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of Use of Effectiveness Research in Managed Care Plans Howard L. Bailit My approach to effectiveness research is from the perspective of the group health insurance industry, particularly that segment of the industry that operates managed care plans. I address four issues in this chapter: 1. The importance of effectiveness research to the group health insurance- managed care industry, 2. Current applications of effectiveness studies in managed care plans, 3. The contributions group health insurers can make to effectiveness research, and 4. Limitations of the effectiveness "strategy" in controlling health care costs. IMPORTANCE OF OUTCOMES RESEARCH It is important to emphasize that the group health insurance industry is under great pressure to control the rate of increase in health care costs. This issue is now the primary concern of employers because they cannot cope with 15- to 20-percent rate increases year after year. This pressure to control costs is causing major changes in the health insurance industry. First, a consolidation is taking place as insurers that are unable to provide employers with effective medical management services go out of business. Second, insurers are concerned about the possibility of national health insurance or other government interventions to control costs that will adversely affect the industry. This is of special concern now because some of America's largest companies are advocating national health insurance. Traditionally, employers have been against greater government control of the delivery system, but some are becoming skeptical that the private sector can success 218

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WlIERE DO WE GO FROM HERE? 219 fully address the cost problem. As a result, insurers and others in the managed-care business have to demonstrate that they can control health care costs. Further, they must find a solution within the next five to seven years to prevent further government controls. Within this general environment, insurers have two basic cost control strategies available to them. One is to increase patient cost-sharing in hopes of reducing utilization by fostering more prudent purchasing of health services. Until recently, patients' out-of-pocket costs were staying constant in real dollars. Employees were protected from the rapid increases in costs by having employers allocate a larger share of their total compensation to health benefits. Now, data from the Health Insurance Association of America suggest that cost-sharing is starting to increase, and this trend is expected to continue. Greater cost-sharing alone is unlikely to solve the problem of rising costs. For one thing, this nation is about to enter a period of severe labor shortages, and companies may compete for skilled workers with richer benefit plans. Also, many Americans feel very strongly about their health benefits and will probably not tolerate major increases in out-of-pocket costs. This can be seen in the recent strikes at Pittston Coal and AT&T, where workers were not willing to accept reduced health benefits. In sum, then, some modest increases in cost-sharing will occur, but this option will probably not solve the problem of rising costs. A second strategy open to the private sector is to establish a more competitive delivery system through the development of health maintenance organizations (HMOs) and other managed care plans. The basic idea is that by carefully selecting cost-effective providers, giving them an appropriate level of risk sharing, and carefully monitoring utilization, health care costs can be controlled. Risk-sharing is an important element in this strategy because it helps focus the attention of providers on the efficient use of resources. However, although risk sharing is a necessary part of a managed-care system, it is not sufficient. Uwe Rheinhart presented a model where physicians' concern with maxi- mizing their incomes was the driving factor in increasing health expenditures. He probably said this facetiously, because there is ample evidence that, even when physicians are at financial risk or are paid a salary, there is still a substantial amount of unnecessary and inefficient care delivered. A good illustration of this point was the case history presented by Steve Schoenbaum from the Harvard Community Health Plan (HCHP), a large staff-model HMO in Boston (1~. He showed that HCHP obstetricians who used Hospi- tal A had much higher rates of cesarean sections and forceps deliveries than those using Hospital B. He noted that this difference was not accounted for by variation in patient mix; more likely, it reflected differences in practice styles in the two obstetrics units. Thus, physicians' economic incentives are only one factor determining utilization patterns.

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220 EFFECTIVENESS AND OUTCOMES IN HEALTH CARE In the view of many persons in the managed-care industry, the key to the private sector's approach to controlling costs is utilization management, that is, programs that attempt to improve the effectiveness and efficiency of care delivered to individual patients. The utilization management strategy is based on the well-documented fact that a substantial amount of care is either unnecessary or only marginally beneficial. If inappropriate care is reduced, the quality of care will be improved and at the same time costs will come under greater control. In part, responsible utilization management requires having explicit guidelines or protocols that define when a given procedure or test is necessary. In turn, the development of protocols depends on having data on the effectiveness of selected procedures in terms of health outcomes. As pointed out many times in this volume, there is a paucity of such data. Clearly then, effectiveness research is an important component of the health insurance-managed care industry's strategy to control health care costs. CURRENT APPLICATIONS OF OUTCOMES RESEARCH CLINICAL PROTOCOLS AEtna has made a major investment in developing protocol-based utilization management programs, and several other insurers are moving in the same direction. AEtna now operates a Recertification system that focuses on about 20 inpatient and 20 outpatient surgical procedures and diagnostic tests. The protocols were actually prepared by academic medical researchers and clinicians under contract to AEtna. We believe that the credibility and acceptance of protocols by employers, employees, and providers is enhanced by having academicians, who are focused on medical science rather than costs, prepare the protocols. Even though AEtna did not develop the protocols internally, an obvious question is, Why are insurers rather than the medical profession taking the initiative in developing protocols? AEtna believes that organized medicine should, and eventually will, assume responsibility for developing national protocols, but for the time being AEtna is filling a gap. AEtna's protocol-based utilization management programs have been running for about a year. They operate as a prior authorization system; that is, patients or providers call AEtna nurses, who use computer-based protocols to solicit specific information that is used to determine whether the proposed procedure is appropriate. If the procedure fails certification, the case is sent to an AEtna physician, who then discusses the details of the treatment with the attending physician. In this sense the protocols serve as screening tools to identify cases that do not meet current quality standards.

