BI’s Article search uses Boolean search capabilities. If you are not familiar with these principles, here are some quick tips.

To search specifically for more than one word, put the search term in quotation marks. For example, “workers compensation”. This will limit your search to that combination of words.

To search for a combination of terms, use quotations and the & symbol. For example, “hurricane” & “loss”.

Login Register Subscribe



The managed care model has clearly demonstrated that it can contain the rise of health care costs. For several years now, the rate of inflation for health insurance premiums has declined for payers of employer-sponsored plans.

Most experts are only too willing to attribute this statistic to the fact that managed care plans have replaced traditional indemnity plans as the primary choice for health care coverage by employers and their employees.

But it's not enough anymore to save money. With HMOs under attack for "rationing" health care, improving patient outcomes is now recognized as an essential component in any health care delivery system.

The challenge for employers is to find true cost-efficiencies in the health insurance they provide to their employees by offering health care that controls the costs to the company and protects against claims of restricting necessary care, keeps people on the job and promotes good medical outcomes.

The lesson we have learned is that managed care saves money, but only by re-engineering the managed care model can we save money and deliver better patient care.

Managed care at the crossroads

Managed care is at a critical point in its evolution. For the past year, it has been the subject of a loud chorus of criticism from consumers, politicians and members of the news media who are concerned about quality medical care and patients' access to it. They are questioning the legitimacy of managed care practices such as:

Gatekeeper primary care physicians.

Closed provider networks.

Reimbursement systems that reward physicians for withholding care.

Mandated length of hospital stays.

The determination of "medical necessity" by insurance policy design rather than clinical assessment.

Are these procedures truly working to improve health care and manage costs, or are they really just ways in which health care is rationed? Are these policies simply major "hassle factors" that keep people from getting the care they need? Are the cost savings from the managed care model being used to improve care and reduce premiums, or are they diverted into cash bonuses and stock options each year to HMO executives and large dividends to their stockholders? Does passing the financial risk to the physician result in better care management or just less care?

Ultimately, the question is, "What are we really managing -- health care or health care profits?"

The health care consumer's question -- "Is managed care producing better outcomes?" -- is still unanswered.

How can HMOs coordinate the mass of data they have on patient care to actually measure the results of a total care plan? Various disease management programs have made a start, but the results are still unknown.

While managed care has created a new way to manage the utilization and cost of health services, it apparently has failed to create a new model for how health care is coordinated to achieve the best outcomes.

Into this picture emerges a new model that challenges the existing managed health care system and seeks to find greater efficiencies and better outcomes.

The disease state management "episode of care" approach grew out of an orthopedic demonstration project with an independent practice association-model HMO.

The episode of care approach has been used with great success for the past two years in the Western United States, and the model now extends to multiple diagnostic categories.

The premise for the disease state "episode of care" concept is simple: the best management strategy that has proved successful in providing superior patient outcomes and simultaneously controlling costs is case management. This is because case management must develop a case plan incorporating all of the individual patient's needs throughout all the layers of required medical care.

Instead of a cookie-cutter approach to standardized health care paths, each patient is evaluated and a plan is developed that takes into account individual needs.

This approach historically has been reserved for catastrophic cases with potential runaway costs, achieving great success and improved patient satisfaction and outcomes.

If the "episode of care" is applied to high-volume, routine cases, though, similar results can be achieved. In addition, the episode of care concept expands this role to enhance outcomes through innovative uses of technology in treatment and care delivery, information system management and interactive education. It also adds the role of procurement to the case manager's responsibilities.

Finally, the episode of care approach generates the type of outcome data that documents its superiority to traditional approaches in terms of better outcomes and higher patient satisfaction. Moreover, this outcomes data can be utilized to forecast what type of treatment alternatives are suited to a specific patient while the decision-making is in process.

The concept of disease state "episode of care" management could offer the managed care industry a solution that has proved quite elusive in this decade. If widely implemented, this could represent a cohesive strategy for savings by placing the organizational emphasis on properly managing patient care. In short, it seeks to manage a patient's overall health care experience and all of the inputs to that process in an "every side wins" solution.

The episode of care

An episode of care is defined as a specific disease state condition or event that has a quantified time frame and requires multiple care delivery systems to achieve the clinical goals established.

The episode of care concept involves packaging the medically necessary products, services and outcomes data to meet the individual needs of the patient and can demonstrate clear evidence of the care delivery's effectiveness.

