Report on Ministry of Health Managed Care Conference, 2–4 May 1996

• Ministry of Health (the Ministry);
• Political;
• Purchasers;
• Primary, secondary and tertiary providers (health and disability support);
• Community groups/consumers;
• Maori;
• Nurses;
• Accident Rehabilitation & Compensation Insurance Corporation (ACC).

How Does the Ministry View Managed Care?

Ministry and political perspective
It is clear that from ministerial and political perspectives there are currently different degrees of devolution of risk and responsibility in New Zealand, ranging from situations where groups have little responsibility through to schemes that pass on full financial risk.

Examples include:

• General practitioners (GPs) are given an indication of expenditure limits for the next year, supported by feedback on their prescribing behaviour.
• A community trust board can take on joint responsibility with the Regional Health Authority (RHA) for deciding the range of services which will be purchased for people in the community.
• A primary health care group of doctors, nurses and other primary care professionals has a budget to purchase specific services for enrolled patients devolved to their organisation, the RHA retaining the risk and the group influences expenditure of any surplus.
• A managed care group has the opportunity to carry the financial risk for specific service provision to a population within a set budget, and in return for carrying that risk, retains any surplus.

Concerns have been raised about under servicing, avoiding high risk people, difficulties of planning, and loss of quality in the search for cost saving.

Public health purchasing requires a balance between universal coverage of the general population and special services for priority population groups. The view of the Public Health Group in the Ministry is that the options for integration and co-ordination of public health initiatives with managed care should be explored.

Quality and safety of programmes is essential but sometimes difficult to assess prior to purchase, resulting in the developments of pilot schemes funded by the RHAs.

There are clearly complexities where public health programmes require more than one service, such as in cervical screening or where abnormal test results require prompt follow-up at secondary level.

The interface between secondary care and MCOs is an area which requires further exploration on how progress may be made [see ’Wrap-Around Notion’].

What is the View of ’Purchasers’ (RHAs and ACC)?
From the RHA Purchaser position, there are risks of:

• getting the capitation formula wrong;
• poor calculation of efficiencies;
• fraud by, or collapse of, the provider;
• cost shifting to consumers;
• under servicing;
• declining health outcomes.

RHAs would wish to develop further the notion of risk sharing in contrast to the view that they wish to shift risk. The risk involved in managing financial exposure against service provision is often faced by both providers and purchasers and therefore requires a partnership approach.

There are various views on the pathway to success:

• Risks can be managed by agreeing on key performance indicators and linking payment with their achievement.
• Risk can also be managed through insurance, though that may lead to the insurance company rationalising delivery.

All stages of risk management must add value. Benefits must outweigh costs and there is an acknowledgment that some organisations could be potentially more concerned with their benefits than with the notion of passing the benefits on to consumers.

Contracting models can be barriers to success in achieving progress in purchasing health care. They can be formed out of a passion for a particular approach, rather than relating to the situations in which they are applied [see ’Wrap-Around Notion’ (RHA Approach)].

In order to promote equitable access to primary health care services, both on a geographic and socio-economic basis, purchasers must address some fundamental questions:

• What incentives, other than finance, can be offered to GPs?
• What are the monitoring requirements for distribution of budget-holder resources?
• Whose responsibility it is to ensure equity?

The ACC is keen for the proposed legislative changes to come into effect in order to become a more substantial purchaser of services from the public system. It is believed that the opportunity to contract directly with acute providers would help them to achieve the managed care ideal of negotiating a fixed price service for defined patient outcomes.

The desired end point for the ACC from a managed care system is to have meaningful, long term, durable outcomes at the best cost. Clearly the ACC is promoting the concept of partnership between ACC, claimants and providers, and wish to use the managed care model to provide better services to claimants and better value for money to premium payers.

Running in parallel with the purchaser perspectives on risk management and accountability is the view that managed care will enhance the peoples’ focus of health service delivery. This focus will reflect the needs of individual communities through the structure of co-ordinated care organisations [see ’ACC - An Outcome Driven Approach to Managed Care’].

