans serve the same basic function--to spread the risk of extensive losses suffered by one individual across an entire membership group that is exposed to similar risk. By pooling the health care dollars of many subscribers, individual enrollees are assured of receiving care that they otherwise might not be able to afford. Managed care differs from traditional insurance in that members of managed care programs typically have less freedom to choose their health care providers, thus limiting the plan member's control over the quality and delivery of care in a managed system. Members of managed care plans usually must select a "primary care physician" from a list of doctors provided by the plan sponsor.

As managed care plans evolved into the twenty-first century, competing plans offered innovative health care delivery in response to the preferences of consumers. Still, all plans had certain elements in common. Common factors included arrangements with selected providers to furnish a set of health care services to members, definition of explicit standards for the selection of health care providers, maintenance of ongoing quality assurance standards, and the utilization of review programs. Additionally, significant financial incentives were set in place to discourage members from using providers and procedures not covered by the plan.

How Managed Care Works.
Managed care plan administrators act as intermediaries by contracting with health care providers and enrollees to deliver medical services. The enrollees pay a set fee that entitles them to services. The plan administrator then supervises the health care providers. Subscribers benefit from reduced health care costs, and the health care providers profit from a guaranteed client base.

Enrollment in managed care plans appeals to members because it can provide savings over traditional indemnity insurance plans, which typically serve the singular function of claims reimbursement. Contrary to traditional insurance plans, managed care sponsors are highly motivated to suppress health care costs and deliver quality services. Indemnity insurance, in contrast, offers little incentive to control the cost of health services. The savings of managed care results from an active role taken by the plan sponsor in determining the most cost-efficient means of delivering care to its members. Sponsors of managed care, for example, work with health care providers to increase outpatient care, reduce administrative costs, eliminate complicated claims forms procedures, and minimize unnecessary tests. Plan sponsors accomplish these tasks by reviewing each patient's needs before treatment and requiring a second opinion before authorizing doctors to administer care. Likewise, hospitalization of a plan member requires prior authorization, and services performed by specialists cannot proceed in the absence of approval. Some managed care plans offer bonuses to doctors for avoiding expensive tests or costly services performed by specialists, and some sponsors employ award bonuses to doctors in return for shortening the time a patient stays in the hospital. Practices such as these, according to critics of managed health care, can easily lead to undertreatment.

Managed care places emphasis on preventive medical techniques that help patients avoid serious future health problems, which, in turn, reduces cost. For instance, managed care plans typically authorize regular physicals and checkups at little or no charge to their members, to prevent or detect long-term complications at an early stage. Many plans offer cancer screenings, stress reduction classes, programs to help members stop smoking, and other services that save the sponsor money in the long run by keeping the plan member healthy. Some plans offer financial compensation to members who lose weight or achieve fitness goals. For example, one plan offered $175 to overweight members who lost 10 pounds and gave $100 to members who participated in fitness programs.

Managed care plans exist in many forms. Most popular are health maintenance organizations (HMOs) and preferred provider organizations (PPOs). Other plans that combine elements of HMOs and PPOs include exclusive provider organizations (EPOs), point of service plans (POS), third-party administrators, and competitive medical organizations. In addition to these established plans, many employers and organizations offer hybrid plans that combine various forms of insurance and managed care into programs that offer multiple options for members of their group. In 2010, 69 percent of Americans with health insurance, or 199 million people, were enrolled in PPOs, according to the American Association of Preferred Provider Organizations (AAPPO). Other figures from the AAPPO showed that HMO benefits generally cost about $8,570 per employee, whereas PPOs cost an average of $8,223 per employee.

Health Maintenance Organizations.
The basic HMO, characterized by the description of managed care plans provided above, was the most popular plan during the 1990s. HMOs, with 70 million enrollees in 1999, boasted a 30 percent market share among managed care providers, up from just fewer than 60 million people at the end of 1996. By the mid-2000s, HMOs had declined in popularity and held only a 25 percent market share.