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WHERE DO WE GO FROM HERE? TECHNOLOGY ASSESSMENT 221 Another application of effectiveness research is technology assessment programs. In the past, insurers paid for procedures if they were in common use within the practicing community. Now, AEtna is taking a much tougher stand and has a large staff involved in trying to determine whether selected procedures are effective and should be covered benefits, regardless of local practice. This is done by reviewing the medical literature, consulting with nationally recognized clinical experts, and monitoring the positions of pro- fessional organizations (such as the American Cordage of Physicians) that have active technology assessment programs. This is just the beginning, and AEtna and other organizations committed to responsible cost management, including the government, are going to have to spend millions of dollars for technology assessment. Hundreds of procedures and tests now being used have never been carefully reviewed for effectiveness. Likewise, new procedures are being introduced into the delivery system with little, if any, scientific evaluation. INSURERS' ROLE IN EFFECTIVENESS RESEARCH Insurers can contribute to effectiveness research in several ways. First. they can assist the research community in obtaining congressional support for research funding. Second, AEtna and other insurers can provide data on the population under age 65. In some respects, insurers' data are more extensive and detailed than data available from Medicare. In addition to the traditional data from paid claims, many insurers are now collecting from utilization management programs clinically detailed information that can be linked to paid claims. A good example is the extensive clinical data obtained in AEtna's protocol-based reviews of selected procedures. Also, the quality of the data is getting much better. For example, AEtna captures International Classification of Disease (ICD-9-CM) codes for am- bulatory visits and is working on ways to collect more detailed information on inpatient ancillary services. Further, some insurers' claims data systems have the capacity to include additional data elements. Thus, for example, a prospective study of several thousand patients could collect some information from hospital bills that is not usually captured on claims. On-site nurses could also collect concurrent data on selected patients. AEtna has nurses in many locations who use laptop computers to collect and transmit data on hospitalized patients. Another enhancement of data that will be of interest to researchers is the ability some insurers have of creating episodes of care and linking claims

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222 EFFECTIVENESS AND OUTCOMES IN HEALTH CARE across settings (outpatient and inpatient) and services (drugs and outpatient ancillary services). Thus, some insurers can provide a fairly comprehensive clinical data set. A third contribution insurers can make to effectiveness research is undertaking joint projects with university investigators. AEtna now employs several health services researchers and is actively seeking opportunities to join with established university groups in obtaining research grants from federal and private funding agencies. The combination of AEtna's access to data, experience in insurance, internal research staff, and other resources with the expertise of university investigators offers a new model for applied health services research. This model should be attractive to funding agencies interested in supporting effec- tiveness research. At some point, the information collected has to be used to effect positive changes in the delivery system. This is the fourth area in which insurers can contribute to the broader field of effectiveness research that is, What are the best methods for changing the practice behaviors of providers? This is a very difficult problem, even with the necessary data on effectiveness. Steve Schoenbaum reported on the difficulty of trying to influence the behavior of several obstetricians employed by HCHP. Just imagine the problems faced by large insurers with HMOs and preferred provider organizations in 100 or more sites trying to modify the practice patterns of physicians. The point is that effectiveness research needs to go beyond measurement and into applications. Because insurers operate many managed care plans in multiple locations, they offer an ideal natural laboratory for applications research. LIMITATIONS OF THE EFFECTIVENESS "STRATEGY" An underlying assumption of the effectiveness "strategy" is that with "hard" data on what medical treatments are cost-effective and with financial incentives and utilization management systems to influence provider practice behaviors, the rate of increase in health care costs can be substantially reduced. From AEtna's experience with protocol-based review programs, HMOs, and other managed-care approaches, significant savings are possible. The still unanswered question is, "Are these one-time savings, or is the long- term rate of cost increases being reduced?" Only time will tell. A related problem is the capacity to implement and operate effective managed-care programs in hundreds of different locations. Even if it can be demonstrated that one HMO can significantly reduce the long-term rate of increase in costs, it does not mean that this HMO can be replicated in every major medical market in the country.

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WHERE DO WE GO FROM HERE? 223 Another concern with the effectiveness strategy is the liability issue. Just imagine the impact of two settlements of $40 million resulting from patients' being denied services, based on protocols, and later having adverse medical outcomes. It would have a profound effect on the whole managed-care industry and the use of protocols. So far, there have been few liability cases associated with managed-care programs, but the field is still relatively new, and we live in a very litigious society. The final problem with the effectiveness strategy is having the time to make it work. Employers and legislators appear to want quick and easy solutions to complex problems. Certainly, all of us can sympathize with the desire to solve the cost problem within the next two years. Realistically, I believe that there are no easy answers, certainly no painless answers, and no answers that are likely to solve the problem within two years. These are my concerns. I am convinced that managed care can work and that effeci~ve- ness research will undoubtedly have a very positive long-term impact on improving health and making the delivery system more efficient. The health insurance industry is a strong supporter of this effort and is prepared to work with the research community to collect, analyze, and apply the results of effectiveness studies. REFERENCE 1. Schoenbaum, S.C. An Attempt to Manage Variation in Obstetrical Practice. Pp. 190-200 in Electiveness and Outcomes in [lealth Care. Heithoff, K.A. and Lohr, K.N., eds. Washington, D.C.: National Academy Press, 1990.