Understanding the Alphabet Soup of Managed Care Integrated Delivery Systems

Evolving Managed Care

Revolution, Counter-Revolution, and Restoration

In the opening substantive session, Robert Hurley of Virginia Commonwealth University provided a framework for the discussion of integrated delivery systems (IDSs) by analyzing recent trends in the health care marketplace and discussing how the emergence of IDSs fit within the broader context of these changes. He described how managed care enrollment grew in response to purchasers' demand for greater value for their health care expenditures and how a variety of managed care models—including preferred provider organizations (PPOs) and point-of-service (POS) plans—evolved in response to market demands and opportunities.

Dr. Hurley then described the development by providers of integrated delivery systems as a strategy for offering consumers a greater array of options in the marketplace and establishing structures and relationships that promote continuity of care, while at the same time strengthening the position of these providers in the marketplace and enhancing their negotiating ability with managed care plans. While IDSs may either serve as subcontractors to managed care plans or compete directly with them, an important objective is for providers to regain some portion of the control they feel they had lost to these managed care plans.

Dr. Hurley noted that potential benefits from the development of provider-sponsored IDSs could accrue to many parties:

• To buyers (e.g., more innovation, competition, and accountability).
• To managed care plans (e.g., increased opportunities to share financial risk and care management responsibilities).
• To providers (e.g., more control or money and greater opportunities to reconfigure themselves).
• To consumers (e.g., more continuity of care, choice, and community-oriented benefits).

At the same time, IDSs face a number of important challenges, including:

• Moving beyond a purely defensive posture and the hospital-based roots of many of these organizations.
• Demonstrating their superiority to managed care plans in the areas of care management, customer service, and provider relations.
• Carrying through on their promised commitment to the communities they serve.
• Proving that they can sustain themselves as organizations providing a full range of services.

Dr. Hurley concluded by raising a series of policy questions about provider-sponsored IDSs for consideration by policymakers. These questions included:

• To what extent do these IDSs differ from commercial managed care organizations?
• What regulatory structure should apply to these organizations?
• What are the evolving relationships between IDSs and managed care organizations (MCOs) and what are the implications for competition?
• What type of public accountability is needed for these organizations?
• What are the implications of IDSs for occupational and institutional licensure and regulation?
• Ultimately, will IDSs satisfy or frustrate buyers' pursuit of value for their health care dollar?

Many of these questions were explored further in subsequent workshop sessions.

Reference

Herzlinger RE. The Managerial Revolution in the U.S. Health Care Sector: Lessons from the U.S. Economy. Health Care Management Review 23(3):19-29.

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