Four organizational models exist for the HMO; these define the respective relationship among plan sponsors, physicians, and subscribers. Under the first model, called independent practice associations (IPAs), HMO sponsors contract with independent physicians who agree to deliver services to members for a fee. Under this plan, the sponsor pays the provider on a per capita, or fee-for-service, basis each time it treats a plan member. Under the second model, the group plan, an HMO contracts with a group of physicians to deliver client services. The sponsor then compensates the medical group on a negotiated per capita rate. The physicians determine how they will compensate each member of their group. Another model, called the network model, is similar to the group model, but the HMO contracts with various groups of physicians based on the specialty that a particular group of doctors practices. Enrollees then get their service from a network of providers based on their specialized needs. In a fourth model, the staff arrangement, doctors practice as employees of the managed care plan sponsor. The HMO owns the facility and pays salaries to the doctors on staff. This type of arrangement allows the greatest control over costs, but also has the highest start-up costs.

Preferred Provider Organization.
A PPO is a variation of the HMO and combines features of indemnity insurance and HMO plans. A large insurer or a group of doctors or hospitals typically organizes a PPO. Under this arrangement, networks of health care providers contract with large organizations to offer their services at a reduced rate. The major difference from the HMO is that PPO enrollees retain the option of seeking care outside of the network with a doctor or hospital of their choice. They are usually charged a penalty for doing so, however. Doctors and hospitals are drawn to PPOs because they receive prompt payment for services; also PPOs provide access to a large client base.

The PPO industry tends to be more fragmented than HMOs, with numerous independent firms providing regional and local services. Some of the larger PPOs have started providing programs and designing products that are similar to those offered under HMO plans. One type of plan that has emerged is the exclusive provider organization (EPO), which is essentially a smaller PPO provider network offering higher discounts. Most EPO plans provide few, if any, benefits when an out-of-network provider is used.

Point of Service.
POS plans combine characteristics of HMOs and PPOs. Like PPOs, POS plans use a network of providers. Covered individuals select a primary care physician who controls referrals to specialists. As long as the covered individual uses a plan provider, there are few or no out-of-pocket expenses. If care is received from a provider not in the plan, the covered individual pays much higher co-payments and deductibles, and the provider is reimbursed by the plan.

Background and Development

The use of managed care in the United States coincides with the use of health care insurance itself. It was first used by the U.S. Public Health Service to provide medical treatment for merchant seamen who traveled from port to port. In the 1800s, managed care expanded to cover some corporate employees and some government employees, including railroad workers. Henry J. Kaiser and Dr. Sidney Garfield started the first major plan in the 1930s to provide medical care for San Francisco shipyard workers. This plan was offered to the public at large in the 1940s.

Although plans similar to the Kaiser plan were formed during the 1950s and 1960s, managed care did not become available to the population until the 1970s, when society began to address spiraling health care costs. The Federal Health Maintenance Organization Act of 1973 stimulated the growth of the industry by providing grants and loans that expanded plans and spawned new HMOs. Although a few companies, such as Kaiser and Group Health of Puget Sound, offered managed care plans in 1973, less than 3 percent of Americans were enrolled in them.

Spiraling Health Care Costs.
The greatest reason for the advent and popularity of managed care has been spiraling health care costs, which many critics blame on the traditional indemnity insurance system. Throughout the 1980s and much of the 1970s, average health care costs in the United States jumped an average of 15 percent per year. Furthermore, between 1965 and 1992, health care expenditures, as a percentage of the gross domestic product (GDP), soared from 6 percent to more than 15 percent. Between 1988 and 1993, health care expenditures rose 63 percent, reaching $889 billion.

As health insurance costs skyrocketed, so did the cost of all types of health insurance. From 1989 to 1991, for example, the average employee contribution to company-sponsored health insurance plans increased 50 percent while the amount of services diminished and deductibles went up. As employers began to scale back their insurance offerings to save money, the number of uninsured Americans rose to nearly 35 million by 1992. Many smaller businesses were forced to terminate their health benefits.

These considerations caused employers and individuals to seek new forms of insurance in the 1980s and 1990s--such as HMOs and PPOs--that could contain costs while still providing satisfactory service. Others, including some government regulators, were advocating a nationalized health care plan similar to those in Canada or Great Britain. In the 2000s, the United States remained one of the only industrialized countries in the world that relied on a privatized system of health care.

Industry Growth.
During the 1970s, the HMO industry grew by approximately 25 percent, serving about 4 percent of the U.S. population by 1980. The HMO industry achieved its greatest period of growth during the 1980s. During this decade, the number of HMOs soared to about 700 in 1987, and enrollment jumped to include approximately 15 percent of the population.