Issues for consumers
The input from consumer advocates and consumers themselves is important to the process of defining managed care and discussing its future in New Zealand.

Issues raised by the consumer advocates included:

• The assumption that the introduction of business values into the health system will improve the practice of medicine and health outcomes.
• The introduction of USA and UK models of health care which have developed within health systems that are perceived to be different from New Zealand.
• The lack of understanding by the general public about what is planned or how it might affect them.
• Concern for the fate of high risk patients in capitation based practices.

The impact of high risk members of registered or capitated practices was explored further. People with costly health problems (the chronically ill, the elderly, cancer patients, people with disabilities) may not be accepted.

Suggested mechanisms to avoid discrimination against these groups include:

• requiring practices to accept anyone who applies; and
• adjustment of the population based funding formula in order to reallocate money to practices with high risk patients.

From a Maori consumer perspective, risk management is also an issue; managed care equates to managed risk. From the perspective of Maori ’to whom and for whom’, risk management is an issue, the view from Maori being that often it is the patient who ends up taking the risk and the consequences [see ’Indigenous People (Maori)’] [see ’Ethical Issues’].


Will managed care promote equity?
Issues of access, fairness and whether financial incentives are the best way to control demand creates discussion in relation to managed care.

There is a view that government policies generally have increased poverty and the gap between rich and poor, and that the philosophy of the ’market driven’ reforms is harsh on the politically weak and those at the bottom of the economic ladder.

From the consumer/patient perspective health promotion is as important as treatment and the shift should be to co-ordinate treatment with health promotion and education.

In the New Zealand situation, it has traditionally been difficult to encourage GPs to set up a practice in low socio-economic areas. These equate with populations with low health status. In the current fee-for-service climate this has not been popular with practitioners.

The need to explore innovative methods of encouraging GPs to set up in such areas and to find motivators other than financial is clear. An additional element of this is the need to define who ensures equity of service provision and access [see ’Ethics’].


Existing managed care organisations (MCOs)
To date, the concept of managed care has been applied in a variety of ways in New Zealand. A number of organisations exist which include formally established MCOs and others extending or exploring their contracting options with the RHAs.

One such option is the Independent Practice Association (IPA), which is a united body of GPs forming a company in order to contract with the RHA. This organisation provides general practice services to a registered population.

Most IPAs involve 30-40 practices and the benefits include:

• a single management structure;
• usually a local focus;
• established by health professionals;
• close to the patient.

There are currently 61 IPAs in New Zealand, the majority of which are in the North Island. RHA contracts cover service provision but may also cover information management, peer review, quality control, continuing medical education, consumer consultation, pharmaceutical management and bulk purchasing.

In line with the direction being taken by some purchasing authorities, IPAs recognise the need for defined standards of service as an integral part of services purchased and provided. Failure of the health reforms to deliver what they promised in access, efficiency, flexibility and innovation is an area of ongoing frustration. This is perceived to result from lack of incentives for services to integrate and meet the comprehensive needs of their patients.

One solution would be to make IPAs the gatekeepers, responsible for achieving given outcomes for a given set of resources. This would mean the IPAs becoming budget-holders.

Primary Care
On the subject of managed care, GPs appear to be divided. Expectations from the GP body vary and the concept of risk increasingly dominates as a key issue for GPs.

During the course of the health restructuring, the medical professional bodies have resisted the repeal of the previous fee-for-service provisions until clear alternatives became apparent.

Increased accountability for GPs is a consequence of managed care. The traditional model will be replaced by accountability to colleagues through peer review, to purchasers, and in some cases to shareholders. This is viewed favourably outside the medical profession but adds to the tensions within the profession.

The concept of skill mix in general practice is an interesting issue within the framework of managed care and the various models that are currently in operation.

GPs also share the view that equity for patients (particularly lower socio-economic patients) would need to be safeguarded. Clearly, the motivators are more than simply financial.

