• What plan executives say about quality

    In response to a prior post about a quantitative study of health plan quality, commenter Jonathan found it odd that the authors of the paper I discussed seemed not to have bothered to talk to health plan executives. Of course he is correct that there is value in gathering qualitative information from leaders in the endeavor one is studying.

    However, in this instance, there is a very good reason why the authors of the paper seemed not to have done what Jonathan suggested. One of the authors had already done the qualitative study Jonathan had in mind. In fact, they cited the study. In fact, I referenced it in my post. Moments ago, I read it. I thought Jonathan and others might be interested in the findings.

    The findings of “Are Managed Care Plans Organizing for Quality?” by Dennis Scanlon, Elizabeth Rolph, Charles Darby, and Hilary Doty (MCRR, 2000) are based on interviews with medical directors, quality improvement (QI) directors, and chief executive officers if 24 health plans. In summary, those findings are:

    Plans are facing real pressure to focus on and engage in QI activities. Although private purchasers are not always the expected direct impetus for QI activities, the requirements of accreditation organizations (such as the NCQA) and public purchasers (such as the Medicare and Medicaid programs) are having a dramatic effect.

    Plans are restructuring themselves in a manner consistent with giving serious and long-term attention to the goal of QI. Boards now have institutionalized QI oversight responsibilities, and high-level managers dedicated to QI are assuming responsibility for clinical and service quality. Practicing physicians are involved, in varying degrees, in setting medical policy.

    Plans are slowly, and in some cases tentatively, developing the necessary technical capabilities to implement QI activities. Data collection, analysis, performance measurement, and the implementation of appropriate change are all components of a strong QI program. Plans exhibit considerable variation in their respective capabilities, but most appear to be making efforts, as resources permit, in one or more of these areas. […]

    Interestingly, however, the authors

    encountered little evidence that today’s MCOs believe quality plays a significant role in attracting customers; the overwhelming consensus is that price drives most purchasing decisions.

    This is consistent with what I wrote last night and explains why plans don’t compete on quality, even when quality is of marginal interest to consumers, second (or third or forth …) to price. If quality is welfare improving (in the economic or non-economic sense) and we can’t rely on competition to deliver improvement in that dimension, it would seem a little regulation is in order.

    An ungated scanned PDF of the paper is here.


    • You should really talk with the marketing guys. They are supposed to promote your place so that you can gain market share. Advertising quality does not work. Advertising prices rarely works. Advertising the prettiest nurses rarely works (in a country where sex sells everything.) It is hard to move market share by direct interactions with patients. If you want to move market share, you buy up practices and make alliances, especially with PCPs. You also build shiny new facilities with fountains, lots of flat screen TVs and gourmet food. That brings in new patients.


      • It’s the referrals, stupid. Is that what you’re saying? 🙂

        • There is a strong element of truth in Steve’s comment. I oversee an employer health plan in N. CA where a “non-profit” health system is a dominant player and continues to buy up physician practices, imaging centers, and competing hospitals. Not to mention the beautiful new towers they are constructing. Their costs are 30-40% higher than neighboring “for-profit” hospital whose outcomes scores are significantly better. Sadly, our employees didn’t care/know about the quality scores but rather 1) deferred hospital decisions to their hospital captive docs, or 2) preferred the “pretty” hospital assuming it was the best one. When this hospital was in our provider network, our annual trend rates were 12-15%.

          We carved the non-profit system out of our provider network and did a direct contract with the for-profit system (Tenet) and our trend has averaged 1.2% for the last 5 years with no plan changes (ACA Grandfathered).

          Evaluating cost alongside quality in selecting a health plan is a rational decision and even when provided the data, prospective patients cede the rational decision to someone else (doc) or to an emotional decision. This is clear evidence the market is broken as rational decision making is not regularly occurring by the consumer.

          I do not have the answer however I attribute the breakdown to the 3rd party payor system since the consumer is disconnected from the cost of the health care decisions they are ceding to others. This won’t/can’t be fixed by govt provided (single payor) care as that is still a 3rd party approach.

          To fully optimize price and quality, there needs to be greater transparency of both in the hands of the consumers and they need to be financially incented to utilize the tools; for example: a narrow network of high performing physicians/hospitals for a given service (e.g., cancer) are covered at 100% but if the patient elects to go to a lower performing/scoring facility, it’s only covered at 80%. This model is commonly used for transplant or COE networks of private health plans and is very effective. Why can’t Medcare/Medicaid use high performing networks rather than contract with all available providers?

          Thanks for letting me rant.

    • Most HMOs or managed care organizations outsource serious problems to existing hospitals. People want plans that give them access to the best hospitals, it’s a way of ensuring plan quality.

      For the less essential stuff, like long term management of chronic disease, there’s too much patient turnover, since most people get their insurance through work and on average, people stay at a company 5 years and companies change insurance every now and then.