In addition to rapid growth in the number of people enrolled in HMOs, PPOs became a popular form of care and grew at a faster rate than HMOs during the mid-1980s. Between 1984 and 1993, the number of PPOs bounded from 115 to nearly 900, with almost 40 percent of the population having the choice to enroll in PPOs through their employer. The PPO industry tended to be more fragmented than the HMO industry, with numerous PPOs offering regional or local services.

HMO industry profits began to sag in 1986. The number of people enrolling in HMOs began to decrease in 1988, with the number of HMOs falling from 707 in 1987 to about 546 by 1993. These trends reflected increasing start-up costs, increased mergers and acquisitions, and concerns by some people that HMOs would not be able to control costs as well as first hoped.

The effect of increased start-up costs was demonstrated in the growth rate of new HMOs between 1988 and 1991. In 1991, only four new HMOs were formed, compared with seven in 1990, 19 in 1989, and 34 in 1988. The sluggish economy and lack of start-up capital that was common in the late 1980s and early 1990s contributed to the fall in newcomers to the market. Many of the very large companies that had entered the industry in the 1980s remained unprofitable into the 1990s.

Increased economic pressures were also responsible for the merger and acquisition trend that reduced the number of HMOs in the late 1980s and early 1990s. While overall industry profits continued to grow in the early 1990s, many underfunded HMOs experienced financial difficulty.

The dramatic growth of the managed care industry can be seen by comparing the market share of managed care plans in 1988 and 1993 to that of traditional indemnity health insurance. In 1988, conventional health insurance held a 71 percent market share. The managed care share of the market was split between HMOs with 18 percent, and PPOs/POSs at 11 percent. By 1993, managed care accounted for 51 percent of the market, and conventional health insurance had fallen to 49 percent. In 1996, HMOs replaced traditional indemnity plans as the primary choice for health care coverage by employers. Of the 1,151 firms with 200 or more employees surveyed, HMO enrollment rose during 1995. Memberships, which were at 29 percent at mid-year in 1995, rose to 33 percent in the first half of 1996. Meanwhile, enrollment in conventional health plans fell from 31 percent to 26 percent over the same period. The survey showed that enrollment in some type of managed care reached 74 percent--a dramatic increase from 29 percent in 1988.

After experiencing financial problems in the late 1980s, managed care industry profits recovered during the early 1990s. Rapid growth, reduced medical costs, and the promise of stable premium rates characterized results in 1995. Some larger HMOs reduced premiums to boost enrollment. One of the largest and most profitable publicly traded HMOs, United HealthCare Corporation, announced it would sacrifice its 1995 profits by cutting premiums to increase enrollment. In 1999, United HealthCare Corporation ranked fifth-largest in the United States.

Mergers and Acquisitions.
Before 1996, there was little blending of HMO companies and traditional insurance companies, but that quickly changed with a series of well-publicized acquisitions. United HealthCare Corporation acquired MetraHealth Companies, Inc. toward the end of 1995. MetraHealth was formed earlier in 1995 by combining the group health care operations of Metropolitan Life Insurance Company and The Travelers Insurance Group. At the time of the acquisition, MetraHealth served more than 10 million individuals, nearly 6 million of whom were in network-based care programs. Other mergers included the entry of Humana, Incorporated into the traditional finance and insurance industry with the acquisition of Emphesys Financial Group and one of its subsidiaries called Employers Health Insurance Company, and a major acquisition that involved the takeover of WellPoint Health Network.

Government Reform.
Managed care companies were poised to benefit from political changes in 1993 that promised to promote the industry. The most crucial development was the election of Bill Clinton as president. Clinton promised in his campaign to deliver a national health care plan within his first 100 days in office. He promised a plan that would reduce costs and provide some type of care for all Americans. In 1993, First Lady Hillary Rodham-Clinton orchestrated the development of a national health care reform package that promised sweeping changes. However, by 1994, it was clear that Clinton's health reform initiatives were dead.

State initiatives dominated the reform agenda in 1994 and 1995 and continued into 1996. In November 1996, two anti-managed care referendums failed in California and Oregon, an indication that consumers remained concerned with the higher costs associated with traditional indemnity insurance. The political realities of election year 1996 again forced Congress to address the issue of health care reform at the national level. The result was the passage of the Kassebaum-Kennedy health insurance reform package.