Equity of access to services and ways in which people with greater health needs and/or fewer financial resources can get better treatment are highlighted by listing the key issues at the patient/provider interface:

• Poverty usually results in poor health and greater need for health services.
• How to prove greater need.
• How to ensure that those in greatest need get the services required.

Managed care could be used as an instrument to address these problems. Ways could be sought to:

• encourage GPs to set up in areas of greatest need; and
• direct GPs’ focus on to the most needy groups.

Secondary Care
It is possible that MCOs have the potential to undo boundaries between primary and secondary care, improve co-ordination and integration and to discover more effective treatments.

[There was surprisingly little material presented or discussion raised on this important subject - Editor]

Community

International comparison of New Zealand developments
New Zealand at present draws on two major models of managed care, originating from the USA and UK.

Common factors are:

• the purchaser / provider split;
• the existence of an agent responsible for putting together a package of care for a user; this agent is often based in primary care;
• financial incentives; not creating ’perverse’ incentives, or barriers to appropriate care;
• managed care brings together medical and resource management, getting clinicians and others involved in decisions about resource use;
• acceptance that efficient use of resources is an ethical issue;
• the acceptance of evidence based health care planning and delivery.

Clear differences emerge in the managed care systems in the UK, USA and New Zealand. The differences are in the delivery and the environment. The USA private medical environment, in which managed care is now growing, started from a clearly stated emphasis on personal financing through insurance.

The managed care approach overlying the National Health Service (NHS) model in the UK is not promoted as managed care in the UK. New Zealand has a smaller population with which to create change and is by reputation faster at introducing new initiatives.

Within the health system there are a number of stakeholders, all with a legitimate interest. Success will come from building a consensus, and promoting partnerships and collaboration. The success of managed care is likely to be a combination or permutation of either a pure market system where the consumer dominates or a total bureaucracy or even clinician led system.

Cultural Issues
The emphasis is on empowering people and working with the nuclear family. Encouraging traditional healing is proving effective, and when control is exercised by indigenous providers, managed care is very effective.

A view from the UK is that emphasis on care management avoids ceaseless boundary battles. However, the emphasis is on management of effective care, therefore, considerable audit and review processes are essential.

Like New Zealand, the desired outcome is a primary-care-led NHS, in which GPs provide care first and then purchase, helping patients through the NHS maze. This can be applied to areas where there is a primary/secondary interface in the community, eg maternity and community mental health services.

The importance of needs assessment and community feedback is high on the agenda which is similar to New Zealand. Co-operation between public health and social services could be considered as a part of the budget-holding service mix. Management skills are a necessary part of a managed care organisation and GPs would need to decide whether to learn these skills themselves or employ other people within the practice.

An issue for New Zealand managed care organisations is the evidence from the UK and USA that there are requirements to keep abreast of national policy developments as well as medical or clinical trends. This presents a challenge to current health practitioners; issues of appropriate skill mix and flexibility of thinking are a requirement for the future within managed care [see ’Indigenous People’].

Conclusions
Access, equitability, lower socio-economic groups and risk management are identified by all stakeholders as common issues. For some, risk management is a purely financial concept while for others it represents the risk of poorly managed care or reduced access to appropriate care.

The underlying message appears to be that patients come first and that managed care stems from a need to manage the resources available in order to get the best quality of service for the people in greatest need. However, how to measure that need and who measures it is an area to be examined in detail and in a collaborative manner.

The need for all parties to work together and to include consumer representation was underlined throughout the conference.

There are no answers to the question, "What is the ideal model?" Perhaps for New Zealand with its bi-cultural society, there are no hard and fast answers. As with the development of the health reforms over the past five years the Ministry focus may be to let many and varied models develop.

This concept is progressive and can develop good models but there is a growing need for detailed, objective evaluation in order to silence the critics and applaud the successes.

The International Perspective

New Zealand at present draws on two major models of managed care, originating from the USA and UK, and speakers from both presented plenary papers at the managed care conference in Wellington.

Local critics of the very concept of managed care tend to claim that it is an alien concept being imported from countries where the approach to primary services is very different from New Zealand.

They point out that: