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Columns   |    
Economic Grand Rounds: Evaluating Health Care Systems
Kevin L. Smith, M.D.; Lawrence B. Lurie, M.D.
Psychiatric Services 2005; doi: 10.1176/appi.ps.56.5.534

Managed care evolved in just a few years, bringing with it a whole new way of providing health care and practicing psychiatry. Management practices drastically altered how treatment is provided for persons with mental illness, including substance use disorders. As tools for managing and systems for financing health care continue to emerge, evolve, and become extinct, it has become clear that the management of health care, in some form or fashion, is here to stay.

In January 2004 the committee on managed care finalized a resource paper for the American Psychiatric Association entitled "Alternatives to Managed Care" (1). The paper was based on commonly recognized tools of managed care, "A Vision for the Mental Health System" (2) Crossing the Quality Chasm: A New Health System for the 21st Century (3). These papers were used as the foundation for developing a model for analyzing any health care financing system and its potential effect on the role of psychiatry. This column discusses the features of the model and how this model can be used to analyze existing and future health care plans.

The following model was developed for analyzing the desirability, feasibility, and quality of any current or future health care delivery system and for anticipating the system's effect on the role of psychiatry. The model is divided into three conceptual categories: clinical care and services, health care financing, and system structure (see the box on the next page). Each of the three components of the model consists of a series of questions, or criteria, by which each health care plan should be evaluated. These questions must be addressed when evaluating any approach to managed or financed care. The items are in prioritized order, and the more positive a response is to the question asked, the more effective the health care plan is likely to be.

Although it is obvious that the first category is the most important in delivering the best care to every recipient, all three categories are mutually dependent if the proposed health care system is to thrive.

Model for evaluating health care systems

  • A. Clinical care and services

      Does the system
    • 1. Allow for treatments to be used that are known to be effective?

    • 2. Actualize its practice guidelines in such a way so as to accommodate the unique needs of patients?

    • 3. Provide for timely access to treatment?

    • 4. Include programs for continuous quality improvement?

    • 5. Address the need for continuity of care?

    • 6. Promote continuation of care, which includes necessary social supports?

    • 7. Prioritize safety, including developing the use of such tools as data feedback to practitioners, incentivizing continuing education, and encouraging the use of appropriate practice guidelines?

    • 8. Advocate for treatment in the least restrictive setting?

    • 9. Prioritize care that is patient and family centered?

  • B. Health care financing

      Does the system
    • 1. Put a majority of premium dollars into treatment?

    • 2. Minimize administrative overhead?

    • 3. Provide parity for mental illness, including substance use disorders?

    • 4. Provide funding commensurate with the level of distress, impaired function, or disability?

    • 5. Provide comprehensive coverage for mental illness, including substance use disorders?

    • 6. Keep the plan's deductible within reasonable boundaries?

    • 7. Contribute to research?

    • 8. Include rather than exclude illnesses or treatments?

    • 9. Provide incentives for consumers to actively participate?

    • 10. Provide incentives for practitioners to actively participate?

    • 11. Provide incentives for purchasers to actively participate?

    • 12. Include catastrophic stop-gap insurance coverage?

  • C. System structure

      Does the system
    • 1. Function efficiently?

    • 2. Reasonably empower its consumers to actively participate?

    • 3. Make it easy for the layperson to navigate the system?

    • 4. Provide accessibility across numerous settings, such as work and school?

    • 5. Ensure coverage for persons who do not recognize their need for mental health services, including substance abuse treatment?

    • 6. Use cost-control mechanisms that do not undermine the criteria listed in the clinical care and service category?

There are two management tools that are emerging as significant elements in health care financing reform: disease management health care plans, which involve adhering to practice guidelines, and consumer-driven health care plans. Each type of plan was examined to see how well it fit the model for evaluating health care systems.


Disease management

Disease management includes two concepts: the scientific principle that evidence-based medicine can provide us with best practice guidelines for treating a particular disease and the basic business principle that standardization leads to efficiencies.

Disease management includes all practices focused on a particular chronic disease, such as patient registries, patient education, patient outreach, practitioner education, data sharing (for example, practice profiling and prescription claim information), treatment compliance, coordination of services, and practice guidelines.

Practice guidelines, also called clinical pathways, are sets of recommendations that provide a standardized roadmap for the treatment of a particular disease. They allow for treatment efficiencies, economies of scale when purchasing medical supplies, and improved treatment outcomes. They also promote analyses of outcomes among practitioners.

When we used our evaluation model to review disease management as a health care management strategy, many potential consequences were exposed. Positive potential outcomes were found; for example, it can be used to provide data feedback for promoting safety, standardization, and efficiency; it requires fewer dollars to administer, because only outliers need to be reviewed; it can be effective in continuous quality improvement programs; it is a very efficient tool once implemented; and it can be used across many settings.

Potentially adverse effects were also found; for example, it can be harmful if it does not accommodate the unique needs of patients; it can exclude treatments known to be effective; it can easily fail to address such variables as patients' preferences, personality characteristics, motivation for particular treatment options, failure of past treatments, and support systems that affect treatment selection; it may not allow for treatment in the most appropriate setting; and it may not include social supports when necessary.