Key elements of the Kassebaum-Kennedy bill included portability, guaranteed coverage, group purchasing for small groups, and medical savings accounts (MSAs). This legislation affected managed care companies by increasing expenses due to regulations requiring upgrading and evaluating care. Federal and state regulations concerning 48-hour hospital stays for new mothers, for example, put increased pressure on profit margins by increasing costs for managed care companies.

While some large organizations experimented with health care cost controls that forced competitive pricing, many individuals and small businesses sought ways to participate in managed care systems. One solution advocated by government reformists in the early 1990s was health insurance purchasing cooperatives (HIPCs). HIPCs allowed individuals or small groups to pool their buying power and negotiate cheaper managed care.

Although some groups found ways to control their health care costs through managed care and managed competition, critics of managed care accused HMOs of "shadow pricing," a technique used to keep premiums just below the level of expensive indemnity plans. They also argued that some managed care providers were engaged in competitive practices that would eventually hurt the overall quality of the U.S. health care industry.

Profitability.
In 1996, the managed care industry experienced falling margins resulting in less profitability. It was a combination of aggressive rate reduction and unrealized medical cost savings that contributed to many managed care companies losing favor with Wall Street. Another factor that put pressure on profit margins was the banding together of doctors and hospitals to negotiate higher provider fees. As a result, enrollment increased by an average of 19.2 percent in 1996, while margins declined to 0.2 percent, down from 2.4 percent in 1995. As a result of falling margins, the industry changed its focus from enrollment growth to one of managing medical costs to achieve profitable margin levels.

According to a study conducted by Weiss Ratings of Palm Beach Gardens, Florida, and reported in Healthcare Financial Management, managed care premiums rose by 3 to 4 percent in the mid-1990s and continued the slow rise, or else remained flat, through the end of the decade. These single-digit increases in premiums were commensurate with the rate of inflation, yet more than 50 percent of HMOs failed to achieve profitability by 1997 and again in 1998 as margins remained under 1 percent. It was provider-owned plans that suffered most severely from the ominous economic conditions of the managed care industry, with average losses estimated at $19 million.

In devising plans to curb escalating health care costs through managed care, regulators looked to examples of HMOs in the relatively new managed care industry. Although many HMOs were successful in the 1990s, others had failed. Furthermore, many of the new arrangements and innovations involving HMOs indicated that, as the federal government prepared to implement comprehensive reforms, the free market was beginning to deal effectively with spiraling health care costs. Managed care plans offered employers a chance to save on their medical expenses. According to the A. Foster Higgins survey, it cost employers an average of $3,739 to insure each indemnity member in 1996, an increase of 2.4 percent over the previous year. That cost compared with $3,185 for each HMO member, a decrease of 2.2 percent. With increasing numbers of indemnity plan participants converting to managed care membership, the market for managed care became saturated, which intensified competition between providers.

The volatility of HMOs in the 1990s was seen when Humana Corp. experimented by vertically integrating its hospital business with its HMO start-up operation during the 1980s. Although the strategy met with initial success, it eventually alienated many physicians and competing HMO networks. Doctors who were not a part of the Humana network started directing their patients away from Humana hospitals and facilities. As a result, Humana split the HMO and hospital businesses into separate divisions in 1993. The splintered corporation grew to be the sixth-largest managed care provider in the United States, with 6.2 million enrollees by 1999.

One successful example of the implementation of HMOs to curb costs involved a plan implemented by Xerox Corporation using the managed competition concept. Like many companies, Xerox offered a combination of indemnity and HMO plans to its employees. However, the company also used a "benchmark" system that limited company funded premiums per employee to the level of premiums charged by the least expensive HMO plan. This caused HMOs competing for Xerox employees to reduce their premiums and subsequently served to keep the rising cost of premiums in check. The program allowed employees to pocket the savings offered by the more efficient plans or pay extra for choosing indemnity plans that offered more freedom in choosing physicians. Xerox distinguished itself among employers over the well-publicized situation, through the practice of closely monitoring the HMOs that serviced the corporation, to ensure that its employees received satisfactory care. Similarly, through an innovative administrative policy, Minnesota became the first large employer to base its health care contributions for employees and dependents on the lowest-priced HMO in each county.

