Integrated Systems Improve Medical Care and Control Costs

Research says proposals to move away from managed care would be a mistake.

September 01, 2005

| by Stanford GSB Staff

Integrating systems to share medical histories, create interdisciplinary medical teams, and update doctors on the latest medical research findings could trim healthcare costs while improving patient care, argues Alain Enthoven.

Proposals to move away from managed care and encourage consumers to choose the best doctor for their condition would be a mistake, says the Marriner S. Eccles Professor of Public and Private Management, Emeritus, at the Graduate School of Business. Instead, Enthoven calls for creating integrated delivery systems (IDSs), a more encompassing version of managed care, to bring coordinated healthcare to U.S. consumers, who currently spend more than $1.7 trillion each year for healthcare.

“We need systems to ensure that healthcare providers are delivering the best care at the lowest possible cost,” says Enthoven, who argues that the safest, most appropriate, and most affordable care does not come from patients visiting individual providers.

Instead, he says, efficient integrated healthcare systems generally are found in large multispecialty medical group practices with transparent links to hospitals, labs, and pharmacies. These organizations provide complete care — from the doctor’s office to the hospital to home care, and everything in between. They often have their own insurance arms and work under contracts where they agree to deliver comprehensive medical services to consumers for a fixed dollar amount. Examples of IDSs include Kaiser Permanente and the Mayo Clinic.

“It’s a complex notion, but one that promises to keep healthcare costs under control while increasing the quality of care for the patient,” says Enthoven.

When asked, most doctors say they prefer a system that lets each doctor or small group of doctors work independently in his or her own office. The model works against sharing information, best practices, or any systemized way to track the overall healthcare activities of a particular patient. And it is precisely this model of healthcare that is causing costs to escalate out of control, Enthoven argues.

The moral hazard prevalent in all health insurance (from the effect of insurance on decisions to use medical care) is exacerbated by the fee-for-service method of payment that rewards doctors financially for doing more, whether or not the added work benefits the patient.

Integrated delivery systems mitigate moral hazard because, usually, the doctors are salaried and do not get more money by doing more diagnostics. Instead, they prosper by keeping you well, Enthoven said. “Doctors need incentives to use resources wisely.”

Managed care is one such incentive, but the concept took on negative connotations in the 1990s, when for-profit insurance companies attempted to limit costs by imposing treatment rules enforced by non-medical administrators. That sort of model is almost inevitably doomed to failure, argues Enthoven. “The success of managed care depends on who does the managing. If care is being managed by doctors, then you’re typically talking about an IDS.”

The emergence of a concept called “evidence-based medicine” is also pointing toward an integrated delivery system as the best possible solution for today’s healthcare woes, says Enthoven. More than 10,000 randomized controlled clinical trials are performed every year. Medical care should be based on the results of this and other research, and not on what a doctor learned in medical school — which can be years, if not decades, out of date. “Typically, new science doesn’t get incorporated into medical practices for 17 years. It’s a very serious problem, and one of the reasons that systems are needed,” says Enthoven.

Yet it is extremely difficult for individual doctors to keep up with scientific literature. They need some sort of organized help — the kind of help provided within an integrated delivery system. “If you look at the Veterans Administration or Kaiser Permanente, they have created organizations within their organizations whose job it is to gather and review the research literature and make recommendations for best practices and procedures,” says Enthoven, who argues that it is critical that the review and resulting recommendations come from practicing doctors who have credibility, not administrators.

One way that IDSs manage costs is through holistic disease management programs, in which trained health professionals take over many of the duties formerly performed by doctors. For example, the job of helping a patient manage his or her diabetes can be handled by a team of medical professionals including nurses, educators, and nutritionists who can provide lifestyle coaching, mentoring, and routine checkups — things that previously a doctor did at a much higher cost, says Enthoven.

A critical part of integrated delivery systems has to do with information. IDSs compile comprehensive medical records over time, so when a patient shows up in the doctor’s office, the doctor has a complete medical history — all checkups, lab results, X-rays, drugs prescribed, and diagnoses made. This is not available in the traditional solo practice sector. There, no doctor has a complete picture of the patient’s medical history. There is a great deal of talk now about innovations to correct this, but they will not come easily, Enthoven says.

Indeed, IDSs have been leading the country in the use of electronic healthcare records. Last year, the U.S. Department of Health and Human Services unveiled a plan to develop an independent information network that will carry electronic medical records. In addition, a compromise version of two health-information technology bills has cleared the Senate Health, Education, Labor, and Pensions Committee with bipartisan support.

“In the full implementation of an online clinical information system, the doctor can not only call up test results—which have much less likelihood of getting lost—but also obtain practice guidelines that explain what should be done for a patient with a certain diagnosis,” says Enthoven, who argues such information sharing can only increase the quality of healthcare. “A doctor may be terribly smart and terrifically hard working, but he or she can still require support and guidelines from colleagues. Systems make this happen.”

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