Disease management itself is neutral with respect to persons who do not recognize their need for mental health services, including substance abuse treatment. The health care system that deploys disease management must actively address this issue.


Consumer-driven systems

Consumer-driven systems are on the immediate horizon of health care financing reform. These systems focus on increased consumer involvement and cost sharing.

The recent and rapid movement toward consumer-driven systems has come about for a variety of reasons, including backlash against managed care from patients and clinicians and a growing recognition of the benefits that are gained when consumers are more responsible for and involved in their health care decisions.

The theory behind consumer-driven health care is that if employees have more control over their health care dollars, they will spend them more responsibly. Consumer participation can range from something as limited as having several insurance options to choose from to something as open as receiving health vouchers that can be used according to the consumer's preference.

The model was used to evaluate consumer-driven plans, and it was found that virtually every criterion for a high-quality system could be overlooked. The plan chosen by a consumer will adequately address key criteria only if the consumer chooses to contribute enough pretax dollars to select a suitable plan. However, one positive potential outcome is that the informed consumer will be able to choose and invest in a plan that will adequately meet the family's needs and that the consumer will have the self-interest to invest in a comprehensive plan with full mental health benefits.

The downside is that consumer-driven plans create financial incentives for patients to control cost at the expense of health maintenance and preventive services. Because consumer-driven plans create a cap on employer cost, employers may become disengaged from the consequences of choosing an inadequate health plan, no matter how negative these consequences are. Additionally, persons with mental illness may not recognize the need for coverage, irrespective of the cost.

It is possible to compile an alternative model of a health care system that is better than the plans that are currently in place and responds more positively to the questions, or criteria, posed by our model. By combining the best of today's management tools, the utility of the system is demonstrated in the following example. The codes within parentheses indicate which criteria are being met.

The employer establishes a health benefits package that requires full parity for mental illness, including substance use disorders (B3, B5). It includes 100 percent coverage with no deductible for preventive health care services (A1, B6, B8, B9, B11). A basic health insurance plan is provided with a standard deductible of $1,500 and a $25,000 per year cap (B9, B11). In addition, a catastrophic plan would cover costs that are more than $25,000 (B6, B12). The employer pays 80 percent of the monthly premium, and the employee pays 20 percent (B9, B11). The basic insurance includes parity for mental illness and substance use disorders. It also incorporates a performance-based, tiered practitioner payment structure (A4, A7, B10), which allows the consumer to choose to see better, more expensive practitioners by paying a higher deductible or higher copay (B9, B10, C2, C6). The only health care services that require precertification are inpatient hospital care as well as outpatient services with the highest costs (B1, B2, C3, C6). Case managers are available on request to provide patient advocacy services, including education, treatment compliance monitoring, and assistance in navigating the health care continuum and insurance benefits (A6, A9, C2, C3).

The employer also provides a funded health reimbursement arrangement, at the rate of $1,000 per employee per year (B9, B11). With a health reimbursement arrangement the employee can contribute pretax dollars at whatever level he or she chooses and is allowed to spend these dollars on any acceptable medical care (B9, C2, C6). Employee dollars are spent first to minimize the tax impact on the employee. In addition, the employer fully funds a "life services" program for consumers that may also be used by practitioners in contacting and activating needed social support services, such as child care and respite care (A8, A9, B4, B9, B10).

Included in the basic and catastrophic insurance plans are disease management guidelines (A2, A4). These guidelines provide clinical pathways for practitioners but allow for needed individual variability (A1, A2, C6). Practitioners receive quarterly intra- and extra-practitioner feedback reports of their clinical outcomes. These reports are summarized annually and used to rate practitioners for establishing tier assignments for the next year (A4, A7).

By using the model for evaluating health care systems, it was found that this alternative health care financing system meets some quality criteria. However, despite the comprehensiveness of the system, it does not meet all the criteria. Perhaps other health care systems can be developed that address even more criteria.

Our proposed model for evaluating health care systems asked fundamental questions that aid the user in measuring the quality of the system.

The authors thank the members of the American Psychiatric Association's subcommittee on the future of managed care for their contributions to this paper: Norman A. Clemens, M.D., Anthony M. D'Agostino, Sandra M. Hass, Lawrence B. Krause, Rod Munoz, M.D., David Nace, M.D., Raphael A. Rovere, M.D., and Jonathan L. Weker, M.D.

Dr. Smith is affiliated with MD Offices, Inc., P.O. Box 2331, 70 West Chestnut Street, Kingston, New York 12402-2331 (e-mail, kevin@mdoffices.com). Dr. Lurie is with the University of California, San Francisco (e-mail, river@itsa.ucsf.edu). Steven S. Sharfstein, M.D., and Haiden A. Huskamp, Ph.D., are editors of this column.

Alternatives to Managed Care. American Psychiatric Association, January 2004
A Vision for the Mental Health System. American Psychiatric Association, April 2003
Crossing the Quality Chasm: A New Health System for the 21st Century. Washington, DC, Institute of Medicine, March 2001


Alternatives to Managed Care. American Psychiatric Association, January 2004
A Vision for the Mental Health System. American Psychiatric Association, April 2003
Crossing the Quality Chasm: A New Health System for the 21st Century. Washington, DC, Institute of Medicine, March 2001

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