Customer Satisfaction.
In 1999, American Medical News quoted Employer Benefit Research Institute statistics indicating that 49 percent of Americans expressed satisfaction for their PPOs, while only 35 percent of HMO members were satisfied with their respective plans. The largest positive response, however, came from fee-for-service plan participants, of whom 64 percent were satisfied. This was in direct contrast to a report issued seven years earlier by the National Research Corporation indicating that people were most satisfied with HMOs and least satisfied with fee-for-service plans. Additionally, the earlier survey indicated that while 85 percent of the people were at least somewhat satisfied with their health plan, younger respondents reported the least amount of contentment. Furthermore, it was the younger respondents who were also the most likely to convert from traditional to managed care plans. As a result of the findings of the later survey, the managed care industry contracted Waylon Advertising of St. Louis, Missouri, to create an advertising campaign to help shed a more positive light on the industry. Along with the American Association of Health Plans, other members of the coalition that contracted the advertising campaign included Aetna U.S. Healthcare, Blue Cross and Blue Shield Association, and CIGNA Healthcare.

A number of factors helped to boost the profits of industry leaders like Aetna and United Health in the early 2000s. Between 2000 and 2002, one of the largest expenses faced by managed care providers--increases in prescription drug costs--actually began to slow, from 19 percent in 1999 to 16 percent in 2002. At the same time, however, managed care providers began to levy substantial increases in premiums, which rose nearly 24 percent, more than three times the rate of inflation, between 2000 and 2002. According to the October 2002 issue of Fortune, industry consolidation has helped give managed care companies negotiating power with their corporate clients. "Big insurers are swallowing little ones--roughly a third of small firms have been gobbled up in the past few years--giving better pricing leverage to the 600 or so remaining players."

Realizing that they would not likely be able to continue raising premiums this substantially without seriously alienating corporate clients, who were forced to choose between passing increases along to employees or swallowing the cost themselves, many managed care companies began experimenting with "consumer driven" or "consumer directed" health plans. These plans put the onus for securing affordable healthcare on consumers by giving them a set number of medical dollars, such as $500 or $1,000, to spend each year. Those who exceed this limit are responsible for additional medical costs up to a set deductible, such as $1,500 or $3,000. Once expenses exceed that amount, the managed care plan then resumes making its typical payments. In 2001, Aetna became the first managed care provider to launch such a plan with the introduction of HealthFund. According to a 2010 article in Medical News Today, the number of Americans with consumer directed health plans reached 23 million in 2009, up 27 percent from 2008.

Managed health care organizations, who were faced with escalating drug and hospitalization costs, also worked to increase efficiency and cut costs by closely monitoring the health care expenditures paid out to members. Patient care was thoroughly reviewed by the managed health care firms, who in some cases refused to approve a physician's treatment plan. As a result, both patients and doctors became increasing disenfranchised with HMOs/PPOs and, beginning in the late 1990s, the phrase "patient bill of rights" entered the national vocabulary. Many managed care organizations implemented features called for by patient bill of rights advocates, such as information disclosure, adequate choice of providers, and complaint and appeal processes. However, only a dozen states took significant action by passing legislation that allowed patients to sue their insurance provider for negligence in the cases when services deemed medically necessary were denied.

In the mid-2000s, the consumer-driven model was being pushed by the Bush administration as a means to contain the exploding consumer health care costs. Created in 2003 and first available in 2004 as part of the Medicare Modernization Act, health savings accounted (HSAs) combine a high-deductible policy with a tax-advantaged saving account, out of which funds can be withdrawn to pay for medical expenses. The insurance industry exhibited an unenthusiastic response to the introduction of HSAs at first, but by 2005 most major companies were offering integrated plans with HSAs options, including account set-up, reimbursement procedures, and even debit card payment systems.

Current Conditions

With health care costs reaching $2.6 trillion in 2009, managed health care was a significant player in a big industry. The average cost of a family policy offered by employers was $13,375 in 2009, up 5 percent from 2008. Wages, on the other hand, were up an average of only 3 percent. Health care costs were predicted to continue to rise, reaching $4.3 trillion in 2018, or about $13,100 per resident.

As the baby boomer population ages into retirement, their medical needs are expected to increase, placing a heavier burden on the nation's health care system. As the country entered the second decade of the twenty-first century, managed health care organizations were faced the challenge of providing advanced, expensive modern medical services at prices that did not drive members into the ranks of the United States' 50 million uninsured population.