Savings are achieved by implementing case management, leveraging technological advances in health care delivery and utilizing progressive procurement strategies that unbundle many services to allow controlled margins and resultant cost savings.

This new model for health care delivery was created to meet the demand for continued improvement in the care and cost-effective management for high-volume disease states, medical events and surgical procedures while demonstrating consistent quality in the health care experience by all participants. It also makes the primary care or specialty physician an advocate for their patients.

The episode of care management strategy assumes that the fundamental service essential in safely altering health care delivery patterns in any patient care event is case management. Indeed, empirical evidence shows that for every $1 invested in case management services, claims costs can be reduced by $10 or more. From that starting point, an entire approach to managing patient care was developed that intrinsically re-engineers the care delivery process.

The episode of care consists of the following five principles:

Clinical choice confirmation.

Thorough patient evaluation is performed before a surgical event or as a situation confirmation in medical cases. Understanding the actual situation confronting the patient, physician and payer ultimately will result in targeted care and cost-effective outcomes. Furthermore, this process actively involves the patient in their own care plan and assures that their particular situation and needs are addressed. The case manager who is performing the assessment and is viewing the "big picture" can serve as the patient's advocate with other components of the delivery system.

During this process, assessments of the patient's clinical, psychosocial and financial situation establish an appropriate individualized pathway. Patient engagement and advocacy assures their close involvement in pathway decisions; compliance with specific disease-state education, such as preventive and coping strategies; caregiver identification; and the development of recovery expectations.

Case management services.

This component offers the most effective care delivery options to the patient, physician and payer. An advocate and an administrator must be available to assure that all safety and care delivery issues have been effectively coordinated through the duration of the episode.

Additionally, any unexpected event is managed immediately, which provides continuity between the original payer and reinsurer as appropriate. Determination, coordination and procurement of all professional services, facility stays, technologies, equipment and products are required to fulfill the individualized episode of care pathway established.

Care substitution.

As the episode of care is planned, all opportunities to substitute less expensive and more beneficial care options are considered. The approach of "care substitution" is the exact opposite of "care subtraction" to reduce costs. Care substitution can include, for example, home care with appropriate attendant assistance -- supplemented by appropriate patient and family health education -- instead of long hospital stays.

Comprehensive outcomes data.

Collection, analysis and reporting of individual case and aggregate population outcomes address the episode of care's clinical, financial and satisfaction concerns. Reliable and valid collection tools and analytical methodologies offer comparisons with data from national, regional and other governing organizations.

The predictive algorithms and care delivery pathways developed from the data offer physicians and payers clear guidance in determining which patients are appropriate candidates for aggressive outpatient options or more conservative facility care. Clinical, humanistic, financial and satisfaction factors are all separately evaluated in the outcomes data collection process.

Case rate pricing structure.

The final component of this unique approach to managed care is fixed monetary reimbursement for the entire episode of care. This single flat rate includes all of the individual elements, including the procurement of all necessary medical products and services and the execution of case management services.

Indeed, part of re-engineering the care delivery process involves the procurement infrastructure. The episode of care approach takes the facilities' bill for a patient and separates all of the pieces, thereby allowing individual components of the care -- for example, medical devices and prosthetic joints -- to be purchased in a competitive manner.

By reimbursing hospitals for specific inpatient costs and then going directly to manufacturers for acquiring the individual components of care delivery, the patient is able to receive customized care and the net costs are significantly reduced.

In fact, the episode of care process typically can reduce payers' overall costs for currently unmanaged events of patient care by 15% to 25%. Moreover, based on our first 300 orthopedic joint replacement episodes of care for which outcome studies were conducted, 98.4% of patients were highly satisfied with their care. These 300 cases resulted in savings to the payers of nearly $6 million.

With the evolution of managed care at a crossroads, the charge to re-engineer the health care delivery model may be the best hope for improving patient care while at the same time continuing to save money for employers.

Built on the premise that independent, third-party case management is the only proven strategy for simultaneously saving money and improving the management of patient care, the "episode of care" seeks to apply these proven techniques to routine, high-volume medical cases.

This new approach offers employers an excellent return on investment by saving money on premiums while delivering improved patient outcomes. This means a better quality of life for employees and their employers.

Sue Sedaka is vp of managed care and Vi Karr is chief operating officer for MedSmart International, a Costa Mesa, Calif.-based company that provides episode of care management services to managed care organizations, self-insured employers and insurance companies.