According to the Kaiser Family Foundation, in 2009 47 million people were enrolled in Medicare. Medicare benefit payments were estimated at $489 billion, accounting for 20 percent of national health expenditures. Medicare accounted for 40 percent of the U.S. home health care spending, 30 percent of hospital spending, and 24 percent of prescription drug costs.

In 2010 all participants in the health insurance industry were awaiting the effects of President Obama's health care reform efforts. Signed into law in March 2010, the reforms were to be implemented in 2014 and intended to expand insurance coverage to 30 million previously uninsured Americans. However, the new rules also set regulations and fees on health insurers and threatened industry profit margins. Discussions on the health care reform issue were heated and rampant throughout the industry and society as a whole into the early 2010s.

Industry Leaders

In 2010 the largest U.S. health insurance provider based on direct premiums written was UnitedHealth Group Inc., based in Minnetonka, Minnesota. UnitedHealth had 2009 revenues of $87.1 billion with 80,000 employees. Second was Indianapolis-based Wellpoint, Inc. , which had annual revenues of $65 billion and 40,500 employees. Wellpoint provided medical insurance to 34 million customers, primarily under the Blue Cross and Blue Shield brands. HMO Kaiser Foundation Health Plan Inc. was based in Oakland, California, and had sales of $34.1 billion in 2009 with more than 13,000 employees. Aetna Inc. (Hartford, Connecticut) was another industry leader, with 35,000 employees and 2009 revenues of $34.7 billion, as was Human Inc. (Louisville, Kentucky), with $30.9 billion in sales and 28,100 workers. Rounding out the top ten, according to the Insurance Information Institute, were HCSC Group, American Family Corp. Group, Coventry Corp. Group, Highmark Group, and Independence Blue Cross Group.

The Henry J. Kaiser Family Foundation was one of the largest nonprofit managed care provider in the industry, with 8.3 million enrollees. Kaiser, founded during the 1930s, remained the oldest managed care provider in the United States at the start of the twenty-first century. The organization had sales of $39.5 billion in 2009.

Workforce

The increase in the popularity of managed care, in conjunction with an aging U.S. population requiring more care, ensured a stable employment market within the industry well into the twenty-first century. The jobs in the managed care industry parallel the positions that existed previously within the health care and health insurance industries. The basic difference, however, is that organizational structures within the managed care industry are subject to an excessively bureaucratic management environment. Additionally, employee and practitioner compensation trends within managed care organizations call for lower wages than health care providers such as doctors, nurses, and facility administrators have traditionally commanded.

Managed care offers similar positions in the insurance and health care fields: jobs in finance, accounting, sales, and administrative support. Managed care health professionals are equivalent to those in other health care environments: physicians, nurses, physical therapists, lab technicians, and occupational therapists. Nurses, who were in particular demand during the 2000s, reported greater job satisfaction in the managed care fields than within the traditional hospital structure.

Research and Technology

The managed care industry has been a major innovator and implementer of advanced research and technology. This is partly because the industry is focused on cost containment. Another reason is most companies in the managed care industry are relatively new and more open to change. In fact, indemnity insurers and hospitals later implemented many of the advances first developed in the managed care industry.

The managed care industry has become increasingly competitive, with HMOs and PPOs vying--and sometimes actually bidding--for contracts to serve the employees of different companies and organizations. As a result, managed care companies with the most advanced information systems and the most effective automation have excelled. Many companies are using new technology to help them provide a "one-stop-shop" for employers seeking efficient managed care benefits for their employees.

Managed care companies used information systems to integrate data about clinical and support services, medical staffs, and enrollees with data from internal operations such as cash management, human resources, and strategic and financial planning. These "seamless" health care delivery systems monitored and lowered treatment costs, reducing human error and intervention in the administrative process, thus speeding treatment. These advances also spilled over into the areas of ambulatory services and medical legal functions.

In the 2000s, all major providers maintained comprehensive Web sites. These sites provided services to their members, including access to their accounts, review of policies, explanation of benefits, and locations of doctors and medical services. The sites also provided extensive links to drug and medical information. Automated pharmacy options, sometimes contracted out to a third-party provider, also provided members with online options to fill or renew prescriptions.

© COPYRIGHT 2018 The Gale Group, Inc. This material is published under license from the publisher through the Gale Group, Farmington Hills, Michigan. All inquiries regarding rights should be directed to the Gale Group. For permission to reuse this article, contact the Copyright Clearance Center.

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